<PAGE>
As filed with the Securities and Exchange Commission on May 13, 1996
REGISTRATION NO. 33-80655
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MOHEGAN TRIBAL GAMING AUTHORITY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S><C>
Not Applicable 7999 06-1436334
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Roland Harris
Chairman, Management Board
67 Sandy Desert Road 67 Sandy Desert Road
Uncasville, Connecticut 06382 Uncasville, Connecticut 06382
(860) 848-0545 (860) 848-0545
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of Registrant's principal executive offices) number including area code, of agent for service)
</TABLE>
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COPY TO:
Lewis B. Rome, Esq.
Rome, McGuigan, Sabanosh & Klebanoff, P.C.
One State Street
Hartford, Connecticut 06103
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If any of the Securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933 check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
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<S> <C> <C> <C> <C>
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered per unit(2) offering price(2) registration fee
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13 1/2% Senior Secured
Notes due 2002(1) $175,000,000(1) 100% $175,000,000 $60,345
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</TABLE>
(1) Includes aggregate principal amount of outstanding Series A Senior
Secured Notes and Series B Senior Secured Notes to be issued in exchange
for outstanding Series A Senior Secured Notes pursuant to the Exchange
Offer to which this Registration Statement relates.
(2) Estimated solely for purposes of calculating the registration fee.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
CROSS-REFERENCE SHEET BETWEEN ITEMS OF FORM S-1 AND THE PROSPECTUS PURSUANT
TO ITEM 501(B) OF REGULATION S-K.
<TABLE>
<CAPTION>
ITEM IN FORM S-1 LOCATION IN PROSPECTUS
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<S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus. . . . . . . . . . . . . . . . . . . Cover Page of Registration
Statement; Cross Reference Sheet;
Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus . . . Inside Front and Outside
Back Cover Pages; Additional
Information
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges. . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Risk Factors;
Business and Property
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . . . . . . Front Cover Page; The Exchange
Offer
6. Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . . . . . . . . . . . . . . Not Applicable
8. Plan of Distribution. . . . . . . . . . . . . . . . . . . . . Front Cover Page; The Exchange
Offer; Plan of Distribution
9. Description of Securities to be Registered. . . . . . . . . . Description of the Senior Notes
10. Interests of Named Experts and Counsel. . . . . . . . . . . . Not Applicable
11. Information With Respect to the Registrant. . . . . . . . . . Front Cover Page; Prospectus
Summary; Risk Factors; Business
and Property; Mohegan Tribe of
Indians of Connecticut
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities. . . . . . . . Not Applicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be
used in connection with the Exchange Offer and one to be used in a contemplated
shelf offering of Series B Senior Notes in connection with resales by
broker/dealers. The two prospectuses are identical in all respects except that
(i) the front and back cover pages of the prospectus that would be used in the
shelf offering refer only to the Series B Senior Notes, (ii) the section of the
prospectus entitled "Plan of Distribution" that would be used in the shelf
offering refers only to sales of Series B Senior Notes to be effected by
broker/dealers and (iii) all descriptions of the Exchange Offer and of the
Series A Senior Notes would be deleted from the prospectus to be used in the
shelf offer. Each of the front and back cover pages and the prospectus section
entitled "Plan of Distribution" that would be included in the prospectus to be
used in the shelf offer, which pages are not included in the prospectus to be
used in the Exchange Offer, are marked "Alternative Prospectus Page."
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MAY 13, 1996
MOHEGAN TRIBAL GAMING AUTHORITY
Offer to Exchange its
13 1/2% Series B Senior Secured Notes due 2002 With Cash Flow
Participation Interest which have been registered under the
Securities Act of 1933, as amended, for any and all outstanding
13 1/2% Series A Senior Secured Notes due 2002 With Cash Flow
Participation Interest
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JUNE 21, 1996, UNLESS EXTENDED.
The Mohegan Tribal Gaming Authority (the "Authority"), an instrumentality
of the Mohegan Tribe of Indians of Connecticut (the "Tribe"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (the "Letter of Transmittal") to exchange
(the "Exchange Offer") $175 million aggregate principal amount of its 13 1/2%
Series B Senior Secured Notes due November 15, 2002 (the "Series B Senior
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for an equal principal amount of its outstanding 13 1/2%
Series A Senior Secured Notes due November 15, 2002 (the "Series A Senior
Notes"), which were sold on September 29, 1995 to institutional accredited
investors and qualified institutional buyers pursuant to an exemption from
registration under the Securities Act (the "Offering") and of which an aggregate
of $175 million principal amount is outstanding. The form and terms of the
Series B Senior Notes are the same as the form and terms of the Series A Senior
Notes, except that (i) the Series B Senior Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
pursuant to the Securities Act, and (ii) following consummation of the Exchange
Offer, holders of the Series B Senior Notes generally will not be entitled to
the rights of holders of the Series A Senior Notes under the Registration Rights
Agreement dated as of September 29, 1995 among the Authority and the holders of
Series A Senior Notes identified therein. See "The Exchange Offer--Registration
Rights Agreement," "--Consequences of Failure to Exchange" and "--Plan of
Distribution; Resales of the Series B Senior Notes." The Series B Senior Notes
will evidence the same debt as the Series A Senior Notes (which they will
replace) and will be issued under, and be entitled to the benefits of, the
Indenture governing the Series A Senior Notes, dated as of September 29, 1995
(the "Indenture"). The Series A Senior Notes and the Series B Senior Notes are
sometimes referred to herein collectively as the "Senior Notes." See "The
Exchange Offer" and "Description of the Senior Notes."
The Authority will accept for exchange any and all Series A Senior Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
June 21, 1996, unless extended by the Authority in its sole discretion
(the "Expiration Date"). Tenders of the Series A Senior Notes may be withdrawn
at any time prior to the Expiration Date. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer." THE SERIES A SENIOR
NOTES MAY BE TENDERED ONLY IN DENOMINATIONS OF $1,000 OR INTEGRAL MULTIPLES
THEREOF.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF SERIES A SENIOR NOTES IN
EVALUATING THE EXCHANGE OFFER AND BY PROSPECTIVE PURCHASERS OF SERIES B SENIOR
NOTES ISSUED BY THE AUTHORITY IN THE EXCHANGE OFFER.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY __, 1996.
<PAGE>
(COVER PAGE CONTINUED)
EXCEPT AS OTHERWISE INDICATED, CERTAIN CAPITALIZED TERMS USED IN THIS
PROSPECTUS HAVE THE MEANINGS ASSIGNED TO THEM IN THE GLOSSARY AND INDEX OF
DEFINED TERMS BEGINNING ON PAGE 134 HEREOF.
Fixed interest will be payable on the Series B Senior Notes at the
rate of 13 1/2% per annum, semi-annually in arrears on November 15 and
May 15 of each year, commencing May 15, 1996. Cash Flow Participation
Interest (as defined herein) will be payable on the Series B Senior Notes,
on each such interest payment date, in an aggregate amount equal to 5.0% of
the Authority's Cash Flow (as defined herein) for the six-month period
ending on September 30 or March 31 (each a "Semi-annual Period") most
recently completed prior to such interest payment date up to a limit,
calculated on a cumulative basis with respect to each period consisting of
two consecutive Semi-annual Periods ending on September 30, of $250 million
of the Authority's Cash Flow; PROVIDED that no Cash Flow Participation
Interest shall be payable with respect to any period prior to the earlier
of the first day the Mohegan gaming and entertainment complex being
constructed by the Authority in southeastern Connecticut (the "Mohegan Sun
Casino") commences operations and October 31, 1996. The aggregate amount of
Cash Flow Participation Interest payable in any Semi-annual Period will be
reduced pro rata for reductions in the outstanding principal amount of
Senior Notes occurring prior to the close of business on the record date
immediately preceding such payment of Cash Flow Participation Interest. The
payment of Cash Flow Participation Interest may be deferred if such payment
would cause the Authority's Fixed Charge Coverage Ratio (as defined herein)
for the four consecutive fiscal quarters last completed to be less than
2.0:1 and is subject to other limitations and restrictions described
herein.
The Series B Senior Notes will not be redeemable at the option of the
Authority prior to November 15, 1999 (except as otherwise required by any
governmental authority, commission or other agency with authority to
regulate the Mohegan Sun Casino), after which time the Series B Senior
Notes will be redeemable, in whole or in part, at the option of the
Authority at the redemption prices set forth herein plus accrued and unpaid
interest and liquidated damages, if any, to the date of redemption. Upon
the occurrence of any of certain specific events described in the Indenture
that effect (or could effect) a change of control of the Authority, each
holder of Senior Notes will have the right to require the Authority to
repurchase such holder's Senior Notes at 101% of the principal amount
thereof plus accrued and unpaid interest and liquidated damages, if any, to
the repurchase date, subject to certain limitations and restrictions
described herein. Within 120 days after the last day of each fiscal year of
the Authority, beginning with the fiscal year ending September 30, 1997,
the Authority will be required to offer to purchase, at the prices set
forth herein, outstanding Senior Notes in a principal amount equal to the
sum of (i) 50% of the Authority's Excess Cash Flow (as defined herein),
(ii) 100% of the amount of Deferred Subordinated Interest (as defined
herein) for such fiscal year and (iii) accrued and unpaid interest and
liquidated damages, if any.
The Series B Senior Notes (and any Series A Senior Notes not tendered
in the Exchange Offer) will be senior secured obligations of the Authority
and will rank PARI PASSU in right of payment with any existing and future
senior Indebtedness (as defined herein) of the Authority, including without
limitation, approximately $40 million of equipment lease financing to be
incurred by the Authority (the "Equipment Financing"). In addition, prior
to opening the Mohegan Sun Casino the Authority expects to incur
approximately $12.5 million of senior indebtedness for working capital
purposes (the "Working Capital Financing"), which may be secured by the
same collateral that secures the Senior Notes, on a PARI PASSU basis with
the Senior Notes. The Senior Notes will rank senior to all existing and
future subordinated indebtedness of the Authority, including $40 million
principal amount of Subordinated Notes due 2003 (the "Subordinated Notes")
acquired by Sun International Hotels Limited ("Sun International")
concurrently with the completion of the Offering and any additional
subordinated notes that may be issued to Sun International pursuant to the
$50 million secured completion guarantee provided by Sun International to
fund any cost overruns incurred in connection with completion of the
Mohegan Sun Casino (the "Secured Completion Guarantee"). Payment of
principal on the Subordinated Notes is subordinate to the prior payment in
full of all obligations on all of the Senior Notes, other than (i) certain
redemptions required by a Gaming Regulatory Authority if a holder is
required to be found suitable and is found unsuitable and (ii) repurchases
of Subordinated Notes using funds not accepted by holders of Senior Notes
in an Excess Cash Purchase Offer. The Series A Senior Notes are, and the
Series B Senior Notes will be, secured by note collateral consisting
primarily of a leasehold mortgage on the Mohegan Sun Casino, a security
interest in the personal property of the Mohegan Sun Casino (with certain
exceptions described herein), a pledge of certain cash collateral accounts
and an assignment of cash generated by the Mohegan Sun Casino. Additional
Indebtedness, including senior Indebtedness, may be incurred from time to
time, subject to certain restrictions.
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to
third parties, the Authority believes that, except as otherwise described
<PAGE>
(COVER PAGE CONTINUED)
EXCEPT AS OTHERWISE INDICATED, CERTAIN CAPITALIZED TERMS USED IN THIS
PROSPECTUS HAVE THE MEANINGS ASSIGNED TO THEM IN THE GLOSSARY AND INDEX OF
DEFINED TERMS BEGINNNING ON PAGE 134 HEREOF.
herein, Series B Senior Notes issued pursuant to the Exchange Offer in
exchange for Series A Senior Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such holder
which is an "affiliate" of the Authority within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act; PROVIDED that such
Series B Senior Notes are acquired in the ordinary course of such holder's
business and that such holder does not intend to participate and has no
arrangement or understanding with any person to participate in the
distribution of such Series B Senior Notes.
Prior to consummation of this Exchange Offer, there has been no public
market for the Series B Senior Notes (or the Series A Senior Notes). The
Series A Senior Notes are not, and the Series B Senior Notes are not
expected to be, listed on any securities exchange or authorized for trading
on the Nasdaq system. The Authority does not presently expect that an
active market for the Series B Senior Notes (or the Series A Senior Notes)
will develop. To the extent that an active market for the Series B Senior
Notes (or the Series A Senior Notes) does develop, the market value thereof
will depend on many factors, including, among other things, prevailing
interest rates, general economic conditions, the Authority's financial
condition, the construction and results of operations of the Mohegan Sun
Casino and other factors. Such conditions may cause the Series B Senior
Notes (or the Series A Senior Notes), to the extent that they are traded,
to trade at a discount. See "Risk Factors--Absence of Public Trading."
The Authority has agreed to pay the costs and expenses of the Exchange
Offer.
<PAGE>
ADDITIONAL INFORMATION
The Authority has filed with the Commission a registration statement on
Form S-1 (the "Registration Statement") under the Securities Act with respect to
the Series B Senior Notes offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is hereby made to such exhibit
for a more complete description of the matter involved and each such statement
shall be deemed qualified in its entirety by such reference. For further
information with respect to the Authority, the Tribe and the Series B Senior
Notes, reference is hereby made to the Registration Statement and such exhibits
and schedules filed as a part thereof, which may be inspected, without charge,
at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and at Room 3190, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
upon payment of prescribed fees.
-------------------------------
ENFORCEABILITY OF CIVIL LIABILITIES
THE AUTHORITY, AS AN INSTRUMENTALITY OF THE TRIBE, A FEDERALLY-RECOGNIZED
INDIAN TRIBE, INTENDS TO ASSERT THE DEFENSE OF SOVEREIGN IMMUNITY IN ANY SUIT
BROUGHT WITHOUT THEIR CONSENT. ALTHOUGH THE TRIBE AND THE AUTHORITY HAVE
CONSENTED TO SUIT AND HAVE GRANTED A LIMITED WAIVER OF ANY SOVEREIGN IMMUNITY
DEFENSE THEY MAY HAVE IN CONNECTION WITH THE SENIOR NOTES, THE INDENTURE AND THE
DOCUMENTS RELATED TO THE NOTE COLLATERAL, INCLUDING SUITS AGAINST THE AUTHORITY
TO ENFORCE THE OBLIGATION TO REPAY THE SENIOR NOTES, THE TRUSTEE AND THE HOLDERS
OF THE SENIOR NOTES COULD BE PRECLUDED FROM JUDICIALLY ENFORCING THEIR RIGHTS
AND REMEDIES IF SUCH WAIVER OR CONSENT IS HELD TO BE INEFFECTIVE. THE TRIBE AND
THE AUTHORITY HAVE NOT WAIVED THE DEFENSE OF SOVEREIGN IMMUNITY WITH RESPECT TO
ANY PRIVATE CIVIL SUITS FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS.
ACCORDINGLY, THE HOLDERS OF THE SENIOR NOTES MAY NOT HAVE AN EFFECTIVE REMEDY
AGAINST THE TRIBE OR THE AUTHORITY FOR VIOLATIONS OF THE SECURITIES ACT.
IN ADDITION, THE GAMING DISPUTES COURT OF THE TRIBE HAS BEEN VESTED WITH
EXCLUSIVE JURISDICTION FOR THE TRIBE OVER DISPUTES WITH RESPECT TO THE MOHEGAN
SUN CASINO, INCLUDING ALL DISPUTES RELATING TO THE SENIOR NOTES OR THE
INDENTURE. FEDERAL COURTS MAY NOT HAVE JURISDICTION OVER DISPUTES NOT ARISING
UNDER FEDERAL LAW AND STATE COURTS MAY NOT HAVE JURISDICTION OVER DISPUTES
ARISING ON THE TRIBE'S RESERVATION. MOREOVER, FEDERAL AND STATE COURTS, UNDER
THE DOCTRINE OF COMITY AND EXHAUSTION OF REMEDIES, MAY BE REQUIRED TO DEFER TO
THE JURISDICTION OF THE GAMING DISPUTES COURT OR REQUIRE A PLAINTIFF TO EXHAUST
ITS REMEDIES IN THE GAMING DISPUTES COURT BEFORE BRINGING ANY ACTION IN A
FEDERAL OR STATE COURT.
-2-
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE
INDICATED, CERTAIN CAPITALIZED TERMS USED IN THIS PROSPECTUS HAVE THE MEANINGS
ASSIGNED TO THEM IN THE GLOSSARY AND INDEX OF DEFINED TERMS BEGINNING ON PAGE
132 HEREOF.
THE MOHEGAN SUN CASINO
The Mohegan Tribal Gaming Authority (the "Authority"), an instrumentality
of the Mohegan Tribe of Indians of Connecticut (the "Tribe"), is developing a
gaming and entertainment complex (the "Mohegan Sun Casino") on an approximately
240-acre site located in southeastern Connecticut (the "Site"). The Authority
has engaged Trading Cove Associates ("TCA"), an affiliate of Sun International
Hotels Limited ("Sun International"), to manage the development, construction,
operation and marketing of the Mohegan Sun Casino. The Mohegan Sun Casino,
scheduled to open in the fourth quarter of 1996, will include approximately
150,000 square feet of gaming space and is designed to accommodate approximately
3,000 slot machines and 180 table games. The Mohegan Sun Casino is expected to
commence operations with a minimum of 2,500 slot machines and 180 table games,
and will feature a 600-seat buffet, four specialty theme restaurants, a coffee
shop, a food court, several bars, an entertainment area featuring children's
recreational facilities and parking for approximately 7,500 cars. Once
completed, the Mohegan Sun Casino and the currently operating Foxwoods Resort &
Casino ("Foxwoods"), which is owned and operated by the Mashantucket Pequot
Tribe (the "Pequot Tribe"), will be the only two casinos offering slot machines
and table games in the northeastern United States that are currently legally
authorized outside of Atlantic City, New Jersey.
The Site for the Mohegan Sun Casino is located approximately one mile from
the interchange of Interstate 395 and Connecticut Route 2A (which is expected to
be widened to a four-lane expressway), just outside Montville, Connecticut, and
approximately 10 miles west of Foxwoods. As part of its integrated development
plan, the Authority is constructing a four-lane access road (with its own exit)
from Route 2A, giving patrons of the Mohegan Sun Casino direct access to
Interstate 395 and to Interstate 95, the main highway connecting Boston,
Providence and New York. The Site, together with all buildings constructed and
to be constructed thereon and improvements thereto, including the Mohegan Sun
Casino, are and will be owned by the United States in trust for the Tribe. Such
real property, and the additional parcel of land adjacent to the Site that was
acquired by the Tribe in its own name for expansion of the access road leading
to the Mohegan Sun Casino, are and will be leased by the Tribe to the Authority
under a long-term land lease.
The Mohegan Sun Casino will incorporate an historical northeastern Indian
theme which will be conveyed through architectural features and the use of
natural design elements such as timber, stone and water. Guests will enter the
Mohegan Sun Casino through one of four major entrances, each of which will be
distinguished by a separate seasonal theme--winter, spring, summer and fall--
emphasizing the importance of the seasonal changes to tribal life. The Authority
believes that the Mohegan Sun Casino's location, ease of access and unique
design, together with Sun International's development and gaming expertise,
should enable the Mohegan Sun Casino to capture a significant share of the
gaming market in the northeastern United States.
-3-
<PAGE>
MARKET
The market for the Mohegan Sun Casino will be primarily day-trip customers
from New England and New York who reside within 150 miles of the Mohegan Sun
Casino. According to market research reports, in 1994 there were approximately
2.6 million adults living within 50 miles of the Site, 10.2 million adults
within 100 miles of the Site and 21.8 million adults within 150 miles of the
Site. The metropolitan areas of Hartford, New Haven, Springfield, Worcester,
Boston and Providence are within one to two hours driving time by interstate
highway to the Mohegan Sun Casino.
The Authority believes that the success of Foxwoods supports the conclusion
that the northeastern United States is an attractive market in which to
establish a casino. Foxwoods is currently the largest gaming facility in the
United States in terms of the number of total gaming positions and, the
Authority believes, is one of the most profitable casinos in the United States.
THE MANAGER
Partners of TCA have been working with the Tribe since 1992 and assisted
the Tribe in obtaining federal recognition, negotiating a gaming compact with
the State of Connecticut and obtaining numerous governmental approvals for the
Mohegan Sun Casino. TCA's partners and their affiliates have extensive
experience in the development, construction, marketing and management of casinos
and hotels throughout the world. A wholly-owned subsidiary of Sun International
is a Managing Partner of, and owns a 50% interest in, TCA. The remaining
partners of TCA are primarily engaged in hotel management and real estate
development.
The senior management of Sun International has been actively engaged in the
gaming and lodging industries for the last 25 years. Prior to establishing Sun
International in 1993, Mr. Solomon Kerzner, the Chairman and Chief Executive
Officer of Sun International, and his management team were responsible for the
development and operation of several world-renowned resorts and casinos
including Sun City, The Lost City and The Carousel Casino and Entertainment
World (the "Carousel") in South Africa. Sun City, which was developed over a
14-year period starting in 1979, currently covers approximately 620 acres and
features four hotels with a total of 1,300 rooms and 55,000 square feet of
gaming space with 1,300 slot machines and 40 table games. Sun City caters to
approximately 2.0 million tourists annually. The most recent addition to Sun
City is The Lost City, a highly themed, $300 million destination resort based
upon a legend of a lost African civilization. The Carousel, located 65 miles
from Johannesburg, is a 500,000 square foot Victorian-themed entertainment
facility featuring 65,000 square feet of gaming space with 1,800 slot machines
and 70 table games and caters to over 4.0 million visitors annually.
In 1993, Mr. Kerzner established Sun International to acquire from Resorts
International, Inc. the Paradise Island businesses, which are located in The
Commonwealth of the Bahamas and include the Paradise Island Resort and Casino.
After acquiring these businesses, Sun International spent approximately $140
million over a seven-month period redeveloping the property into an ocean-themed
destination resort that was relaunched as the Atlantis Resort and Casino
("Atlantis"). Atlantis features 1,147 hotel rooms and 30,000 square feet of
gaming space with 800 slot machines and 75 table games. Sun International
currently owns interests in and operates nine resort and gaming facilities,
including Atlantis, four casinos in France and four hotel properties in the
Indian Ocean. On March 1, 1996, Sun International redesignated its two series
of Ordinary Shares as one series of Ordinary Shares, which trade on the New York
Stock Exchange (the "NYSE") under the symbol "SIHLF." Based upon the closing
price of its Ordinary Shares on May 1, 1996, Sun International had an equity
market capitalization of approximately $1.24 billion.
-4-
<PAGE>
In connection with the Offering, Sun International purchased $40 million of
Subordinated Notes. See "--Investment by Sun International." In addition,
subject to certain qualifications and limitations, Sun International has
undertaken to cause the Mohegan Sun Casino to be Completed (as defined herein)
and, pursuant to the Secured Completion Guarantee, has guaranteed the payment of
all project costs owing prior to such completion up to a maximum amount of
$50 million. To the extent Sun International advances funds under the Secured
Completion Guarantee, the Authority will issue to Sun International additional
subordinated notes in a principal amount equal to the funds so advanced. All
existing and future indebtedness of the Authority to Sun International is, and
will be, subordinated to Sun International's obligations under the Secured
Completion Guarantee. See "Material Agreements--Secured Completion Guarantee."
THE TRIBE AND THE AUTHORITY
The Tribe is a federally-recognized Indian tribe, whose federal recognition
became effective May 15, 1994. Although it only recently received federal
recognition, the Tribe has lived in a cohesive community since time immemorial
in what is today southeastern Connecticut. The Tribe historically has cooperated
with the United States and is proud of the fact that members of the Tribe have
fought on the side of the United States in every war from the Revolutionary War
to Desert Storm. The Tribe believes that this philosophy of cooperation
exemplifies its approach to developing the Mohegan Sun Casino. This philosophy
of cooperation, rather than confrontation, has enabled the Tribe to create a
unique alliance among local, state and federal officials to achieve its goal of
building the Mohegan Sun Casino.
The Tribe established the Authority, which has perpetual life, with
exclusive constitutional power to conduct and regulate its gaming activities.
Under the Indian Gaming Regulatory Act of 1988, as amended ("IGRA"),
federally-recognized Indian tribes are permitted to conduct casino gaming
operations on tribal land, subject to, among other things, the negotiation of a
tribal-state compact with the affected state. The Tribe and the State of
Connecticut have entered into such a compact, which has been approved by the
Secretary of the Interior (the "Mohegan Compact"). The Mohegan Compact and
related agreements require that certain payments based on slot machine revenues
be made to the State of Connecticut. Such payments, however, are not required to
be made if the State of Connecticut legalizes any gaming operation with slot
machines or other commercial casino games, other than those conducted by the
Tribe or the Pequot Tribe on tribal lands. See "Business and Property--
Competition."
SOURCES AND USES OF FUNDS
The cost of developing, constructing, equipping and opening the Mohegan Sun
Casino is expected to total approximately $312.5 million, which consists of
$300 million of project development costs and $12.5 million of initial working
capital. The estimated sources and uses of funds for the Mohegan Sun Casino
through the scheduled opening date in the fourth quarter of 1996, as revised
since the Offering to reflect updated cost estimates, are as follows (in
millions):
<TABLE>
<CAPTION>
SOURCES
-------
<S> <C>
Series A Senior Notes . . . . . . . . . . . . . . . . . $175.0
Equipment Financing (a) . . . . . . . . . . . . . . . . 40.0
Subordinated Notes (b) . . . . . . . . . . . . . . . . 40.0
Secured Completion Guarantee (c) . . . . . . . . . . . 45.0
Sources for Project Costs . . . . . . . . . . . . . . . $300.0
-5-
<PAGE>
Working Capital Financing (d) . . . . . . . . . . . . . 12.5
Total Sources. . . . . . . . . . . . . . . . . . . $312.5
------
------
USES (E)
--------
Acquisition of the Site. . . . . . . . . . . . . . . . $29.7
Construction Costs . . . . . . . . . . . . . . . . . . 176.0
Furniture, Fixtures and Equipment . . . . . . . . . . . 18.6
Gaming Equipment . . . . . . . . . . . . . . . . . . . 28.1
Capitalized Interest (f) . . . . . . . . . . . . . . . 18.8
Pre-Opening Expenses . . . . . . . . . . . . . . . . . 18.5
Organizational and Financing Fees and Expenses . . . . 10.3
Contingency (g) . . . . . . . . . . . . . . . . . . . . --
Total Project Costs . . . . . . . . . . . . . . . . . . $300.0
------
------
Initial Working Capital . . . . . . . . . . . . . . . . 12.5
Total Uses . . . . . . . . . . . . . . . . . . . . $312.5
------
------
</TABLE>
- --------------
(a) The Authority has entered into an agreement that provides for up to $40
million of equipment financing (the "Equipment Financing") representing
financing for approximately 2,500 slot machines and certain other
equipment. The Mohegan Sun Casino will be designed to accommodate an
additional 500 slot machines, which the Indenture permits to be financed
through Additional Lease Financing (as defined in the Indenture).
(b) Concurrently with the closing of the Offering, the Subordinated Notes were
purchased by Sun International for $38.3 million in cash and the exchange
of $1.7 million of outstanding indebtedness of the Authority.
(c) Sun International has provided a $50 million secured completion guarantee
(the "Secured Completion Guarantee") to fund any cost overruns. The
obligations of Sun International under the Secured Completion Guarantee are
secured by an irrevocable letter of credit in the amount of $15 million and
a pledge of 1,500,000 Ordinary Shares of Sun International. Because the
costs of constructing, equipping and opening the Mohegan Sun Casino are
expected to exceed the net proceeds of the Offering and the sale of the
Subordinated Notes and the $40 million of Equipment Financing available to
the Authority, the Authority currently anticipates that approximately $45
million will be drawn under the Secured Completion Guarantee. The Secured
Completion Guarantee is subject, however, to a number of important
qualifications, exceptions and limitations. See "Risk Factors--Limitations
Under the Secured Completion Guarantee."
(d) The Authority has entered into an agreement with a third party lender for a
$12.5 million senior working capital line of credit for the Mohegan Sun
Casino (the "Working Capital Financing"). The Indenture permits the Working
Capital Financing to be secured by the Note Collateral on a PARI PASSU
basis with the Senior Notes.
-6-
<PAGE>
(e) The Authority believes that the construction budget for the Mohegan Sun
Casino, as revised since the Offering to reflect updated cost estimates,
changes to the project and unanticipated site conditions (the "Construction
Budget"), is reasonable. The Authority has entered into a guaranteed
maximum price construction contract for the construction of the Mohegan Sun
Casino for a price not in excess of the costs set forth in the Construction
Budget. Given the risks inherent in the construction process, however,
actual construction costs may be significantly higher. See "Risk Factors--
Potential Inability to Commence Operations as Scheduled."
(f) Net of interest income anticipated to be earned on the funds in the Escrow
Account (as defined herein).
(g) Due to the availability of funds under the Secured Completion Guarantee,
no specific funds have been allocated herein as contingency.
DEVELOPMENT AND CONSTRUCTION
The Authority and TCA have developed a master plan for the Site that
integrates all major aspects of gaming and entertainment design. The master plan
places particular emphasis on creating direct highway access, providing
convenient parking, designing an attractively themed facility and developing a
variety of non-gaming entertainment amenities. Morse Diesel International
("Morse Diesel") is serving as general contractor for the Mohegan Sun Casino and
the Authority has entered into a guaranteed maximum price contract with Morse
Diesel for the construction of the Mohegan Sun Casino. Sun International, which
has substantial development experience, is overseeing the development of the
Mohegan Sun Casino. Construction of the Mohegan Sun Casino was commenced after
the closing of the Offering, at which time the Site was purchased and conveyed
to the United States in trust for the Tribe and leased to the Authority. See
"Business and Property--Design and Construction."
REGULATORY APPROVALS
A number of federal, state and tribal governmental licenses and approvals
are required to open and operate the Mohegan Sun Casino. Prior to consummation
of the Offering, the Tribe's management agreement with TCA (the "Management
Agreement") was approved by the Chairman of the National Indian Gaming
Commission (the "NIGC") and the documentation related to the Senior Notes was
approved by the Bureau of Indian Affairs of the Department of the Interior (the
"BIA"). No further approvals from the NIGC are required with respect to the
construction, financing, management and operations of the Mohegan Sun Casino;
however, the NIGC may have the authority, under certain circumstances, to
require modifications of the Management Agreement or to void the Management
Agreement if it is not being implemented in accordance with the conditions
specified upon approval or if TCA or the Authority fails to comply with
applicable laws and regulations. See "Risk Factors--Highly Regulated Industry."
Prior to opening the Mohegan Sun Casino, each of the partners of TCA and
certain employees of the Mohegan Sun Casino must be licensed by relevant tribal
and state authorities. Each of the partners of TCA has applied for and received
temporary gaming licenses from the Commissioner of Revenue Services of the State
of Connecticut. See "Risk Factors--Transkei Investigation." As each employee
who is required to be licensed is hired, the Authority or TCA will cause such
employee to apply for all required licenses.
A number of federal and state approvals are required to construct the
access roads to the Mohegan Sun Casino. The Department of Transportation of the
State of Connecticut ("DOT") or the Authority has obtained all requisite permits
and approvals for the construction of the access road from Route 2A.
-7-
<PAGE>
The Authority and TCA believe that they will be able to acquire all other
necessary licenses, permits and approvals in order to construct, open and
operate the Mohegan Sun Casino. However, no assurances can be given that any or
all of the licenses, permits and/or approvals described above will be issued or
that any or all of such licenses, permits and/or approvals will be issued
without certain conditions or restrictions that could adversely affect the
construction and operation of the Mohegan Sun Casino or the development of the
adjacent roadways. The failure to obtain any of these licenses, permits or
approvals in a timely manner may delay, restrict or prevent the Mohegan Sun
Casino from opening as contemplated herein.
-8-
<PAGE>
THE EXCHANGE OFFER
Registration Rights Agreement. . . To finance the development, construction,
equipping and opening of the Mohegan Sun
Casino, on September 29, 1995 the Authority
sold the Series A Senior Notes to Bear,
Stearns & Co. Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation, as initial
purchasers (the "Initial Purchasers"), for
resale to qualified institutional buyers
and/or to certain institutional accredited
investors within the meaning of Rule 501
under the Securities Act. In connection
therewith, the Authority and the Initial
Purchasers entered into a Registration Rights
Agreement dated as of September 29, 1995 (the
"Registration Rights Agreement"), which
grants the holders of the Series A Senior
Notes certain exchange and registration
rights. The Exchange Offer made hereby is
intended to satisfy such exchange and
registration rights. Each holder who tenders
Series A Senior Notes and receives Series B
Senior Notes in exchange therefor pursuant to
the Exchange Offer shall cease to have any
further exchange or registration rights under
the Registration Rights Agreement. The
Registration Rights Agreement provides that
the Authority may be required, under certain
circumstances specified therein, in lieu of
or in addition to the foregoing, to file with
the Commission (and use its best efforts to
cause to become effective) a shelf
registration statement with respect to the
Senior Notes. Holders of Series A Senior
Notes, if any, who are not permitted, by law
or any policy of the Commission, to
participate in the Exchange Offer and who
satisfy certain other conditions will be
eligible to sell their Series A Senior Notes
pursuant to a resale prospectus when and if
filed by the Authority as part of an
amendment to the Registration Statement of
which this Prospectus is a part. See "The
Exchange Offer--Registration Rights
Agreement," "--Consequences of Failure to
Exchange" and "--Resales of the Series B
Senior Notes."
Liquidated Damages . . . . . . . . The Registration Rights Agreement obligates
the Authority to pay liquidated damages to
the holders of Senior Notes under certain
circumstances if the Authority fails to
comply with the registration requirements
thereof. Pursuant to the Registration Rights
Agreement, the Authority agreed to file a
registration statement under the Securities
Act to effect the Exchange Offer no later
than 30 days after consummation of the
Offering. As a result of the Authority's
failure to file the Registration Statement of
which this Prospectus is a part within such
30-day period and because such Registration
Statement was not declared effective by the
Commission on or before the Effectiveness
Target Date (as defined in the Registration
Rights Agreement), in connection with the
May 15, 1996, interest payment in respect
of the Senior Notes, the
-9-
<PAGE>
Authority paid to the holders of Senior Notes
an aggregate of $95,000 (which equals
approximately $0.54 per $1,000 principal
amount of Senior Notes) in liquidated
damages. See "--Interest Payment Dates,"
"The Exchange Offer--Registration Rights
Agreement."
The Exchange Offer . . . . . . . . The Authority is offering to exchange $175
million aggregate principal amount of Series
B Senior Notes for an equal principal amount
of Series A Senior Notes. The Authority will
issue the Series B Senior Notes on the
earliest practicable date following the
Expiration Date (as defined herein).
Expiration Date. . . . . . . . . . The Exchange Offer will terminate at 5:00
p.m., New York City time, on June 21, 1996,
unless extended by the Authority in its sole
discretion (if and as extended, the
"Expiration Date").
Procedures for Tendering
Series A Senior Notes. . . . . . . Each holder of Series A Senior Notes wishing
to accept the Exchange Offer must complete,
sign and date the accompanying Letter of
Transmittal in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal together with the Series A Senior
Notes and any other required documentation to
the Exchange Agent (as defined herein) at the
address set forth herein. By executing the
Letter of Transmittal, a holder will make
certain representations to the Authority.
See "The Exchange Offer-Registration Rights
Agreement" and "-Procedures for Tendering."
Special Procedures for
Beneficial Owners. . . . . . . . . Any beneficial owner whose Series A Senior
Notes are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and who wishes to tender should
contact such registered holder promptly and
instruct such registered holder to tender on
such beneficial owner's behalf. A form of
Instruction to Registered Holder from
Beneficial Owner is enclosed with this
Prospectus for the convenience of such
beneficial owners. See "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights. . . . . . . . . Tenders may be withdrawn at any time prior to
the Expiration Date.
Acceptance of Series A Senior
Notes and Delivery of
Series B Senior Notes . . . . . . The Authority will accept for exchange any
and all Series A Senior Notes that are
properly tendered in the Exchange Offer, and
not withdrawn, prior to the Expiration Date.
The Series B
-10-
<PAGE>
Senior Notes issued pursuant to the Exchange
Offer will be delivered on the earliest
practicable date following the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Exchange Agent . . . . . . . . . . First Fidelity Bank, n/k/a First Union Bank
of Connecticut, is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer.
Federal Income
Tax Considerations . . . . . . . . The exchange of Series A Senior Notes for
Series B Senior Notes pursuant to the
Exchange Offer should not be a taxable
exchange for federal income tax purposes.
See "Material Federal Income Tax
Considerations."
SERIES B SENIOR NOTES
Securities Offered . . . . . . . . $175,000,000 in aggregate principal amount of
Series B Senior Secured Notes due 2002.
Maturity . . . . . . . . . . . . . November 15, 2002.
Fixed Interest . . . . . . . . . . 13 1/2% per annum, payable semi-annually in
arrears.
Interest Payment Dates . . . . . . May 15 and November 15, commencing May 15,
1996.
Cash Flow Participation
Interest . . . . . . . . . . . . . Cash Flow Participation Interest (as defined
herein) is payable on the Senior Notes, on
November 15 and May 15 of each year, in an
aggregate amount equal to 5.0% of the
Authority's Cash Flow (as defined herein) for
the six-month period ending on March 31 and
September 30 (each, a "Semi-annual Period")
most recently completed prior to such
interest payment date, up to a limit,
calculated on a cumulative basis with respect
to each two consecutive Semi-annual Periods
ending on September 30, of $250 million of
the Authority's Cash Flow; provided that no
Cash Flow Participation Interest shall be
payable with respect to any period prior to
the earlier of the first day the Mohegan Sun
Casino commences operations and October 31,
1996. Payment of all or a portion of any
installment of Cash Flow Participation
Interest may be deferred if (a) the payment
of such portion of Cash Flow Participation
Interest will cause the Authority's Fixed
Charge Coverage Ratio (as defined herein) for
the four consecutive fiscal quarters last
completed prior to such interest payment date
to be less than 2.0:1 on a pro forma basis
after giving effect to the assumed payment of
such Cash Flow Participation Interest but
before giving effect to any interest on the
Subordinated Notes which is then not payable
in cash and (b) the principal of the Senior
Notes corresponding
-11-
<PAGE>
to such Cash Flow Participation Interest has
not then matured and become due and payable
(at stated maturity, upon acceleration, upon
maturity of repurchase obligation or
otherwise). The aggregate amount of Cash Flow
Participation Interest payable in any
Semi-annual Period will be reduced pro rata
for reduction in the outstanding principal
amount of Senior Notes prior to the close of
business on the record date immediately
preceding such payment of Cash Flow
Participation Interest. The payment of Cash
Flow Participation Interest is subject to
certain restrictions set forth herein. See
"Description of Senior Notes--Principal,
Maturity and Interest."
No Sinking Fund. . . . . . . . . . There will be no mandatory sinking fund
payments for the Series B Senior Notes.
Mandatory Redemption . . . . . . . None.
Optional Redemption. . . . . . . . The Series B Senior Notes will not be
redeemable at the option of the Authority
prior to November 15, 1999 (except as
otherwise required by a Gaming Regulatory
Authority (as defined herein)). Thereafter,
the Series B Senior Notes will be redeemable,
in whole or in part, at the option of the
Authority at the redemption prices set forth
herein, together with accrued and unpaid
interest and liquidated damages, if any,
through the redemption date.
Security . . . . . . . . . . . . . The Series B Senior Notes will be (and the
Series A Senior Notes currently are) secured
by the Note Collateral, consisting of, among
other things (i) a first priority leasehold
mortgage (the "Leasehold Mortgage") on the
25-year ground lease from the Tribe to the
Authority with respect to the Site (the
"Lease"), (ii) a first priority security
interest in all of the Authority's furniture,
trade fixtures and equipment, accounts
receivable, general intangibles, inventory
and other personal property (other than
personal property permitted to be financed
and secured, as described elsewhere herein,
or personal property that is not permitted by
applicable law to secure the Senior Notes),
(iii) a first priority security interest in
the proceeds of the Series A Senior Notes
which will remain deposited in an escrow
account until such proceeds have been
disbursed (the "Escrow Account"), (iv) a
first priority security interest in all funds
at any time on deposit in the Replacement
Reserve Account, the Cash Maintenance Account
and the Interest and Excess Cash Flow Account
(as each is defined herein) and (v) an
assignment of material construction contracts
pursuant to which the Mohegan Sun Casino is
to be constructed. In addition, all cash
generated by the Mohegan Sun Casino will be
deposited into an account controlled by the
Trustee for the benefit of the holders of the
Senior Notes (the "Trustee") pending
distribution in accordance with the terms of
-12-
<PAGE>
the Indenture for the Senior Notes (the
"Indenture"). The payment of any management
fee to TCA and distributions to the Tribe
(other than a minimum payment of $50,000 per
month) will be subordinate to the payment of
all interest and principal then due on the
Senior Notes. The Leasehold Mortgage
excludes any interest in the fee title to the
Site, the improvements constructed or to be
constructed thereon and any rights
appurtenant to the fee title. Upon any
foreclosure of the Leasehold Mortgage, the
Trustee would succeed to the rights of the
Authority under the Lease; however,
restrictions under IGRA prohibit the use of
the Mohegan Sun Casino as a gaming facility
by any person other than the Tribe or an
instrumentality of the Tribe, such as the
Authority. Certain other limitations on the
enforcement of remedies may also make less
effective the rights of the holders of the
Senior Notes in the event of a default
thereunder. See "Risk Factors--Potential
Inability to Realize on Note Collateral" and
"Material Agreements--Leasehold Mortgage
Deed." The Authority may require the Trustee
to release portions of the Site from the lien
of the Leasehold Mortgage in order to finance
or develop amenities and other non-gaming
facilities on the Site.
Ranking. . . . . . . . . . . . . . The Series B Senior Notes will be senior
obligations of the Authority and will rank
PARI PASSU in right of payment with other
senior indebtedness that the Authority is
permitted to incur under the terms of the
Indenture, including Series A Senior Notes
not tendered in the Exchange Offer. The
Indenture prohibits the Authority from
incurring any such senior indebtedness, other
than up to $40 million of capital lease or
purchase money obligations, which includes
the Equipment Financing, and up to
$25 million of Working Capital Financing,
which may be secured by the Note Collateral
on a PARI PASSU basis with the Senior Notes.
The Senior Notes are and will be senior in
right of payment to all subordinated
indebtedness of the Authority, including the
Subordinated Notes. The Authority may not
incur aggregate development costs for the
Mohegan Sun Casino in excess of $325 million
without further prior approval of the NIGC.
Change of Control. . . . . . . . . Upon a Change of Control (as defined herein),
subject to certain limitations, each holder
of Senior Notes will have the right, at such
holder's option, to require the Authority to
repurchase such holder's Senior Notes at 101%
of the principal amount thereof plus accrued
and unpaid interest and liquidated damages,
if any, to the date of repurchase. There can
be no assurance that sufficient funds will be
available at the time a Change of Control
occurs to enable the Authority to make all
required repurchases. See "Description of
Senior
-13-
<PAGE>
Notes--Repurchase at the Option of Holders--
Change of Control."
Excess Cash Purchase Offer . . . . Within 120 days after the last day of each
fiscal year of the Authority, beginning with
the fiscal year ending September 30, 1997,
the Authority will be required to make an
offer to purchase (an "Excess Cash Purchase
Offer") outstanding Senior Notes in an amount
equal to the sum of (i) 50% of the Excess
Cash Flow (as defined herein) for such fiscal
year, (ii) 100% of the amount of the Deferred
Subordinated Interest (as defined herein) for
such fiscal year and (iii) accrued interest
to the purchase date and liquidated damages,
if any, on such principal at the purchase
prices set forth below (expressed as a
percentage of the principal amount). To the
extent the Excess Cash Purchase Offer is not
accepted by the holders of the Senior Notes,
the Authority is required to offer to
repurchase outstanding Subordinated Notes in
such amount. See "Description of Senior
Notes--Repurchase at the Option of Holders--
Excess Cash Purchase Offer."
YEAR %
---- -----
1997 113.5
1998 112.0
1999 110.0
2000 105.0
2001 100.0
Other Offers to Purchase . . . . . Under certain circumstances, the Authority
may be required to make an offer to purchase
outstanding Senior Notes following certain
asset sales. In addition, the Authority may
be required to purchase outstanding Senior
Notes following certain events of loss. See
"Description of Senior Notes--Repurchase at
the Option of Holders--Asset Sales" and "--
Event of Loss."
Covenants. . . . . . . . . . . . . The Indenture contains restrictions on, among
other things, the making of certain payments,
the incurrence of liens, incurrence of
additional indebtedness, asset sales, the
leasing and dedication of leased property,
transactions with affiliates, mergers and
consolidations or the transfer of all or
substantially all of the Authority's assets
and business activities. See "Description of
Senior Notes--Certain Covenants."
Secured Completion Guarantee . . . The completion of the Mohegan Sun Casino and
payment of all project costs owing prior to
such completion up to an aggregate maximum
limitation of $50 million is guaranteed on a
secured basis, subject to certain important
qualifications and exceptions, by Sun
International pursuant to the Secured
Completion Guarantee. Sun International's
obligation to complete the Mohegan Sun Casino
does not take effect until
-14-
<PAGE>
and unless the net proceeds of the Offering,
the proceeds from the sale of the
Subordinated Notes and the amounts available
pursuant to the Equipment Financing and the
Working Capital Financing are insufficient to
meet the costs of acquiring the Site and
developing, constructing and opening the
Mohegan Sun Casino. In addition, Sun
International's obligations under the Secured
Completion Guarantee may be suspended as a
result of any force majeure event or other
event outside the control of the Authority or
Sun International, which makes completion of
the Mohegan Sun Casino physically impossible,
commercially impracticable or unlawful. The
Secured Completion Guarantee terminates on
September 30, 1997, or earlier upon the
occurrence of certain events. See "Material
Agreements--Secured Completion Guarantee."
To the extent Sun International advances
funds under the Secured Completion Guarantee,
the Authority will issue to Sun International
additional subordinated notes in a principal
amount equal to the funds so advanced.
The obligations of Sun International under
the Secured Completion Guarantee are secured
in part, by an irrevocable letter of credit
in the amount of $15 million, the entire
amount of which is expected to be drawn to
fund the costs of completion. See "--Sources
and Uses of Funds." In addition, Sun
International Investments Limited, the owner
of approximately 55% of Sun International's
equity shares ("SIIL"), has secured Sun
International's obligations under the Secured
Completion Guarantee with a pledge of
1,500,000 Ordinary Shares of Sun
International. Based upon the closing price
of Sun International's Ordinary Shares on the
NYSE on May 1, 1996, such shares had a market
value of approximately $64.1 million. The
share pledge will be released upon
termination of the Secured Completion
Guarantee. No assurance can be given that
funds available under the Secured Completion
Guarantee, including the collateral securing
such guarantee, will be sufficient to cover
all amounts required to complete the Mohegan
Sun Casino. In addition, the value of the
pledged shares is subject to fluctuations as
market prices change. See "Risk Factors--
Limitations Under the Secured Completion
Guarantee."
Required Deposits. . . . . . . . . The Indenture requires the Authority to
deposit cash on a monthly basis into (i) a
Cash Maintenance Account and (ii) an Interest
and Excess Cash Flow Account. Up to $6
million per year is required to be deposited
into the Cash Maintenance Account up to a
maximum deposit of $36 million. The amount
equal to the accrued interest on the Senior
Notes and the Subordinated Notes and 50% of
Excess Cash Flow is required to be deposited
into the Interest and Excess Cash Flow
-15-
<PAGE>
Account. The Interest and Excess Cash Flow
Account will fund interest payments on the
Senior Notes and any Excess Cash Purchase
Offers. In addition, pursuant to the
Management Agreement the Authority and TCA
have agreed to deposit on a monthly basis up
to an aggregate of $3 million per year into
the Replacement Reserve Account to fund
replacement capital expenditures. The cash in
each of these accounts will be collateral
security for the Senior Notes. See "Risk
Factors--Ability to Realize on Note
Collateral."
INVESTMENT BY SUN INTERNATIONAL
As a result of federal Indian gaming law prohibiting any non-Indian entity,
including TCA or its partners, from owning an equity interest in an Indian
casino, Sun International structured its investment in the Mohegan Sun Casino in
the form of a deferred interest subordinated loan. Sun International purchased,
concurrently with and as a condition to the closing of the Offering, $40 million
in aggregate principal amount of Subordinated Notes. Sun International financed
such purchase with borrowings under a bank credit agreement. If, as is
currently anticipated, Sun International is required to advance funds under the
Secured Completion Guarantee, the Authority will issue to Sun International
additional subordinated notes in a principal amount equal to the amount so
advanced.
Interest on the Subordinated Notes will be deferred and not paid in cash
until (i) at least $87.5 million in aggregate principal amount of the Senior
Notes have been retired (or offered to be retired pursuant to Excess Cash
Purchase Offers) and (ii) the Authority achieves a Fixed Charge Coverage Ratio
of at least 2.5:1 for the prior four fiscal quarters. Deferred interest on the
Subordinated Notes may be paid only if the current interest may be paid in cash
and the Authority achieves a Fixed Charge Coverage Ratio of at least 4.0:1 for
the prior four fiscal quarters. Interest may also be paid in connection with any
redemption or repurchase described below. The Subordinated Notes may not be
accelerated until all obligations under the Senior Notes have been paid in full.
Default under the Senior Notes will not of itself constitute a default under the
Subordinated Notes.
Payment of principal of the Subordinated Notes is subordinate to the prior
payment in full of all obligations on all of the Senior Notes, other than
(i) certain redemptions required by a Gaming Regulatory Authority if a holder is
required to be found suitable and is found unsuitable and (ii) repurchases of
Subordinated Notes using funds not accepted by holders of Senior Notes in an
Excess Cash Purchase Offer. See "Material Agreements--Note Purchase Agreement."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders of Series A Senior Notes in evaluating the Exchange Offer
and by prospective purchasers of Series B Senior Notes issued by the Authority
in the Exchange Offer.
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<PAGE>
RISK FACTORS
HIGH DEGREE OF LEVERAGE
At the time the Exchange Offer is consummated (or shortly thereafter), the
Authority expects to have aggregate long-term senior indebtedness of
approximately $215 million, consisting of $175 million of Senior Notes and $40
million of Equipment Financing, and aggregate long-term subordinated
indebtedness of $40 million. In addition, prior to the time the Mohegan Sun
Casino commences operations the Authority expects to incur $12.5 million of
Working Capital Financing. Based on a recently revised estimate of construction
costs, the Authority expects development, construction, equipping and opening
costs for the Mohegan Sun Casino to be approximately $312.5 million, which
exceeds the proceeds of the foregoing by $45 million and represents an increase
of approximately $52.5 million over previously estimated costs. The remaining
$45 million currently projected to be needed to complete the Mohegan Sun Casino
is expected to be provided by draws under the $50 million Secured Completion
Guarantee provided by Sun International, which will have the effect of
increasing the Authority's outstanding subordinated indebtedness by the amount
of such draws. See "--Limitations Under the Secured Completion Guarantee" and
"Material Agreements--Secured Completion Guarantee."
The Authority's high degree of leverage could have significant consequences
for the holders of the Senior Notes, including, without limitation, the
following: (i) a substantial portion of the Authority's cash flow from
operations will be dedicated to payment of such indebtedness, including payments
to the Replacement Reserve Account, the Interest and Excess Cash Flow Account
and the Cash Maintenance Account; (ii) the Authority's ability to obtain future
additional financing for working capital, capital expenditures and other
purposes may be impaired; and (iii) the Authority may be vulnerable to an
economic downturn which may hamper the Mohegan Sun Casino's ability to meet
expected operating results.
POTENTIAL INABILITY TO REALIZE ON NOTE COLLATERAL
Although the Authority's obligation to repay the Senior Notes is secured by
the Note Collateral, there are substantial restrictions on the Trustee's ability
to realize value by foreclosing on any of the Note Collateral. Under IGRA and
the rules and regulations of the NIGC, only the Tribe or a tribal
instrumentality, such as the Authority, is permitted to have a proprietary
interest in gaming operations. Consequently, if the Trustee (as the mortgagee
under the Leasehold Mortgage) were to foreclose on the Leasehold Mortgage
following an event of default under the Indenture (an "Event of Default"), the
Trustee would not be permitted to conduct, and could not assign the Lease to any
person (other than the Tribe or a tribal instrumentality) for the purpose of
conducting, gaming operations. The Trustee, however, may use the land under the
Lease, or assign the Lease to another person for value, for other commercial
purposes, subject to compliance with the terms of the Lease (including the
payment of rent thereunder). It is unlikely that such other commercial use will
produce revenues sufficient to retire any significant amounts under the Senior
Notes. Accordingly, in the event of a default under the Senior Notes and a
foreclosure by the Trustee on the Leasehold Mortgage, it is not anticipated that
sufficient funds will be available to satisfy any judgment entered against the
Authority in favor of the Trustee or the holders of the Senior Notes. In
addition, other than through the assets of the Authority, the Tribe has no
obligation for the repayment of the Senior Notes and none of the Tribe's assets,
including cash distributions paid by the Authority to the Tribe and the Tribe's
ownership interest in the Site and the Mohegan Sun Casino, will be subject to
attachment, execution or similar process for the payment of any judgment that
may be entered against the Tribe or the Authority. Any foreclosure of the
Leasehold Mortgage may subject the tenant thereof to the risk of contingent
environmental liabilities. See "--Possible Environmental Liabilities."
Furthermore, the ability of the Trustee and/or the holders of the Senior
Notes to foreclose on any of the Note Collateral, upon the occurrence of an
Event of Default or otherwise, will be subject to the provisions of the
documents governing the Note Collateral and, in certain instances, to perfection
and priority issues and to practical
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problems associated with realization of security interests. Upon the occurrence
of an Event of Default, the Trustee may deem it not to be in the best interests
of the holders of the Senior Notes to foreclose upon the Leasehold Mortgage or
other non-cash Note Collateral, thereby enabling the Mohegan Sun Casino to
continue to operate. In such event, as a practical matter, the only Note
Collateral available to the Trustee for payment to the holders of Senior Notes
would be the Replacement Reserve Account, the Cash Maintenance Account, the
Interest and Excess Cash Flow Account and such funds as may be available after
all expenses of the Mohegan Sun Casino, including any amortizing payments on the
Equipment Financing and the Working Capital Financing, and the Minimum Priority
Payment (as defined herein) have been paid. See "Description of Senior Notes--
Ranking and Security." In addition, the ability of the holders of the Senior
Notes to realize upon the Note Collateral will be dependent upon the
availability of a court or other forum with appropriate jurisdiction over the
Tribe and the Authority necessary to enforce such foreclosure rights. See "--
Difficulties in Enforcing Obligations" and "Government Regulation--Tribal Law
and Legal Systems."
The Note Collateral also will secure, on a PARI PASSU basis with the Senior
Notes, the Working Capital Financing. Even if the Trustee elects to foreclose on
the Note Collateral, the actions of the Trustee and the amount the Trustee
ultimately may realize on the Note Collateral for the benefit of the Senior Note
holders may be limited by the actions of the Working Capital Financing lender.
In addition, the Indenture permits future development on the Site, including
hotels, to be separately financed. To finance such developments, the Authority
may require the Trustee to release portions of the Leasehold Mortgage
collateral, thereby reducing the value of the Note Collateral. Such future
developments and the revenues therefrom are not expected to be collateral for
the Senior Notes. See "Description of Senior Notes--Security."
DIFFICULTIES IN ENFORCING OBLIGATIONS
The Authority, as an instrumentality of the Tribe, a federally-recognized
Indian tribe, intends to assert the defense of sovereign immunity in any suit
brought without their consent. Each of the Tribe and the Authority, however, has
consented to suit and has granted a limited waiver of any sovereign immunity
defense it may have in connection with the Senior Notes, the Indenture and the
documents related to the Note Collateral, including suits against the Authority
to enforce its obligation to repay the Senior Notes. Generally, waivers of the
defense of sovereign immunity have been held to be enforceable against Indian
tribes such as the Tribe; however, in the event that such waiver or consent is
held to be ineffective, the Trustee and the holders of the Senior Notes could be
precluded from judicially enforcing their rights and remedies. The Tribe and
the Authority, however, have not waived their sovereign immunity defense with
respect to private civil suits for violations of the federal securities laws.
Accordingly, the holders of the Senior Notes may not have any remedy against the
Tribe or the Authority for violations of federal securities laws.
The Tribe has established the Gaming Disputes Court of the Mohegan Tribe
and vested it with exclusive jurisdiction for the Tribe over disputes with
respect to the Mohegan Sun Casino, including all disputes relating to the Senior
Notes or the Indenture and all disputes or controversies related to gaming
between any person and the Authority, the Tribe or TCA. The Gaming Disputes
Court may be the only forum with jurisdiction over any suits brought against the
Tribe or the Authority. The Gaming Disputes Court has been authorized by the
Tribe's Constitution to consist of at least four judges, none of whom may be
members of the Tribe, and each of whom must be either a retired federal judge or
a Connecticut Attorney Trial Referee (who are attorneys appointed by the
Connecticut Supreme Court). Appeals of the decisions of the trial branch of the
Gaming Disputes Court are heard by the appellate branch of the Gaming Disputes
Court. Matters as to which applicable federal or state courts have jurisdiction
may be brought in such courts. However, the federal courts may not have
jurisdiction over disputes not arising under federal law, and the state courts
may not have jurisdiction over any disputes arising on the Tribe's reservation.
Moreover, the federal and state courts, under the doctrines of comity and
exhaustion of tribal remedies, may be required to defer to the jurisdiction of
the Gaming Disputes Court, or to require that any plaintiff exhaust its remedies
in the Gaming Disputes Court before bringing any action in the federal or state
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court. Thus, there may be no federal or state court forum with respect to a
dispute relating to the Senior Notes, the Indenture or documents governing or
relating to gaming. In addition, the Authority may not be a "person" under the
federal Bankruptcy Act, and, consequently, may not be able to become a debtor
under the federal bankruptcy laws. Thus, no assurance can be given that, if an
Event of Default occurs, any forum will be available to the holders of the
Senior Notes other than the Gaming Disputes Court. Because the Tribal
Constitution and the laws of the Tribe have only been recently established,
there are no guiding precedents for the interpretation of Tribal law. Any
execution of a judgment of the Gaming Disputes Court will require the
cooperation of the Tribe's officials in the exercise of their police powers.
Thus, to the extent that a judgment of the Gaming Disputes Court must be
executed on Tribal lands, the practical realization of any benefit of such a
judgment will be dependent upon the willingness and ability of the Tribal
officials to carry out such judgment.
The Tribe is permitted to amend the provisions of its Constitution that
establish the Authority and the Gaming Disputes Court with the approval of
two-thirds of the members of the Tribal Council and a ratifying vote of a
two-thirds majority of all votes cast, with at least 40% of the registered
voters of the Tribe voting. However, prior to the enactment of any such
amendment by the Tribal Council, any non-tribal party will have the opportunity
to seek a ruling from the Appellate Division of the Gaming Disputes Court that
the proposed amendment would constitute an impermissible impairment of contract.
The Tribe's Constitution prohibits the Tribe from enacting any law that would
impair the obligations of contracts entered into in furtherance of the
development, construction, operation and promotion of Gaming on Tribal lands.
Amendments to this provision of the Tribe's Constitution require the affirmative
vote of 75% of all registered voters of the Tribe. Amendment to any of such
provisions of the Tribe's Constitution could adversely affect the ability of the
holders of Senior Notes to enforce the obligations of the Authority on the
Senior Notes.
COMPETITION
The gaming industry is characterized by intense competition among entities
that, in many instances, have greater resources than will the Authority. Because
the Mohegan Sun Casino will be marketed primarily to the day- trip customer, it
expects to compete primarily with other casinos within 150 miles and, to a
lesser extent, with casinos in Atlantic City, New Jersey. Currently, Foxwoods is
the only casino in operation within 150 miles of the Site. However, Foxwoods is
located approximately 10 miles from the Site and is currently the largest gaming
facility in the United States in terms of the number of total gaming positions.
In addition, Foxwoods offers a number of amenities that the Mohegan Sun Casino
does not currently plan to offer in its initial development, including hotels
and extensive entertainment facilities. Foxwoods has been in operation for
nearly four years and the Authority believes that Foxwoods' successful operation
has enabled it to build financial resources that are currently substantially
greater than the Authority's or the Tribe's. Although the Authority believes
Foxwoods' profitability indicates that there is substantial market demand for
gaming in the northeastern United States, there can be no assurance that the
population base within 150 miles of the Site will support both Foxwoods and the
Mohegan Sun Casino.
Currently, outside of Atlantic City, New Jersey, casino gaming in the
northeastern United States may be conducted only by federally-recognized Indian
tribes operating under IGRA. In addition to the Pequot Tribe, which operates
Foxwoods, a federally-recognized tribe in Rhode Island and a
federally-recognized tribe in Massachusetts each are currently seeking to
establish gaming operations. In addition, a number of tribes in New England are
seeking federal recognition in order to establish gaming operations. The
Authority cannot predict whether any of these tribes will be successful in
establishing gaming operations, and if established, whether such gaming
operations will have a material adverse effect on the proposed operations by the
Authority.
In addition, a number of states, including Connecticut, have investigated
legalizing casino gaming by non-Indians in one or more locations. However, under
the Mohegan Compact and the tribal-state compact between the Pequot Tribe and
the State of Connecticut, and agreements related thereto, if Connecticut
legalizes any gaming operations other than pursuant to IGRA (I.E., by an Indian
tribe on Indian land) with slot machines or other
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commercial casino games, the Pequot Tribe and the Tribe will no longer be
required to make payments related to slot machine revenues. In 1995, the State
of Connecticut made a request for proposals for the possible development of a
casino in Bridgeport, Connecticut, but in November 1995, the Connecticut
legislature declined to adopt special legislation authorizing such casino
operations. The Authority is unable to predict whether the Connecticut
legislature will consider other gaming initiatives or reconsider the Bridgeport
proposal, or the ultimate outcome of any such deliberations.
Although the Mohegan Sun Casino will be dependent primarily upon gaming
customers residing within 150 miles of the Mohegan Sun Casino, the Authority
also will compete for customers with casinos in Atlantic City, New Jersey, many
of which have greater resources and greater name recognition than the Mohegan
Sun Casino.
POTENTIAL INABILITY TO COMMENCE OPERATIONS AS SCHEDULED
Construction projects such as the Mohegan Sun Casino are inherently subject
to significant development and construction risks, including, but not limited
to, labor disputes, shortages of material and skilled labor, weather
interference, unforeseen engineering problems, unforeseen environmental problems
(including asbestos, lead and hazardous waste removal), fire, natural disasters,
geological, construction, demolition, excavation, regulatory and/or equipment
problems and unanticipated cost increases, any of which could give rise to
delays or cost overruns. Such risks may be compounded by the Authority's
decision to construct the Mohegan Sun Casino utilizing an accelerated
construction schedule under which construction begins before final plans are
completed.
To reduce the risk of cost overruns, the Authority has entered into a
guaranteed maximum price contract with Morse Diesel, the general contractor, for
the construction of the Mohegan Sun Casino. The maximum price of such contract,
however, is subject to modification based upon the occurrence of certain events,
such as certain design change orders and costs associated with certain types of
construction delays, including, in certain cases, force majeure events.
Unforeseen delays in obtaining required road construction and other permits
could delay the completion of the Mohegan Sun Casino. See "--Highly Regulated
Industry." Construction in the northeastern United States is also subject to a
number of weather related risks. An earlier than expected winter, a delayed
spring, unexpected rain, storms or other bad weather may have the effect of
delaying completion and/or increasing the costs of the construction. There is no
assurance that the Mohegan Sun Casino will commence operations on schedule or
that construction costs for the Mohegan Sun Casino will not exceed budgeted
amounts. The $312.5 million estimated cost of developing, constructing,
equipping and opening the Mohegan Sun Casino exceeds the proceeds of the sale of
the Senior Notes and the Subordinated Notes and funds available or expected to
be made available pursuant to the Equipment Financing and the Working Capital
Financing. Accordingly, the Authority anticipates drawing approximately $45
million under the Secured Completion Guarantee. See "--Limitations Under
Secured Completion Guarantee" and "Material Agreements--Secured Completion
Guarantee." Failure to complete the Mohegan Sun Casino within the budget or on
schedule may have a material adverse effect on the results of operations and
financial condition of the Authority.
The Authority may not obligate itself to pay development costs in excess of
$325 million without the further consent of the NIGC. No assurance can be given
that if expenditures in excess of $325 million are required for completion of
the Mohegan Sun Casino, such NIGC consent can be obtained.
LIMITATIONS UNDER THE SECURED COMPLETION GUARANTEE
Sun International has executed the Secured Completion Guarantee under which
it has guaranteed, subject to certain important limitations, completion of the
Mohegan Sun Casino and payment of all design, construction and opening costs
prior to such completion up to a maximum aggregate amount of $50 million.
Because Sun International has given its Secured Completion Guarantee, the
Authority has not budgeted any funds as contingency in the event of a cost
overrun. To pay the revised estimated $312.5 million cost of completing
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and opening the Mohegan Sun Casino, the Authority expects to draw approximately
$45 million under the Secured Completion Guarantee. Accordingly, no
assurance can be given that funds available under the Guarantee, including
the collateral securing such guarantee, will be sufficient to cover all
amounts required to complete the Mohegan Sun Casino.
The Secured Completion Guaratee is subject to a number of important
qualifications, exceptions and limitations.
Sun International's obligation to provide funds pursuant to the Secured
Completion Guarantee does not take effect until and unless the proceeds of the
Offering, the sale of the Subordinated Notes, the Equipment Financing and the
Working Capital Financing are insufficient to meet the costs of acquiring the
Site and developing, constructing and completing the Mohegan Sun Casino. In
addition, Sun International's obligations under the Secured Completion Guarantee
are suspended during the pendency of any force majeure event (a "Force Majeure
Event"), which includes fire or other casualty; governmental preemptions in
connection with a national emergency; breakdowns, accident or other acts of God;
acts of war, insurrection, civil strife and commotion; certain failures of
supply; any enactment, promulgation or amendment of any statute, rule, order or
regulation of any legislature or governmental agency or any subdivision thereof;
any litigation not caused by Sun International, or any other event that occurs
after the date of the Secured Completion Guarantee outside of the control of the
Authority or Sun International; in each case which shall make it physically
impossible, unlawful or commercially impracticable to cause the Mohegan Sun
Casino to be completed. The legalization of casino gaming at any other location
in New England, including Bridgeport, however, will not be deemed to constitute
a Force Majeure Event. The Secured Completion Guarantee terminates upon the
earliest to occur of (i) any action by the United States Congress, the
Authority, the Tribe, the Tribe's council or any other entity of the Tribe, any
legislature that has jurisdiction or any governmental agency, the result of
which is that gaming as currently proposed to be conducted at the Mohegan Sun
Casino is substantially diminished, (ii) September 30, 1997, (iii) the time
immediately prior to the acceleration of all or any portion of the amounts due
under the Senior Notes, (iv) the Management Agreement or the Lease shall have
been terminated or become unenforceable in any material respect, (v) the Senior
Notes shall have been repaid in full and (vi) the Authority shall have
repudiated the Management Agreement. See "Material Agreements--Secured
Completion Guarantee."
The obligations of Sun International under the Secured Completion Guarantee
are secured in part by an irrevocable letter of credit in the amount of
$15 million. In addition, SIIL has secured Sun International's obligations
under the Secured Completion Guarantee with a pledge of 1,500,000 Ordinary
Shares of Sun International. As a result of the recent increases in the
Construction Budget, approximately $45 million, including the entire amount
available under the letter of credit, is expected to be drawn to fund
construction of the Mohegan Sun Casino. See "Prospectus Summary--Sources and
Uses of Funds." If, as is anticipated, the entire amount under the letter of
credit is drawn, Sun International's remaining obligations under the Secured
Completion Guarantee will be secured only by the pledged Sun International
shares. Based upon the closing price of Sun International's Ordinary Shares on
the NYSE on May 1, 1996, such shares had a market value of approximately $64.1
million. No assurance can be given as to the amount of proceeds, if any, that
the Trustee would realize upon a foreclosure and sale of such shares in order to
satisfy the obligations under the Secured Completion Guarantee. The market price
of the Sun International stock is subject to change from time to time. If the
Secured Completion Guarantee is called upon, the value of the pledged Sun
International stock may decrease as the result of Sun International's
requirement to make additional investments in the Mohegan Sun Casino or if such
shares are required to be sold to fund the Secured Completion Guarantee. The
terms of the pledge agreement provide that the Trustee may foreclose upon the
pledged shares only after obtaining a final judgment from a court of competent
jurisdiction that Sun International has breached its obligations under the
Secured Completion Guarantee. Accordingly, there may be a substantial delay in
realizing any proceeds from the share pledge. The share pledge will be released
upon termination of the Secured Completion Guarantee.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or chemical
releases at such property, and may be held liable to a governmental entity or to
third parties for property damage, personal injury and for investigation and
cleanup costs incurred by such parties in
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connection with the contamination. Such laws typically impose cleanup
responsibility and liability without regard to whether the owner knew of or
caused the presence of the contaminants, and the liability under such laws has
been interpreted to be joint and several unless the harm is divisible and there
is a reasonable basis for allocation of responsibility. The costs of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate such
property, may adversely affect the owner's ability to rent such property or to
borrow using such property as collateral. In addition, the owner or former
owners of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from a
site.
The Site was formerly occupied by United Nuclear Corporation ("UNC"), a
naval products manufacturer of, among other things, nuclear reactor fuel
components. UNC's facility was officially decommissioned on June 8, 1994 when
the Nuclear Regulatory Commission ("NRC") confirmed that all licensable
quantities of special nuclear material ("SNM") had been removed from the Site
and that any residual SNM contamination was remediated in accordance with the
NRC approved decommissioning plan.
From 1991 through 1993, UNC commissioned an environmental consultant to
perform a series of environmental audits and reports on the Site. The
environmental audits and soil sampling programs detected, among other things,
volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and
groundwater. Extensive remediation of contaminated soils and additional
investigations were completed. By letter dated March 20, 1995, the State of
Connecticut Department of Environmental Protection approved the remediation
report for the Site.
Although the Site currently meets all applicable federal, state and local
remediation requirements, no assurance can be given that the various
environmental reports or any other existing environmental studies with respect
to the Site revealed all environmental liabilities, that any prior owners or
tenants of the Site did not create any material environmental condition not
known to the Authority, that future laws, ordinances or regulations will not
impose any material environmental liability, or that a material environmental
condition does not otherwise exist on the Site. Future remediation may be
necessary if excavation and construction exposes contaminated soil which has
otherwise been deemed isolated and not subject to cleanup requirements.
Certain federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of building
remodeling, renovation or demolition. Such laws may impose liability for release
of ACMs and may entitle third parties to seek recovery from owners or operators
of real properties for personal injury associated with ACMs. In December 1994
UNC hired an asbestos contractor who removed all exposed asbestos insulations.
In addition, it is contemplated that ACMs will be removed as part of the
construction of the Mohegan Sun Casino. However, no assurance can be given that
additional future asbestos removal will not be necessary.
UNCERTAINTY OF FUTURE OPERATING RESULTS
The Mohegan Sun Casino is a development stage entity that has not commenced
operations and, accordingly, is subject to all of the risks inherent in the
establishment of a new business enterprise. Although the Authority has engaged
the management services of TCA, a partnership whose partners have substantial
experience in the development and management of resorts and gaming facilities,
the ability of the Authority to meet its debt service obligations will be
entirely dependent upon the future financial performance of the Mohegan Sun
Casino, which is subject to financial, economic, political, competitive,
regulatory and other factors, many of which are beyond its control. While the
Authority expects that its operating cash flow will be sufficient to cover its
expenses, including interest costs, there can be no assurance with respect
thereto. If the Authority is unable to generate sufficient cash flow, it could
be required to reduce or delay planned capital expenditures, dispose of certain
assets, and/or seek to restructure some or all of its debt. There can be no
assurance that any of these alternatives could be effected, if at all, on
satisfactory terms.
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HIGHLY REGULATED INDUSTRY
Gaming on Indian land is regulated by federal, state and tribal governments
and may be adversely affected by changes in the law. There is currently
legislation proposed in the United States Congress to place a moratorium on new
Indian casinos. If such legislation passes before the Mohegan Sun Casino is
completed and if such legislation does not exclude projects under construction,
such legislation would have a material adverse effect on the ability of the
Authority to repay the Senior Notes. There is also legislation proposed in the
United States Congress to modify other provisions of IGRA and future litigation
may be expected to challenge the constitutionality of the Act as it presently
exists. See "Government Regulation--The Indian Gaming Regulatory Act of 1988."
In addition, from time to time, various governmental officials have proposed to
tax casino gaming or to otherwise restrict or limit casino gaming. No assurance
can be given that such legislation or other legislation in the future will not
have a material adverse effect on the operations or the proposed operations of
the Mohegan Sun Casino. In addition, under federal law, gaming on Indian land is
dependent on the permissibility under state law of certain forms of gaming or
similar activities. If the State of Connecticut were to make various forms of
gaming illegal or against public policy, then such action may have an adverse
effect on the ability of the Authority to conduct gaming. Connecticut currently
permits, among other things, a state lottery, Jai-Alai fronton betting and
off-track betting parlors. The Authority believes that Connecticut is unlikely
to make gaming against public policy due to the amount of payments derived from
gaming activities currently being received by the State.
The NIGC approved the Management Agreement on September 29, 1995 and no
further approvals from the NIGC are required with respect to the construction,
financing, management and operations of the Mohegan Sun Casino; however, the
NIGC retains jurisdiction to require modifications of or to void a previously
approved agreement to the extent the NIGC receives information indicating that
such agreement is not being implemented in accordance with the conditions
specified upon approval (which may include environmental standards) or if the
parties thereto fail to comply with applicable laws and regulations. In
addition, any renewal and extension of term of the Management Agreement will
require further approval of the NIGC. The Authority does not expect that it or
the Tribe will incur material liability to TCA in the event the NIGC exercises
its limited authority to re-review the Management Agreement or if legislative
changes are enacted that affect the terms of the Management Agreement; however,
the NIGC's modification or voiding of the Management Agreement, or the failure
of the NIGC to approve any renewal or extension of the same, could have a
material adverse effect on the results of operations of the Mohegan Sun Casino.
Prior to opening the Mohegan Sun Casino, each of the partners of TCA and
certain employees of the Mohegan Sun Casino must be licensed by relevant tribal
and state authorities. Each of the partners of TCA has applied for and received
temporary gaming licenses from the Commissioner of Revenue Services of the State
of Connecticut. As each employee who is required to be licensed is hired, the
Authority or TCA will cause such employee to apply for all required licenses.
A number of federal and state approvals are required to construct the
access roads to the Mohegan Sun Casino. DOT or the Authority has obtained all
requisite permits and approvals for the construction of the access road off of
Route 2A. During a special session of the Connecticut State Senate held to
consider the approval of a gaming facility in Bridgeport, Connecticut, which was
to be owned and operated by the Pequot Tribe, the Tribe testified before the
Connecticut Senate Public Safety Committee that, if the Bridgeport Casino
project were approved, the Authority would no longer be required to make slot
revenue payments to the State of Connecticut. Shortly after the Tribe's
testimony, it was reported in certain Connecticut newspapers that officials of
the State of Connecticut disagreed with the Tribe's position and had stated that
regulatory approvals required for the construction of the Mohegan Sun Casino may
be delayed. The Connecticut State Senate rejected the Bridgeport casino project
on November 16, 1995. Although the Authority has received from the State of
Connecticut substantially all of the permits required to construct the Mohegan
Sun Casino and adjacent roadways as planned, there can be no assurance that any
of such permits will not be revoked or that any additional permits that may be
required will be granted in a timely manner.
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The Authority and TCA believe that they will be able to acquire all other
necessary licenses, permits and approvals in order to construct, open and
operate the Mohegan Sun Casino. However, no assurances can be given that any or
all of the licenses, permits and/or approvals described above will be issued or
that any or all of such licenses, permits and/or approvals will be issued
without certain conditions or restrictions that could adversely affect the
construction and operation of the Mohegan Sun Casino or the development of the
adjacent roadways. The failure to obtain any of these licenses, permits or
approvals in a timely manner may delay, restrict or prevent the Mohegan Sun
Casino from opening as contemplated herein. See "Government Regulation."
LACK OF EXPERIENCED PERSONNEL
The Authority anticipates that approximately 4,000 full time employees will
be required to operate the Mohegan Sun Casino. Although the Authority and TCA
believe that they will be able to attract and train qualified individuals to
operate the Mohegan Sun Casino, there is no assurance that they will be able to
do so. In addition, the Authority and TCA will be obligated to give preference
in hiring first to qualified members of the Tribe (and qualified spouses and
children of members of the Tribe), and second to members of other Indian tribes.
There is no assurance that the Authority will be able to hire qualified
individuals satisfying such criteria. If the Authority is able to hire qualified
individuals satisfying these criteria, the costs of hiring such individuals
could be significantly higher than if the Authority was not bound by these
hiring criteria. See "Material Agreements--Management Agreement."
RELIANCE UPON TCA
The Mohegan Sun Casino's profitability will be largely dependent upon the
efforts and skills of TCA, which has exclusive responsibility for developing,
marketing and managing the Mohegan Sun Casino. No assurance can be given that
the operating results achieved by Sun International or the other partners of TCA
in their other projects will be achieved by the Mohegan Sun Casino.
TRANSKEI INVESTIGATION
Shortly after the Connecticut legislature declined to adopt special
legislation authorizing casino operations in Bridgeport, the Connecticut press
reported that Connecticut Governor Rowland had made statements questioning the
suitability of Sun International and Mr. Solomon Kerzner, its Chairman and Chief
Executive Officer, to hold a gaming license in Connecticut and to participate in
the management of the Mohegan Sun Casino. Such statements were based on
matters that occurred in 1986 in the Transkei, a former "tribal homeland" that
was regarded by South Africa as an independent country but not recognized by the
international community, relating to an alleged improper payment of $450,000
made to George Matanzima, then Prime Minister of the Transkei, who was
overthrown by a military coup in 1988. Prior to the press report, the Transkei
matter had been disclosed to the Tribe and the Authority, the NIGC and the
Connecticut State Police and, following an investigation, the NIGC and the Tribe
approved Sun International and Mr. Kerzner as a partner in TCA. In addition,
the State of Connecticut issued to Mr. Kerzner a temporary gaming license as
part of its ordinary licensing procedures.
In April 1994, as part of South Africa's new constitutional process, the
Transkei was reincorporated into South Africa and the Attorney General of the
Transkei is now an official of the South African judicial system. In October
1995, Mr. Kerzner, although not officially notified, learned that the Attorney
General of the Transkei had requested that the South African police investigate
the 1986 payment. A recent report of the investigating police officer, made
available to the attorneys for the companies involved in accordance with South
African law, states that, in allowing the payment to be made, Mr. Kerzner acted
without any personal benefit in an effort to protect what Mr. Kerzner believed
to be legitimate rights of the companies involved, which rights were being
threatened by Matanzima. The police report also describes Matanzima's action as
being tantamount to commercial extortion. It has recently been reported in the
press that the same South African police officer in charge of the investigation
stated that the Attorney General of the Transkei had decided that Mr. Kerzner
will not
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be charged but that one of the companies in which Mr. Kerzner was chairman and
chief executive officer at the time may be charged with infringing provisions of
the Transkei penal code. Sun International has no interests in such company.
Despite such reports, until the case is officially closed, the Authority is
unable to predict the ultimate outcome of this matter.
The Transkei events, which occurred nearly 10 years ago, have not affected
the ability of Sun International or Mr. Kerzner to be licensed in the
jurisdictions in which Sun International operates. After disclosure to all
applicable licensing authorities of the facts surrounding the Transkei matter,
and following investigations, Sun International and Mr. Kerzner were issued and
currently hold gaming licenses in The Bahamas and France, and companies in
southern Africa of which Mr. Kerzner has been chairman and chief executive
officer, including Sun Bop, hold gaming licenses in South Africa, including the
Transkei region. Although at this time the Transkei matter has not affected the
licensing qualifications of Mr. Kerzner or Sun International, no assurance can
be given that Mr. Kerzner's or Sun International's licensing qualifications,
including with respect to the Mohegan Sun Casino, will not be affected in the
future. Any adverse change in Mr. Kerzner's or Sun International's licensing
qualifications could have a material adverse affect on the operations of the
Mohegan Sun Casino.
LACK OF PUBLIC MARKET FOR THE SECURITIES
The Senior Notes are the Authority's first issuance of securities, have no
established trading market and may not be widely distributed. Pursuant to the
Exchange Offer, the Authority is offering to exchange freely tradeable
registered Series B Senior Notes for the outstanding Series A Senior Notes, but
the Authority does not intend to apply to list either the Series A Senior Notes
or the Series B Senior Notes on any stock exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System. The
Senior Notes are expected to be eligible for trading in the Private Offering,
Resale and Trading through Automatic Linkages market. There can be no
assurance, however, that a trading market for the Senior Notes will develop or
will provide liquidity to the holders thereof. Historically, the market for
non-investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to the Senior Notes.
There can be no assurance that, if a market for the Senior Notes were to
develop, such a market would not be subject to similar disruptions. See "The
Exchange Offer--Registration Rights Agreement."
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THE EXCHANGE OFFER
REGISTRATION RIGHTS AGREEMENT
To finance the development, construction, equipping and opening of the
Mohegan Sun Casino, the Authority on September 29, 1995 sold the Series A Senior
Notes to Bear, Stearns & Co. Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchasers, for resale to qualified institutional buyers
and/or to certain institutional accredited investors within the meaning of Rule
501 under the Securities Act. In connection therewith, the Authority and the
Initial Purchasers entered into a Registration Rights Agreement which grants the
holders of the Series A Senior Notes certain exchange and registration rights.
Pursuant to the Registration Rights Agreement, the Authority agreed to file with
the Commission a registration statement under the Securities Act with respect to
an offer to exchange the Series B Senior Notes for the Series A Senior Notes
(the "Exchange Offer Registration Statement") no later than 30 days following
the date of the Registration Rights Agreement (the "Closing Date"), to use its
best efforts to cause such registration statement to become effective under the
Securities Act at the earliest possible time, but in no event later than 120
days after the Closing Date and, upon effectiveness of such registration
statement, to commence the Exchange Offer and use its best efforts to issue, on
or prior to the expiration of 30 business days following the date on which the
Exchange Offer Registration Statement is declared effective by the Commission,
Series B Senior Notes in exchange for all Series A Senior Notes properly
tendered in the Exchange Offer and not withdrawn. The Authority also agreed to
include in this Prospectus certain information necessary to allow a broker-
dealer who holds Series A Senior Notes that were acquired for its own account as
a result of market-making activities or other ordinary course trading activities
(other than Series A Senior Notes acquired directly from the Authority) to
exchange such Series A Senior Notes pursuant to the Exchange Offer and to
satisfy the prospectus delivery requirements in connection with resales of
Series B Senior Notes received by such broker-dealer in the Exchange Offer and
to maintain the effectiveness of the Exchange Offer Registration Statement for
such purposes for one year. See "Plan of Distribution."
In addition, the Authority agreed, pursuant to the Registration Rights
Agreement, to file a shelf registration statement (the "Shelf Registration
Statement") pursuant to Rule 415 under the Securities Act (which may be an
amendment to the Exchange Offer Registration Statement of which this Prospectus
is a part), registering for resale (i) any Series A Senior Notes held by persons
who are not permitted by law or any policy of the Commission to participate in
the Exchange Offer, (ii) any Series B Senior Notes acquired in the Exchange
Offer by any holder who must comply with the Prospectus delivery requirements of
the Securities Act in connection with the resales of such Series B Senior Notes
and for which this Prospectus is not appropriate or available for such resales
by such holder or (iii) any Series A Senior Notes held by a broker-dealer which
were acquired directly from the Authority or one of its affiliates. To
participate in such a shelf registration, any such holder of Senior Notes must
furnish to the Authority, in writing, within 20 business days after receipt of a
request therefor, such information specified in Item 507 of Regulation S-K under
the Securities Act. The Authority agreed to file with the Commission the Shelf
Registration Statement (which may be an amendment to the Exchange Offer
Registration Statement of which this Prospectus is a part) no later than 30 days
after receipt of notice from a holder described above that a Shelf Registration
Statement is required and to use its best efforts to keep such Shelf
Registration Statement continually effective, supplemented and amended to the
extent necessary to ensure that it is available for resales of Senior Notes for
a period of at least three years following the Closing Date.
If (i) the Authority fails to file any of the registration statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (ii) any of such registration statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Authority fails to
consummate the Exchange Offer within 30 business days after the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (iv)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable
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for its intended purpose without being succeeded immediately by a post
effective amendment to such registration statement that cures such failure
and that is itself declared effective within a five business day period (each
such event referred to in clauses (i) through (iv) above, a "Registration
Default"), the Authority has agreed to pay as liquidated damages to each
holder of Senior Notes to which such registration statement or amendment
relates, for the first 90-day period immediately following the occurrence of
such failure, an amount equal to $.05 per week per $1,000 principal amount of
Series A Senior Notes constituting the Senior Notes held by such holder for
each week or portion thereof that such Registration Default continues. The
amount of liquidated damages increases by an additional $.05 per week per
$1,000 principal amount of Series A Senior Notes constituting the Senior
Notes held by such holder for each subsequent 90-day period until the
applicable registration statement or amendment is declared effective or again
becomes effective, as the case may be, up to a maximum amount of liquidated
damages of $.50 per week per $1,000 principal amount of Series A Senior Notes
constituting the Senior Notes held by such holder. As a result of the
Authority's failure to file the Registration Statement of which this
Prospectus is a part within 30 days after the Closing Date and because such
Registration Statement was not declared effective by the Commission on or
before the Effectiveness Target Date, in connection with the May 15, 1995
interest payment in respect of the Senior Notes, the Authority was obligated
to pay to the holders of Senior Notes an aggregate of $95,000 in liquidated
damages (which equals approximately $0.54 per $1,000 principal amount of
Senior Notes). Additional liquidated damages will be payable in the event
the Authority fails to consummate the Exchange Offer within 30 days after the
effectiveness of the Exchange Offer Registration Statement. Accrued
liquidated damages will be paid by the Authority on November 15, 1996, the
next date on which interest on the Senior Notes becomes due and payable. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Exchange Offer Registration Statement of which this Prospectus is a part.
This Prospectus covers the offer and sale of the Series B Senior Notes
pursuant to the Exchange Offer made hereby and the resale of Series B Senior
Notes received in the Exchange Offer by any broker-dealer who holds Series A
Senior Notes acquired for its own account as a result of market-making
activities or other trading activities (other than Series A Senior Notes
acquired directly from the Authority or one of its affiliates).
Except as set forth above, after consummation of the Exchange Offer,
holders of Senior Notes will have no registration or exchange rights under the
Registration Rights Agreement. See "-Consequences of Failure to Exchange," and
"-Resales of the Series B Senior Notes."
CONSEQUENCES OF FAILURE TO EXCHANGE
Series A Senior Notes which are not exchanged for Series B Senior Notes
pursuant to the Exchange Offer and are not included in a resale prospectus
which, if required, may be filed as part of an amendment to the Registration
Statement of which this Prospectus is a part, will remain restricted securities.
Accordingly, such Series A Senior Notes may be resold (i) to the Authority (upon
redemption thereof or otherwise), (ii) so long as the Series A Senior Notes are
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a "qualified institutional buyer" within the meaning of
Rule 144A under the Securities Act, purchasing for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or other transfer is being made in reliance on Rule 144A, (iii)
in an offshore transaction in accordance with Regulation S under the Securities
Act, (iv) pursuant to an exemption from registration in accordance with Rule 144
(if available) under the Securities Act, (v) in reliance on another exemption
from the registration requirements of the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United States
and subject to certain requirements of the registrar or co-registrar being met,
including receipt by the registrar or co-registrar of a certification and (in
the case of (v)) an opinion of counsel reasonably acceptable to the Authority
and the registrar.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in the Prospectus
and in the accompanying Letter of Transmittal, the Authority will accept any and
all Series A Senior Notes validly tendered and not withdrawn
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prior to the Expiration Date. The Authority will issue $1,000 principal amount
of Series B Senior Notes in exchange for each $1,000 principal amount of
outstanding Series A Senior Notes accepted in the Exchange Offer. Holders may
tender some or all of their Series A Senior Notes pursuant to the Exchange
Offer; however, the Series A Senior Notes may be tendered only in integral
multiples of $1,000 principal amount.
The form and terms of the Series B Senior Notes are the same as the form
and terms of the Series A Senior Notes except that (i) the Series B Senior Notes
have been registered under the Securities Act and therefore will not bear
legends restricting their transfer pursuant to the Securities Act, and (ii)
except as otherwise described above, holders of the Series B Senior Notes will
not be entitled to the rights of holders of Series A Senior Notes under the
Registration Rights Agreement. The Series B Senior Notes will evidence the same
debt as the Series A Senior Notes (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture, which governs all of the
Senior Notes.
As of the date of this Prospectus, $175 million in aggregate principal
amount of Series A Senior Notes were outstanding. Solely for reason of
administrative convenience (and for no other purpose), the Authority has fixed
the close of business on May 17, 1996 as the record date for the Exchange
Offer for purposes of determining the persons to whom this Prospectus and the
Letter of Transmittal will be mailed initially. Only a registered holder of
Series A Senior Notes (or such holder's legal representative or attorney-in-
fact) as reflected on the records of the Trustee under the Indenture may
participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Series A Senior Notes entitled to
participate in the Exchange Offer.
Holders of the Series A Senior Notes do not have any appraisal or
dissenters' rights in connection with the Exchange Offer under either the Stock
Corporation Act of the State of Connecticut or the Indenture. The Authority
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
The Authority shall be deemed to have accepted validly tendered Series A
Senior Notes when, as and if the Authority has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of the Series A Senior Notes for the purposes of receiving the
Series B Senior Notes from the Authority.
If any tendered Series A Senior Notes are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Series A Senior Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Series A Senior Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of the
Series A Senior Notes pursuant to the Exchange Offer. The Authority will pay
all charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offer. See "-Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
June 21, 1996, unless the Authority, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Authority will notify the
Exchange Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
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The Authority reserves the right, in its sole discretion, (i) to delay
accepting any Series A Senior Notes, (ii) to extend the Exchange Offer, (iii) if
any of the conditions set forth below under "-Conditions of the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (iv) to amend the terms of the Exchange Offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed as promptly
as practicable by a public announcement thereof. If the Exchange Offer is
amended in a manner determined by the Authority to constitute a material change,
the Authority will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Series A
Senior Notes, and the Authority will extend the Exchange Offer for a period of
five to 10 business days, as required by law, depending upon the significance of
the amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such five to 10 business day
period.
Without limiting the manner in which the Authority may choose to make
public announcement of any delay, extension, termination or amendment of the
Exchange Offer, the Authority shall not have an obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release thereof to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a registered holder of the Series A Senior Notes may tender such
Series A Senior Notes in the Exchange Offer. To tender in the Exchange Offer, a
holder must complete, sign and date the Letter of Transmittal, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal to the address set forth below
under "-Exchange Agent" for receipt by the Exchange Agent prior to the
Expiration Date. In addition, either (i) certificates for such Series A Senior
Notes must be received by the Exchange Agent from Holders of Definitive Notes
along with the Letter of Transmittal, or (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Series A Senior Notes, if
such procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
for book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively, the
Letter of Transmittal and all other required documents must be received by the
Exchange Agent at the address set forth below under "-Exchange Agent" prior to
the Expiration Date.
The tender by a holder will constitute an agreement between such holder and
the Authority in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF THE SERIES A SENIOR NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A SENIOR NOTES
SHOULD BE SENT TO THE AUTHORITY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTION FOR SUCH HOLDERS.
Any beneficial owner whose Series A Senior Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See the
"Instruction to Registered Holder from Beneficial Owner" included with the
Letter of Transmittal. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and executing the
Letter of Transmittal and delivering such owner's Series A Senior Notes, either
make appropriate arrangements to register
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ownership of the Series A Senior Notes in such beneficial owner's name or obtain
properly completed bond powers from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Series A Senior Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal, or (ii) for the account of an
Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act (each an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Series A Senior Notes listed therein, such Series A
Senior Notes must be endorsed or accompanied by a properly completed bond power,
signed by such registered holder as such registered holder's name appears on
such Series A Senior Notes, with signatures guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Series A Senior Notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and evidence satisfactory
to the Authority of their authority to so act must be submitted with the Letter
of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Series A Senior Notes will be
determined by the Authority in its sole discretion, which determination will be
final and binding. The Authority reserves the absolute right to reject any and
all Series A Senior Notes not properly tendered or any Series A Senior Notes the
Authority's acceptance of which would, in the opinion of counsel for the
Authority, be unlawful. The Authority also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Series A Senior
Notes. The Authority's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of the Series A Senior Notes must be cured within
such time as the Authority shall determine. Although the Authority intends to
notify holders of defects or irregularities with respect to tenders of the
Series A Senior Notes, neither the Authority, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of the Series A Senior Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Series A Senior Notes
that are not validly tendered and as to which the defects or irregularities have
not been cured or waived, or if Series A Senior Notes are submitted in a
principal amount greater than the principal amount of Series A Senior Notes
being tendered by such tendering holder, such unaccepted or non-exchanged Series
A Senior Notes will be returned by the Exchange Agent to the tendering holders
(or, in the case of Series A Senior Notes returned by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such unaccepted or non-exchanged
Series A Senior Notes will be credited to an account maintained with such Book-
Entry Transfer Facility), unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
By tendering, each registered holder will be deemed to represent to the
Authority that, among other things, (i) the Series B Senior Notes to be acquired
by the holder and any beneficial owner(s) of the Series A Senior Notes
("Beneficial Owner(s)") in connection with the Exchange Offer are being acquired
by the Holder and such Beneficial Owner(s) in the ordinary course of business of
the holder and any Beneficial Owner(s), (ii) the holder and each Beneficial
Owner are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in a distribution
of the Series B Senior Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that (x) any person participating in the Exchange Offer
for the
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purpose of distributing the Series B Senior Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction with respect to the Series B
Senior Notes acquired by such person and cannot rely on the position of the
Staff of the Commission set forth in no-action letters that are discussed herein
under "-Resales of the Series B Senior Notes," and (y) any broker-dealer that
receives Series B Senior Notes for its own account in exchange for Series A
Senior Notes pursuant to the Exchange Offer must deliver a prospectus in
connection with any resale of such Series B Senior Notes and, by so
acknowledging, the holder or Beneficial Owner shall not be deemed to admit that,
by delivering a prospectus, it is an "underwriter" within the meaning of the
Securities Act, (iv) neither the holder nor any Beneficial Owner is an
"affiliate" of the Authority as defined under Rule 405 of the Securities Act,
except as otherwise disclosed to the Authority in writing, and (v) the holder
and each Beneficial Owner understands that a secondary resale transaction
described in clause (iii) above should be covered by an effective registration
statement containing the selling security holder information required by Item
507 of Regulation S-K of the Commission. The Authority has no obligation to
register any of the Series B Senior Notes under the Securities Act in connection
with any such resale thereof.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Series A Senior Notes at the Book-Entry Transfer Facility, for purposes
of the Exchange Offer, within two business days after the date of this
Prospectus, and any financial institution that is a participant in the Book-
Entry Transfer Facility's system may make book-entry delivery of Series A Senior
Notes by causing the Book-Entry Transfer Facility to transfer such Series A
Senior Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Series A Senior Notes may be effected
through book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal, with any required signature guarantees and any other documents,
must be transmitted to and received by the Exchange Agent at the address set
forth below under "-Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Senior Notes and (i) whose Series
A Senior Notes are not immediately available, or (ii) who cannot deliver their
Series A Senior Notes, the Letter of Transmittal or any other required documents
to the Exchange Agent prior to the Expiration Date, may effect a tender if:
(1) The tender is made through an Eligible Institution;
(2) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Series A Senior
Notes and the principal amount of the Series A Senior Notes being tendered,
stating that the tender is being made thereby and guaranteeing that, within
five business days after the Expiration Date, the Letter of Transmittal
together with the certificate(s) representing the Series A Senior Notes (or
a Book-Entry Confirmation) and any other documents required by the Letter
of Transmittal will be delivered by the Eligible Institution to the
Exchange Agent; and
(3) Such properly completed and executed Letter of Transmittal, as
well as the certificate(s) representing all tendered Series A Senior Notes
in proper form for transfer (or a Book-Entry Confirmation) and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Senior Notes according to the
guaranteed delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Senior Notes may
be withdrawn at any time prior to the Expiration Date.
To withdraw Series A Senior Notes previously tendered in the Exchange
Offer, a written or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Series A Senior Notes to be withdrawn (the "Depositor"),
(ii) identify the Series A Senior Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Series A Senior
Notes), and (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Series A Senior Notes were
tendered (including any required signature guarantees). All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Authority in its sole discretion, which determination shall
be final and binding on all parties. Any Series A Senior Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer and no Series B Senior Notes will be issued with respect thereto unless
the Series A Senior Notes so withdrawn are properly retendered prior to the
Expiration Date. Properly withdrawn Series A Senior Notes may be retendered by
following one of the procedures described above under "-Procedures for
Tendering" at any time prior to the Expiration Date.
Any Series A Senior Notes which have been tendered but which are not
accepted for exchange due to the rejection of the tender due to uncured defects
or the prior termination of the Exchange Offer, or which have been validly
withdrawn, will be returned to the holder thereof (unless otherwise provided in
the Letter of Transmittal), as soon as practicable following the Expiration Date
or, if so requested in the notice of withdrawal, promptly after receipt by the
Authority of notice of withdrawal without cost to such holder.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Authority shall
not be required to accept for exchange, or exchange the Series B Senior Notes
for any Series A Senior Notes, and may terminate the Exchange Offer as provided
herein before the acceptance of such Series A Senior Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Authority, might materially impair
the ability of the Authority to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Authority, or any material adverse development has occurred in any existing
action or proceeding with respect to the Authority; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Authority has occurred which, in
the reasonable judgment of the Authority, might materially impair the
ability of the Authority to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Authority; or
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the reasonable judgment of the Authority, might
materially impair the ability of the Authority to proceed with the Exchange
Offer or materially impair the contemplated benefits of the Exchange Offer
to the Authority; or
(d) any governmental approval has not been obtained, which approval
the Authority, in its reasonable discretion, shall deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
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All of the foregoing conditions must be satisfied or (other than the receipt of
any governmental approvals described in clause (d) above) waived prior to
consummation of the Exchange Offer. If the Authority determines that any of the
foregoing conditions are not satisfied, the Authority may (i) refuse to accept
any Series A Senior Notes and return all tendered Series A Senior Notes to the
tendering holders, (ii) extend the Exchange Offer and retain all Series A Senior
Notes previously tendered, subject however, to the rights of holders to withdraw
such Series A Senior Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer (to the extent it may
lawfully do so) and accept all validly tendered Series A Senior Notes which have
not been withdrawn. If any waiver described in the foregoing clause (iii)
constitutes a material change to the Exchange Offer, the Authority will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders and will extend the Exchange Offer for a
period of five to 10 business days, depending upon the significance of the
change and the manner of disclosure to the registered holders, if the Exchange
Offer would otherwise expire during such five to 10 business day period.
EXCHANGE AGENT
First Fidelity Bank, n/k/a First Union Bank of Connecticut, has been
appointed as Exchange Agent for the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery and other
documents should be directed to the Exchange Agent addressed as follows:
First Union Bank of Connecticut
10 State House Square
Hartford, Connecticut 06103-3698
Attn: W. Jeffrey Kramer
Vice President, Corporate Trust
In addition, questions and requests may be directed to the Exchange Agent
by telephone at (860) 247-1353 or by facsimile at (860) 247-1356.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Authority. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by authorized representatives
of the Authority and its affiliates.
The Authority has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Authority, however, will pay
the Exchange Agent reasonable out-of-pocket expenses in connection therewith.
The expenses to be incurred in connection with the Exchange Offer will
be paid by the Authority and are estimated in the aggregate to be
approximately $220,000. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
The Authority will pay all transfer taxes, if any, applicable to the
exchange of the Series A Senior Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the exchange of the
Series A Senior Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder.
ACCOUNTING TREATMENT
The carrying value of the Series A Senior Notes is not expected to be
materially different from the fair value of the Series B Senior Notes at the
time of the exchange. Accordingly, no gain or loss for accounting
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<PAGE>
purposes will be recognized by the Authority. The expenses of the Exchange
Offer will be amortized over the term of the Series B Senior Notes.
RESALES OF THE SERIES B SENIOR NOTES
With respect to resales of the Series B Senior Notes, based on an
interpretation by the staff of the Commission set forth in no-action letters
issued to third parties, the Authority believes that, except as described below,
a holder (other than a person that is an "affiliate" of the Authority within the
meaning of Rule 405 under the Securities Act) who exchanges Series A Senior
Notes for Series B Senior Notes in the ordinary course of business and who is
not participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the Series
B Senior Notes will be allowed to resell the Series B Senior Notes to the public
without further registration under the Securities Act and without delivering to
the purchasers of the Series B Senior Notes a prospectus that satisfies the
requirements of Section 10 thereof. However, if any holder acquires Series B
Senior Notes in the Exchange Offer with the intention or for the purpose of
distributing, or participating in a distribution of, the Series B Senior Notes,
such holder cannot rely on the position of the staff of the Commission
enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988) or
similar no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Accordingly,
such a secondary resale transaction should be covered by an effective
registration statement containing the information with respect to the selling
holder that is required by Item 507 of Regulation S-K. The Authority has no
obligation to register any of the Series B Senior Notes under the Securities Act
in connection with any such resale thereof.
As contemplated by the no-action letters described above and the
Registration Rights Agreement, each holder participating in the Exchange Offer
is required to represent to the Authority in the Letter of Transmittal that (i)
the Series B Senior Notes are being acquired by the holder in the ordinary
course of business, (ii) the holder is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in a distribution of the Series B Senior Notes, and (iii) the
holder acknowledges that if such holder participates in the Exchange Offer with
the intention or for the purpose of distributing the Series B Senior Notes, such
holder must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the Series B Senior
Notes and cannot rely on the above no-action letters.
Notwithstanding the registration of the Series B Senior Notes in the
Exchange Offer, holders who are "affiliates," as defined under Rule 405 of the
Securities Act, of the Authority may publicly offer for sale or resell Series B
Senior Notes only in compliance with the provisions of Rule 144 under the
Securities Act, excluding the two-year holding period imposed by Rule 144(d), or
another available exemption from registration. At the date of this Prospectus,
none of the registered holders of the Series A Senior Notes was believed by the
Authority to be such an "affiliate."
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<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Authority's
obligations under the Registration Rights Agreement and the Authority will not
receive any cash proceeds from the issuance of the Series B Senior Notes offered
hereby. In consideration for issuing the Series B Senior Notes as contemplated
in this Prospectus, the Authority will receive in exchange Series A Senior Notes
in like principal amount, the form and terms of which are identical in all
material respects to the form and terms of the Series B Senior Notes, except as
otherwise described herein under "The Exchange Offer -- Terms of the Exchange
Offer." The Series A Senior Notes surrendered in exchange for the Series B
Senior Notes will be retired and canceled and cannot be reissued. Accordingly,
the issuance of the Series B Senior Notes will not result in any increase in the
indebtedness of the Authority. Proceeds from the sale of the privately placed
Series A Senior Notes have been and will be used to acquire the Site, to
develop, construct, equip and open the Mohegan Sun Casino and to pay related
fees and expenses.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Authority as of
March 31, 1996 and as adjusted to give effect to the Equipment Financing and the
Working Capital Financing.
<TABLE>
<CAPTION>
MARCH 31, 1996
ACTUAL AS ADJUSTED
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C>
Restricted Cash . . . . . . . . . . . . . . . . $134.4 $186.9(a)
------------- -------------
------------- -------------
Senior Notes (b) . . . . . . . . . . . . . . . 175.0 175.0
Equipment Financing . . . . . . . . . . . . . -- 40.0
Working Capital Financing (c) . . . . . . . . . -- 12.5
------------- -------------
Total Senior Debt . . . . . . . . . . 175.0 227.5
Subordinated Notes (d) . . . . . . . . . . . . 40.0 84.7
Other Long-Term Debt . . . . . . . . . . . . . .3 .3
------------- -------------
Total Capitalization . . . . . . . . $215.3 $312.5
------------- -------------
------------- -------------
</TABLE>
- -------------------
(a) Reflects the estimated cash balance after giving effect to the Equipment
Financing and the Working Capital Financing. The net proceeds of the
Offering and of the issuance of the Subordinated Notes, less amounts
expended through the date of this Prospectus, are currently held in an
Escrow Account pending disbursement. The Authority has arranged for the
Working Capital Financing to be available prior to the opening of the
Mohegan Sun Casino. See note (c) below.
(b) See "Description of the Senior Notes" for further description of the terms
and conditions of the Senior Notes.
(c) The Authority has signed a commitment letter with a third party lender for
the Working Capital Financing.
(d) Adjusted amount gives effect to the anticipated issuance of additional
subordinated notes in connection with the anticipated draw of
approximately $45 million under the Secured Completion Guarantee to fund
recent estimated cost increases in the Construction Budget. See "Material
Agreements--Note Purchase Agreement" for a description of the terms and
conditions of the Subordinated Notes.
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<PAGE>
THE MANAGER
TRADING COVE ASSOCIATES
The Authority has engaged TCA, a Connecticut general partnership, to manage
the development, construction, operation and marketing of the Mohegan Sun
Casino. Partners of TCA have been working with the Tribe since 1992 and assisted
the Tribe in obtaining federal recognition, negotiating the Mohegan Compact with
the State of Connecticut and obtaining numerous governmental approvals for the
Mohegan Sun Casino. TCA's partners and their affiliates have extensive
experience in the development, construction, marketing and management of casinos
and resorts throughout the world. The two managing partners of TCA are (i) Sun
Cove Limited, a wholly-owned subsidiary of Sun International, which owns 50% of
TCA, and (ii) LMW Investments, Inc., an entity controlled by Len Wolman. See "--
Management of TCA." LMW Investments, Inc. and the other partners of TCA are
primarily engaged in hotel management and real estate development.
MANAGEMENT OF TCA AND SUN INTERNATIONAL
TCA, drawing upon the gaming and resort expertise of Sun International and
its other partners, has assembled an experienced management team to oversee the
development and operation of the Mohegan Sun Casino. TCA's management team, led
by Mr. Solomon Kerzner (see "--Certain Information Regarding Sun International
Hotels Limited"), includes:
John R. Allison, 48 -- Executive Vice President--Chief Financial Officer of
Sun International. Mr. Allison joined SII in December 1987 as Chief
Financial Officer--Southern African operations and served in this position
until February 1994. Prior to joining SII, he was the Group Financial
Director of Kimberly-Clark (South Africa) Limited for four years. He is a
fellow of the Institute of Chartered Accountants in England and Wales and a
member of the South African Institute of Chartered Accountants.
Kevin DeSanctis, 42 -- Executive Vice President; President--Gaming of Sun
International. Mr. DeSanctis recently joined Sun International. Prior to
joining Sun International, Mr. DeSanctis served as Executive Vice President
and Chief Operating Officer of Hemmeter Enterprises since April 1994. From
1991 to 1994 Mr. DeSanctis served as President and Chief Operating Officer
of the Trump Plaza Hotel and Casino. From August 1989 to February 1991,
Mr. DeSanctis served as Vice President of Casino Operations of The Mirage
Hotel and Casino in Las Vegas, Nevada. Prior to August 1989, Mr. DeSanctis
served in various positions in the casino industry.
William Katz, 44 -- Executive Vice President--Project Development of Sun
International. Mr. Katz joined Sun International in September 1994 as Vice
President--Project Development for Americas & Caribbean. From 1993 to
September 1994, Mr. Katz was Operations Manager for Beauchamp Construction
Company, Coral Gables, Florida. From 1991 to 1993, Mr. Katz was Project
Executive for Morse Diesel International, Fort Lauderdale, Florida. From
1989 to 1991, Mr. Katz was Project Executive for Stoltz, Inc, Miami,
Florida.
Howard B. Kerzner, 32 -- Executive Vice President--Corporate Development of
Sun International. Mr. Kerzner joined Sun International in September 1992
as Director--Corporate Development. Previously Mr. Kerzner worked for
Lazard Freres & Co. from September 1991 to 1992. Prior to that time
Mr. Kerzner worked for the First Boston Corporation. Mr. Howard Kerzner is
Mr. Solomon Kerzner's son.
Len Wolman, 40 -- President and Chief Executive Officer of Waterford Hotel
Group, Inc. and founder of LMW Investments, Inc. Mr. Wolman joined
Waterford in 1986 when the company had only one
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<PAGE>
property under management. Currently, Waterford has eighteen properties
under management in nine states. Waterford currently operates franchises
with Marriott, Sheraton, Choice and Hospitality Franchise Systems. Prior
to operating Waterford Hotel Group, Mr. Wolman gained experience with major
operators including Westin, Hyatt, Four Seasons and Holiday Inn.
CERTAIN INFORMATION REGARDING SUN INTERNATIONAL HOTELS LIMITED
BACKGROUND OF THE MANAGEMENT OF SUN INTERNATIONAL
The senior management of Sun International has been actively engaged in the
gaming and lodging industries over the past 25 years. Mr. Solomon Kerzner, the
Chairman and Chief Executive Officer of Sun International, founded South
Africa's two largest hotel and resort companies and became involved in the
gaming industry in 1977.
In 1969, Mr. Kerzner established Southern Sun Hotels Limited ("Southern
Sun") which grew from six properties in 1969 to 29 properties by 1983. Southern
Sun's properties included resorts, city hotels, and casino resorts primarily in
southern Africa and the Indian Ocean.
In 1983, Mr. Kerzner began to focus primarily on the casino and resort
industry and established Sun International Limited to acquire Southern Sun's two
gaming operations in southern Africa and three resort hotels in the Indian Ocean
(subsequently, such interests were transferred into Sun International
Incorporated ("SII")). SII manages 27 casino resorts in southern Africa and for
the year ended June 30, 1994 the company generated revenues of approximately
$540 million and consolidated net income of approximately $125 million. The
commercial success of SII is reflected in the strong financial performance of
Sun Bop, the publicly-traded corporation that owns 12 casino resorts in South
Africa including Sun City, The Lost City and the Carousel.
Mr. Kerzner and his management team have been responsible for the
development of a number of world renowned resort hotel and casino properties. In
1979, Mr. Kerzner pioneered the concept of the total gaming resort that would
appeal to all market segments by developing Sun City. Sun City was designed to
cater to a broad public market by offering gaming entertainment and a wide
variety of non-gaming entertainment experiences. Sun City was developed in a
remote area approximately 100 miles northwest of Johannesburg, South Africa.
Today, Sun City covers some 620 acres and attracts over 2.0 million visitors
annually. The facilities at Sun City include: four hotels with approximately
1,300 rooms; two Gary Player designed 18-hole golf courses; an entertainment
center that includes a 6,000-seat indoor Superbowl and Africa's largest
convention facility; a 46-acre man-made lake for watersports; and approximately
55,000 square feet of gaming space with 1,300 slot machines and 40 table games.
In 1992, Sun City was expanded to include The Lost City. TCA believes that
The Lost City, a $300 million development, is one of the best examples of the
ability and talent of Mr. Kerzner's management team to develop and construct a
highly themed and unique resort. The Lost City is a recreation of a forgotten
African civilization that has been recently rediscovered. The Lost City covers
approximately 60 acres and at its center includes The Palace, a 350-room luxury
hotel. The resort also includes a jungle in which over one million trees were
transplanted, the Valley of the Waves, which includes a wave pool, adventure
rides and sand beaches, and a bridge that intermittently rumbles to simulate an
earthquake.
In 1993, Mr. Kerzner established Sun International to acquire from Resorts
International, Inc. the Paradise Island businesses, including the Paradise
Island Resort and Casino. In May 1995, Sun International became Mr. Kerzner's
primary vehicle for the development and establishment of gaming and resort
operations. Sun International currently owns interests in and operates nine
resorts and gaming facilities, including Atlantis, four casinos in France and
four hotels properties in the Indian Ocean.
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<PAGE>
SUN INTERNATIONAL PROPERTIES
PARADISE ISLAND. Sun International acquired its properties on Paradise
Island, located in the Bahamas, in May 1994 and has completed an approximately
$140 million redevelopment program to create the 1,147-room Atlantis Resort and
Casino, which is a themed resort based upon the wonders of the ocean. In
addition to refurbishing the guest rooms and redeveloping and extending the
common areas, a 14-acre salt water marine life habitat was created that
showcases over 100 species of marine life, waterfalls, lagoons, adventure walks
and a walk-through clear acrylic tunnel submerged in a predator lagoon. The
gaming facility at Atlantis includes a 30,000 square foot casino with 75 table
games and 800 slot machines. The fast-tracked redevelopment plan was
substantially completed by the end of 1994 after only seven months of
construction. Results to date have exceeded management's expectation with
average occupancy and room rates of 85% and $125, respectively, for the first
six months of 1995, as compared to 74% and $87, respectively, for the first six
months of 1994.
In addition to Atlantis, Sun International owns the Ocean Club Golf &
Tennis Resort, a luxury resort with 71 guest rooms, villas and cabanas that was
completely renovated in the redevelopment program, an 18-hole championship golf
course, and Paradise, a 100-room hotel catering to value conscious tourists.
FRANCE. Sun International owns an equity interest in, and pursuant to a
technical services agreement assists in the management of, four casinos in
France in the cities of Nice, Cassis, Carry-le-Rouet and Chamonix that cater
primarily to the local market. These casinos operate a total of approximately
520 slot machines and 53 table games.
INDIAN OCEAN. Sun International owns an equity interest in, and manages,
four hotels on the islands of Mauritius and the Comores located in the Indian
Ocean. These resorts cater primarily to European tourists in the mid-priced to
luxury segments. In total, Sun International currently manages 825 rooms in the
Indian Ocean under long-term management contracts. Two new hotels with 589
additional rooms which Sun International will manage are under construction.
Both hotels are scheduled to open during 1996.
OWNERSHIP OF SUN INTERNATIONAL
Sun International is a Bahamian corporation formed in 1993 that is publicly
traded in the United States (NYSE:SIHLF). Approximately 55% of Sun International
is owned by SIIL, a private holding company in which each of Caledonia
Investments plc, Safmarine & Rennies Holdings Limited and a trust for the
Kerzner family controls approximately a one-third interest. An aggregate of
approximately 5% of Sun International is owned by certain funds managed by
Fidelity Management and Research Company and by Oaktree Capital Management, LLC.
At May 1, 1996, the closing price on the NYSE for Sun International Ordinary
Shares was $42 3/4 per share. At such prices, Sun International had an equity
market capitalization of approximately $1.24 billion. Equity market
capitalization, however, is subject to fluctuation as market prices change.
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<PAGE>
SUN INTERNATIONAL FINANCIAL RESULTS
The following table presents selected consolidated financial data for Sun
International as of and for the three years ended December 31, 1995. Such data
has been derived from consolidated financial statements of Sun International
that have been audited by Arthur Andersen & Co. L.L.P., independent certified
public accountants. Notwithstanding the inclusion in this Prospectus of
selected Sun International financial statements in connection with the Secured
Completion Guarantee, none of the Authority, the Tribe or Sun International
believes that such financial statements enhance a potential investor's
understanding of the merits and risks of participating in the Exchange Offer.
Although Sun International has provided the Secured Completion Guarantee, it is
not an obligor or guarantor of the Senior Notes. No assurance can be given that
the operating results achieved by Sun International, or the other partners of
TCA, will be achieved by the Mohegan Sun Casino.
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31
JUNE 30, -----------
1993 1994(1) 1995(2)
---- ------- -------
(in thousands, except per
share data)
<S> <C> <C> <C>
SELECTED OPERATING DATA:
Gross Revenues . . . . . . . . . . . . . . 0 79,957 223,214
Operating Expenses . . . . . . . . . . . . 21 96,181 190,950
Operating Income (loss) . . . . . . . . . (21) (19,441) 22,990
Net Income (loss)(3) . . . . . . . . . . . (727) (16,475) 18,359
Earnings (loss) per share of Class A and
B Common Stock, before accretion of -- (1.06) 0.87
redemption value(4) . . . . . . . . . .
Earnings (loss) per share of Class A and
B Common Stock, after accretion of (.08) (1.12) 0.79
redemption value(4) . . . . . . . . . .
Average number of shares outstanding(4) 8,852 15,482 21,194
<CAPTION>
December 31
----------------------
1994(1) 1995(2)
------- -------
(in thousands)
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Current Assets . . . . . . . . . . . . 57,610 41,959
Noncurrent Assets . . . . . . . . . . 259,065 328,468
Current Liabilities . . . . . . . . . 85,135 55,120
Noncurrent Liabilities . . . . . . . . 75,000 116,153
Redeemable Common Stock . . . . . . . 62,020 63,543
Total Shareholders' Equity . . . . . . 94,520 135,611
</TABLE>
- -------------------
(1) Sun International completed the refurbishment and redevelopment program on
Paradise Island in December 1994. As a result, the financial data for
fiscal year 1994 are not comparable to the financial data for fiscal year
1995.
(2) On May 1, 1995, Sun International purchased from SIIL substantially all of
SIIL's businesses and business opportunities. The purchase was treated as a
reorganization of entities under common control and, as such, was accounted
for in a manner similar to a pooling of interests. Accordingly, the
financial information set forth herein has been restated to include the
results of SIIL's businesses for the period presented.
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<PAGE>
(3) Included in Net Income for fiscal year 1995 is a non-recurring gain of
$900,000 resulting from the sale of Paradise Island Airlines.
(4) All share and per share information has been restated to reflect a two-for-
one stock split effected on October 31, 1995.
Sun International financed its purchase of the Subordinated Notes by
borrowing funds under a bank credit agreement.
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<PAGE>
BUSINESS AND PROPERTY
THE MOHEGAN SUN CASINO
The Authority, an instrumentality of the Tribe with perpetual life, is
developing the Mohegan Sun Casino, a gaming and entertainment complex on the
approximately 240-acre Site located in southeastern Connecticut. The Mohegan Sun
Casino is expected to open in the fourth quarter of 1996. Once completed, the
Mohegan Sun Casino and the currently operating Foxwoods, which is owned and
operated by the Pequot Tribe, will be the only two casinos offering slot
machines and table games in the northeastern United States that are currently
legally authorized outside of Atlantic City, New Jersey.
The Mohegan Sun Casino is being constructed on a wooded site overlooking
the Thames River. The historical northeastern Indian theme will be conveyed
through architectural features and the use of natural design elements such as
timber, stone and water. The Mohegan Sun Casino will be separated into four
themed quadrants, each of which will have its own unique entrance and will be
designed to reflect a separate seasonal theme-winter, spring, summer and fall-
emphasizing the importance of the seasonal changes to tribal life. The
approximately 625,000 square foot facility will include approximately 150,000
square feet of gaming space, and is designed to accommodate approximately 3,000
slot machines and 180 table games. The Mohegan Sun Casino is expected to
commence operations with a minimum of 2,500 slot machines and 180 table games.
The quality and variety of the food service will be a hallmark of the
Mohegan Sun Casino which will include a 600-seat buffet, four specialty theme
restaurants, a coffee shop and a large food court. Multiple full service and
floor service bars will be located throughout the facility. For non-gaming
entertainment, the Mohegan Sun Casino will offer a children's recreation area
and child care facilities.
Parking at the Mohegan Sun Casino will be provided through surface parking
spaces and underground valet parking spaces, totalling approximately 7,500
spaces. Traffic will enter the grounds via a newly constructed four-lane access
road to Route 2A and will be directed to the valet parking drop-off zones or to
the self-park surface lots which will be connected to the main building by
shuttle bus service. A separate loading and parking area will be established for
bus groups.
The Site for the Mohegan Sun Casino, located approximately one mile from
the interchange of I-395 and Connecticut Route 2A (which is expected to be
widened to a four-lane expressway), is just outside Montville, Connecticut,
approximately 10 miles west of Foxwoods. As part of its integrated development
plan, the Authority will construct a four-lane access road (with its own exit)
from Route 2A, giving patrons of the Mohegan Sun Casino direct access to
Interstate 395 and Interstate 95, the main highway connecting Boston, Providence
and New York.
The Authority and TCA have developed a master plan for the Site that
integrates all major aspects of gaming and entertainment design. The master plan
places particular emphasis on creating direct highway access, providing
convenient parking, designing an attractively themed facility and developing a
variety of non-gaming entertainment amenities. The Authority believes that the
Mohegan Sun Casino's location, ease of access and unique design, together with
the development, marketing and gaming expertise of Sun International, should
enable the Mohegan Sun Casino to capture a significant share of the gaming
market in the northeastern United States.
MARKET
The market for the Mohegan Sun Casino will be primarily day-trip customers
from New England and New York who reside within 150 miles of the Mohegan Sun
Casino. According to market research reports, in 1994 there were approximately
2.6 million adults living within 50 miles of the Site, 10.2 million adults
within 100 miles of the Site and 21.8 million adults within 150 miles of the
Site. The metropolitan areas of Hartford,
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<PAGE>
New Haven, Springfield, Worcester, Boston and Providence are within one to two
hours driving time by interstate highway to the Mohegan Sun Casino. New York
City is approximately three hours driving time from the Site. Access from Long
Island, New York is available through passenger and vehicle ferry to New London,
Connecticut, which is approximately 20 miles from the Mohegan Sun Casino.
The Authority believes that the success of Foxwoods supports the conclusion
that the northeastern United States is an attractive market in which to
establish a casino. Foxwoods is currently the largest gaming facility in the
United States in terms of the number of total gaming positions and, the
Authority believes, is one of the most profitable casinos in the United States.
MARKETING STRATEGY
The Authority intends to employ a comprehensive marketing program to
establish the Mohegan Sun Casino as a premier entertainment facility for the
entire family. The Mohegan Sun Casino will seek to distinguish itself by
emphasizing a uniquely themed gaming environment, a superior food experience in
a variety of settings, ease of access and attention to personal service.
The Authority believes that its primary target market will be adults living
within 100 miles (or approximately one to two hours driving time) and
secondarily, the population living between 100 and 150 miles (or approximately
two to three hours driving time) of the Mohegan Sun Casino, which includes most
of the New York City and Boston metropolitan areas. The Authority does not
intend to market heavily to visitors outside its primary target market unless it
expands the Mohegan Sun Casino to include lodging facilities.
Consistent with its emphasis on the day-trip market, the Authority expects
to organize regular bus routes and private limousine service to the major
metropolitan areas in its vicinity to attract gaming patrons at all levels of
play. Although the Mohegan Sun Casino will seek to accommodate premium
high-stakes players, it does not initially expect to spend significant resources
targeting the more demanding and costly premium player market.
The Authority expects that it will seek to create market awareness and
customer loyalty through a wide variety of activities that will include: public
relations programs, print and broadcast advertisements, direct mail promotions,
slot players clubs, bus stop signage and billboard signage. In addition to the
fun and excitement of casino action, the Authority expects to promote superior
customer service and the quality and value of its food offerings to attract
repeat patrons. Also, the Authority expects to promote the Mohegan Sun Casino
through special events to be held from time to time at the Mohegan Sun Casino.
DESIGN AND CONSTRUCTION
Initial phases of the construction of the Mohegan Sun Casino are underway
at the Site. The Site was formerly a manufacturing facility operated by UNC and
will be substantially redeveloped, with many of the existing buildings
(consisting of 350,000 square feet) to be renovated and incorporated into the
approximately 625,000 square foot complex. The Site will also include indoor
valet parking and surface parking for a total of approximately 7,500 cars, tour
bus parking and unloading zones, and access roads, including a four-lane direct
access road from the Mohegan Sun Casino to Route 2A. Although the plan for the
Mohegan Sun Casino does not currently call for any lodging facilities, there is
ample room on the 240-acre site for hotels and other entertainment amenities.
The Site, together with all buildings constructed or to be constructed thereon
and improvements thereto, including the Mohegan Sun Casino, are and will be
owned by the United States in trust for the Tribe. Such real property, and the
additional parcel of land adjacent to the Site that was acquired by the Tribe in
its own name for expansion of the access road leading to the Mohegan Sun Casino,
are and will be leased by the Tribe to the Authority under a long-term land
lease. See "Material Agreements--Land Lease."
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<PAGE>
PROJECT DEVELOPMENT
The Authority and TCA have assembled an experienced team of architectural,
design and construction firms to develop and build the Mohegan Sun Casino.
Pursuant to agreements between TCA and the Authority, TCA will coordinate and
supervise the conceptual planning, design and construction of the Mohegan Sun
Casino. See "Material Agreements--Development Agreement" and "--Management
Agreement." TCA will rely heavily upon Sun International's demonstrated
expertise in designing and developing casino resorts.
Morse Diesel is serving as the general contractor for the Mohegan Sun
Casino and the Authority has entered into a guaranteed maximum price contract
with Morse Diesel for the construction of the Mohegan Sun Casino. Construction
of the Mohegan Sun Casino is expected to be completed by the fourth quarter of
1996. TCA's partners have demonstrated an ability to successfully fast-track
their own respective projects. Sun International's management team built the
$300 million Lost City project in only 26 months and substantially completed the
$140 million reconstruction of Atlantis in only seven months, despite the fact
that the hotel remained open throughout the reconstruction period.
The following is a brief description of the design, construction and
engineering professionals selected to assist in the development and construction
of the Mohegan Sun Casino:
MORSE DIESEL INTERNATIONAL has been selected as the general contractor for
the Mohegan Sun Casino. Founded in 1936, Morse Diesel is a leading construction
firm in the northeastern United States. Morse Diesel has successfully completed
world class projects including the Sears Tower and the United Center (the arena
for the Chicago Bulls and Chicago Blackhawks) in Chicago, the Philadelphia
Convention Center and the Marriott Marquis in New York City.
DESIMONE, CHAPLIN AND DOBRYN CONSULTING ENGINEERS, P.C. ("DCD") has been
selected as the structural engineer for the Mohegan Sun Casino. DCD has provided
structural engineering services to architects, owners and developers for over 25
years. DCD's major casino projects include the Crystal Palace and the Paradise
Island Hotel & Casino in The Bahamas, and the Sands Hollywood Hotel and Casino
and Trump Plaza in Atlantic City. Since 1969, DCD has been involved in the
construction of over 25 major hotels including the Embassy Suites Hotel and the
Sheraton New Yorker in New York City.
LEHR ASSOCIATES CONSULTING ENGINEERS ("LEHR") has been selected to provide
mechanical/electrical/plumbing and fire/life protection design services for the
Mohegan Sun Casino. LEHR has provided such services for over 25 years, including
in connection with the Atlantis Resort and Casino project on Paradise Island.
LEHR's other casino projects include Bally's Park Place and Casino Hotel, the
Dunes Hotel and Casino, Resorts International, the Sands Hotel and Casino, the
Tropicana Hotel and Casino and Trump's Castle Hotel and Casino, all in Atlantic
City. LEHR has received several awards for engineering excellence, and numerous
members of LEHR have been published in leading engineering publications and are
recognized as technical experts in their respective disciplines.
BRENNAN BEER GORMAN has been selected to coordinate the architectural
design of the Mohegan Sun Casino. Major recent projects include the Barclay's
Bank headquarters in New York City, the new Jakarta Stock Exchange complex and
the Peninsula hotel complex in Bangkok, Thailand. Recent hotel renovations by
Brennan Beer Gorman include the Ritz Carlton in Washington, D.C., the St. Regis
Hotel, the Essex House and Sherry Netherland hotels in New York City.
ROCKWELL ARCHITECTURE, PLANNING AND DESIGN, P.C. ("Rockwell") has been
selected to coordinate the interior design of the Mohegan Sun Casino. Led by
David Rockwell, Rockwell is well known for its innovative entertainment
architecture, and has been the recipient of numerous awards. Rockwell's client
list includes: The Walt Disney Company, Planet Hollywood, Giorgio Armani, CBS,
Loews Hotels, McDonald's, Marvel Comics,
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Sony Theaters and Caesars Palace. High profile restaurant and club designs
include: the Monkey Bar and Restaurant, Nobu, Vong, The Whiskey at the Paramount
Hotel and Tatou, all in New York, as well as most of the Planet Hollywood
restaurants worldwide. Rockwell has also been involved in major
mixed-use/entertainment projects including: New York City's Forty-Second Street
Development Project, the World Trade Center Plaza Competition, Disney BoardWalk
at Walt Disney World, Kids' Place and the proposed Caesars Forum III, both in
Las Vegas.
DAVID JACOBSEN ASSOCIATES, PA ("DJA") has been selected to design the
layout of the casino. DJA has been servicing the gaming industry with
architectural design since 1956--beginning with The New Frontier in Las Vegas.
DJA provided architectural and interior design services to all but two of the
casino hotels in Atlantic City. DJA has completed 60 casino, casino-hotel and
riverboat/dockside projects including Trump's Castle Hotel and Casino, Trump
Plaza Hotel and Casino, Sands Hotel and Casino, in Atlantic City, and Circus,
Caesars Palace, and the Cal-Neva Lodge in Nevada.
EDWARD D. STONE, JR. AND ASSOCIATES ("EDSA") has been selected to provide
landscape planning for the Mohegan Sun Casino. Formed in 1960, EDSA is one of
the leading planning and landscape architectural firms in the world, and has
been recognized with more than 120 awards for its design excellence and
environmental sensitivity. EDSA has extensive experience in the design of
resort, hotel and golf community developments in the United States and
internationally including: the Atlantis Resort and Casino in The Bahamas, the
Grand Cypress Resort in Florida, the Four Seasons Resort in Nevis, the Hyatt
Regency Aruba Resort and Casino, El Conquistador in Puerto Rico, and the PGA
Resort Community in Florida.
CLOSE, JENSEN & MILLER ("CJM") has been selected as the civil engineers for
the design of the roadways leading from I-395 to the Mohegan Sun Casino, as well
as the layout of the parking facilities. CJM has provided a wide scope of
professional consulting services in civil engineering design, land survey and
planning since 1926 and its specialties include site design, roadway engineering
and traffic and structural design. CJM has served the DOT as Consulting Liaison
Engineers for review and management of bridge repair and replacement projects
since 1983.
REGULATORY APPROVALS
A number of federal, state and tribal governmental licenses and approvals
are required to open and operate the Mohegan Sun Casino.
Prior to opening the Mohegan Sun Casino, each of the partners of TCA and
certain employees of the Mohegan Sun Casino must be licensed by relevant tribal
and state authorities. Each of the partners of TCA has applied for and received
temporary gaming licenses from the Commissioner of Revenue Services of the State
of Connecticut. As each employee who is required to be licensed is hired, the
Authority or TCA will cause such employee to apply for all required licenses.
See "Risk Factors--Transkei Investigation."
A number of federal and state approvals are required to construct the
access roads to the Mohegan Sun Casino. DOT or the Authority has obtained all
requisite permits and approvals for the construction of the access road off of
Route 2A. During a special session of the Connecticut State Senate held to
consider the approval of a gaming facility in Bridgeport, Connecticut, which was
to be owned and operated by the Pequot Tribe, the Tribe testified before the
Connecticut Senate Public Safety Committee that, if the Bridgeport Casino
project were approved, the Authority would no longer be required to make slot
revenue payments to the State of Connecticut. Shortly after the Tribe's
testimony, it was reported in certain Connecticut newspapers that officials of
the State of Connecticut disagreed with the Tribe's position and had stated that
regulatory approvals required for the construction of the Mohegan Sun Casino may
be delayed. The Connecticut State Senate rejected the Bridgeport casino project
on November 16, 1995. Although the Authority has obtained from the State of
Connecticut substantially all of the permits required to complete construction
of the Mohegan Sun Casino as planned, there
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can be no assurance that any of such permits will not be revoked or that any
additional permits that may be required will be granted in a timely manner.
The Authority and TCA believe that they will be able to acquire all other
necessary licenses, permits and approvals in order to construct, open and
operate the Mohegan Sun Casino. However, no assurances can be given that any or
all of the licenses, permits and/or approvals described above will be issued or
that any or all of such licenses, permits and/or approvals will be issued
without certain conditions or restrictions that could adversely affect the
construction and operation of the Mohegan Sun Casino or the development of the
adjacent roadways. The failure to obtain any of these licenses, permits or
approvals in a timely manner may delay, restrict or prevent the Mohegan Sun
Casino from opening as contemplated herein.
COMPETITION
The gaming industry is characterized by intense competition among entities
that, in many instances, have greater resources than will the Authority. Because
the Mohegan Sun Casino will be marketed primarily to the day-trip customer, it
expects to compete primarily with other casinos within 150 miles, and to a
lesser extent, with casinos in Atlantic City, New Jersey. The Authority
believes the Mohegan Sun Casino will compete with other gaming entities on the
basis of its superior location, with direct access to a heavily trafficked state
highway as well as the main highway connecting Boston, Providence and New York,
and its unique tribal and "seasonal" atmosphere. Currently, Foxwoods is the
only casino in operation within 150 miles of the Site. However, Foxwoods is
located approximately 10 miles from the Site and is the largest gaming facility
in the United States in terms of the number of total gaming positions. In
addition, Foxwoods offers a number of amenities that the Mohegan Sun Casino does
not currently plan to offer in its initial development, including hotels and
extensive entertainment facilities. Foxwoods has been in operation for nearly
four years and the Authority believes that Foxwoods' successful operation has
enabled it to build financial resources that are currently substantially greater
than the Authority's or the Tribe's.
Currently, outside of Atlantic City, New Jersey, casino gaming in the
northeastern United States may be conducted only by federally-recognized Indian
tribes operating under IGRA. In addition to the Pequot Tribe, which operates
Foxwoods, a federally-recognized tribe in Rhode Island and a
federally-recognized tribe in Massachusetts are each currently seeking to
establish gaming operations. In addition, a number of tribes in New England are
seeking federal recognition in order to establish gaming operations. The
Authority cannot predict whether any of these tribes will be successful in
establishing gaming operations, and if established, whether such gaming
operations will have a material adverse effect on the proposed operations by the
Authority.
In addition, a number of states, including Connecticut, have investigated
legalizing casino gaming by non-Indians in one or more locations. However, under
the Mohegan Compact and the tribal-state compact between the Pequot Tribe and
the State of Connecticut, and agreements related thereto, if Connecticut
legalizes any gaming operations other than pursuant to IGRA (I.E., by an Indian
tribe on Indian land) with slot machines or other commercial casino games, the
Pequot Tribe and the Tribe will no longer be required to make payments related
to slot machine revenues. In 1995, the State of Connecticut made a request for
proposals for the possible development of a casino in Bridgeport, Connecticut,
but in November 1995, the Connecticut legislature declined to adopt special
legislation authorizing such casino operations. The Authority is unable to
predict whether the Connecticut legislature will reconsider the Bridgeport
proposal, or whether and when it may consider other gaming initiatives.
Although the Mohegan Sun Casino will be dependent primarily upon gaming
customers residing within 150 miles of the Mohegan Sun Casino, the Authority
also will compete for customers with casinos in Atlantic City, New Jersey, many
of which have greater resources and greater name recognition than the Mohegan
Sun Casino.
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EMPLOYEES; TRAINING
As of April 1, 1996, the Authority had approximately 60 employees, all of
whom have administrative or managerial responsibilities. When the Mohegan Sun
Casino commences operations, approximately 4,000 full-time employees will be
required. Pursuant to its Management Agreement with the Authority, TCA will be
solely responsible for recruiting and training the Authority's employees to
operate the Mohegan Sun Casino. In recruiting personnel, TCA is obligated to
give preference, first to qualified members of the Tribe (and qualified spouses
and children of members of the Tribe) and second to members of other Indian
tribes. TCA believes that it will be able to hire and train employees in order
to operate the Mohegan Sun Casino and that the relative proximity of Atlantic
City will enable it to find a large pool of trained and licensable employees to
fill all skilled and operating management positions. See "Material Agreements--
Management Agreement."
TCA will develop and implement training programs to teach Mohegan Sun
Casino employees necessary technical skills as well as to instill a commitment
to the highest levels of service in the industry. TCA will utilize Sun
International's established training programs to train Mohegan Sun Casino
employees, thereby ensuring adherence to the high quality standards that prevail
in Sun International's casino resorts.
LEGAL PROCEEDINGS
Neither the Tribe nor the Authority is a party to any pending material
litigation.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or chemical
releases at such property, and may be held liable to a governmental entity or to
third parties for property damage, personal injury and for investigation and
cleanup costs incurred by such parties in connection with the contamination.
Such laws typically impose cleanup responsibility and liability without regard
to whether the owner knew of or caused the presence of the contaminants, and the
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial. In addition, the owner or former owners of a site
may be subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from a site.
The Site was formerly occupied by UNC, a naval products manufacturer of,
among other things, nuclear reactor fuel components. UNC's facility was
officially decommissioned on June 8, 1994 when the NRC confirmed that all
licensable quantities of SNM had been removed from the Site and that any
residual SNM contamination was remediated in accordance with the NRC approved
decommissioning plan.
From 1991 through 1993, UNC commissioned an environmental consultant to
perform a series of environmental audits and reports on the Site. The
environmental audits and soil sampling programs detected, among other things,
volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and
groundwater.
The Connecticut Department of Environmental Protection (the "DEP") reviewed
the environmental audits and reports and established cleanup goals to achieve
direct exposure criteria for residential use of the Site (the most conservative
cleanup levels) and to eliminate sources of groundwater contamination. In
December 1994, the DEP approved UNC's November 1994 Remedial Plan which
determined that although the groundwater beneath the Site was contaminated, it
met the applicable groundwater criteria given the classification of the
groundwater under the Site, and as such, groundwater remediation was
unnecessary. The November 1994 Remedial Plan also determined that certain soils
contained contamination in excess of the clean-up criteria, requiring soil
remediation. Extensive remediation of contaminated soils and additional
investigation were completed to achieve the DEP's cleanup criteria and
demonstrate that the remaining soils complied with applicable cleanup criteria.
The
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Permitting, Enforcement and Remediation division of the DEP Bureau of Water
Management has reviewed and approved the cleanup activities at the Site. By
letter dated March 20, 1995, the DEP approved the remediation report for Site.
Although the Site currently meets all applicable federal, state and local
remediation requirements, no assurance can be given that the various
environmental reports or any other existing environmental studies with respect
to the Site revealed all environmental liabilities, that any prior owners or
tenants of the Site did not create any material environmental condition not
known to the Authority, that future laws, ordinances or regulations will not
impose any material environmental liability, or that a material environmental
condition does not otherwise exist on the Site. Future remediation may be
necessary if excavation and construction exposes contaminated soil which has
otherwise been deemed isolated and not subject to cleanup requirements. In
addition, if after new construction a building is within fifteen feet of the
water table, ventilation equipment may be necessary, given the present levels of
contamination in the groundwater.
As part of the DEP's approval, UNC must continue to perform post-closure
groundwater monitoring at the Site to insure the adequacy of the cleanup. This
long term groundwater monitoring is not expected to require mitigation other
than maintaining existing monitoring wells. UNC is financially responsible for
the post-closure groundwater monitoring and such monitoring should not interfere
with the development and enjoyment of the Site.
The Phase I Reports did locate several underground storage tanks ("USTs")
and above the ground storage tanks ("ASTs") on the Site. By June 1995 all but
two ASTs had been removed, and such remaining ASTs are exempt from state and
federal regulations because of use and size. Some of the USTs were cleaned,
decontaminated and removed in compliance with state and federal laws. Other USTs
were abandoned in place or are believed to have been removed during prior
construction on the Site. Investigation did not locate any leaking USTs.
There is one federal and state permitted solid waste landfill located
within one-half mile of the Site. The landfill has only been in operation since
1993 and is permitted to accept ash disposal. The landfill is somewhat
upgradient from the Site, so if contaminants from the landfill were to reach
groundwater, such contaminants could migrate to the Site.
Certain federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of building
remodeling, renovation or demolition. Such laws may impose liability for release
of ACMs and may provide the right for third parties to seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
December 1994, UNC hired an asbestos contractor who removed all exposed asbestos
insulations. In addition, it is contemplated that ACMs will be removed as part
of the construction of the Mohegan Sun Casino. However no assurance can be given
that additional future asbestos removal will not be necessary. See "Business and
Property--Design and Construction."
The DEP is currently in the process of drafting newly proposed soil
remediation standards and ground water quality standards and criteria (the
"Clean-up Standard Regulations"). In the past, the DEP has made remedial
decisions on a case-by-case basis with the goal of eliminating or minimizing
sources of pollution, eliminating risks to human health, and restoring water
quality consistent with the Water Quality Standards. The Clean-up Standard
Regulations are meant to codify those same standards and goals to make the
clean-up process as clear and predictable as possible.
The Site has been the subject of extensive environmental investigations for
both nuclear material and non-nuclear contaminants including, among other
things, volatile organic chemicals, heavy metals and fuel hydrocarbons in the
soil and groundwater. Substantial remediation of the Site was completed from
1991 until January 1995. According to the data gathered in the Phase III
Environmental Site Assessment Remediation Report dated January 1995, as amended
March 1995, (the "Phase III Assessment") which was commissioned by UNC,
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remediation is complete and is consistent with the most recent February 16, 1995
draft proposal for the Connecticut Clean-up Standard Regulations. However, no
assurance can be given that the Phase III Report or any other existing
environmental studies with respect to the Project Site reveal all environmental
liabilities, or that future laws, ordinances or regulations, including but not
limited to the currently proposed Clean-up Standard Regulations, will not impose
any material environmental liability, or that a material environmental condition
does not otherwise exist as to the Site.
In June 1995 the Tribe and TCA commissioned a Draft Environmental
Assessment of the Mohegan Sun Casino ("Environmental Assessment"). The
Environmental Assessment concludes that for EPA Clean Air Act general SIP
conformity purposes, emissions from the Mohegan Sun Casino are projected to be
below the DE MINIMIS level of 50 tons/year for nitrogen oxides ("NOx") or
volatile organic compounds ("VOCs") and accordingly, should not cause
significant air quality impacts. The Environmental Assessment's projection is
based in part on the Tribe's and TCA's pollution prevention plans and ability to
obtain emission reduction credits to offset emissions. Connecticut Light and
Power Company has indicated to the Tribe that it has sufficient Nox emission
credits that it will make available to the Tribe to offset emissions related to
the Mohegan Sun Casino.
In addition to federal, state and local laws relating to hazardous or toxic
substances, construction and proposed operation of the Mohegan Sun Casino must
comply with the National Environmental Policy Act ("NEPA"). A provision of NEPA,
42 U.S.C. Section 4332(2)(C), requires that, prior to taking any federal action
that may significantly affect the quality of the human environment, the
responsible federal agency must prepare an environmental impact statement
("EIS") describing and quantifying, to the extent possible, such affects. NEPA
applies to the construction and proposed operation of the Mohegan Sun Casino
because of the NIGC and the BIA approvals required in connection therewith. See
"Government Regulation--NIGC and BIA Approvals." An EIS is not required,
however, if the responsible federal agency, based on an environmental
assessment, issues a "Finding of No Significant Impact" ("FONSI"). On September
29, 1995, the NIGC and the BIA jointly issued a FONSI with respect to the
construction and operation of the Mohegan Sun Casino.
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MOHEGAN TRIBE OF INDIANS OF CONNECTICUT
GENERAL
The Mohegan Tribe of Indians of Connecticut is a federally-recognized
Indian tribe, whose federal recognition became effective May 15, 1994. The Tribe
currently has approximately 1,100 members. Although it only recently received
federal recognition, the Tribe has lived in a cohesive community since time
immemorial in what is today southeastern Connecticut. The Tribe historically has
cooperated with the United States and is proud of the fact that members of the
Tribe have fought on the side of the United States in every war from the
Revolutionary War to Desert Storm. The Tribe believes that this philosophy of
cooperation exemplifies its approach to developing the Mohegan Sun Casino.
Although the Tribe is a sovereign entity, it has sought to work with, and
gain the support of, local communities in establishing the Mohegan Sun Casino.
For example, the Tribe gave up its claim to extensive tracts of land that have
been guaranteed by various treaties in consideration for certain agreements in
the Mohegan Compact. As a result, local residents and businesses whose property
values had been clouded by this dispute were able to gain clear title to their
property. In addition, the Tribe has been sensitive to the concerns of the local
community in developing the Mohegan Sun Casino. This philosophy of cooperation,
rather than confrontation, has enabled the Tribe to build a unique alliance
among local, state and federal officials to achieve its goal of building the
Mohegan Sun Casino.
In addition to the Tribe's beneficial interest in the Site, the Tribe also
owns a 0.40 acre parcel, which is the site of the Mohegan Church (the "Church
Parcel"), and a parcel of land adjacent to the Site to be used for the expansion
of the access road leading to the Mohegan Sun Casino. The Church Parcel is the
only remnant of the Tribe's original reservation, a reservation which was
acknowledged and set apart for the Tribe by the Crown Colony of Connecticut and
subsequently by the State of Connecticut, through a series of official actions
beginning in 1638.
GOVERNANCE OF THE TRIBE
The Tribe's Constitution, as amended on April 12, 1996, provides for the
governance of the Tribe by a Tribal Council (the "Council"), consisting of nine
members, and a Council of Elders (the "Elders"), consisting of seven members.
All members of the Council and the Elders serve terms of five years. On
February 22, 1992, Chief Ralph Sturges was elected to the position of Lifetime
Chief of the Tribe. On October 20, 1995, Chief Sturges resigned from the
Council but he remains Lifetime Chief of the Tribe, a traditional religious and
ceremonial position. Roland Harris has been elected to succeed Chief Sturges as
Council Chair. A special election was held following Chief Sturges's
resignation from the Council to fill the vacancy created by his resignation.
The legislative and executive powers of the Tribe are vested in the
Council. The members of the Council are elected by the registered voters of the
Tribe and must be at least 21 years of age prior to the date of the election.
The powers of the Council are set forth in the Tribe's Constitution, as amended,
and include the legislative and executive powers to establish a departmental
structure for the executive branch and to establish governmental sub-divisions
and agencies and delegate appropriate powers to such subdivisions and agencies.
The terms of each of the Council members ends on October 5, 2000. Presently the
members of the Council are as follows:
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TRIBAL COUNCIL
NAME AGE
---- ---
Mark Brown . . . . . . . . . . . . . . . . . . . . . . 38
Jayne Fawcett . . . . . . . . . . . . . . . . . . . . . 59
Carlisle Fowler . . . . . . . . . . . . . . . . . . . . 66
Courtland Fowler . . . . . . . . . . . . . . . . . . . 68
Roland Harris . . . . . . . . . . . . . . . . . . . . . 55
Loretta Roberge . . . . . . . . . . . . . . . . . . . . 64
Maynard Strickland . . . . . . . . . . . . . . . . . . 51
Shirley Walsh . . . . . . . . . . . . . . . . . . . . . 48
Glen R. LaVigne . . . . . . . . . . . . . . . . . . . . 35
The Tribe's Council of Elders presently consists of six elected members,
each of whom is a registered voter of the Tribe, is at least 55 years of age and
was elected by the registered voters of the Tribe. The seventh member of the
present Elders was appointed by the Tribal Council. In the future, all seven
members of the Elders will be elected by registered voters of the Tribe and will
be required to be at least 55 years of age. Any case or controversy arising
under the Tribe's Constitution must be submitted to the Elders for
determination, except those matters which relate to the Mohegan Sun Casino,
including the Senior Notes, which are required to be submitted to the Gaming
Disputes Court. The decision of the Elders on such matters is final. The Elders
are not permitted to issue advisory opinions. The term of each of the Elders
expires on October 2, 1998. Presently, the members of the Elders are as follows:
COUNCIL OF ELDERS
NAME AGE
---- ---
Pauline Brown . . . . . . . . . . . . . . . . . . . . . 66
Carlton Eichelberg . . . . . . . . . . . . . . . . . . 65
Everett Eichelberg . . . . . . . . . . . . . . . . . . 61
Melissa Fawcett . . . . . . . . . . . . . . . . . . . . 35
Margaret LaVigne . . . . . . . . . . . . . . . . . . . 65
Dorothy Long . . . . . . . . . . . . . . . . . . . . . 68
Laurence Schultz . . . . . . . . . . . . . . . . . . . 63
MOHEGAN TRIBAL GAMING AUTHORITY
On July 15, 1995, the Tribe established the Mohegan Tribal Gaming
Authority. The Mohegan Constitution provides that the Authority shall exercise
all governmental and proprietary powers of the Tribe over all gaming-related
development. The Authority has two major functions. The first, delegated to the
Authority's Management Board (the "Management Board"), is to direct the
development, operation, management, promotion and construction of the gaming
enterprise and all related development. The Management Board consists of the
nine members of the Council. Presently, the members of the Authority's
Management Board are the same as the members of the Council. The Management
Board also selects tribal representatives to a Business Board which oversees the
business aspects of the gaming operation (the "Business Board"). The Business
Board is established under the Management Agreement and consists of two members
appointed by the Tribe and two members appointed by TCA.
Although the Management Agreement gives TCA the exclusive right and
obligation to develop, manage, operate and maintain Class III gaming at the
Mohegan Sun Casino, ultimate management authority over gaming operations is
vested in the Authority and the Tribe. The Management Agreement also contains
numerous
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restrictions on TCA's independent authority. TCA is required to operate the
Mohegan Sun Casino in compliance with all tribal legal requirements and other
applicable laws and TCA and all of its executive officers must be licensed by
the Tribe pursuant to the Tribal Gaming Ordinance. General oversight
responsibility and decision-making authority with respect to certain key
business matters are delegated specifically to the Business Board.
Additionally, certain responsibilities delegated to TCA are subject to the prior
approval of the Authority (E.G., selection of a General Manager and adoption of
the operating and capital budgets for the Mohegan Sun Casino).
The second major function of the Authority is to regulate gaming. The
Management Board appoints an independent Director of Regulation to ensure the
integrity of the gaming operation through the promulgation and enforcement of
appropriate regulation. The Director of Regulation serves at the pleasure of the
Management Board and employs a staff that is responsible for performing
background investigation into gaming license applicants. The Director is
responsible for issuance and revocation of gaming licenses.
EXECUTIVE OFFICERS AND MEMBERS OF THE MANAGEMENT BOARD
The following table provides information as of April 9, 1996 with respect
to each of (i) the executive officers of the Authority and (ii) the members of
the Management Board.
Name Age Position
---- --- --------
Roland Harris . . . . . . . 55 Chairman and member, Management Board
Jayne Fawcett . . . . . . . 59 Vice Chairman and member, Management Board
William J. Valardo . . . . 41 Executive Vice President and General
Manager
George T. Papanier . . . . 38 Senior Vice President and Chief Financial
Officer
Mitchell Grossinger Etess . 38 Senior Vice President, Marketing
Carlisle Fowler . . . . . . 66 Treasurer and member, Management Board
Loretta Roberge . . . . . . 64 Corresponding Secretary and member,
Management Board
Shirley Walsh . . . . . . . 48 Recording Secretary and member, Management
Board
Mark Brown . . . . . . . . 38 Member, Management Board
Courtland Fowler . . . . . 68 Member, Management Board
Maynard Strickland . . . . 51 Member, Management Board
Glen R. LaVigne . . . . . . 35 Member, Management Board
Roland Harris has been Chairman and a member of the Management Board since
October 1995. Mr. Harris is the founder and president of the firm Harris and
Clark, Inc.--Civil Engineers, Land Surveyors & Land Planners, which has
performed services for the Authority. See "--Certain Relationships and Related
Party Transactions." Mr. Harris has served as First Selectman and CEO of the
Town of Griswold, Connecticut and also as its Planning and Zoning Commissioner.
He has served as Deputy Chief of the Griswold Fire Department and as Fire
Marshall and Inspector of the Town of Griswold. Prior to assuming the
Chairmanship of the Management
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Board, Mr. Harris served as the Tribal Planner. In addition to his duties as
Chairman, Mr. Harris also is a member of the Business Board and Director of the
Tribe's Housing Authority.
Jayne Fawcett has been Vice Chairman of the Management Board since December
1995 and a member of the Management Board since July 15, 1995. Ms. Fawcett
worked as a social worker for the State of Connecticut in 1987 and recently
retired from teaching after 27 years of service. Ms. Fawcett was Chairman of
the Constitutional Review Board from 1992 to 1993. In addition, she serves as
an alternate on the Business Board and oversees the Tribe's public relations.
Ms. Jayne Fawcett is the mother of Melissa Fawcett, who is serving on the
Constitutional Review Board.
William J. Valardo has been Executive Vice President, General Manager of
the Authority since October 1995 and has 20 years of experience in gaming
operations. Prior to his employment with the Authority, Mr. Valardo was Chief
Operating Officer for River City, a riverboat gaming joint venture in New
Orleans, Louisiana. From 1991 to 1994, Mr. Valardo served as Senior Vice
President, Casino Operations at Trump Plaza Hotel and Casino in New Jersey. Mr.
Valardo opened the Mirage in Las Vegas and was Vice President, Table Games from
1989 to 1991. Mr. Valardo also worked as Assistant Casino Manager and Pit
Manager for Caesars Tahoe and Caesars Palace.
George T. Papanier, who has been Senior Vice President Finance and the
Chief Financial Officer of the Authority since October 1995, has 17 years of
experience in the casino and hotel industry. Prior to joining the Authority,
Mr. Papanier worked for Hemmeter Enterprises from November 1994 to July 1995 as
its Vice President of Operations and prior thereto was Vice President of Finance
for Trump Plaza Hotel and Casino. Mr. Papanier also held various financial
management positions at Bally's Grand, Golden Nugget and Sands Hotel and Casino.
Mr. Papanier is a certified public accountant.
Mitchell Grossinger Etess has been Senior Vice President, Marketing since
November 1995 and has 16 years experience in the casino and hotel industry.
Prior to his employment with the Authority, Mr. Etess was Vice President at
Players Island and, from 1989 to 1994, was Senior Vice President of Marketing
and Hotel Operations at Trump Plaza Hotel and Casino. Prior thereto, Mr. Etess
held various management positions in the casino and hotel industry.
Carlisle Fowler has been the Treasurer and a member of the Management Board
since July 15, 1995 and has been active in the Tribe's government for over 20
years. Prior to his retirement in 1989, Mr. Fowler was an electronics
technician for the State of Connecticut and operated his own electronics
business. Mr. Fowler serves on the Business Board and on the Finance Committee
of the Management Board. Mr. Carlisle Fowler is the brother of Mr. Courtland
Fowler.
Loretta Roberge has been Corresponding Secretary and a member of the
Management Board since July 15, 1995. Mrs. Roberge has served as a
paraprofessional at the Mohegan School for 24 years, working with children with
special needs. Active in the Tribe's community all her life, Mrs. Roberge
previously served as secretary of the Management Board. She presently chairs the
Finance Committee, co-chairs the Glad and Sad Committee and is a member of the
Cemetery Committee of the Tribe. Mrs. Loretta Roberge is the sister of Ms.
Margaret LaVigne, who is serving on the Constitutional Review Board.
Shirley Walsh has been the Recording Secretary of the Management Board
since October 1995 and has been a member of the Management Board since July 15,
1995. Mrs. Walsh has worked for the Tribe in various capacities for almost four
years. Prior to that time, she was employed for 13 years by a local certified
public accountant. Mrs. Walsh chaired the Tribe's Election Committee from 1994
to 1995 and serves on the Bingo, Glad and Sad and the Wigwam Committees of the
Tribe.
Mark Brown has been a member of the Management Board since October 1995 and
serves as the security liaison for the Council. Prior to joining the Council,
he served as a law enforcement officer for eight years. Mr.
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Brown worked with the Tribe's historian during the period in which the Tribe was
working to obtain federal recognition and also served on the Constitutional
Review Board from 1993 to 1994. Mr. Brown is the son of Ms. Pauline Brown, who
is serving on the Constitutional Review Board. Mr. Brown has co-chaired the
Tribe's Wigwam Committee for the past two years and also serves on its Cemetery
Committee.
Courtland Fowler has been a member of the Management Board since July 15,
1995 and was a major contributor to the cultural research that led to the
federal recognition of the Tribe. Mr. Fowler continues to lend his expertise to
the Cultural Resources Department. Mr. Fowler was previously employed as a
chemical operator and assistant foreman at Pfizer until his retirement in 1990.
He has served as Vice Chairman of the Management Board, as a member of the
Constitutional Review Board and as a member of the Tribe's Cemetery Committee.
Mr. Fowler also was on the committee that drafted the first constitution of the
Tribe. Mr. Courtland Fowler is the brother of Mr. Carlisle Fowler.
Maynard Strickland has been a member of the Management Board since October
1995. During the past 20 years, Mr. Strickland owned and operated several
restaurants in Norwich, Connecticut and in Florida. Mr. Strickland is actively
engaged in developing the Tribe's bingo facility to be housed in the Mohegan Sun
Casino. Mr. Strickland was born and raised in the Tribe community, continuing a
long family tradition of tribal involvement.
Glenn R. LaVigne has been a member of the Management Board since January
1996. Mr. LaVigne has been employed by the Town of Montville, Connecticut since
1979 and oversees building and maintenance for Montville's seven municipal
buildings. Mr. Glenn LaVigne is the son of Ms. Margaret LaVigne, who is serving
on the Constitutional Review Board.
EXECUTIVE COMPENSATION
During the Authority's fiscal year ended September 28, 1995, Chief Ralph
Sturges served as the Chairman of the Management Board, in a capacity similar in
many respects to chief executive officer of the Authority. Neither Chief
Sturges nor any other person who served during fiscal 1995 as an executive
officer of the Authority received compensation from the Authority for such
period. Roland Harris, who currently serves as the Chairman of the Management
Board, receives no remuneration from the Authority; however, Mr. Harris receives
compensation from the Tribe for his services as an executive officer of the
Tribe and as a member of the Tribal Council.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On October 7, 1995, the Authority entered into an agreement pursuant to
which Harris and Clark, Inc. agreed to provide surveyance, civil engineering and
professional design services to the Authority for fees not to exceed $344,430.
Roland Harris, Chairman of the Management Board of the Authority, is the founder
and president of the Harris and Clark, Inc. As of December 31, 1995, the
Authority had paid approximately $202,000 in fees to Harris and Clark, Inc.
pursuant to such agreement. The Authority believes that the terms and
conditions of this transaction are no less favorable than the Authority could
have obtained at that time from unaffiliated third parties.
GAMING DISPUTES COURT
On July 20, 1995, the Council enacted a Tribal Ordinance creating the
Gaming Disputes Court (the "Gaming Disputes Court"). The Gaming Disputes Court
is composed of a trial and an appellate branch. A single judge presides over
cases at the trial level. Trial court decisions can be appealed to the appellate
branch where they will be heard by a panel of three judges, one of whom will be
the Chief Judge, and none of whom shall have presided over the case below.
Decisions of the appellate branch are final and no further appeal is available
in the Gaming Disputes Court.
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The Mohegan Constitution and the tribal ordinance establishing the Gaming
Dispute Court give the Court exclusive jurisdiction for the Tribe over all
disputes related to gaming on the Site. This includes jurisdiction over all
disputes or controversies related to gaming between any person or entity and the
Authority, the Tribe, or TCA. The Gaming Disputes Court has jurisdiction over
all disputes arising out of the Authority's regulatory powers, including
licensing actions. By ordinance, the Tribe has adopted the substantive law of
the State of Connecticut as the applicable law of the Gaming Dispute Court. The
Tribe has also adopted all of Connecticut's rules of civil and appellate
procedure, professional and judicial conduct to govern the Gaming Disputes
Court.
Judges of the Gaming Disputes Court are chosen by the Tribal Council from a
publicly available list of eligible retired federal judges and Connecticut
Attorney Trial Referees appointed by the Chief Justice of the Connecticut
Supreme Court pursuant to Connecticut General Statute 52-434(a)(4), all of whom
must remain licensed to practice law in the State of Connecticut. Judges are
appointed sequentially from the list as cases are filed with the clerk of the
Gaming Disputes Court. The Chief Judge of the Gaming Disputes Court, who serves
as the Gaming Disputes Court's administrative superintendent, is chosen by the
Tribal Council from the list of eligible judges and serves a five-year term.
Judges of the Gaming Disputes Court are subject to discipline and removal for
cause pursuant to the rules of the Gaming Disputes Court. The Chief Judge is
vested with the sole authority to revise the rules of the Gaming Disputes Court.
Judges are compensated by the Tribal Council at an agreed rate of pay
commensurate with their duties and responsibilities and such rate cannot be
diminished during a judge's tenure.
The present members of the Gaming Disputes Court are:
Neal Ossen, Chief Judge (acting) . . . Partner, Ossen & Murphy, Attorney
Trial Referee, District of Hartford;
member of panel of Bankruptcy
trustees, District of Connecticut,
Chairman, Division C, National
Conference of Commissioners on Uniform
State Laws. Professional practice of
27 years with emphasis in commercial
litigation and bankruptcy.
T. Steven Bliss, Judge . . . . . . . . Of counsel to Resha, Smith & Goldberg,
P.C., Attorney Trial Referee, Danbury
Judicial District. Professional
practice of 25 years with emphasis in
general litigation.
Carl E. Cella, Judge . . . . . . . . . Partner, Cella McKeon & Williams, P.C.
Attorney Trial Referee, District of
New Haven; Professional practice of 30
years with emphasis on property,
casualty and personal injury
litigation.
Robert R. Petrucelli, Judge. . . . . . Partner, Palmesi, Kaufman, Goldstein
and Petrucelli, P.C., Attorney Trial
Referee, District of Fairfield; Panel
of Arbitrators to American Arbitration
Association; Professional practice of
35 years with emphasis in general
civil litigation and commercial law.
Mark J. Rosen, Judge . . . . . . . . . Partner, Zeisler & Zeisler, Attorney
Trial Referee, District of Fairfield.
Author of nine books in the areas of
collection, foreclosure, replevin and
secured creditor's rights.
Professional practice of 20 years with
emphasis in commercial litigation,
commercial workouts and administrative
law and proceedings.
The Tribe has constitutionally authorized the Authority to stipulate for
judgment before the Gaming Disputes Court, and to bind the Tribe and the
Authority thereby. Under this power, the Authority has stipulated
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for judgment before the Gaming Disputes Court for the enforcement of the
remedies in the Indenture. Under the Constitution of the Tribe, that stipulation
is the law of the Tribe.
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GOVERNMENT REGULATION
GENERAL
In addition to a variety of generally applicable state and federal laws
governing business operations, the Authority is also subject to extensive
regulation by special federal, state and tribal laws and regulations applicable
to commercial relationships with Indians generally, as well as Indian gaming and
the management and financing of Indian casinos. In addition, the Authority is
regulated by federal and state laws and regulations applicable to the gaming
industry generally and to the distribution of gaming equipment. The following
description of the regulatory environment in which gaming takes place and in
which the Authority will operate is intended to be a summary and is not intended
to be a complete recitation of all applicable law. Moreover, because the
regulatory environment is dynamic and evolving, it is impossible to predict how
certain provisions will be ultimately interpreted or how they may affect the
Authority. Changes in such laws or regulations could have a material adverse
impact on the Authority's operations. See "Risk Factors."
TRIBAL LAW AND LEGAL SYSTEMS
APPLICABILITY OF STATE AND FEDERAL LAW. Federally-recognized Indian tribes
are independent governments, subordinate to the United States, with sovereign
powers, except as those powers may have been limited by treaty or by the United
States Congress. The power of Indian tribes to enact their own laws to regulate
gaming derives from the exercise of tribal sovereignty. Indian tribes maintain
their own governmental systems and often their own judicial systems. Indian
tribes have the right to tax persons and enterprises conducting business on
Indian lands, and also have the right to require licenses, and to impose other
forms of regulations and regulatory fees on persons and businesses operating on
their lands.
Absent the consent of the Tribe or the United States Congress, the laws of
the State of Connecticut do not apply to the Tribe or the Authority. Under the
federal law that recognizes the Tribe, the Tribe consented to the extension of
Connecticut criminal law and Connecticut state traffic controls over the Site.
WAIVER OF SOVEREIGN IMMUNITY; JURISDICTION; EXHAUSTION OF TRIBAL REMEDIES.
Indian tribes generally enjoy sovereign immunity from unconsented suit similar
to that of the states and the United States. In order for an Indian tribe (or an
agency or instrumentality of an Indian tribe, such as the Authority) to be
subject to suit (other than by the United States), the tribe must have
effectively waived its sovereign immunity with respect to the matter in dispute.
Further, in most commercial disputes with Indian tribes, the jurisdiction of the
federal courts, which are courts of limited jurisdiction, may be difficult or
impossible to obtain. A commercial dispute is unlikely to present a federal
question, and some courts have ruled that an Indian tribe as a party is not a
citizen of any state for purposes of establishing diversity jurisdiction in the
federal courts. State courts may also lack jurisdiction over suits brought by
non-Indians against Indian tribes in Connecticut. The remedies available against
an Indian tribe also depend, at least in part, upon the rules of comity
requiring initial exhaustion of remedies of tribal tribunals and, as to some
judicial remedies, the tribe's consent to jurisdictional provisions contained in
the disputed agreements. The United States Supreme Court has held that where a
tribal court exists, the jurisdiction in that forum must first be exhausted
before any dispute can be properly heard by federal courts which would otherwise
have jurisdiction. Where a dispute as to the existence of jurisdiction in the
tribal forum exists, the tribal court must first rule as to the limits of its
own jurisdiction.
In connection with the Offering, the Tribe agreed, and has constitutionally
granted the Authority the power, to waive its sovereign immunity, and the
Authority has agreed to waive its sovereign immunity, for the limited purpose of
any suit by the Trustee under the Indenture or, as to the Authority, under
certain circumstances by the holders of the Senior Notes to enforce repayment of
the Senior Notes. The Tribe also adopted a constitutional restraint against any
action by the Tribe or its officers which impairs contractual obligations. In
the
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event that such waiver of sovereign immunity is held to be ineffective, the
Trustee and the Note holders could be precluded from judicially enforcing their
rights and remedies against the Tribe or the Authority. In the event that the
waiver of the rule requiring exhaustion of tribal remedies is held to be
ineffective, the Trustee and the Note holders could be subjected to substantial
delay, cost and expense while seeking such remedies in the Gaming Disputes Court
or other tribunals of the Tribe. In addition, unless the decisions of the Gaming
Disputes Court or other tribunals of the Tribe violate applicable state or
federal law, there might be no effective right to appeal such decisions in state
or federal court.
THE INDIAN GAMING REGULATORY ACT OF 1988
REGULATORY AUTHORITY. The terms and conditions of the Management
Agreement, as well as the operation of casinos and of all gaming on Indian land,
are subject to the Indian Gaming Regulatory Act of 1988, 25 U.S.C. 2701 ET SEQ.
("IGRA").
IGRA is administered by the National Indian Gaming Commission ("NIGC"), an
independent agency, within the U.S. Department of Interior, exercising primary
federal regulatory responsibility over Indian gaming. The NIGC has exclusive
authority to issue regulations governing tribal gaming activities, approve
tribal ordinances for regulating Class II and Class III Gaming (as described
below), approve management agreements for gaming facilities, conduct
investigations, and generally monitor tribal gaming. Certain responsibilities
under IGRA (such as the approval of per capita distribution plans to tribal
members, and the approval of transfer of lands into trust status for gaming) are
retained by the BIA. The BIA also has responsibility to review and approve land
leases and other agreements relating to Indian lands. See "--BIA Approvals."
Criminal enforcement is the exclusive responsibility of the United States
Department of Justice, except to the extent such enforcement responsibility is
shared with the State of Connecticut under the Mohegan Compact and under the
federal law that recognizes the Tribe.
The NIGC is empowered to inspect and audit all Indian gaming facilities, to
conduct background checks on all persons associated with Indian gaming, to hold
hearings, issue subpoenas, take depositions, adopt regulations and assess fees
and impose civil penalties for violations of IGRA. IGRA also provides for
federal criminal penalties for illegal gaming on Indian land and for theft from
Indian gaming facilities.
In 1993, the NIGC published rules implementing certain provisions of IGRA.
These rules govern, among other things, the submission and approval of tribal
gaming ordinances or resolutions, and require an Indian tribe to have the sole
proprietary interest in and responsibility for the conduct of any gaming.
Tribes are required to issue gaming licenses only under articulated
standards, to conduct or commission financial audits of their gaming
enterprises, to perform or commission background investigations for primary
management officials and key employees, and to maintain facilities in a manner
that adequately protects the environment and the public health and safety. The
1993 rules also set out a review procedure for tribal licensing of all gaming
operation employees. Reporting requirements applicable to tribes are
articulated, requiring the report of specified information, including that
derived from background investigations, to the NIGC.
TRIBAL ORDINANCES. Under IGRA, except to the extent otherwise provided in
a tribal-state compact, Indian tribal governments have primary regulatory
authority over Class III Gaming on land within the tribe's jurisdiction.
Therefore, the Authority's gaming operations, and persons engaged in gaming
activities, are guided by and subject to the provisions of the Tribe's
ordinances and regulations regarding gaming.
IGRA requires that the NIGC review tribal gaming ordinances, and authorizes
the NIGC to approve such ordinances only if they meet certain requirements
relating to (i) the ownership, security, personnel background, recordkeeping,
and auditing of a tribe's gaming enterprises; (ii) the use of the revenues from
such gaming; and
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(iii) the protection of the environment and the public health and safety. The
Tribe adopted its gaming ordinance on July 24, 1994, and the NIGC approved the
gaming ordinance on November 8, 1994.
CLASSES OF GAMING. IGRA classifies games that may be conducted on Indian
lands into three categories. "Class I Gaming" includes social games solely for
prizes of minimal value, or traditional forms of Indian gaming engaged in by
individuals as part of, or in connection with, tribal ceremonies or
celebrations. "Class II Gaming" includes bingo, pulltabs, lotto, punch boards,
tip jars, instant bingo, and certain other games similar to bingo, if those
games are played at the same location as bingo is played. "Class III Gaming"
includes all other forms of gaming, such as slot machines, video casino games
(E.G., video slots, video blackjack and video poker), so-called "table games"
(E.G., blackjack, craps, roulette), and other commercial gaming (E.G., sports
betting and parimutuel wagering).
Class I Gaming on Indian lands is within the exclusive jurisdiction of the
Indian tribes and is not subject to the provision of IGRA. Class II Gaming is
permitted on Indian lands if (i) the state in which the Indian lands lies
permits such gaming for any purpose by any person, organization or entity;
(ii) the gaming is not otherwise specifically prohibited on Indian lands by
federal law; (iii) the gaming is conducted in accordance with a tribal ordinance
or resolution which has been approved by the NIGC; (iv) an Indian tribe has sole
proprietary interest and responsibility for the conduct of gaming; (v) the
primary management officials and key employees are tribally licensed; and
(vi) several other requirements are met. Class III Gaming is permitted on Indian
lands if the conditions applicable to Class II Gaming are met and, in addition,
the gaming is conducted in conformance with the terms of a written agreement
between the tribal government and the government of the state within whose
boundaries the tribe's lands lie (a "Tribal-State Compact").
TRIBAL-STATE COMPACTS. IGRA requires states to negotiate in good faith
with Indian tribes that seek to enter into Tribal-State Compacts for the conduct
of Class III Gaming. Such Tribal-State Compacts may include provisions for the
allocation of criminal and civil jurisdiction between the state and the Indian
tribe necessary for the enforcement of such laws and regulations, taxation by
the Indian tribe of such activity in amounts comparable to those amounts
assessed by the state for comparable activities, remedies for breach, standards
for the operation of such activity and maintenance of the gaming facility,
including licensing, and any other subjects that are directly related to the
operation of gaming activities. The terms of Tribal-State Compacts vary from
state to state; however, Tribal-State Compacts within one state tend to be
substantially similar. Tribal-State Compacts usually specify the types of
permitted games, establish technical standards for video gaming machines, set
maximum and minimum machine payout percentages, entitle the state to inspect
casinos, require background investigations and licensing of casino employees,
and may require the tribe to pay a portion of the state's expenses for
establishing and maintaining regulatory agencies. Some Tribal-State Compacts are
for set terms, while others are for indefinite duration. The Mohegan Compact was
entered into in May 1994 and was approved by the Secretary of the Interior on
December 14, 1994, does not have a specific term and will remain in effect until
terminated by written agreement of both parties, or the provisions are modified
as a result of a change in applicable law. See "Risk Factors--Highly Regulated
Industry."
Tribal-State Compacts have been the subject of litigation in several
states, including Alabama, California, Florida, Kansas, Michigan, Mississippi,
New Mexico, New York, Oklahoma, Oregon, Rhode Island, South Dakota, Wisconsin
and Washington. Among the issues litigated is the constitutionality of the
provision of IGRA which entitles tribes to sue in federal court to force states
to negotiate Tribal-State Compacts. The Supreme Court has recently ruled, in
SEMINOLE TRIBE OF FLORIDA V. FLORIDA, 116 S. Ct. 114 (1996), that Congress lacks
the power to abrogate state immunity to permit tribes to sue in federal court to
enforce the compacting requirements of IGRA. While, on a similar basis, a
federal district court in Washington previously held the Class III provisions of
IGRA to be unconstitutional, that decision was never subject to appellate review
and the constitutionality of the IGRA survives the Supreme Court decision
unimpaired, except that tribes may not avail themselves of the provision to sue
unconsenting states to secure a compact. On April 15, 1996, the Supreme Court
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disposed of the remaining cases consistently with the SEMINOLE decision, and
without further addressing the IGRA provisions. To the extent that they have
jurisdiction to do so, appellate courts in the Ninth and Tenth Circuits may
address the same issues on remand from the Supreme Court, and future litigation
may be expected to call into question the constitutionality of IGRA, either in
whole or in part, in view of the partial invalidity of the remedial scheme.
There has also been litigation challenging the authority of governors,
under state law, to enter into Tribal-State Compacts. Federal courts have upheld
the authority of the governors of Louisiana and Mississippi to enter into
compacts, while the highest state courts of New Mexico, Kansas and Rhode Island
have held that the governors of those states did not have authority to enter
into such compacts without the consent or authorization of the legislatures of
those states. In the New Mexico, Kansas and Rhode Island cases, the courts held
that compacting is a legislative function under the respective state
constitutions. The court in a second New Mexico case has held that state law
does not permit casino-style gaming.
In Connecticut, there has been no litigation challenging the governor's
authority to enter into the Mohegan Compact. If such a suit were filed, however,
the Authority does not believe that the precedent in New Mexico or Kansas cases
would apply. On May 18, 1994, the Connecticut Attorney General issued a formal
opinion that concluded that "existing [state] statutes provide the Governor with
the authority to negotiate and execute the . . . [Mohegan] Compact". The
Attorney General therefore declined to follow the Kansas case. In addition, the
United States Court of Appeals for the Second Circuit Court has held, in a case
brought by the Pequot Tribe, that Connecticut law authorizes casino gaming.
After execution of the Mohegan Compact in May 1994, the Connecticut Legislature
passed a law to require future gaming compacts to be approved by the
legislature, but that law does not apply to previously executed compacts such as
the Mohegan Compact.
The Authority's operation of gaming is subject to the requirements and
restrictions contained in the Mohegan Compact. The Mohegan Compact authorizes
the Tribe to conduct most forms of Class III Gaming.
POSSIBLE CHANGES IN FEDERAL LAW. Several bills have been introduced in
Congress which would amend IGRA. To this date, no such bill has passed either
house of Congress. If IGRA were amended, the amendment could change the
governmental structure and requirements within which the Tribe could conduct
gaming.
NIGC AND BIA APPROVALS
The Authority will construct and operate the Mohegan Sun Casino on lands
held in trust for the Tribe by the United States of America, which are leased by
the Tribe to the Authority. Such leases, and modifications or amendments to such
lease, must be and were approved by the BIA pursuant to 25 U.S.C. Section 415
and 25 C.F.R. Section 162. In addition, 25 U.S.C. Section 81 ("Section 81"), a
federal statute originally passed in 1871, requires that all contracts "by any
person with any tribe of Indians" which are "relative to their lands" must be
approved by the Secretary of the Interior. The remedies pursuant to Section 81
enable the federal courts to find agreements which violate this statute to be
void AB INITIO, and to grant full restitution of all amounts paid to the
non-Indian party by the tribe.
Prior to the passage of IGRA, the BIA took the position that management
contracts for Indian gaming facilities did not require BIA approval.
Nevertheless, beginning in the early 1980s federal courts held that gaming
management contracts did require such approval, and several such agreements were
set aside by federal courts because they lacked approval. In 1988, with the
passage of IGRA, the approval of gaming management agreements and collateral
agreements between Indian tribes and gaming managers became the province of the
NIGC, but the BIA continues to have some residual Section 81 jurisdiction. The
full scope of required review and approval pursuant to this statute is not fully
or precisely defined. The regulations and guidelines which the NIGC and the BIA
use to interpret their respective responsibilities regarding Section 81 are
incomplete and
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evolving. Both Section 81 and IGRA have been the subject of litigation and may
be subject to further judicial or legislative interpretation.
CONSTRUCTION PERMITS FOR THE MOHEGAN SUN CASINO AND ROADWAYS
STATE TRAFFIC COMMISSION
The Site lies northwest of Connecticut Route 2A. The Authority will
construct an interchange off of Connecticut Route 2A for access to the Mohegan
Sun Casino. The Site lies to the east of Connecticut Route 32. Sandy Desert
Road, a town road, extends from Route 32 approximately 1,000 feet to the Site.
The Authority will construct an extension of Sandy Desert Road through the Site
to connect the same to the Route 2A interchange.
The interchange primarily traverses land owned or controlled by the DOT.
The extension of Sandy Desert Road will bisect the Site and cross other adjacent
land owned by an affiliate of the Tribe. That portion of the extension of Sandy
Desert Road which is adjacent to but not on the Site will not be a part of the
Tribe's reservation. Portions of Sandy Desert Road up to the Site will be used
and maintained as a part of the Montville municipal road system, and the
interchange will be used and maintained as a part of the state road systems.
The Tribe has received a permit ("STC Permit") from the State Traffic
Commission of the State of Connecticut ("STC") for the construction of the
interchange off of Connecticut Route 2A and for the extension of Sandy Desert
Road. The STC Permit requires that the developer construct a number of
improvements to existing roads, including establishing a full interchange on
Route 2A, and widening a portion of Route 2A from two-lanes to four-lanes with a
median divided highway.
The STC Permit also requires the Authority to review various traffic
operations after opening of the Mohegan Sun Casino and to submit a report to the
STC summarizing the results. If the STC determines that operational deficiencies
exist as a result of the added traffic from the Mohegan Sun Casino, the
Authority may be required to mitigate such operational deficiencies as
determined by the STC.
Prior to performing any work within the state highway right of way, an
encroachment permit must be obtained from the DOT. The Authority has obtained
such encroachment permit.
ENVIRONMENTAL PROTECTION
The State of Connecticut is required under the federal Clean Air Act to
develop and submit to the United States Environmental Protection Agency ("EPA")
a State Implementation Plan ("SIP") which outlines measures needed to achieve
attainment of federal ambient air quality standards by certain required dates.
The State of Connecticut has submitted a SIP which is under review by the EPA.
The Tribe must also comply with the requirements of the federal Clean Air
Act. The Tribe has committed to conform with the SIP as such requirements would
apply to similar activities conducted elsewhere in the State of Connecticut. The
DEP has confirmed that such conformity with the SIP would satisfy the Tribe's
obligations under the Clean Air Act, provided that the EPA approves the SIP.
In addition to the SIP, DEP evaluates the potential direct emissions from a
facility. New emission sources must meet new source performance standards. A
permit is required if total emissions could reach certain minimum levels. New
source owners must apply even if no permit will be required. Total emissions at
the Mohegan Sun Casino are not expected to reach the minimum levels. However,
the Authority will apply for such permit as required.
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Finally, in order to construct the new access road off of a state highway,
a developer is required to obtain a permit if the indirect air quality impacts
are expected to be "significant." The indirect air quality impacts of the
Mohegan Sun Casino are not expected to be "significant," and, accordingly, no
such permit should be required.
The Tribe must also comply with the requirements of the federal Clean Water
Act. Any person whose activity may result in any discharge into navigable water,
including wetlands and watercourses, and natural and manmade ponds, must obtain
a permit and/or a certification that the discharge is consistent with the Clean
Water Act. The Authority has preliminarily determined that all discharges will
be consistent with the Clean Water Act, and believes that such certification
and/or permit will be issued.
Neither the shoreline nor the tidal wetlands on or adjacent to the Site are
expected to be negatively impacted by construction and operation of the Mohegan
Sun Casino. However, because the Site is located within 1,000 feet of tidal
wetlands, the Tribe must comply with the Connecticut Coastal Area Management
Program as part of its federal compliance with the Federal Coastal Zone
Management Act. The Authority expects that construction of the Mohegan Sun
Casino will comply with applicable policies and will have no adverse impacts to
coastal resources.
In order to construct the interchange off of Route 2A and the extension of
Sandy Desert Road, the Authority will be required to comply with the Connecticut
Coastal Area Management Program and the federal Clean Water Act, including the
regulations promulgated under the National Pollution Discharge Elimination
System. Such compliance is confirmed by the DEP through the issuance of permits
pursuant to the DEP's regulations. The Authority believes that all such permits
will be timely issued to the DOT or the Authority.
No assurances can be given that any or all of the permits and/or approvals
described above will be issued or that any or all of such permits and/or
approvals will be issued without certain conditions or restrictions that could
adversely affect the construction and operation of the Mohegan Sun Casino or the
development of the adjacent roadways. It was reported in certain Connecticut
newspapers that officials of the State of Connecticut had stated that regulatory
approvals required for the construction of the Mohegan Sun Casino may be
delayed. See "Business and Property--Regulatory Approvals." Although the
Authority has received from the State of Connecticut substantially all of the
permits required to construct the Mohegan Sun Casino and adjacent roadways as
planned, there can be no assurance that any of such permits will not be revoked
or that any additional permits that may be required will be granted in a timely
manner.
LICENSING
Prior to opening the Mohegan Sun Casino, each of the partners of TCA and
certain employees of the Mohegan Sun Casino must be licensed by relevant tribal
and state authorities. Each of the partners of TCA has applied for and received
temporary gaming licenses from the Commissioner of Revenue Services of the State
of Connecticut. As each employee who is required to be licensed is hired, the
Authority or TCA will cause such employee to apply for all required licenses.
See "Risk Factors--Transkei Investigation."
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MATERIAL AGREEMENTS
The following discussion summarizes significant terms of certain material
agreements to which the Tribe and the Authority are parties. This summary does
not purport to be complete and is qualified in its entirety by reference to each
of the agreements described herein, copies of which will be made available upon
request without charge by writing to the Authority at 67 Sandy Desert Road,
Uncasville, CT 06382, Telecopy: (860) 848-0545, attn: Roland Harris and Carlisle
Fowler, Business Board Members, and Chief Ralph Sturges. Capitalized terms used
but not otherwise defined herein shall have the meaning ascribed to such terms
in the agreement being described (unless otherwise indicated).
TRIBAL-STATE MOHEGAN COMPACT
Presently, the Tribe is not engaged in any gaming activities. The Tribe and
the State of Connecticut entered into The Mohegan Tribe--State of Connecticut
Gaming Mohegan Compact (the "Mohegan Compact") to authorize and regulate
Class III Gaming operations on lands owned by the Tribe. The Mohegan Compact is
substantively similar to the agreement governing Class III Gaming of the Pequot
Tribe in the State of Connecticut. The Mohegan Compact provides, among other
things, that:
(1) The Tribe agrees to submit all gaming-related operation and
development to the regulation of the State of Connecticut Gaming Commission, in
order to attempt to insure the fair and honest operation of gaming activities
and to maintain the integrity of all activities conducted in regard to Class III
gaming. The Tribe further agrees to adopt certain standards of operation and
management of all gaming operations and to regulate the same through a Tribal
gaming agency.
(2) The Tribe may conduct, on the Site, games of chance, including:
Blackjack, Poker, Dice, Money-Wheels, Roulette, Baccarat, Chuck-a-Luck, Pai Gow,
Over and Under, Horse Race Game, Acey-ducey, Beat the Dealer, Bouncing Ball,
Slot Machines, video facsimile games and Pari-mutuel betting.
(3) Law enforcement matters relating to Class III Gaming activities will
be under the jurisdiction of the State of Connecticut and the Tribe.
(4) All gaming employees will obtain and maintain a gaming license issued
by the State of Connecticut gaming agency. Documentation relating to personal
and family history, personal and business references, criminal convictions,
business activities, financial affairs, gaming industry experience, gaming
school education and general education, as well as photographs and fingerprints,
will be submitted to the State of Connecticut gaming agency. State and federal
criminal record checks will be conducted on all applicants.
(5) Any enterprise providing gaming services or gaming equipment to the
Tribe will be required to hold a current valid registration issued by the State
of Connecticut gaming agency.
(6) The State of Connecticut will annually assess the Tribe for the costs
attributable to its regulation of the Tribe's gaming operations and for the
provision of law enforcement in accordance with the Mohegan Compact.
(7) The Tribe shall have each of its Class III Gaming operations audited
on an annual basis by an independent certified public accountant and shall
include any additional procedures required by the State of Connecticut gaming
agency, such additional procedures to be performed at the sole expense of the
State of Connecticut gaming agency.
(8) In order to beneficially effect health and safety, the Tribe shall
enact fire, building, sanitary and health ordinances and regulations no less
rigorous than laws and regulations of the State of Connecticut.
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(9) Service of alcoholic beverages within any gaming facility will be
subject to regulation by the State of Connecticut.
(10) The Tribe waived any defense which it may have by virtue of sovereign
immunity in respect to any action in United States District Court to enforce the
Mohegan Compact.
In addition, the Tribe and the State of Connecticut entered into a
memorandum of understanding (the "Memorandum") setting forth certain matters
regarding the implementation of the Mohegan Compact. The Memorandum provides
that:
(1) So long as there is no change in state law to permit the operation of
slot machines or other commercial casino games by any other person (other than
the Pequot Tribe under IGRA), the Tribe will contribute to the State of
Connecticut on a monthly basis a sum equal to twenty-five percent (25%) of gross
operating revenues derived from the slot machines operated by the Tribe, which
amount shall be reduced by the amounts set forth in (2) and (3) hereof.
(2) The payment of the State of Connecticut is to be reduced by $5,000,000
in the second year of the Tribe's gaming operations, by $2,500,000 in the third
year of the Tribe's gaming operations, and by $2,500,000 in the fourth year of
the Tribe's gaming operations. This represents the settlement of the land claims
of the Tribe.
(3) The Tribe's payment is to be reduced by $3,000,000 in the first year
following the completed transfer of Fort Shantok State Park to the United States
to be held in trust for the Tribe.
(4) For each fiscal year commencing July 1, the minimum contribution of
the Tribe to the State of Connecticut shall be the LESSER of (a) thirty percent
(30%) of gross revenues from slot machines, or (b) the greater of
(i) twenty-five percent (25%) of gross revenues from slot machines or
(ii) $80,000,000.
On December 5, 1994, the Secretary of the Interior approved the Mohegan
Compact in accordance with the IGRA.
AGREEMENT WITH THE TOWN OF MONTVILLE
As a part of its review of the Tribe's land in trust application to the
BIA, the United States Secretary of the Interior (the "Secretary of the
Interior") reviewed the impact on the State as well as local authorities of
accepting the land in trust. In order to minimize the impact to the Town of
Montville (the "Town") resulting from the removal of the land to be taken into
trust from the Town's tax rolls and jurisdiction, on June 16, 1994, the Tribe
and the Town entered into an agreement (the "Town Agreement"), whereby the Tribe
agreed to pay to the Town an annual payment of $500,000 derived from gaming
revenues and a one-time payment of $3,000,000 towards improvements in the Town's
water system. The annual payment is payable commencing one year after the
commencement of slot machine gaming activities; the one-time payment is payable
one year after the commencement of slot machine gaming activities. In addition,
the Town Agreement provides that the Tribe will use and compensate the Town
accordingly for the Town's disposal system and the Town's wastewater collection
and treatment system, and that the Tribe will cooperate with the Town in its
development regarding traffic patterns and planning and zoning issues. Finally,
the Town Agreement provides that the Tribe will make payments in lieu of taxes
to the Town on lands that the Tribe may acquire outside of the currently
contemplated 700-acre reservation.
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LAND LEASE
LEASED PROPERTY; TERM. The Tribe and the Authority have entered into a
land lease (the "Lease"), pursuant to which the Tribe leases to the Authority
certain land located in the Town of Montville, Connecticut (the "Leased
Property"), which land is held by the United States of America in trust for the
Tribe, and all buildings, improvements and related facilities (E.G., the Mohegan
Sun Casino and related developments) constructed or installed on the Leased
Property during the term of the Lease (collectively, the "Improvements"). The
Lease also covers an additional parcel of land adjacent to the Site that is held
by the Tribe in its own name (and is not part of the Tribe's reservation) and
was acquired for expansion of the access road leading to the Mohegan Sun Casino.
Upon the termination of the Lease, the Authority will be required to surrender
to the Tribe possession of the Improvements, excluding any equipment, furniture,
trade fixtures or other personal leased property which may be removed by the
Authority in accordance with the terms of the Lease.
The initial term of the Lease is for 25 years. Provided that the Authority
is not in default under the Lease, the Authority has the right to extend the
term of the Lease for one additional 25-year term upon notice to the Tribe not
more than two years, nor less than one year, prior to the expiration of the
initial term. All terms and conditions of the Lease (excluding the Authority's
option to extend the term of the Lease) will remain in effect during any
extended term thereof.
Subject to the provisions of any Permitted Mortgage, the Tribe has the
right to terminate the Lease as to any portion of the Leased Property, provided
that such released portion shall not be used to conduct any gaming operations.
RENT; EXPENSES; DEFAULT. Under the terms of the Lease, the Authority is
required to pay to the Tribe annual rent in the amount of $1.00. In the event
the Authority assigns its interest in the Lease to the Tribe (assuming the Tribe
subsequently fails to merge its lessee and lessor interests under the Lease) or
to any other instrumentality of the Tribe, the Lease and this annual rent
obligation would remain in effect. For any period when the Tribe or another
agency or instrumentality of the Tribe is not the tenant under the Lease (for
example, upon the foreclosure of the Leasehold Mortgage by the Trustee), the
annual rent would increase to 8% of the tenant's gross revenues from the
premises, payable monthly in arrears, based on the gross revenues of the prior
month.
The Lease is a "net" lease; accordingly, the Authority is responsible for
the payment of all costs of owning, operating, constructing, maintaining,
repairing, replacing and insuring the Leased Property, including, without
limitation, the payment of all taxes, fees, assessments or other charges which
may be levied against the Leased Property or the Authority's interest therein by
the Tribe or any other governmental authority. The Tribe has agreed that it will
not impose any new or additional taxes, fees, assessments or other charges on
the Leased Property or the Authority other than those specified in the Lease or
non-discriminatory charges for utilities or other governmental services supplied
by the Tribe to the Leased Property or the Authority. The Mohegan Constitution
includes a provision prohibiting the impairment of contracts.
The Authority will be in default of its obligations under the Lease upon
any (i) failure to pay when due any amount required to be paid by the Authority
under the Lease (except for any amount for which the Authority will indemnify
the Tribe under the terms of the Lease), which failure continues for 30 days
after written notice thereof from the Tribe to the Authority and any Permitted
Mortgagee (as defined in the Lease), (ii) failure to observe or perform any
other covenant or obligation of the Authority under the Lease excluding certain
obligations under the Lease, which failure continues for 60 days (or such other
longer period as may be reasonably required to cure such default) after written
notice from the Tribe to the Authority and any Permitted Mortgagee; or (iii)
pledge, encumbrance or conveyance by the Authority of its interest in the Lease
in violation of the terms of the Lease. Notwithstanding the foregoing, the
Authority will not be in default under the Lease
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if, in connection with any good faith dispute, it deposits funds in escrow or
obtains a bond that prevents any foreclosure of the leasehold estate.
USE OF LEASED PROPERTY. Under the Lease, the Authority may use the Leased
Property solely for the construction and operation of the Resort (as defined in
the Indenture), unless prior approval is obtained from the Tribe for any
proposed alternative use. Similarly, no construction or alteration of any
building or improvement located on the Leased Property by the Authority may be
made unless complete and final plans and specifications therefor have been
approved by the Tribe. Following foreclosure of any mortgage on the Authority's
interest under the Lease (including the Leasehold Mortgage) or any transfer of
such interest to the holder of such mortgage in lieu of foreclosure, the Leased
Property may be used for any lawful purposes, subject only to applicable codes
and governmental regulations.
Under the Lease, the Authority has the obligation to construct and maintain
access roads required to permit reasonable access to the Leased Property and the
non-exclusive right to construct, install, maintain, repair, replace, use and
operate the same. The Authority also has the right to acquire, construct,
install, maintain, repair, replace, use and operate such electric power, water,
sanitary and storm sewer and other utilities reasonably required for the
development and operation of the Leased Property subject to the approval of the
Secretary of the Interior or to the extent required by law, which utilities must
be designed and constructed in accordance with plans approved by the Tribe. The
Tribe has the non-exclusive right to operate and use access roads and utilities
constructed or installed by the Authority (and to construct, install and grant
easements with respect to access roads and utilities to serve other property of
the Tribe, including areas of the Leased Property not occupied or retained by
the Authority as to which the Lease is terminated), provided that such use,
operation, construction or installation does not unreasonably interfere with the
Authority's use of the Leased Property. In addition, the Tribe has certain entry
and inspection rights with respect to the Leased Property and the activities
thereon and the option to perform the obligations of the Authority under the
Lease if the Authority fails to do so after reasonable prior notice to the
Authority and all Permitted Mortgagees.
PERMITTED MORTGAGES AND RIGHTS OF PERMITTED MORTGAGEES; ASSIGNMENT;
AMENDMENT OF LEASE. The Authority may not mortgage, pledge or otherwise
encumber its leasehold estate in the Leased Property except through a Permitted
Mortgage. Under the Lease, a "Permitted Mortgage" is defined to include the
Leasehold Mortgage securing the obligations of the Authority under the Senior
Notes and the Trustee for the Senior Notes is a Permitted Mortgagee. See "--
Leasehold Mortgage Deed." A Permitted Mortgage also includes any other mortgage
granted by the Authority that provides, among other things, that (i) the Tribe
has the right to notice of, and to cure, any default of the Authority
thereunder, (ii) the Tribe has the right to prior notice of the Permitted
Mortgagee's intention to foreclose on such Permitted Mortgage and the right to
purchase such mortgage in lieu of any foreclosure, and (iii) such Permitted
Mortgage is subject and subordinate to any and all access and utility easements
granted by the Tribe under the Lease.
As provided in the Lease, Permitted Mortgagees have the right, but not the
obligation, without the Tribe's consent, to (i) cure any default of the
Authority within any applicable cure period under the Lease, (ii) acquire and
convey, transfer, assign and exercise any right, remedy or privilege of the
Authority under the Lease or applicable law in accordance with the provisions of
the applicable Permitted Mortgage, and (iii) rely on any provisions of the Lease
that are for the benefit of Permitted Mortgagees. In addition, the Tribe has
agreed that it will provide notice of any default by the Authority of its
obligations under the Lease to each Permitted Mortgagee so as to allow, but not
require, the Permitted Mortgagee to cure such default within 60 days following
such notice in the name, and on behalf, of the Authority. Provided that current
payments are made to the Tribe under the Lease during such 60-day period, the
Tribe may not terminate the Lease. Any payment or performance by a Permitted
Mortgagee in accordance with the foregoing provisions will not be construed as
an agreement by such Permitted Mortgagee to assume personal liability under the
Lease (except to the extent that a Permitted Mortgagee actually becomes the
lessee under the Lease); however, in the event that a Permitted Mortgagee
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transfers the leasehold estate to a third party purchaser, then such purchaser
shall be required to assume personal liability under the Lease and the Permitted
Mortgagee shall automatically be released from all liability thereunder.
Under the Lease, the Tribe and the Secretary of the Interior have consented
to the assignment and transfer by the Authority of its interest in the Lease to
any Permitted Mortgagee pursuant to (i) a foreclosure by any Permitted
Mortgagee, (ii) a transfer in lieu of foreclosure, (iii) the exercise of any
right or remedy granted by the applicable Permitted Mortgage or (iv) any
purchase by a third party at a foreclosure or other sale. Any Permitted
Mortgagee who, after a default by the Authority under the terms of a Permitted
Mortgage, succeeds to the Authority's interest under the Lease shall have the
right to assign or sublet the Leased Property without obtaining the consent of
the Tribe or the Secretary of the Interior; in the alternative, prior to any
foreclosure or transfer in lieu of foreclosure of the Authority's interest under
the Lease, any Permitted Mortgagee, upon notice to the Tribe, shall have the
right to take possession of and sublease all or any part of the Leased Property
for the account of the Authority and to exercise, in the name of the Authority,
the rights and privileges of the Authority under the Lease. Following any
assignment of the Authority's interest under the Lease by a Permitted Mortgagee,
any assignee shall be required to assume the Authority's obligations under the
Lease and the Permitted Mortgagee shall automatically be released from all
liability, if any, under the Lease. In no event, however, shall any Permitted
Mortgagee (or any assignee, sublessee, purchaser or transferee of any Permitted
Mortgagee) be permitted to transfer any interest in the Lease or its leasehold
interest in the Leased Property to any person or entity engaged by the Tribe or
the Authority to manage a gaming enterprise under IGRA.
Except as provided in the Lease and subject to any restrictions of any
Permitted Mortgage, the Authority may not assign or transfer all or any part of
its interest under the Lease without the prior consent of the Tribe. The
Authority may, however, without obtaining the consent of the Tribe or the
Secretary of the Interior, sublease all or any portion of the Leased Property to
any entity that is, directly or indirectly, owned or controlled by the Tribe.
Pursuant to the terms of the Lease, any material amendments to the Lease
are subject to the prior written approval of each Permitted Mortgagee. In
addition to changes in the rental rate and the term of the Lease, material
amendments also include changes in the circumstances that trigger a termination
of the Lease or any other change which materially and adversely affects the
rights of any Permitted Mortgagee thereunder or the value of the Leased
Property. The Tribe and the Authority have agreed to execute any further
amendments to the Lease that may be reasonably required by a Permitted Mortgagee
or a prospective mortgagee to carry out the provisions of the Lease. The Tribe
has agreed that, so long as any Permitted Mortgage remains outstanding with
respect to the Leased Property, it will not without the prior written consent of
the Permitted Mortgagee (i) accept any surrender of the Leased Property or
termination of the Lease, whether voluntary or involuntary, or upon a failure of
any condition of the Lease, or (ii) exercise, or accept the exercise of, any
right or option of the Authority to terminate the Lease or to purchase the
Tribe's reversionary interest thereunder. The requirement that the Tribe obtain
the consent of each Permitted Mortgagee in connection with the foregoing
matters, however, shall not apply to the Tribe's assertion of its rights upon a
default by the Authority under the Lease. Furthermore, the Tribe has agreed
that, so long as any Permitted Mortgage remains outstanding with respect to the
Leased Property, it will not (i) terminate the Lease nor the Authority's right
to possession of the Leased Property, (ii) exercise any right of re-entry,
(iii) take possession of and/or relet the Leased Property or any portion
thereof, or (iv) enforce any other right or remedy which may materially and
adversely affect the rights of any Permitted Mortgagee under the applicable
Permitted Mortgage, unless such Permitted Mortgagee has failed to cure the
Authority's defaults under the Lease.
COMPLIANCE WITH LAW; INSURANCE; INDEMNIFICATION. The Authority has agreed
to comply with all applicable tribal and governmental laws, regulations, codes
and ordinances applicable to its use and occupancy of the Leased Property. The
Tribe has agreed that it will not impose any additional requirements that would
materially and adversely affect the Authority's use of the Leased Property for
the purposes contemplated by the Lease. During the term of the Lease, the
Authority is responsible for maintaining, repairing and replacing the
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Leased Property and all Improvements thereon and ensuring that the same is in
good, safe and habitable condition. The Authority also is required to maintain
"all-risk" property insurance in an amount equal to the full replacement value
of all Improvements located on the Leased Property and comprehensive general
liability insurance against claims for injury, death or property damage
occurring in or on the Leased Property with a combined single limit of $2
million per occurrence, together with an umbrella policy of liability insurance
providing additional coverage of at least $5 million per occurrence. All
insurance policies maintained by the Authority are required to name the Tribe
and any Permitted Mortgagee as additional insureds and loss payees, as
appropriate. In addition, such policies must be in form and substance reasonably
satisfactory to the Tribe and such Permitted Mortgagees and may not be cancelled
or modified without 30 days' prior notice thereto. Subject to the terms of any
Permitted Mortgage, which terms are subject to approval by the Tribe, all
insurance proceeds received as a result of damage or destruction shall be
applied first to cost of restoration of any Improvements located on the Leased
Property, with the remainder, if any, payable to the Authority or to any
Permitted Mortgagee, to the extent required by such Permitted Mortgage.
The Authority has agreed to indemnify and hold harmless the Tribe, its
members, officers, agents and employees against all liability, claims,
obligations, suits, damages, penalties, costs, charges and expenses (including
attorneys' fees) that may be imposed upon the Tribe or such individuals by
reason of (i) any work or things done in, on or about the Leased Property and/or
any Improvement located thereon, (ii) any use, nonuse, possession, occupation,
condition, operation or maintenance of the Leased Property and/or Improvements
located thereon, (iii) any negligence on the part of the Authority or any of its
agents, contractors, employees, subtenants, licensees or invitees, (iv) any
accident, injury or damage to any person or property occurring in, on or about
the Leased Property and/or any Improvements located thereon; (v) the failure of
the Authority to perform or comply with the terms and conditions of the Lease;
and (vi) any tax attributable to the execution, delivery of recording of the
Lease or any modification thereof. In the event that any action or proceeding is
brought against the Tribe and/or any indemnified individual in connection with
any of the foregoing, the Authority will have the obligation to protect and
defend the Tribe and/or such indemnified individual at its sole expense and by
counsel reasonably satisfactory to the Tribe.
DISPUTE RESOLUTION AND CONSENT TO SUIT. The Lease expressly provides that
the Tribe has not consented to the enforcement, levy or any other execution of
any judgment for money or other damages against any assets of the Tribe, except
that the Tribe and the Authority have each consented to the enforcement and
execution of any judgment, whether obtained as the result of judicial,
administrative or arbitration proceedings, against any assets of the Authority,
in connection with any judicial, administrative or arbitration proceeding
commenced for the purposes of interpreting or enforcing the obligations of the
Tribe or the Authority pursuant to the Lease. Subject to the foregoing
limitation, each of the Tribe and the Authority has waived sovereign immunity
from unconsented suit, whether pursuant to a judicial, administrative or
arbitration proceeding, to permit the commencement, maintenance and enforcement
of any action, brought by any person with standing to maintain such action, to
enforce or interpret the terms of the Lease and to enforce or execute any
judgment resulting therefrom. The Tribe and the Authority have agreed that
during any dispute, controversy or claim arising out of the Lease, the Authority
shall remain in possession of the Leased Property and the Tribe and the
Authority shall continue their performance of the terms of the Lease. In
addition, the Tribe and the Authority have agreed that, during the pendency of
any such dispute, controversy or claim, the Authority shall be entitled to
injunctive relief so as permit the Authority to maintain possession of the
Leased Property in the event of any threatened eviction in connection therewith.
LEASEHOLD MORTGAGE DEED
NOTE COLLATERAL. The Authority has executed an Open-End Construction--
Permanent Leasehold Mortgage Deed, Assignment of Leases and Rents and Security
Agreement (the "Mortgage") in favor of the Trustee whereby the Authority has
granted to the Trustee a first priority lien on (i) the Lease, (ii) the
Authority's leasehold interest in the Leased Property, the Improvements now or
hereafter constructed on the Leased Property and all rights,
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privileges, benefits, easements, rights of way, and other appurtenances
benefitting the Leased Property (the "Appurtenant Rights") under the Lease,
(iii) all other right, title, interest and claim of the Authority under the
Lease, and (iv) all goods, furnishings, equipment, trade fixtures, inventory,
supplies, building and other construction materials and other personal property
constituting a part of or used in connection with the operation of the business
on the Leased Property (the "Personal Property").
Additionally, the Authority has granted to the Trustee a first priority
lien on (i) all insurance proceeds, condemnation proceeds and other proceeds
relative to the disposition of the foregoing, (ii) all leases, subleases,
licenses, concessions, and other space agreements for any portion of the Leased
Property or the Improvements (the "Space Leases"), (iii) all maps, plans,
specifications, surveys, studies, tests, reports, data and drawings relating to
the development of the Leased Property, (iv) all licenses, permits, variances,
special permits, franchises, certificates, rulings, approvals, waivers, orders,
rights and agreements from governmental authorities relating to the Leased
Property, EXCLUDING Gaming Permits, (v) all monies or other property arising
from or used in connection with the Authority's operation of the Leased
Property, and (vi) all accounts receivable and other benefits from the Leased
Property. For purposes of the Mortgage, a "Gaming Permit" is defined as any
license, franchise, permit or other authorization on the date of the Indenture
required to own, lease, operate or otherwise conduct casino gaming at the Leased
Property, which cannot be mortgaged, pledged or assigned as security for the
obligations of the Authority under IGRA, the regulations of all applicable
gaming authorities and other applicable laws.
The Mortgage expressly excludes any interest in (i) the fee title and
reversionary interest of the United States and the Tribe in the Leased Property,
the Improvements, and the Appurtenant Rights, and (ii) any Personal Property, to
the extent that the Authority is permitted to enter into a financing agreement
for such Personal Property under the Indenture and such financing agreement
prohibits the Authority from maintaining a security interest in the Personal
Property covered thereby but only while the debt evidenced by such financing
agreement remains unsatisfied.
Nothing contained in the Mortgage shall be construed to authorize the
Trustee to conduct gaming operations on the Leased Property. Further, nothing
contained in the Mortgage shall be construed to grant to the Trustee any
interest in any manager's interest in any management agreement for the operation
of all or any portion of the Leased Property.
GENERAL COVENANTS AND WARRANTIES. The Authority warrants, represents
and/or covenants to the Trustee as to the following matters:
(1) The Authority shall pay and perform all obligations under the
Indenture, the Mortgage or any other document related thereto.
(2) The Authority represents and warrants to the Trustee as follows:
(a) the Authority is the owner of the leasehold interest under the Lease
and is the owner of the Personal Property, has the right and authority to grant
the Mortgage, and that the collateral subject to the Mortgage is free and clear
of any encumbrances except for Permitted Encumbrances;
(b) the Authority is not bound by any indenture, contract or agreement, or
governmental, judicial or administrative restriction which prohibits the
execution, delivery or performance of the obligations under the Indenture, the
Mortgage or any other document related thereto;
(c) the Indenture, the Mortgage and other documents related thereto have
been duly authorized executed and delivered by the Authority;
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(d) all applicable rules and regulations affecting the Leased Property
permit the use and occupancy thereof for Class II and Class III Gaming and
related purposes, and the Authority has obtained the necessary consents, permits
and licenses to operate the Improvements for said purposes; and
(e) the Trustee may peaceably and quietly enjoy the collateral in
accordance with the Mortgage, neither the Authority nor any affiliate of the
Authority is insolvent or subject to any bankruptcy or similar proceedings, all
costs related to construction of the improvements and acquisition of the
Personal Property is or shall be paid when due, the Authority shall conduct its
operations so as not to lose any right to conduct gaming operations at the
Leased Property, no material part of the collateral has been damaged, destroyed,
condemned or abandoned, and each representation and warranty in the Senior
Notes, the Indenture, the Mortgage and any other document related thereto is
true and correct in all material respects.
(3) The Mortgage constitutes a security agreement, and the Authority
grants to the Trustee a security interest in the Personal Property.
(4) The Authority shall not commit waste on the Leased Property and shall
cause the Leased Property to be maintained and in compliance with applicable
governmental regulations.
(5) The Authority shall pay all taxes (not including income taxes of the
Trustee), assessments and other governmental charges on the Leased Property
before the same become delinquent and shall pay any mechanics statutory or other
lien on the Leased Property; provided that the Authority shall have the right to
contest in good faith the imposition of any such governmental charges or the
validity of any such lien.
(6) The Authority shall maintain insurance as required by the Indenture,
and any proceeds of insurance shall be disbursed as provided in the Indenture.
(7) The Authority shall pay all utilities charges and other service fees
for the Leased Property.
(8) If the Authority fails to observe any of the foregoing, the Trustee
shall have the option to perform the same at the Authority's expense.
(9) Except as permitted by the Indenture, the Authority shall not permit
any sale, transfer or encumbrance of the Lease or the Personal Property without
the prior written consent of the Trustee, not to be unreasonably withheld or
delayed.
(10) The Authority assigns to the Trustee the Space Leases now or hereafter
entered into, and the Authority shall perform all obligations of the Authority
under the Space Leases and shall cause the lessees under such Space Leases to
perform all obligations of such lessees under such Space Leases.
(11) The Authority shall not permit hazardous substances to be placed on
the Leased Property, except for incidental storage or use of hazardous
substances in the ordinary course of the Authority's business and in compliance
with applicable environmental regulations.
(12) The Authority shall indemnify and hold the Trustee harmless from any
loss due to a default by the Authority under the Mortgage, any construction on
the Leased Property, any negligence by the Authority or any injury to any person
on the Leased Property or any adjacent property, except if the same results
directly from the gross negligence or willful misconduct of the Trustee.
(13) The Authority shall comply with all obligations of the Authority under
the Lease, and, upon any default of the Authority thereunder, the Trustee may
perform such obligations at the Authority's expense.
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(14) In the event of bankruptcy of the Authority, the Authority shall not
elect to terminate or permit termination of the Lease without the Trustee's
consent.
TAKING OF LEASED PROPERTY. In the event of condemnation of the Authority's
interest in the Leased Property, the proceeds of any such condemnation shall be
disbursed in accordance with the Indenture.
DEFAULT AND REMEDIES. An Event of Default, as defined under the Indenture,
constitutes an Event of Default under the Mortgage. Upon an Event of Default,
the entire indebtedness secured by the Mortgage may be accelerated, and the
Trustee has the right to pursue any of the following remedies:
(1) The Trustee may foreclose on the Mortgage in the manner provided by
the laws of the State of Connecticut, may have a receiver appointed to operate
and manage the Leased Property and collect the revenues, and may exercise all
rights of a secured creditor under the Uniform Commercial Code as adopted by the
laws of the State of Connecticut.
(2) The Trustee may take possession of the Leased Property and operate the
Leased Property or may, with or without taking possession, receive all revenues
from the Leased Property and apply the same to costs of the Trustee, operating
expenses and the indebtedness secured by the Mortgage.
(3) The Trustee shall, have the right to sell or otherwise dispose of the
Authority's leasehold interest and the Personal Property in a commercially
reasonable manner and apply the proceeds thereof to the indebtedness secured by
the Mortgage.
(4) The Trustee may specifically enforce any of the provisions of the
Mortgage.
Nothing contained in the Mortgage permits the Trustee to transfer the
Authority's leasehold interest to any manager of the gaming enterprise in
violation of IGRA, or authorize any sale or other disposition of the fee title
or reversionary interest of the United States in the Leased Property, the
Improvements or the Appurtenant Rights.
The Authority has waived any constitutional or statutory rights to notice
and hearing before any sale or other disposition of the collateral. Further, the
Authority has acknowledged that the rights, powers and remedies of the Trustee
under the Mortgage are cumulative and may be exercised concurrently or
separately.
Upon any such disposition of the Authority's leasehold interest or of the
Personal Property, the proceeds shall be used first to pay costs incurred in
connection with such disposition, second to pay the indebtedness secured by the
Mortgage, and third to pay any balance to the Authority.
RIGHTS OF THE TRIBE. If an Event of Default occurs, the Trustee shall not
have the right to accelerate the indebtedness, to foreclose the mortgage or to
dispose of the collateral unless the Trustee shall have provided the Tribe with
notice of such default under the Lease and provided the Tribe with an
opportunity to cure such default within sixty (60) days (or if such default
cannot with diligence be cured within such sixty day period, within a reasonable
time) thereafter. Such limitation shall not apply to a monetary default by the
Authority, provided that the Trustee shall provide the Tribe with notice of such
monetary default and any payment made by the Tribe on behalf of the Authority
shall be accepted by the Trustee as if it had been made by the Authority.
Before the Trustee may foreclose the mortgage or dispose of the collateral,
the Trustee must provide the Tribe with the notice and opportunity to cure as
provided above and provide the Tribe with notice of intent to foreclose this
Mortgage or dispose of the collateral and allow a period of sixty (60) days
within which the Tribe shall have the right (but not the obligation) to purchase
the Senior Notes, the Indenture, the Mortgage and all other documents executed
and deliver in connection therewith for an amount equal to the outstanding
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indebtedness; provided that such purchase shall be consummated within ninety
(90) days after such notice of intent to foreclose the Mortgage or dispose of
the collateral is given to the Authority.
PARTIAL RELEASE OF LEASED PROPERTY. Provided that no Event of Default has
occurred and is continuing under the Indenture and subject to certain conditions
set forth therein, the Authority may require the Trustee to release the lien of
the Mortgage as to a portion of the Leased Property, provided that, no such
released portion of the Leased Property shall be used to conduct any gaming
operations.
MISCELLANEOUS. The Mortgage shall be governed by and interpreted in
accordance with federal law (to the extent applicable) and the law of the Tribe,
and to the extent required to supplement applicable federal law and tribal law,
the substantive laws of the State of Connecticut (except its choice of law
rules and except that the Trustee's rights and remedies set forth in the
Mortgage and the lien of the Mortgage shall in any event be lawful and
enforceable in accordance with the terms thereof).
The Mortgage is subject and subordinate to any and all access and utility
easements granted by the Tribe pursuant to the Lease, and the Trustee shall
execute such additional documents to confirm such subordination as shall be
reasonably required by the Authority.
The liability of the officers, agents and employees of the Authority shall
be limited to the extent provided in the Indenture. The Authority waives
sovereign immunity from unconsented suit to interpret or enforce the provisions
of the Mortgage.
To the extent permitted by applicable law, the Authority waives the right
to trial by jury in any action arising out of the Senior Notes, the Indenture,
the Mortgage or any other documents executed in connection therewith.
The Tribe, as landlord under the Lease, has consented to the Mortgage.
DEVELOPMENT AGREEMENT
GENERAL. The Tribe and TCA have entered into an Amended and Restated
Gaming Facility Construction and Development Agreement (the "Development
Agreement") providing for the design, construction, furnishing and site
development of the Mohegan Sun Casino by TCA. The Tribe has assigned its rights
and obligations in this agreement to the Authority. TCA and the Authority have
consented to this assignment.
EXCLUSIVE RIGHTS OF TCA; CONDITIONS TO TCA'S OBLIGATION. Subject to
certain design and budget approval rights retained by the Authority and the
Management Board under the Development Agreement, the Authority has granted to
TCA the exclusive right to design, engineer, construct, furnish and develop the
Mohegan Sun Casino and any related facilities that are owned by the Authority.
The obligation of TCA to perform under the Development Agreement is conditioned
upon the satisfaction of certain conditions including, without limitation,
(i) NIGC and/or BIA approval (as appropriate) of the Development Agreement, the
Management Agreement (as hereinafter defined), the Indenture, the Senior Notes,
the Subordinated Notes, the Note Purchase Agreement (as hereinafter defined) and
any other related collateral agreements requiring such approval(s); (ii) the
ownership of the site designated for the development of the Mohegan Sun Casino
by the United States in trust for the Tribe and the Tribe's control thereof; and
(iii) the receipt by TCA of all required governmental licenses. Under the
Development Agreement, the date five days following the date upon which these
and certain other conditions and obligations of the Authority and TCA have been
satisfied is designated as the "Effective Date," and TCA and the Authority have
each agreed to use its best efforts to satisfy all such conditions and
obligations as of the earliest possible date.
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BUSINESS BOARD. Under the Development Agreement, certain decision-making
authority and oversight duties are delegated to a board comprised of an equal
number of representatives of the Authority and TCA (the "Business Board"). The
Business Board is responsible for various matters, including, without
limitation, the selection of architects and/or engineers (the "Architect"), the
selection of one or more contractors and/or construction managers, the
establishment of design, construction and furnishing budgets, and the
procurement of trade fixtures, furnishings and equipment ("Furnishings"). In
addition, the Business Board is responsible for establishing a program
implementing TCA's and the Authority's objectives, schedule requirements and
design criteria with respect to the Mohegan Sun Casino.
CONSTRUCTION BUDGETS; FUNDING REQUIREMENTS; COST OVERRUNS. With the
assistance of the Architect, the Business Board is responsible for the
preparation of budgets for the design, construction and furnishing of the
Mohegan Sun Casino, which will be subject to the approval of the Management
Board. This budget is subject to revision from time to time by TCA, in its
capacity as Manager under the Management Agreement (as hereinafter defined) and
with prior notice to the Management Board, to reflect unpredicted significant
changes or events or to include significant, additional or unanticipated
expenses. Business Board approval is required, however, for any individual or
cumulative budget modification that constitutes an increase of 5% or more over
the approved budget for any specific design package. In addition, the
Authority's representatives on the Business Board may require Management Board
approval of any other budget adjustment that varies from the terms of the
Development Agreement.
TCA has agreed to assist the Authority in obtaining from one or more third
parties funding necessary for the design, construction, equipping, start-up and
working capital costs of the Mohegan Sun Casino. All funds, including, without
limitation, proceeds from the issuance of the Senior Notes and the Subordinated
Notes, will be deposited in a development account designated exclusively for
satisfying the Authority's and TCA's obligations under design and construction
agreements with third parties and to cover related costs, including the lease or
purchase costs of furnishings, consulting fees, supplies, utility costs,
landscaping, parking, curb cuts, access enhancements, off-site road
improvements, architectural and engineering fees, TCA's attorneys' fees and
closing costs. The Authority has agreed to make available from the proceeds of
such financing funds to cover the initial working capital requirements for the
Mohegan Sun Casino.
The Authority and TCA have estimated that the total costs for development
and construction of the Mohegan Sun Casino will be $275 million. Under the
Development Agreement, if there are any cost overruns related to the
construction of the Mohegan Sun Casino, TCA has agreed to assist the Authority
in borrowing additional funds necessary to finance such overruns, up to a
maximum of $325 million.
DESIGN PHASE--ARCHITECT SELECTION; PLANS AND SPECIFICATIONS. The
Development Agreement provides that the construction of the Mohegan Sun Casino
is divided into two phases: a "Design Phase" and a "Construction Phase." The
Design Phase consists of the engagement of the Architect, the preparation of
design, construction, and furnishings budgets, preliminary program evaluation,
design development and the approval of final detailed plans and specifications
(the "Plans and Specifications"). Within 30 days following the Effective Date
TCA, with the approval of the Business Board, will select one or more Architects
to design the Mohegan Sun Casino and the Management Board, or its designees,
must approve the form of the contract with any Architect selected for the
project, who will then be employed and directly compensated by the Authority.
The Authority has agreed to assign to TCA its responsibilities under any
architectural and/or engineering agreements to allow TCA to directly supervise
and administer directly the duties of the Architect and/or engineer thereunder.
Adjustments to budgets in excess of five percent require the approval of the
Business Board.
The Development Agreement provides that the design and construction of the
Mohegan Sun Casino must comply with all federal and Connecticut statutes and
regulations that otherwise would apply if the Mohegan Sun Casino was located
outside the jurisdictional boundaries of the Tribe.
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CONSTRUCTION PHASE--CONTRACTOR SELECTION AND PREFERENCE; TCA OVERSIGHT.
The Construction Phase consists of the selection of one or more contractors and
subcontractors and the commencement and completion of construction. Following
TCA's review of proposals from prospective contractors, the Business Board is
authorized to negotiate and award contracts to one or more qualified applicants
of its choosing. All contractors will be engaged and paid directly by the
Authority. In addition, the Development Agreement requires subcontractors to be
selected in accordance with certain provisions of the Management Agreement,
which requires, among other things, that employment preference be given to
members of the Tribe, their spouses and children, and business entities
controlled by members of the Tribe, who or which, in TCA's opinion, possess
sufficient skills and competence.
TCA will be responsible for the administration and supervision of all
contracts and agreements with contractors and will act as the Authority's
representative, with full power and authority to act on behalf of the Authority,
in connection with any such contracts that are approved by the Business Board.
Specifically, TCA will be responsible for control and charge of all persons
performing work on the site of the Mohegan Sun Casino, inspecting the progress
of construction, determining completion dates and reviewing contractor payment
requests submitted to the Authority. The Authority, subject to the direction and
approval of the Business Board, will make progress payments to the contractors.
All contractors will be required to warrant that their construction is free of
defects and constructed in a workmanlike manner for a period of at least one
year from the date of completion and TCA will have the authority to reject any
work that does not comply with the applicable contracts.
EMPLOYMENT PREFERENCE. The Development Agreement requires that, with
respect to all job categories relating to development and construction of the
Mohegan Sun Casino, recruiting, training and employment preference be given to
members of the Tribe, their spouses and their children who, in TCA's opinion,
possess sufficient skills and competence. Thereafter, secondary preference must
be given to qualified members of other federally-recognized Indian tribes. TCA
has agreed to use its best efforts to assist members of the Tribe and their
spouses and children in obtaining necessary skills to qualify for available
positions.
FURNISHINGS. Furnishings for the Mohegan Sun Casino will be purchased by
the Authority from vendors selected by the Business Board or leased on terms
arranged by TCA and approved by the Business Board. TCA has agreed to use good
business practices and, where appropriate, competitive bidding with respect to
the procurement of Furnishings.
TERMINATION AND DEFAULT; DISPUTES. Each party has the right to terminate
the Development Agreement in the event that a default or failure to perform any
material duty or obligation by the other party thereunder remains uncured for at
least 20 days following notice to such party of such breach or failure to
perform. In addition, each party may terminate the Development Agreement
pursuant to applicable provisions of the Management Agreement. In the event of a
dispute between the parties or the termination of the Development Agreement
and/or any related agreement, the Authority and TCA may pursue any remedy
available under the Management Agreement. See "--Management Agreement--
Termination and Default."
MANAGEMENT AGREEMENT
GENERAL. To provide for the management of the Mohegan Sun Casino, the
Tribe and TCA have entered into the Amended and Restated Gaming Facility
Management Agreement (the "Management Agreement"), pursuant to which the Tribe
has retained and engaged TCA on an exclusive, independent contractor basis, to
develop, operate, manage and maintain the Mohegan Sun Casino. The Tribe has
assigned its rights and obligations in this agreement to the Authority. The
Authority and TCA have consented to this assignment. The term of the Management
Agreement is seven years, subject to a one time option for a buyout by the
Authority effective on the last day of the 60th month following the first full
month of operations (the "Buyout Option"). In order to exercise the Buyout
Option, the Authority must (i) fully pay and satisfy certain outstanding
indebtedness, including all indebtedness under the Senior Notes and the
Subordinated Notes, (ii) give notice of
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its intent to exercise the option not more than 90 and not less than 30 days
prior to the last day of the 60th month after opening of the Mohegan Sun Casino,
(iii) enter into discussion with TCA to determine the option price on
commercially reasonable terms, (iv) execute and deliver to TCA a full release of
all of TCA's obligations under, and claims, whether asserted or unasserted,
liquidated or contingent, arising in connection with, the Management Agreement
and (v) pay all amounts otherwise due TCA pursuant to the Management Agreement.
Under the Management Agreement, the Authority has granted to TCA the
exclusive right and obligation to develop, manage, operate and maintain the
Mohegan Sun Casino and all other related facilities that are owned by the
Authority. The Management Agreement is not assignable by either party without
the prior consent of the other party. Pursuant to the terms of the Management
Agreement, the Authority and TCA have agreed that neither party may establish or
operate any other gaming facility within the states of Connecticut or Rhode
Island without first obtaining the consent of the other party, which consent may
not be unreasonably withheld. In addition, TCA has agreed to use its best
efforts to promote and manage the Casino and the Authority has agreed that,
except as required by law, it will not adopt any amendments to its gaming
ordinances that would adversely affect TCA's right to operate and maintain the
Mohegan Sun Casino. The Management Agreement provides that neither the
Authority nor any of its agents, affiliates or representatives will impose any
taxes, fees, assessments or other charges on payments of any debt service to TCA
or any lender, on the Mohegan Sun Casino or the revenues therefrom or on the
management fee payable to TCA thereunder and, if any such tax is imposed, TCA
has the right to obtain compensation from the Authority in equal amount to the
amount of the tax.
BUSINESS BOARD. Under the Management Agreement, certain decision-making
authority and oversight duties are delegated to a committee comprised of an
equal number of representatives of the Authority and of TCA (the "Business
Board"). Actions by the Business Board require the unanimous approval of its
members or their respective designees. The Authority and TCA have agreed that,
in the event that the Business Board is unable to reach a mutual decision or
compromise, any disputes will be submitted to summary arbitration before a
single arbitrator who shall render a decision within 48 hours of submission of
the dispute.
MANAGEMENT DUTIES AND RELATED OBLIGATIONS OF TCA. The Management Agreement
provides that TCA will be responsible for the day-to-day management, operation
and maintenance of the Mohegan Sun Casino, including the establishment of
operating days and hours. The Management Agreement authorizes TCA to select a
general manager ("General Manager") to fulfill its responsibilities thereunder.
Any General Manager selected by TCA is subject to approval by the Authority, by
resolution of the Management Board or its designee, and may be removed at the
Authority's request, by resolution of the Management Board and with the consent
of TCA, which consent may not be unreasonably withheld. As manager of the
Mohegan Sun Casino, TCA has agreed to operate the facility in compliance with
all Tribal legal requirements and other applicable laws and that TCA and all of
TCA's executive officers shall be licensed by the Tribe pursuant to the Tribe's
Gaming Ordinance.
Under the Management Agreement, the Tribe may not unreasonably withhold,
withdraw, qualify or condition such licenses. The enabling resolution which
approved the Management Agreement and was approved by the Tribal Council,
provides that the Management Agreement itself is the law of the Tribe and is
enforceable according to its terms. The Tribal Constitution includes a provision
which forbids any action by the Tribal Council or any officer of the Tribe which
impairs contractual obligations.
The Management Agreement provides that TCA shall have the authority,
through the General Manager, to enter into contracts for the operation of the
Mohegan Sun Casino on behalf of the Authority. Any contracts that require annual
expenditures in excess of $25,000 or that are entered into with affiliates of
TCA must be approved by the Business Board. With respect to contracts for the
supply of goods and services, TCA is required to give preference to members of
the Tribe, their spouses and children, and business entities controlled by Tribe
members. In addition, TCA has agreed to assist the Authority in obtaining
funding necessary for the operation of the Mohegan Sun Casino and will be
responsible for the marketing, advertisement and promotion thereof.
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Pursuant to the Management Agreement, TCA will be responsible for the
security and surveillance at the Mohegan Sun Casino. The parties have agreed
that the Authority will have 24-hour access to the entire Mohegan Sun Casino,
including all security and surveillance facilities and records. In addition, TCA
will be responsible for maintaining, on behalf of the Authority, adequate
insurance coverage for the Mohegan Sun Casino, including "all risk," general
commercial liability, workers' compensation, employer liability and such other
policies of insurance as the Business Board may reasonably request from time to
time. All such policies will name TCA as an additional insured party and/or loss
payee to the extent provided in the Management Agreement.
TCA will have the right to sell alcoholic beverages and tobacco products at
the Mohegan Sun Casino in accordance with the Mohegan Compact and Tribal legal
requirements. The Tribe does not presently have enabling legislation necessary
to permit retail sale of alcoholic beverages but the parties expect that such
legalization will be approved and that TCA will be permitted to include service
of alcoholic beverages within the Mohegan Sun Casino. Furthermore, the Tribe has
agreed that such enabling legislation will provide for the sale of alcoholic
beverages to the maximum extent permitted under the Mohegan Compact.
TCA will be responsible for bringing, defending or settling any legal claim
brought against TCA or the Authority in connection with the operation of the
Mohegan Sun Casino. However, the Business Board will have the right to approve
the retention of legal counsel and, in the event such proceeding poses
substantial risk to the operation of the Mohegan Sun Casino, such proceedings
will be supervised by the Business Board with notice to and consultation with
the Management Board.
MOHEGAN SUN CASINO EMPLOYEES; EMPLOYMENT PREFERENCE. Pursuant to the
Management Agreement, TCA will have the exclusive responsibility and authority
to select, retain, train and discharge all employees hired to perform services
at the Mohegan Sun Casino; however, all employees will be employees of the
Authority and not TCA. The Authority will have the right to select inspectors,
who will be responsible for verifying the daily gross revenues of the Mohegan
Sun Casino and who will report directly to the Authority. Subject to the
approval of the Management Board, TCA will also have the right to engage its own
employees and the employees of its affiliates to provide services for the
Mohegan Sun Casino; however, neither TCA nor any of its officers, employees or
partners will be entitled to receive wages or other monetary compensation for
such services under the Management Agreement.
In order to maximize the benefits enjoyed by the Tribe, members of the
Tribe will be given preference in recruiting, employment and training with
respect to all job categories in connection with the operation of the Mohegan
Sun Casino, including management positions. Pursuant to the terms of the
Management Agreement, however, no member or employee of the government of the
Authority may be employed without a waiver by the Authority and such federal
agencies as may be required by law. TCA has agreed to conduct applicable
background investigations with respect to each applicant for employment at the
Mohegan Sun Casino.
TCA will have the sole responsibility for determining whether a prospective
employee possesses necessary skills for any position and the level of
compensation to be paid to such individual. In addition, TCA has agreed to
establish standardized personnel policies and procedures, including a job
classification system with salary levels and scales, which will be subject to
approval by the Management Board and include a grievance procedure to promote
fair and uniform standards for members of the Tribe employed at the Mohegan Sun
Casino. TCA has agreed that any discharge, demotion or discipline of employees
will be conducted in accordance with such policies and procedures.
OPERATING AND CAPITAL BUDGETS; REPLACEMENT RESERVE FUND. Prior to the
first date that the Mohegan Sun Casino is substantially complete and open to the
public (the "Commencement Date") and 60 days prior the commencement of each
fiscal year thereafter, TCA must submit to the Management Board, for its
approval, a detailed proposed operating budget for the facility. Under the
Management Agreement, TCA is required to meet with the Management Board to
discuss the proposed budget and the Management Board is obligated to review
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the budget on a line-by-line basis. The Management Board may not unreasonably
withhold or delay its approval of a budget proposed by TCA and the Management
Agreement establishes specific procedures and time limits for the Management
Board to object to any budget submitted for its approval. In the event that TCA
and the Management Board are unable to agree on one or more budget items, the
Management Agreement provides for arbitration of the disputed item(s), in the
case of the initial budget, and a carry over of the prior fiscal year's
allocation (with adjustments for inflation), in the case of subsequent annual
budgets. Upon notice to the Management Board, TCA will have the right to revise
the budget and/or reallocate budgeted items from time to time to reflect any
unpredicted significant changes, variables or events, or to include significant,
additional, unanticipated items of expense. Any increase in planned expenditures
of more than 5% of the amount budgeted for any profit center of the Mohegan Sun
Casino will require approval of the Business Board, and the Authority's
representative(s) to the Business Board may require written approval of the
Authority for any budget modification that varies from the terms of the
Management Agreement.
In addition to an annual operating budget, TCA is required to submit, not
less than 45 days prior to the commencement of each fiscal year, a recommended
capital budget for furnishings, equipment and ordinary capital replacement items
required to operate the Mohegan Sun Casino in accordance with sound business
practices. The approval and dispute resolution provisions applicable to capital
budgets are the same as those for operating budgets. TCA will be responsible
for the design and installation of all capital replacement items, and the
Authority has agreed to expend such amounts as are necessary to maintain the
Mohegan Sun Casino in compliance with all legal requirements and to correct any
emergency conditions. In addition, the Authority has agreed to authorize such
funds as are necessary to comply with the capital renovation and improvement
programs recommended by the Business Board to maintain first class standards at
the Mohegan Sun Casino and maintain its competitiveness.
Pursuant to the terms of the Management Agreement, TCA will be required to
establish a replacement reserve fund (the "Reserve Fund"), which may be used to
pay any approved budgeted capital expenditures. Any portion of a Reserve Fund
which remains unused at the end of any fiscal year will be carried forward to
the following year. Each of TCA and the Authority will be required to make
monthly contributions to the Reserve Fund at the rate of 60% from the Authority
and 40% from TCA up to a combined total of $3 million per year from both
parties. Deposits by the Authority to the Reserve Fund will be deemed capital
expenditures and will not reduce amounts distributable as Net Revenues; however,
deposits made by TCA will reduce Net Revenues payable to TCA under the
Management Agreement. In addition, proceeds from the sale of capital items no
longer needed for the operation of the Mohegan Sun Casino and insurance proceeds
received in reimbursement for items previously paid for out of the Reserve Fund
will be deposited into the Reserve Fund. In the event that the Reserve Fund is
insufficient to cover replacements authorized to be paid out of such fund, TCA
may, in its discretion, advance funds necessary to cover such insufficiency and
will be entitled to reimbursement therefor. See "--Management Fee; Reimbursement
and Disbursement."
BANK ACCOUNTS AND ACCOUNTING PROCEDURES; INSPECTION BY AUTHORITY. Under
the Management Agreement, the Business Board is authorized to establish such
bank accounts, for the benefit of the Authority, as TCA shall deem necessary for
the operation of the Mohegan Sun Casino. The accounts are also subject to the
terms of the Indenture, which provides for the establishment of a security
interest in the accounts, and requires that the accounts be opened in the name
of the Trustee designated pursuant to the Indenture. The Management Agreement
provides for the establishment of depositary and disbursement accounts and
authorizes TCA to pay from the disbursement accounts such funds as are necessary
to cover the operating expenses of the Mohegan Sun Casino, debt service payments
under the Senior Notes, the Indenture, the Development Agreement and fees
payable to TCA under the Management Agreement. TCA may not make any cash
disbursements from the depositary accounts, except for disbursements of cash
prizes from a cash contingency reserve fund and petty cash fund established in
accordance with the terms of the Management Agreement. In addition, TCA will be
responsible for the installation of internal systems for the monitoring of all
funds, which systems will be subject to approval by the Business Board and
review by the Authority. The Authority is entitled to appoint an inspector, who
will
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have the right to inspect and oversee such internal control systems at all times
and will have full access to the "hard count" (I.E., coins and tokens) and "soft
count" (I.E., non-coin revenues and credits) rooms as well as to the
closed-circuit television system required to be installed by TCA to monitor the
cash-handling activities at the Mohegan Sun Casino.
The Management Agreement requires TCA to maintain, in accordance with
generally accepted accounting principles, books and records reflecting the
operations of the Mohegan Sun Casino and to prepare monthly, quarterly and
annual statements for the Authority. An annual audit of the Mohegan Sun Casino
will be conducted by a nationally-recognized independent certified public
accounting firm with experience in the casino industry. In addition, the
Authority's inspector, or any other authorized agent of the Authority, will have
an unlimited right to inspect such books and supporting business records.
MANAGEMENT FEE; REIMBURSEMENT AND DISBURSEMENT. Subject to the priorities
described below and in accordance with the required Reserve Fund contributions,
the Management Agreement authorizes TCA to pay itself a monthly management fee.
The annual fee is calculated in three tiers based upon Net Revenues set forth
below (in thousands):
<TABLE>
<CAPTION>
I II III
REVENUES IN TIER I REVENUES IN TIERS I &
------------------ ---------------------
40% OF NET REVENUES PLUS 35% OF NET II PLUS 30% OF NET
------------------- --------------- ------------------
UP TO REVENUES BETWEEN REVENUES ABOVE
----- ---------------- --------------
<S> <C> <C> <C>
Year 1 . . . . . . . . . . . . . $50,546 $50,547-$63,183 $63,183
Year 2 . . . . . . . . . . . . . $73,115 $73,116-$91,394 $91,394
Year 3 . . . . . . . . . . . . . $91,798 $91,799-$114,747 $114,747
Year 4 . . . . . . . . . . . . . $95,693 $95,694-$119,616 $119,616
Year 5 . . . . . . . . . . . . . $104,107 $104,108-$130,134 $130,134
Year 6 (subject to Buyout Option) $114,335 $114,336-$142,919 $142,919
Year 7 (subject to Buyout Option) $130,944 $130,945-$163,680 $163,680
</TABLE>
The monthly management fee payments are calculated against 1/12th of the
annual projections, and then adjusted annually within 60 days of the close of
the fiscal year. This annual adjustment might or might not have a material
effect on cash flow. As defined in the Management Agreement, "Net Revenues" of
the Mohegan Sun Casino means all revenues of any nature generated directly or
indirectly from operations of the facility ("Gross Revenues") less operating
expenses and certain specified categories of revenue, such as income from any
financing or refinancing, taxes or charges received from patrons on behalf of
and remitted to a governmental entity, proceeds from the sale of capital assets,
insurance proceeds and interest on the Reserve Fund. Net Revenues also include
Net Gaming Revenues, which are equal to the amount of the "net win" from
Class III Gaming operations (I.E., the difference between gaming wins and
losses) less all gaming-related operational expenses (excluding the management
fee). Within 25 days after the end of each calendar month, TCA is required to
calculate and report to the Authority, the Gross Revenues, operating expenses
and Net Revenues.
Class II Gaming conducted at the Mohegan Sun Casino is not subject to the
Management Agreement; the Agreement does not provide for TCA to manage any
Class II Gaming or to share in any Class II Gaming revenues.
As and when received by TCA, all revenues from Mohegan Sun Casino
operations are required to be deposited in the bank account established under
the Management Agreement and to be disbursed, for and on behalf of the
Authority, on a monthly basis to cover operating expenses and required deposits
to the Reserve Funds. In addition, TCA will be required to reserve additional
funds each month, in excess of any required minimum balances established by the
Business Board to cover working capital costs, sufficient to cover operating and
other costs that are not paid on a monthly basis, such as insurance premiums.
See "--Operating and Capital
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Budgets; Replacement Reserve Fund" and "--Bank Accounts and Accounting
Procedures; Inspection by the Authority."
Under the Management Agreement, Net Revenues (less any amount reasonably
required to maintain a cash contingency reserve fund for the payment of cash
prizes) are required to be disbursed, to the extent due and payable and earned,
in the following order of priority:
(1) $50,000 shall be paid each month to the Authority as a "Minimum
Priority Payment," chargeable against the Authority's distribution of Net
Revenues. In the event that Net Revenues for any given month are less than the
Minimum Priority Payment, TCA will be required to fund any deficiency and will
be entitled to reimbursement therefor in subsequent months. Minimum Priority
Payments shall be made for any month during which any gaming is conducted, even
if only for part of a month. No Minimum Priority Payment will be required to be
made for any month during which gaming at the Mohegan Sun Casino is suspended or
terminated for the full month.
(2) current principal and other payments, including sinking funds or any
required deposit to the Cash Maintenance Account or the Interest and Excess Cash
Flow Account (exclusive of interest, which is paid as an operating expense) due
on the Senior Notes, the Indenture or the Subordinated Notes;
(3) recoupment payment to the Manager for funds advanced in prior periods
and reimbursement of amounts advanced by TCA (including any Minimum Priority
Payment deficiencies funded by TCA pursuant to Item (1), above; all such funds
are charged without interest against the Authority's share of Net Revenues);
(4) deposits to the Reserve Fund by the Authority and TCA; and
(5) payment of the Management Fee to TCA.
All remaining Net Revenues, if any, and cash shall be distributed to the
Authority, subject to restrictions on distributions to the Authority in the
Indenture. In the event of liquidation all disbursements will be subordinate to
repayment of the Senior Notes. The Management Agreement provides that the
holders of the Senior Notes are expressly recognized as third party
beneficiaries for purposes of enforcing this provision of the Management
Agreement.
The Management Agreement provides that if any person or entity with a
financial interest in, or management responsibility for, the Management
Agreement is formally indicted, or if a comparable criminal action is initiated
in any United States Federal or State Court, or in any foreign court or other
comparable jurisdiction, then such person or entity (i) shall not be permitted
to exercise any management or other control over the gaming operation of the
Mohegan Sun Casino or over TCA, (ii) shall have his or its financial proceeds
from the Management Agreement placed in escrow (which escrowed amounts shall be
retained by TCA and not transmitted to any intermediate person or entity) until
such indictment or other action is finally resolved and (iii) if convicted of
any misdemeanor involving gaming or any felony, shall forfeit all of his or its
interest in the Management Agreement and any proceeds placed in escrow pursuant
to the foregoing clause (ii).
LIENS; TAXES. Under the Management Agreement, the Authority and TCA have
represented and warranted to the other that it will not act in any way to cause
any party, other than TCA or the holders of the Senior Notes to become a
lienholder of the Leased Property or the Mohegan Sun Casino, or to allow any
party to obtain any such interest under the Management Agreement without the
prior consent of TCA or the Authority, as the case may be, and, if required, the
United States. In addition, the Authority and TCA have agreed to keep the Leased
Property and the Mohegan Sun Casino free and clear of any liens, whether
resulting from the construction of the facilities or otherwise.
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The parties have agreed that in the event that any government attempts to
impose taxes upon any party to the Management Agreement or upon the property or
operations of the Mohegan Sun Casino or the Leased Property, the Business Board
may elect unanimously to resist such attempt on behalf of such party or entity
through appropriate legal proceedings. The costs of such proceedings and any tax
or other payment required to be made will be treated as an operating expense
under the Management Agreement. The Authority has agreed not to impose any
taxes, fees, assessments or other charges (i) on payments of any debt service to
TCA or any other lender furnishing financing to the Mohegan Sun Casino, and
(ii) on the salaries, benefits or dividends paid to any of TCA's partners,
officers, employees or affiliates or any employees of the Mohegan Sun Casino.
The Management Agreement provides that the Authority shall have the right,
however, to assess license fees that reflect reasonable regulatory costs
incurred by the Authority.
RELATIONSHIP BETWEEN THE AUTHORITY AND TCA. Under the Management
Agreement, TCA expressly covenants that it will not unduly interfere in or
attempt to improperly influence the internal governmental affairs of the
Authority. Furthermore, TCA has agreed that it will not make any payments or
gifts of services, except for gifts of nominal value, to any member of the
government or other official of the Authority or their relatives (an "Authority
Official"). In addition, TCA may not offer any promotional allowances (E.G.,
complimentary meals, drinks, accommodations or gaming tokens) to any member of
the Authority's government. Similarly, no officer of the Authority or family
member of any officer or member of the Authority may be employed at the Mohegan
Sun Casino without a written waiver by the Authority and, if required under
applicable law, the NIGC or other applicable government agency. Furthermore, no
Authority Official may have any direct or indirect interest in the Mohegan Sun
Casino greater than the interest of any other member of the Authority, except
for minimal equity ownership in TCA, its partners, parents, subsidiaries or
affiliates. Pursuant to the Management Agreement, TCA has agreed to guarantee
to the Authority payment of 40% of the amount of the outstanding balance of the
indebtedness of the Authority for Project Costs. This obligation to guarantee
will be met to the extent of any participation by the Manager or any of its
affiliates in the Subordinated Notes and the Secured Completion Guarantee. This
guarantee is for sole benefit of the Authority and is not for the benefit of any
holder of the Senior Notes.
DAMAGE, CONDEMNATION OR IMPOSSIBILITY OF THE ENTERPRISE. In the event that
the Mohegan Sun Casino is damaged or destroyed, taken by condemnation (or sold
under threat thereof), or if gaming at the Mohegan Sun Casino is legally
prohibited, the Management Agreement provides that TCA will have certain options
with respect to the continuation of gaming operations under the Management
Agreement. First, TCA will have the option to retain its obligations under the
Management Agreement and commence or recommence the operation of the Mohegan Sun
Casino if, at some point during the term of the Management Agreement,
commencement or recommencement is legally and commercially feasible.
Second, if the Mohegan Sun Casino is damaged, destroyed or condemned, and
the Business Board elects to apply insurance or condemnation proceeds to the
repair or replacement thereof, TCA may elect within 60 days to reconstruct such
facility. In the event that the insurance or condemnation proceeds are
insufficient to fund such reconstruction, TCA may, at its option, elect to
provide additional funds to finance the reconstruction, subject to the approval
of the Authority, the BIA and the NIGC, as appropriate. Such funds will
constitute a loan to the Authority, will be secured by the revenues of the
Mohegan Sun Casino and will not be subject to the limitations set forth in the
Development Agreement. See "--Development Agreement; Construction Budget;
Funding Requirements; Cost Overruns." Alternatively, if the Business Board
elects not to apply the insurance or condemnation proceeds to the reconstruction
of the Mohegan Sun Casino, such proceeds will be applied first to amounts due
under the Senior Notes, second, to the Subordinated Notes and other outstanding
indebtedness, third, to any undistributed Net Revenues and, fourth, to the
Authority and TCA in accordance with their respective interests.
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TCA will have the option to use the Mohegan Sun Casino for any other
business purposes reasonably incidental to a Class III Gaming facility. In the
event that the Mohegan Sun Casino is to be used for any purpose other than
gaming, TCA and the Business Board will need to obtain all approvals necessary
under applicable law.
In the event of the failure of the Mohegan Sun Casino to produce a
Management Fee for a period of six consecutive months, or the cessation of
gaming on the Leased Property, the Management Agreement provides that TCA will
have the right to terminate its obligations. Following such termination, TCA
will remain entitled to undistributed Net Revenues in accordance with the terms
of the terminated Management Agreement. However, in the event that TCA elects
not to terminate, it will have the right, with the approval of the Business
Board, to take whatever actions are necessary to reduce operating expenses of
the Mohegan Sun Casino, during such period. In addition, during any period of
cessation of operation of the Mohegan Sun Casino, the term of the Management
Agreement will be deemed to have been tolled and the expiration date of the term
thereof will be accordingly extended.
TERMINATION AND DEFAULT. Each party has the right to terminate the
Management Agreement for cause, which includes, without limitation, a default or
failure by the other party to perform any material duty or obligation that
remains uncured for at least 60 days following notice to such party of such
breach or failure to perform. In addition, the Authority may terminate the
Management Agreement if TCA has its gaming license withdrawn as a result of the
conviction of any director or officer of TCA for a criminal felony or
misdemeanor offense directly related to the performance of TCA's duties under
such agreement. In the event that the Management Agreement is terminated for
cause, regardless of which party is at fault, the parties will be entitled to
retain all funds previously disbursed to them under the agreement and the
Authority shall retain title to the Mohegan Sun Casino. Following such
termination, TCA shall have the right to receive its share of all accrued and
unpaid Net Revenues and will continue to have the right to repayment of unpaid
principal and interest under the Subordinated Notes owned by it, pursuant to the
terms thereof.
The Management Agreement may also be terminated in the event that any
change in law renders the operation of the Mohegan Sun Casino unlawful. For a
description of TCA's rights in the event of such a termination. See "--Damage,
Condemnation or Impossibility of the Enterprise." Similarly, TCA has the right
to terminate the Management Agreement in the event that any Tribal, federal or
state authority fails to approve, or objects to, the performance by TCA of its
obligations under such agreement or if TCA's performance would jeopardize any
licenses or approvals previously obtained by TCA.
WAIVER OF TRIBAL SOVEREIGN IMMUNITY; ARBITRATION. Under the Management
Agreement, the Authority has waived sovereign immunity for the purposes of
permitting, compelling or enforcing arbitration and to be sued by TCA in any
court of competent jurisdiction for the purposes of compelling arbitration or
enforcing any arbitration or judicial award arising out of the Management
Agreement, the Indenture, the Senior Notes, the Secured Completion Guarantee and
any collateral agreements or other obligations (including the Subordinated
Notes), the Gaming Ordinance of the Tribe or decisions of the Authority. The
parties have agreed that all disputes and claims arising out of the Management
Agreement or the Tribe's Gaming Ordinance will be submitted to binding
arbitration, which shall be the sole remedy of the parties and that punitive
damages may not be awarded to either party by any arbitrator. The Authority's
waiver of immunity is limited to enforcement of money damages from undistributed
or future Net Revenues of the Mohegan Sun Casino (or, under certain conditions,
net revenues of other gaming operations of the Authority); Funds earned and paid
over to the Authority as the Authority's share of Net Revenues prior to any
judgement or award are not subject to the waiver and would not be available for
levy pursuant to any judgement or award.
SECURED COMPLETION GUARANTEE
GENERAL. Sun International has executed the Secured Completion Guarantee,
in favor of the Trustee, whereby Sun International has irrevocably guaranteed
the obligations of the Authority to complete construction
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of the Mohegan Sun Casino up to a maximum obligation of $50 million. Sun
International's obligations under the Secured Completion Guarantee, which are
described below, are hereinafter referred to collectively as the "Guaranteed
Obligations."
GUARANTEED OBLIGATIONS. Sun International has guaranteed (i) the
obligations of the Authority to complete construction of the Mohegan Sun Casino
in accordance with the terms of the Indenture and the Disbursement and Escrow
Agreement and to cause the Mohegan Sun Casino to be Completed (as defined below)
and (ii) the payment of all "Amounts Required for Completion" (as defined below)
payable by the Authority in connection with work or services performed or goods
or materials delivered or other Guaranteed Obligations that accrued on or prior
to the earlier of the date on which the Mohegan Sun Casino first becomes
Completed or the occurrence of a Terminating Event (as defined below) under the
Secured Completion Guarantee. Under the Secured Completion Guarantee "Amounts
Required for Completion" include, without limitation, (v) all regularly
scheduled payments of principal and interest on any indebtedness (other than the
Senior Notes), (w) all regularly scheduled payments of interest (but not
principal) due on the Senior Notes, (x) all costs and cost overruns of
construction and completion of the Mohegan Sun Casino (E.G., costs of labor,
materials, equipment and supplies, taxes, utilities, assessments, insurance and
maintenance expenses), (y) all operating costs of the Authority, and (z) all
other amounts or funds required to cause the Mohegan Sun Casino to be Completed.
The Guaranteed Obligations of Sun International specifically include the
payment, satisfaction or discharge of all liens (other than those permitted
under the Indenture) that may be imposed upon the Mohegan Sun Casino or any
related property and the defense and indemnification of the Trustee and the
holders of the Senior Notes against all such liens.
Sun International's Guaranteed Obligations continue until the earlier of
the Mohegan Sun Casino being Completed or the occurrence of a Terminating Event.
Under the Secured Completion Guarantee, the Mohegan Sun Casino will be deemed
"Completed" when all liens (other than those permitted under the Indenture or
which relate to amounts disputed by Sun International) relating to the
construction of the Mohegan Sun Casino have been paid, the Trustee has received
a certificate from the general contractor and project architect for the Mohegan
Sun Casino (or other mutually acceptable independent construction expert)
certifying that the Mohegan Sun Casino is complete in all material respects in
accordance with the plans therefor and in compliance with all applicable laws,
ordinances, and regulations with respect to the physical structure, health and
safety, environmental and hazardous materials, fire, equipment, security and
physical operating requirements of the Mohegan Sun Casino, and the Mohegan Sun
Casino is in a condition to receive guests in the ordinary course of business. A
"Terminating Event" under the Secured Completion Guarantee includes (i) any
Congressional, Tribal or other governmental action that results in a substantial
diminution of the gaming operations proposed to be conducted at the Mohegan Sun
Casino, (ii) September 30, 1997 (iii) the date immediately prior to the
acceleration of amounts due on the Senior Notes, (iv) the repayment of the
Senior Notes in full, (v) the termination or unenforceability, in any material
respect, of the Management Agreement or the Lease, or (vi) the termination or
repudiation of the Management Agreement by the Authority. The legalization of
casino gaming at any other location in New England, including Bridgeport,
however, will not be deemed to constitute a Terminating Event.
Sun International is obligated to perform under the Secured Completion
Guarantee regardless of whether the Authority is individually or jointly and
severally liable for the Guaranteed Obligations or whether recovery against the
Authority is or may become barred by any statute of limitations, sovereign
immunity or for any other reason. However, Sun International is liable for the
Guaranteed Obligations only in the event, and to the extent, that funds are not
available for the payment thereof under the Disbursement and Escrow Agreement.
See "Description of Senior Notes--Disbursement and Escrow Agreement."
ENFORCEMENT OF SECURED COMPLETION GUARANTEE; PROCEDURES FOR COMPLETION. If
the Authority (i) fails or neglects to complete construction of the Mohegan Sun
Casino (including the furnishing and fixturing thereof) in the manner specified
in the Indenture and the Disbursement and Escrow Agreement, free of all liens
(other than those permitted under the Indenture or which relate to disputed
amounts), (ii) fails in any other manner to prosecute with diligence and
continuity the construction and completion of the Mohegan Sun Casino, (iii) is
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unable to satisfy any condition required to receive disbursement under, or
violates any covenant in, the Disbursement and Escrow Agreement, such that the
Mohegan Sun Casino cannot become Completed with funds held therefor, or (iv) is
subject to a termination of its right to receive funds from the Escrow Account,
then Sun International will be required, at its sole cost, to perform the
Guaranteed Obligations within 30 days following written notice from the Trustee,
until the Mohegan Sun Casino is Completed or the occurrence of a Terminating
Event. Upon the occurrence of a force majeure event, such as fire, war, strike
or any other event outside Sun International's control that makes it physically
impossible, unlawful or commercially impracticable to cause the Mohegan Sun
Casino to be Completed (a "Force Majeure Event"), Sun International's Guaranteed
Obligations will be suspended until such time as the Force Majeure Event is
removed. During any such suspension period, Sun International has agreed to use
reasonable commercial efforts to effect the removal of the Force Majeure Event
to the extent that it may be removed or affected by the actions of Sun
International.
In addition, in the event that Sun International fails to perform the
Guaranteed Obligations, the Trustee may, at its option and in its sole
discretion, elect to undertake completion of the construction of the Mohegan Sun
Casino or to foreclose, judicially or nonjudicially, on all or any portion of
the Note Collateral. In either case, the Trustee may recover from Sun
International the costs of enforcing such rights, including reasonable
attorneys' fees. Pursuant to the terms of the Secured Completion Guarantee, the
Trustee's rights to complete construction of the Mohegan Sun Casino or to
recover damages against Sun International are the sole and exclusive remedies of
the Trustee against Sun International and are independent and not exclusive of
any other rights or remedies available to the Trustee or the holders of the
Senior Notes against the Authority. Similarly, any alteration by the Trustee or
the holders of the Senior Notes of the Guaranteed Obligations with respect to
the Authority (including the modification of the Disbursement and Escrow
Agreement or the addition or release of other guarantors of the Guaranteed
Obligations) shall not affect the Guaranteed Obligations of Sun International.
The Guaranteed Obligations are also secured, in part, by an irrevocable
letter of credit in the amount of $15 million. The Trustees may draw upon the
letter of credit if (i) Sun International fails to pay any SIHL Guaranteed
Amount (as defined in the Disbursement and Escrow Agreement) after such amount
becomes due and payable and 30 days after notice to Sun International and
(ii) Sun International fails to pay any amount required to cause the Mohegan Sun
Casino to become Completed (as certified by a professional architect) after such
amount becomes due and 30 days after notice to Sun International. Any amounts
drawn upon shall be deposited into the Escrow Account and disbursed pursuant to
the Disbursement and Escrow Agreement and the Secured Completion Guarantee.
In the event that there is a dispute between the Authority and any
contractor, subcontractor, supplier, vendor or any other person providing goods
or services in connection with the amount owed to such person, Sun International
has agreed to allocate and reserve from Available Funds under the Disbursement
and Escrow Agreement an amount that it reasonably believes will be sufficient to
settle such dispute. In the event that the settlement of such dispute requires
expenditures in excess of the amount reserved therefor plus any unallocated
reserves, Sun International has guaranteed the payment in full of such disputed
amount. Sun International is required to pay any of such disputed amounts when
the dispute is resolved or if necessary to prevent a foreclosure, seizure,
closure or work or supply stoppage caused by the disputing party.
SUBORDINATION; NOTES TO EVIDENCE AMOUNTS PAID UNDER SECURED COMPLETION
GUARANTEE. All existing and future indebtedness of the Authority to Sun
International is, or will be, subordinated to the Guaranteed Obligations of Sun
International. Any payments to Sun International by the Authority in violation
of the Secured Completion Guarantee are required to be held by Sun International
in trust for the Trustee and must either be paid over to the Trustee or applied
against the Guaranteed Obligations.
Any amounts paid or advanced by Sun International under the Secured
Completion Guarantee shall be deemed a loan by Sun International to the
Authority and will be evidenced by additional subordinated notes, which shall be
promptly issued by the Authority in the principal amount of the amount so paid
or advanced. Such
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additional subordinated notes will bear interest at an annual rate of the prime
rate announced from time to time by Chemical Bank plus one percent. The
Authority will be obligated to repay, with interest, any payments or advances
made by Sun International under the Secured Completion Guarantee (whether or not
such amounts are actually evidenced by additional subordinated notes) pursuant
to the terms and conditions set forth in the Note Purchase Agreement (as defined
herein). As such, any amounts paid or advanced by Sun International to the
Authority under the Secured Completion Guarantee will be subordinated to the
prior payment in full of the obligations under the Senior Notes in accordance
with the terms and conditions of the Note Purchase Agreement for the
Subordinated Notes. See "--Note Purchase Agreement."
BANKRUPTCY. Pursuant to the Secured Completion Guarantee, Sun
International has agreed that, so long as any Guaranteed Obligations are owed to
the Trustee, it will not, without the consent of the Trustee, commence, either
individually or with others, any bankruptcy, insolvency or reorganization
proceeding against the Authority. Sun International's Guaranteed Obligations may
not be altered or limited by any proceeding, voluntarily or involuntarily,
involving the bankruptcy, reorganization, insolvency, receivership, liquidation
or arrangement of the Authority or by any defense which the Authority may have
by reason thereof. The Authority, however, may not be subject to the federal
bankruptcy laws. See "Risk Factors--Difficulties in Enforcing Obligations."
COLLATERAL. SIIL secured Sun International's obligations under the Secured
Completion Guarantee with a pledge of 1,500,000 Ordinary Shares of Sun
International. Based upon the closing price of Sun International Ordinary Shares
on the NYSE on May 1, 1996, such shares had a market value of approximately
$64.1 million. No assurance can be given, however, as to the amount of
proceeds, if any, that the Trustee would realize upon a foreclosure and sale of
such shares in order to satisfy the obligations under the Secured Completion
Guarantee. The terms of the pledge agreement provide that the Trustee may
foreclose upon the pledged shares only after obtaining a final judgment from a
court of competent jurisdiction that Sun International has breached its
obligations under the Secured Completion Guarantee. Accordingly, there may be
substantial delay in realizing any proceeds from the share pledge. The share
pledge will be released upon termination of the Secured Completion Guarantee.
Sun International has agreed to provide certain registration rights to the
Trustee in order to permit the Trustee to sell the pledged shares. On March 1,
1996, Sun International redesignated its two series of Ordinary Shares, Series A
and Series B, as one series of Ordinary Shares.
NOTE PURCHASE AGREEMENT
GENERAL. Pursuant to a Note Purchase Agreement (the "Note Purchase
Agreement"), entered into between the Authority and Sun International, the
Authority issued and sold to Sun International $40,000,000 aggregate principal
amount of Subordinated Notes at an aggregate purchase price equal to 100% of the
principal amount thereof, approximately $38.3 million of which is payable in
cash and the balance of which is payable by the exchange of amounts owed by the
Authority to TCA. The Subordinated Notes are subordinate in right of payment to
the Senior Notes. The Authority may issue additional subordinated notes from
time to time in principal amounts equal to advances made by Sun International
under the Secured Completion Guarantee. The following summary sets forth the
material terms and provisions of the Note Purchase Agreement.
INTEREST. Except for Subordinated Notes, if any, issued to evidence
indebtedness of the Authority to Sun International under the Secured Completion
Guarantee, each Subordinated Note bears interest at the rate of 15% per annum of
the principal amount then outstanding from the Issuance Date to the date of
payment of such principal amount of such Subordinated Note. Each Subordinated
Note issued to evidence indebtedness under the Secured Completion Guarantee will
bear interest at the rate per annum then most recently announced by Chemical
Bank of New York as its prime rate at New York, New York plus 1%, which rate
shall be set and revised at intervals of six months. Installments of interest
become due and payable semi-annually in arrears on each May 15 and November 15
to the holders of record at the close of business on the preceding April 30 or
October 31. Additionally, installments of accrued and unpaid interest will
become due and payable with respect to any principal amount of the Subordinated
Notes that matures (whether at stated maturity, upon acceleration, upon
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maturity of repurchase obligation, upon repurchase or otherwise) upon such
maturity of such principal amount of the Subordinated Notes. Interest on the
Subordinated Notes is computed on the basis of a 360-day year, consisting of
twelve 30-day months. Each installment of interest is calculated to accrue from
and include the most recent date to which interest has been paid or provided for
(or from and including the Issuance Date if no installment of interest has been
paid) to, but not including, the date of payment.
Interest in respect of the most recently ended semi-annual period shall be
deferred unless (i) $87.5 million in aggregate principal amount of Senior Notes
have been repurchased or retired (for purposes of such determination, the
aggregate principal amount of Senior Notes offered to be repurchased in any
Senior Note repurchase offer shall be deemed to have been repurchased, whether
or not such amount was properly tendered pursuant to such repurchase offer) and
(ii) the Authority's Fixed Charge Coverage Ratio for the four full fiscal
quarters last ended is equal to or greater than 2.5 to 1 and no deferred cash
flow Participation Interest on the Senior Notes remains unpaid. Deferred
interest shall continue to be deferred unless (and then only to the extent)
current interest may be paid in cash and the Authority's Coverage Ratio for the
four full fiscal quarters last ended (calculated as if such accrued interest
payable were the oldest interest accrued and was added to Interest Expense for
such period if not already included therein) is equal to or greater than 4.0 to
1. Notwithstanding the foregoing, all accrued and unpaid interest shall be
payable in cash on the interest payment dates and shall not be deferred if the
Authority has paid in full all obligations under the Senior Notes and the
Indenture and the same shall have been discharged. Notwithstanding anything
herein to the contrary, installments of accrued or deferred and unpaid interest
shall become due and payable (and shall not be further deferred) with respect to
any principal amount of Subordinated Notes that matures (whether at stated
maturity, upon acceleration, upon maturity of repurchase obligation or
otherwise) upon the maturity of such principal amount of Subordinated Notes. The
term "Fixed Charge Coverage Ratio" shall have the same meaning as set forth in
the Indenture.
The Subordinated Notes are payable both as to principal and interest at the
office or agency of the Authority maintained for such purpose within the City
and State of New York or, at the option of the Authority, payment of interest
may be made by check mailed to the holders of the Subordinated Notes at their
respective addresses set forth in the register of holders of Subordinated Notes.
Until otherwise designated by the Authority, its office or agency in New York is
the office of the Trustee maintained for such purpose. The Subordinated Notes
were issued in registered form, without coupons, and in denominations of $1,000
and integral multiples thereof.
USE OF PROCEEDS. Under the terms of the Note Purchase Agreement, the
Authority is obligated to use the proceeds from the sale of the Subordinated
Notes to (i) finance a loan to the Tribe for the acquisition of the real
property on which the Mohegan Sun Casino will be built, (ii) for any use
permitted under the Indenture, and (iii) to pay fees and expenses in connection
with the uses described in clauses (i) and (ii). The Authority deposited the
proceeds from the sale of the Subordinated Notes (other than any portion of such
net proceeds used immediately to acquire the Site) in the Escrow Account
established in connection with the sale of the Senior Notes and will disburse
such proceeds only in accordance with the terms of the Disbursement and Escrow
Agreement. See "Description of Senior Notes--Disbursement and Escrow Agreement".
SUBORDINATION. The Subordinated Notes rank subordinate in right of payment
to the prior payment of all obligations related to the Senior Notes and PARI
PASSU or senior to all other subordinated indebtedness of the Authority.
Payments of interest on the Subordinated Notes may be made only if at the time
of such payment, no Default or Event of Default exists and is continuing with
respect to the Senior Notes. No payment of principal of or premium, if any, on
the Subordinated Notes may be made, and no Subordinated Notes may be
repurchased, redeemed or otherwise retired, until all obligations in respect of
the Senior Notes under the Indenture have been paid in full, except that
(i) payments of principal and premium, if any, and interest on Subordinated
Notes tendered in connection with a Change of Control offer may be made if the
Authority has fulfilled all obligations in respect of a Change of Control offer
with respect to the Senior Notes and no other Default or Event of Default has
occurred and is continuing under the Indenture, (ii) payments of principal and
premium, if any, and interest
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on the Subordinated Notes to be redeemed in the circumstances described in the
second paragraph under "--Optional Redemption of Subordinated Notes by
Authority" may be made if no Default or Event of Default has occurred and is
continuing under the Indenture and (iii) payments of principal and premium, if
any, and interest on Subordinated Notes tendered in connection with a Remaining
Excess Cash Purchase Offer if no Default or Event of Default has occurred and is
continuing under the Indenture. See "--Remaining Excess Cash Purchase Offer."
Upon any payment or distribution of the assets of the Authority to
creditors in a total or partial liquidation or dissolution of the Authority,
holders of the Senior Notes shall be entitled to receive payment in full of all
obligations in respect of the Senior Notes before the holders of the
Subordinated Notes shall receive any payment in respect of the Subordinated
Notes. If the payment of the Subordinated Notes is accelerated because of an
Event of Default under the Note Purchase Agreement, the Authority and the
holders of the Subordinated Notes are required to promptly notify holders of the
Notes of such acceleration and the Authority may not pay the Subordinated Notes
until five days after such notice is received and, thereafter, may pay the
Subordinated Notes only if the Note Purchase Agreement otherwise permits the
payment at that time. In the event that any distributions are made to the
holders of the Subordinated Notes in violation of the Note Purchase Agreement,
the holders of the Subordinated Notes shall be obligated to hold such
distributions, in trust, for the benefit of the holders of the Senior Notes and
pay over such amounts to the holders of the Senior Notes as their interests may
appear.
MANDATORY REDEMPTION. The Authority is not be required to make a mandatory
redemption or sinking fund payments with respect to the Subordinated Notes.
OPTIONAL REDEMPTION OF SUBORDINATED NOTES BY AUTHORITY. Under the Note
Purchase Agreement, the Authority may make an optional redemption of the
Subordinated Notes; however, such redemption may be made only after the Senior
Notes have been paid in full. Subject to the foregoing, the Authority may redeem
the Subordinated Notes at a price equal to 100% of the principal amount thereof
plus all accrued and unpaid interest on the unpaid principal to the date of
redemption. Any redemption of the Subordinated Notes, whether in whole or in
part, must be made in accordance with procedures set forth in the Note Purchase
Agreement.
Notwithstanding the foregoing, in the event that any holder or beneficial
owner of the Subordinated Notes is found unsuitable, or refuses or is unable to,
within 30 days after being asked to do so by the applicable gaming regulatory
authority, become licensed or qualified under any applicable gaming laws
requiring such holder or beneficial owner of the Subordinated Notes to be so
licensed, qualified or suitable in order for the Authority to maintain any
gaming license or franchise, then, the Authority shall have, at its option, the
right (i) to require such holder or beneficial owner to dispose of such holder's
or beneficial owner's Subordinated Notes or (ii) to call for the redemption of
the Subordinated Notes of such holder or beneficial owner at a redemption price
equal to the lesser of the outstanding principal balance of such Subordinated
Notes or the price at which such holder or beneficial owner paid to acquire such
Subordinated Notes (in each case together with accrued and unpaid interest to
the date of redemption). Redemption of the Subordinated Notes pursuant to the
foregoing circumstances, however, may not be made if any Event of Default has
occurred and is continuing under the Indenture.
OFFER TO REPURCHASE SUBORDINATED NOTES UPON CHANGE OF CONTROL. Upon any
Change of Control and subject to certain priority rights of the holders of the
Senior Notes, the Authority is required to purchase all of the outstanding
Subordinated Notes at a purchase price equal to 101% of the aggregate principal
thereof plus accrued and unpaid interest to the purchase date; provided,
however, the Authority is not required to repurchase the Subordinated Notes if
(i) an event deemed to be a Change of Control ceases to exist prior to the
closing of such offer or (ii) if on or before the 120th day after the Change of
Control, which Change of Control arises under either clause (iv) or (v) of the
definition thereof, the Manager (as defined herein) is replaced (or the
Authority is using its best efforts to effect such a replacement) with a Person
with experience and reputation comparable to Sun International. Any offer to
repurchase the Subordinated Notes may be made by the Authority only after
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a repurchase offer has been made to the holders of the Senior Notes. A "Change
of Control" as defined in the Note Purchase Agreement has the same meaning as
under the Indenture. See "Description of Senior Notes--Certain Definitions."
CASH MAINTENANCE ACCOUNT; SECURITY INTEREST. The Authority is obligated to
make monthly deposits into the Cash Maintenance Account as provided for under
the Indenture. See "Description of Senior Notes--Mandatory Cash Maintenance
Account."
Under the Note Purchase Agreement, the Authority is required to grant and
maintain a perfected first priority security interest in favor of the Trustee
for the ratable benefit of the holders of the Senior Notes and a perfected,
second priority security interest for the ratable benefit of the holders of the
Subordinated Notes in all amounts in, or investments constituting amounts in,
the Cash Maintenance Account. The second priority security interest of the
holders of the Subordinated Notes, however, does not impair or prevent the
Authority from transferring amounts in the Cash Maintenance Account to the
holders of the Senior Notes in accordance with the terms of the Indenture, free
and clear of such second priority security interest. Upon full repayment of the
Senior Notes, the perfected, second priority security interest shall
automatically become, and the Authority is required to take all acts to assure,
a perfected, first priority security interest in favor of the holders of the
Subordinated Notes. Furthermore, if an Event of Default has occurred and is
continuing under the Note Purchase Agreement and the Senior Notes have been paid
in full, then, the holders of the Subordinated Notes will have the right, among
other things, to direct any investments in the Cash Maintenance Account and to
apply any cash or investments therein to the payment of principal and interest
on the Subordinated Notes.
REMAINING EXCESS CASH PURCHASE OFFER. To the extent that the aggregate
purchase price of Senior Notes tendered pursuant to any Excess Cash Purchase
Offer required to be made pursuant to the Indenture is less than the Excess Cash
Purchase Amount with respect thereto, the Authority has agreed to make an offer
to the holders of the Subordinated Notes to purchase the maximum principal
amount of Subordinated Notes that is an integral multiple of $1,000 that may be
purchased with the Remaining Excess Cash Flow (as defined in the Note Purchase
Agreement) at an offer price in cash equal to the principal amount of the
Subordinated Notes to be purchased plus accrued and unpaid interest. In the
event that more Subordinated Notes are tendered than are required to be
purchased by the Authority, the Authority will purchase Subordinated Notes pro
rata from each tendering holder. Any Remaining Excess Cash Flow not used to
repurchase Subordinated Notes in accordance with the foregoing may be used by
the Authority for general purposes.
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS. Under the Note Purchase
Agreement, the Authority has agreed that the total outstanding principal balance
of indebtedness of the Authority shall not exceed an aggregate of $270 million,
plus Subordinated Notes issued thereunder and issued to evidence indebtedness
incurred pursuant to the Secured Completion Guarantee. The total indebtedness of
the Authority permitted to be outstanding at any one time shall be reduced from
time to time. In addition, the Authority has agreed that the principal amount of
any indebtedness incurred by the Authority to refinance other outstanding
indebtedness will not exceed the principal amount of such refinanced
indebtedness and, in the event refinancing indebtedness is issued to refinance
the Senior Notes or any portion thereof, such refinancing indebtedness shall
have a Weighted Average Life to Maturity not less than that of the Senior Notes.
See "Description of Senior Notes--Limitations on Incurrence of Indebtedness."
CERTAIN OTHER COVENANTS OF THE AUTHORITY. Under the Note Purchase
Agreement, the Authority has made certain other covenants with respect to the
repayment of the Subordinated Notes and the conduct of its business during the
period which such Subordinated Notes remain outstanding that are substantially
similar to the covenants made by the Authority under the Indenture. See
"Description of Senior Notes--Certain Covenants."
EVENTS OF DEFAULT. Under the Note Purchase Agreement, Events of Default
include the following:
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(i) a default by the Authority for 30 days in payment of any interest due
on the Subordinated Notes (such due date shall take into account any interest
payments entitled to be deferred by the Authority under the Note Purchase
Agreement);
(ii) default by the Authority in the payment of the principal of or
premium, if any, on any Subordinated Notes when due;
(iii) failure by the Authority to observe or perform any other covenant,
representation, warranty or agreement under the Note Purchase Agreement or the
Subordinated Notes that continues for 90 days after written notice to holders of
at least 25% of the principal amount of the Subordinated Notes; and
(iv) certain events of bankruptcy and insolvency of the Authority.
If an Event of Default (other than certain events with respect to bankruptcy,
insolvency and reorganization) shall occur and be continuing, then the holders
of 25% of the aggregate principal amount of the Subordinated Notes outstanding
may declare by written notice to the Authority the principal amount of the
Subordinated Notes to be due and payable immediately; provided, however, that no
such declaration may be made unless all obligations under the Senior Notes and
the Indenture have been paid in full and discharged. If an Event of Default with
respect to certain events of bankruptcy or insolvency occurs and all obligations
under the Senior Notes and the Indenture have been paid in full and discharged,
then all outstanding Subordinated Notes will become due and payable without any
act on the part of any holder of Subordinated Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. The Note Purchase Agreement
contains legal defeasance and covenant defeasance provisions that are
substantially similar to those under the Indenture. See "Description of Senior
Notes--Legal Defeasance and Covenant Defeasance."
EQUIPMENT FINANCING
The Authority has entered into an agreement with Sodek Gaming, Inc. which
provides for up to $40 million of financing for the acquisition by the Authority
of certain equipment, including gaming equipment. The agreement provides that
amounts borrowed for the acquisition of equipment will bear interest, commencing
o the date of delivery of the equipment, at a rate of prime plus two-percent.
Amounts borrowed under the financing will be payable over 48 months, commencing
30 days after the Mohegan Sun Casino commences operations. The Construction
Budget currently allocates $40 million, the full amount available under the
agreement, for the acquisition of equipment.
WORKING CAPITAL FINANCING
The Authority has signed a commitment letter with a third party lender for
$12.5 million of Working Capital Financing. In the event that the Authority
requires additional working capital, the Indenture permits up to $25 million in
Working Capital Financing, which may be secured by the Note Collateral on a PARI
PASSU basis with the Senior Notes. Pursuant to the Secured Completion
Guarantee, Sun International is required to arrange or provide financing in the
event the Authority is unable to arrange or provide the Working Capital
Financing from a third party lender.
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DESCRIPTION OF SENIOR NOTES
GENERAL
The Series A Senior Notes were, and the Series B Senior Notes will be,
issued pursuant to the Indenture between the Authority, First Fidelity Bank,
n/k/a First Union Bank of Connecticut, as trustee (the "Trustee"), and the Tribe
for certain limited purposes stated therein. The terms of the Senior Notes
include those stated in the Indenture and the Collateral Documents and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), as in effect on the date of the Indenture.
The Senior Notes are subject to all such terms, and Holders of the Senior Notes
are referred to the Indenture, the Collateral Documents and the Trust Indenture
Act for a statement thereof. The following summary of certain provisions of the
Indenture and the Collateral Documents does not purport to be complete and is
qualified in its entirety by reference to the Indenture and the Collateral
Documents, including the definitions therein of certain terms used below. A copy
of the form of Indenture and of each of the Collateral Documents is available
from the Authority as described under "--Additional Information." The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." Capitalized terms that are used but not otherwise
defined in this section of the Prospectus have the meanings assigned them in the
Indenture.
RANKING AND SECURITY
The Series A Senior Notes are, and the Series B Senior Notes will be,
ranked senior in right of payment to all Subordinated Indebtedness of the
Authority and will rank PARI PASSU in right of payment with the Working Capital
Financing and the Equipment Financing.
The Series A Senior Notes are, and the Series B Senior Notes will be,
secured by a first lien on the Note Collateral (which also will secure the
Working Capital Financing) owned by the Authority whether such Note Collateral
is now owned or hereafter acquired and such first liens on Note Collateral will
be subject to Permitted Liens. The Note Collateral includes, without limitation,
all of the assets, with certain exceptions, comprising the Resort including the
leasehold interest of the Authority in the Resort (other than certain assets to
the extent such assets are permitted to be financed by Indebtedness permitted to
be incurred pursuant to the covenant entitled "Limitations on Incurrence of
Indebtedness" and such Indebtedness is permitted to be secured pursuant to the
covenant entitled "Liens" pursuant to clauses (i), (v) and (viii) of the
definition of "Permitted Liens").
Real property pledged as security may be subject to known and unknown
environmental risks. Under the federal Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), as amended, for example, a secured
lender may be held liable, in certain limited circumstances, for the costs of
remediating a release of or preventing a threatened release of hazardous
substances at a mortgaged property.
Under CERCLA, a person "who, without participating in the management of
a facility, holds indicia of ownership primarily to protect his security
interest" is not a property owner, and thus not a responsible person under
CERCLA. Lenders have seldom been held liable under CERCLA. The lenders who have
been found liable have generally been found to have been sufficiently involved
in the mortgagor's operations so that they have "participated in the management
of the borrower." CERCLA does not specify the level of actual participation in
management. There is currently no controlling authority on this matter.
The Trustee may appoint one or more collateral agents, who may be delegated
any one or more of the duties or rights of the Trustee under the Collateral
Documents or which are specified in any Collateral Documents.
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PRINCIPAL, MATURITY AND INTEREST
The Series A Senior Notes are, and the Series B Senior Notes will be,
secured obligations of the Authority, limited in aggregate principal amount to
$175 million and will mature on November 15, 2002.
Each Senior Note bears interest at the rate of 13 1/2% per annum of the
principal amount then outstanding (the "Fixed Interest") from the Issuance Date
to the date of payment of such principal amount of such Senior Note.
Installments of Fixed Interest become due and payable semi-annually in arrears
on each November 15 and May 15 of each year to the Holders of record at the
close of business on the preceding November 1 or May 1. Additionally,
installments of accrued and unpaid Fixed Interest become due and payable with
respect to any principal amount of the Senior Notes that matures (whether at
stated maturity, upon acceleration, upon maturity of repurchase obligation or
otherwise) upon such maturity of such principal amount of the Senior Notes.
Fixed Interest on the Series A Senior Notes is, and the Series B Senior Notes
will be, computed on the basis of a 360-day year, consisting of twelve 30-day
months. Each installment of Fixed Interest is or will be calculated to accrue
from and including the most recent date to which Fixed Interest has been paid or
provided for (or from and include the Issuance Date if no installment of Fixed
Interest has been paid) to, but not including, the date of payment.
In addition, the Senior Notes bear Cash Flow Participation Interest,
calculated as described below, from the Commencement Date to the date of payment
of the Senior Notes. Installments of accrued or deferred Cash Flow Participation
Interest accrued through the Accrual Period (as defined herein) last ended
become due and payable semi-annually on each November 15 and May 15 after the
Commencement Date to the Holders of record at the close of business on the
preceding November 1 or May 1; PROVIDED THAT no Cash Flow Participation Interest
is payable with respect to any period prior to the earlier of the first day the
Resort commences operations and October 31, 1996. Additionally, all installments
of accrued or deferred Cash Flow Participation Interest become due and payable
(and may not be further deferred) with respect to any principal amount of the
Senior Notes that matures (whether at stated maturity, upon acceleration,
maturity of repurchase obligation or otherwise) upon such maturity of such
principal amount of the Senior Notes.
The Authority, at its option, may defer payment of all or a portion of any
installment of Cash Flow Participation Interest then otherwise due if, and only
to the extent that, (a) the payment of such portion of Cash Flow Participation
Interest will cause the Authority's Fixed Charge Coverage Ratio for the four
consecutive fiscal quarters last completed prior to such interest payment date
to be less than 2.0:1 on a pro forma basis after giving effect to the assumed
payment of such Cash Flow Participation Interest but before giving effect to any
interest on the Subordinated Notes which is then not payable in cash and (b) the
principal of the Senior Notes corresponding to such Cash Flow Participation
Interest has not then matured and become due and payable (at stated maturity,
upon acceleration, upon maturity of repurchase obligation or otherwise). Cash
Flow Participation Interest that is deferred shall become due and payable on the
earlier of (i) the next succeeding interest payment date on which such Cash Flow
Participation Interest is not permitted to be deferred, and (ii) upon the
maturity of the corresponding principal of the Senior Notes (whether at stated
maturity, upon acceleration, upon maturity of repurchase obligation or
otherwise). No interest will accrue on any Cash Flow Participation Interest
deferred and which has not yet become due and payable. To the extent permitted
by law, interest will accrue on overdue Fixed Interest or Cash Flow
Participation Interest at the same rate as the Fixed Interest plus one percent
(1%) per annum.
Each installment of Cash Flow Participation Interest is calculated to
accrue (an "Accrual Period") from, but not including, the most recent date to
which Cash Flow Participation Interest has been paid or provided for or through
which Cash Flow Participation Interest had been calculated and deferred (or from
and including the Commencement Date if no installment of Cash Flow Participation
Interest has been paid, provided for or deferred) to, and including, either
(a) the last day of the next Semi-annual Period if the corresponding principal
of the Senior Notes has not become due and payable or (b) the date of payment if
the corresponding principal of the
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Senior Notes has become due and payable (whether at stated maturity, upon
acceleration, upon maturity of repurchase obligation or otherwise). With respect
to each Accrual Period, Cash Flow Participation Interest accrues daily on the
principal of each Senior Note outstanding during such period as follows (except
with respect to the Initial Period): (i) for each day during each month that
ends during such Accrual Period and which month ends at least 25 days prior to
the date of payment, an amount equal to 1/30 of the Monthly Cash Flow
Participation Interest on the Senior Note for such month until all of such
Monthly Cash Flow Participation Interest on the Senior Note is accrued (and all
of such month's Monthly Cash Flow Participation Interest on the Senior Note
shall be accrued by the last day of such month) and (ii) for any day in any
remaining period, 1/30 of the prior month's Monthly Cash Flow Participation
Interest on the Senior Note; provided, however, that additional Cash Flow
Participation Interest ceases accruing on any outstanding principal of the
Senior Note until the next succeeding September 30, if on any day, the Cash Flow
Participation Interest on such principal amount of the Senior Note accrued since
the immediately preceding September 30 (excluding any deferred Cash Flow
Participation Interest accrued prior to such September 30) exceeds the product
of $250 million times such principal amount of the Senior Note divided by
$175,000,000. With respect to any principal amount of the Senior Notes during
the Initial Period, the Cash Flow Participation Interest accrues daily in the
amount of 1/180 of the Cash Flow Participation Interest for such principal in
the next succeeding Semi-annual Period.
Any reference in this Prospectus to "accrued and unpaid interest" on the
Senior Notes includes the amount of Fixed Interest, unpaid Cash Flow
Participation Interest and Liquidated Damages, if any, due and payable thereon.
"CASH FLOW PARTICIPATION INTEREST" means, as of any payment date, Cash Flow
Participation Interest on the Senior Notes accrued through the Accrual Period
last ended (including any Accrual Period that ends on such payment date) and any
Cash Flow Participation Interest previously accrued and the payment of which has
been permitted to be deferred.
"COMMENCEMENT DATE" means the earlier of (i) October 31, 1996 and (ii) the
first day that the Resort becomes Operating.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Cash Flow of such Person for such period to the Fixed
Charges of such Person for such period.
"INITIAL PERIOD" means the period, if any, beginning on the Commencement
Date and ending on the day prior to the first day that the Resort becomes
Operating.
"MONTHLY CASH FLOW PARTICIPATION INTEREST" means , with respect to any
month and any principal amount of the Senior Notes, the product of 5.0% of the
Authority's Cash Flow for such month times a fraction, the numerator of which is
the principal amount outstanding on the Senior Notes and the denominator of
which is $175,000,000.
"SEMI-ANNUAL PERIOD" means each period that begins on April 1 and ends on
the next succeeding September 30 or each period that begins on October 1 and
ends on the next succeeding March 31.
The Senior Notes are payable as to principal, premium, if any, interest
(including Cash Flow Participation Interest, if any), and Liquidated Damages at
the office or agency of the Authority maintained for such purpose within the
City and State of New York or, at the option of the Authority, payment of
interest (including Cash Flow Participation Interest, if any), may be made by
check mailed to the Holders of the Senior Notes at their respective addresses
set forth in the register of Holders of Senior Notes. Until otherwise designated
by the Authority, its office or agency in New York is the office of the Trustee
maintained for such purpose. The Series A Senior Notes were, and the Series B
Senior Notes will be, issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof
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NO SINKING FUND
There will be no mandatory sinking fund payments for the Senior Notes.
MANDATORY REDEMPTION
The Authority is not required to make mandatory redemptions prior to
maturity with respect to the Senior Notes.
OPTIONAL REDEMPTION
Except as described below, the Senior Notes are not redeemable at the
Authority's option prior to November 15, 1999. From and after November 15, 1999,
the Authority shall have the option to redeem the Senior Notes, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest (including Cash Flow Participation Interest and
Liquidated Damages, if any), thereon to the applicable redemption date, if
redeemed during the twelve (12)-month period beginning on November 15 of the
years indicated below:
YEAR %
---- -----
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 110.0
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 105.0
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0
Notwithstanding any other provision of the Indenture, if any Gaming
Regulatory Authority requires that a Holder or beneficial owner of the Senior
Notes must be licensed, qualified or found suitable under any applicable gaming
laws in order to maintain any gaming license or franchise of the Authority under
any applicable gaming laws, and the Holder or beneficial owner fails to apply
for a license, qualification or finding of suitability within 30 days after
being requested to do so by such Gaming Regulatory Authority (or such lesser
period that may be required by such Gaming Regulatory Authority) or if such
Holder or beneficial owner is not so licensed, qualified or found suitable, the
Authority shall have the right, at its option:
(1) to require such Holder or beneficial owner to dispose of such
Holder's or beneficial owner's Senior Notes within 30 days of receipt of such
finding by the applicable Gaming Regulatory Authority (or such earlier date as
may be required by the applicable Gaming Regulatory Authority); or
(2) to call for redemption of the Senior Notes of such Holder or
beneficial owner at a redemption price equal to the lesser of the principal
amount thereof or the price at which such Holder or beneficial owner acquired
the Senior Notes, together with, in either case, accrued and unpaid interest
(including Cash Flow Participation Interest and Liquidated Damages, if any), to
the earlier of the date of redemption or, the date of the finding of
unsuitability by such Gaming Regulatory Authority, which may be less than 30
days following the notice of redemption if so ordered by such Gaming Regulatory
Authority.
In connection with any such redemption, and except as may be required by a
Gaming Regulatory Authority, the Authority shall comply with the procedures
contained in the Indenture for redemptions of the Senior Notes. Under the
Indenture, the Authority is not required to pay or reimburse any Holder of the
Senior Notes or beneficial owner of Senior Notes who is required to apply for
any such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expenses will, therefore, be the obligation of such Holder or beneficial
owner. See "Government Regulation."
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Authority will make an
offer to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of the Senior Notes pursuant to the offer described below (the "Change
of Control Offer") at a price in cash (the "Change of Control Payment") equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
(including Cash Flow Participation Interest) and Liquidated Damages, if any, to
the date of purchase. The Authority shall not be required to make such an offer
to purchase (i) if the Change of Control event ceases prior to the closing of
such offer or (ii) if on or before the 120th day after the Change of Control,
which Change of Control arises under either clause (iv) or (v) of the definition
thereof, the Manager is replaced (or the Authority is using its best efforts to
effect such a replacement) with a Person with experience and reputation
comparable to Sun International. To effect any Change of Control Offer, the
Authority will mail a notice to each Holder with the following information:
(1) a Change of Control Offer is being made pursuant to Section 4.16 of
the Indenture, the length of time the offer will remain open and that all Senior
Notes properly tendered pursuant to such Change of Control Offer will be
accepted for payment;
(2) the Offer Amount, the purchase price and the purchase date, which
will be no earlier than 30 days nor later than 60 days from the date such notice
is mailed, except as may be otherwise required by applicable law (the "Change of
Control Payment Date");
(3) any Senior Note not properly tendered or accepted for payment will
remain outstanding and continue to accrue interest (including Cash Flow
Participation Interest, if any);
(4) unless the Authority defaults in the payment of the Change of Control
Payment, all Senior Notes accepted for payment pursuant to the Change of Control
Offer will cease to accrue interest after the Change of Control Payment Date;
(5) Holders electing to have any Senior Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Senior Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Notes completed, to the Authority, a depositary, if appointed by the Authority,
or a Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(6) Holders will be entitled to withdraw their tendered Senior Notes and
their election to require the Authority to purchase the Senior Notes, PROVIDED,
HOWEVER, that the Authority, the depositary or the Paying Agent receives, not
later than the close of business on the last day of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Senior Notes tendered for purchase, and a
statement that such Holder is withdrawing his tendered Senior Notes and his
election to have such Senior Notes purchased; and
(7) that Holders whose Senior Notes are being purchased only in part will
be issued new Senior Notes equal in principal amount to the unpurchased portion
of the Senior Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Authority will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Senior Notes pursuant to a Repurchase Offer.
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On the Change of Control Payment Date, the Authority will, to the extent
permitted by law:
(1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the aggregate Change
of Control Payment in respect of all Senior Notes or portions thereof so
tendered; and
(3) deliver, or cause to be delivered, to the Trustee for cancellation
the Senior Notes so accepted together with an Officers' Certificate stating that
such Notes or portions thereof have been tendered to and purchased by the
Authority.
The paying agent will promptly mail to each Holder of Senior Notes the
Change of Control Payment for such Senior Notes, and the Trustee will promptly
authenticate and mail to each holder a new Senior Note equal in principal amount
to any unpurchased portion of the Senior Notes surrendered, if any, PROVIDED,
HOWEVER, that each such new Senior Note will be in a principal amount of $1,000
or an integral multiple thereof. The Authority will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The source of funds for any repurchase of Senior Notes upon a Change of
Control will be the Authority's cash or cash generated from operations or other
sources, including borrowings, sales of assets or Capital Stock. However, there
can be no assurance that sufficient funds will be available at the time of any
Change of Control to make any required repurchases. Any failure by the Authority
to repurchase Senior Notes tendered pursuant to a Change of Control Offer will
be deemed an Event of Default.
ASSET SALES
The Indenture provides that the Authority will not cause, make or suffer to
exist an Asset Sale, unless:
(1) the Authority receives consideration at the time of such Asset Sale
at least equal to the fair market value of the assets sold or otherwise disposed
of; and
(2) at least 85% of such consideration is in the form of cash; PROVIDED,
HOWEVER, that the Authority will not be permitted to make any Asset Sale of Key
Project Assets.
Within 180 days after the Authority's receipt of the Net Proceeds of any
Asset Sale, the Authority may apply the Net Proceeds from such Asset Sale to
either:
(1) an investment in the Principal Business or in tangible long-term
assets used or useful in the Principal Business; or
(2) to permanently reduce Indebtedness that is not Subordinated
Indebtedness.
Pending the final application of any such Net Proceeds, such Net Proceeds
shall be pledged to the Trustee as security for the Senior Notes. Any Net
Proceeds from the Asset Sale that are not invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Authority
shall make an offer to all Holders of Senior Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest (including Cash Flow Participation Interest) and Liquidated
Damages, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in
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the Indenture. The Authority will commence an Asset Sale Offer with respect to
Excess Proceeds within 10 Business Days after the date that Excess Proceeds
exceeds $5.0 million by mailing the notice required pursuant to the terms of the
Indenture. To the extent that the aggregate amount of Senior Notes properly
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, such
remaining Excess Proceeds shall be released to the Authority, subject to the
terms of the Cash Collateral Accounts Pledge and Security Agreement, and the
Authority may use any such remaining Excess Proceeds for any lawful purpose. If
the aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
to be purchased in the manner described under the caption "Selection and Notice"
below. Upon completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero. The Indenture will also require the Authority
to grant to the Trustee, on behalf of the Holders of the Senior Notes, a first
priority lien on any properties or assets acquired with the Net Proceeds of any
such Asset Sale on the terms set forth in the Indenture and the Collateral
Documents.
EVENT OF LOSS
The Indenture provides that within 360 days after any Event of Loss with
respect to Note Collateral with a fair market value (or replacement cost, if
greater) in excess of $500,000, the Authority may apply the Net Loss Proceeds
from such Event of Loss to the rebuilding, repair, replacement or construction
of improvements to the Resort, with no concurrent obligation to make any
purchase of any Senior Notes, provided that:
(1) the Authority delivers to the Trustee within 45 days of such Event of
Loss a written opinion from a reputable architect that the Resort with at least
the Minimum Facilities can be rebuilt, repaired, replaced, or constructed and
Operating within 360 days of such Event of Loss and that, with respect to any
Event of Loss that occurs on or prior to September 30, 1997, such rebuilding,
repair, replacement or construction of improvements can be rebuilt, repaired,
replaced or constructed and Operating on or prior to September 30, 1997;
(2) an Officer's Certificate certifying that the Authority has available
from Net Loss Proceeds or cash or sufficient funds on hand to complete such
rebuilding, repair, replacement or construction; and
(3) the Net Loss Proceeds is less than $50 million.
Any Net Loss Proceeds from an Event of Loss that are not reinvested or are
not permitted to be reinvested as provided above will be deemed "Excess Loss
Proceeds." When the aggregate amount of "Excess Loss Proceeds" exceeds $50.0
million, the Authority shall make an offer to all Holders of Senior Notes (an
"Event of Loss Offer") to purchase the maximum principal amount of Senior Notes,
that is an integral multiple of $1,000, that may be purchased out of the Excess
Loss Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest (including Cash Flow
Participation Interest and Liquidated Damages), if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Senior Notes tendered
pursuant to an Event of Loss Offer is less than the Excess Loss Proceeds, such
remaining Excess Loss Proceeds shall be released to the Authority, subject to
the terms of the Cash Collateral Accounts Pledge and Security Agreement, and the
Authority may use any such remaining Excess Loss Proceeds so released for any
lawful purpose. If the aggregate principal amount of Senior Notes surrendered by
Holders thereof exceeds the amount of Excess Loss Proceeds, the Trustee shall
select the Senior Notes to be purchased in the manner described under the
caption "Selection and Notice" below. Upon completion of any such Event of Loss
Offer, the amount of Excess Loss Proceeds shall be reset at zero. Pending any
permitted rebuilding, repair or construction or the completion of any Excess
Loss Offer, the Authority shall pledge to the Trustee as additional Note
Collateral any Net Loss Proceeds or other cash on hand required for such
permitted rebuilding, repair or construction pursuant to the terms of the
Leasehold Mortgage. Such pledged funds will be released to the Authority to pay
for such permitted rebuilding, repair or construction or such Event of Loss
Offer pursuant to the terms of the Leasehold Mortgage. The Indenture also
requires the Authority to grant to the Trustee, on behalf of the Holders of the
Senior Notes, a first priority lien
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on any properties or assets rebuilt, repaired or constructed with such Net Loss
Proceeds on the terms set forth in the Indenture and the Collateral Documents.
The Indenture also provides that with respect to any Event of Loss pursuant
to clause (D) of the definition of "Event of Loss" that has a fair market value
(or replacement cost, if greater) in excess of $2.0 million, the Authority will
be required to receive consideration at least:
(1) equal to the fair market value (as determined by an Independent
Financial Advisor) of the assets subject to an Event of Loss; and
(2) 85% of which is in the form of cash or Cash Equivalents; PROVIDED,
HOWEVER, that the amount of:
(a) any liabilities (as shown on the Authority's most recent balance
sheet or in the notes thereto) of the Authority (other than liabilities that are
by their terms expressly subordinated to the Senior Notes), that are assumed by
the transferee of any such assets and
(b) any notes or other obligations received by the Authority from such
transferee that are converted by the Authority into cash (to the extent of the
cash received) within 10 Business Days following the closing of such sale of the
assets subject to such Event of Loss,
shall be deemed to be cash only for purposes of satisfying this item 2 and
for no other purpose.
The Indenture also provides that with respect to any Event of Loss with
respect to Note Collateral with a fair market value (or replacement cost, if
greater) of $500,000 or less, the Net Loss Proceeds therefrom shall be released
to the Authority.
EXCESS CASH PURCHASE OFFER
The Indenture provides that within 120 days after each fiscal year end of
the Authority, beginning with the fiscal year that first ends on September 30,
1997, the Authority shall make an offer to all Holders of Senior Notes (the
"Excess Cash Purchase Offer") to purchase the maximum principal amount of Senior
Notes that is an integral multiple of $1,000 at an offer price equal to the
percentage of such principal amount set forth below, plus accrued and unpaid
interest to the date of payment (the "Excess Cash Offer Price") that may be
purchased with the sum of (i) 50% of the Excess Cash Flow in respect of the
fiscal year then ended (or if the amount of Excess Cash Flow for such period is
less than $2.0 million and is greater than zero, then the Excess Cash Flow shall
be deemed zero, or if the amount of Excess Cash Flow for such period is less
than zero, the amount of such negative amount), (ii) the amount of Deferred
Subordinated Interest for such fiscal year and (iii) accrued and unpaid interest
(including Cash Flow Participation Interest), if any, to the date fixed for the
closing of such Excess Cash Purchase Offer on such principal (collectively the
amounts under clauses (i) and (ii), the "Excess Cash Purchase Amount").
YEAR %
---- -----
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 113.5
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 112.0
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 110.0
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 105.0
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0
The Excess Cash Purchase Offer is required to remain open for 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law. Upon the expiration of such period,
the Authority will apply the Excess Cash Purchase Amount to the purchase of all
Senior
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Notes tendered at the Excess Cash Offer Price. If less than all the Senior Notes
tendering in such Excess Cash Purchase Offer are required to be purchased by the
Authority, the Authority will purchase Senior Notes pro rata from each tendering
Holder in accordance with the principal amount of indebtedness properly
tendered. To the extent that the aggregate principal amount of Senior Notes
properly tendered pursuant to any Excess Cash Purchase Offer is less than the
Excess Cash Purchase Amount with respect thereto, the Authority is required to
make an offer to purchase Subordinated Notes from the holders thereof. See
"Subordinated Note Purchase Agreement--Remaining Excess Cash Purchase Offer".
SELECTION AND NOTICE
If less than all of the Senior Notes are to be purchased in an Asset Sale
Offer, Event of Loss Offer or Excess Cash Purchase Offer or redeemed at any
time, selection of Senior Notes for purchase or redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Senior Notes are listed, or, if the Senior Notes
are not so listed, on a PRO RATA basis, by lot or by such other method as the
Trustee considers fair and appropriate (and in such manner as complies with
applicable legal requirements), PROVIDED, that no Senior Notes of $1,000 or less
shall be purchased or redeemed in part.
The Authority shall mail, by first class mail, postage prepaid, at least 30
but not more than 60 days before the purchase or redemption date, a notice of
purchase or redemption to each Holder of Senior Notes to be purchased or
redeemed at such Holder's registered address. If any Senior Note is to be
purchased or redeemed in part only, any notice of purchase or redemption that
relates to such Senior Note shall state the portion of the principal amount
thereof that has been or is to be purchased or redeemed.
A new Senior Note in principal amount equal to the unpurchased or
unredeemed portion of any Senior Note purchased or redeemed in part will be
issued in the name of the Holder thereof upon cancellation of the original
Senior Note. On and after the purchase or redemption date unless the Authority
defaults in payment of the purchase or redemption price, interest shall cease to
accrue on Senior Notes or portions thereof purchased or called for redemption.
CERTAIN COVENANTS
USE OF PROCEEDS
The Indenture provides that the Authority use the net proceeds from the
sale of the Series A Senior Notes and the net proceeds from the sale of the
Subordinated Notes (to the extent provided in the Indenture), only for Permitted
Proceed Uses. The Authority caused the net proceeds from the sale of the Series
A Senior Notes and the net proceeds from the sale of the Subordinated Notes to
be deposited into the Escrow Account and such net proceeds will be disbursed
only in accordance with the Disbursement and Escrow Agreement. See "Material
Agreements--Disbursement and Escrow Agreement."
CONSTRUCTION
The Indenture provides that the Authority cause construction of the Resort,
including the furnishing, fixturing and equipping thereof, to be prosecuted with
diligence and continuity in a good and worker-like manner substantially in
accordance with the Plans and within the Construction Budget.
GAMING LICENSES
The Indenture provides that the Authority use its best efforts to obtain
and retain in full force and effect at all times all Gaming Licenses necessary
for the operation of the Resort, PROVIDED, THAT, if in the course of the
exercise of its governmental or regulatory functions the Authority is required
to suspend or revoke any consent,
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permit or license or close or suspend any operation of any part of the Resort as
a result of any noncompliance with law, the Authority use its best efforts to
promptly and diligently correct such noncompliance or replace any personnel
causing such noncompliance so that the Resort will be opened and fully
Operating.
The Authority shall file with the Trustee and provide Holders of Senior
Notes, promptly after receipt by the Authority, any Notice of Violation, Order
of Temporary Closure, or Assessment of Civil Fines, from the NIGC pursuant to 25
C.F.R. Part 573 or 575 (or any successor provision) and any Notice of Non-
Compliance issued by, or cause of action commenced by, the State of Connecticut
under Section 13 of the Compact (or any successor provision).
RESTRICTED PAYMENTS
The Indenture provides that the Authority shall not directly or indirectly:
(i) purchase, redeem, defease, or otherwise acquire or retire for value
any Subordinated Indebtedness of the Authority or make any interest payment on
the Subordinated Notes;
(ii) make any payment or distribution to the Tribe (or any other agency,
instrumentality or political subunit thereof) or make any general distribution
to the members of the Tribe;
(iii) make any Management Fee payment or pay any other management or
similar fee to the Manager or its affiliates;
(iv) make any payment in respect of repayment or reimbursement of any
obligations under the Secured Completion Guarantee; or
(v) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (v)
above being collectively referred to as "Restricted Payments"), unless, such
Restricted Payment is:
(a) a monthly payment of the Minimum Priority Payment to the Tribe in an
amount not to exceed $50,000 per month pursuant to the terms of the Gaming
Facility Management Agreement in effect on the Issuance Date;
(b) a monthly payment of a Management Fee to TCA in respect of the Net
Revenues of the prior month pursuant to the terms of the Management Agreement in
effect on the Issuance Date, which fee may not be greater than that provided by
Section 6.4 of such Management Agreement and any management fee in respect of
any commercial activity not covered by the Management Agreement (provided that
all such fees shall be after paying all Operating Expenses, the Minimum Priority
Payment, any required deposit in the Cash Maintenance Account and the Interest
and Excess Cash Flow Account and replacement reserve deposits);
(c) a monthly payment to the Tribe in respect of the Net Revenues for the
prior month, which payment shall not exceed the amount payable to the Tribe
pursuant to Section 6.4 of the Management Agreement in effect on the Issuance
Date and any Net Revenues from commercial activities not covered under the
Management Agreement (provided that all such payments shall be after
(i) payments of amounts required by the Management Agreement to be paid prior to
payments to the Tribe (other than the Minimum Priority Payment), and
(ii) without limiting the generality of clause (i), payments of Operating
Expenses, the Minimum Priority Payment, required deposits in the Cash
Maintenance Account, the Interest and Excess Cash Flow Account, and Replacement
Reserve Account, Management Fees and required payments on the Subordinated Notes
permitted by the Indenture;
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(d) payment of interest on the Subordinated Notes in accordance with the
terms of the Subordinated Notes as in effect on the issuance date of the
Indenture;
(e) redemption of the Subordinated Notes pursuant to the requirements of
any gaming law as provided for in the Note Purchase Agreement in effect on the
Issuance Date;
(f) an annual purchase, redemption, defeasance or retirement of any
Subordinated Indebtedness to be paid no earlier than the day after any required
payment to the Holders of the Senior Notes in respect of any Excess Cash
Purchase Offer has been made, in an amount equal to the Excess Cash Purchase
Amount offered to the Holders of the Senior Notes under the covenant entitled
"Excess Cash Purchase Offer" in respect of such year and not accepted by such
Holders at a price not to exceed 100% of the principal amount thereof and
accrued and unpaid interest;
(g) an annual payment to the Tribe to be paid no earlier than the day
after any required payment has been made to the Holders of the Senior Notes in
respect of any Excess Cash Flow Offer (or, if no such offer is required to be
made in respect of any year, no earlier than May 1 of the next succeeding year),
in an amount not to exceed the amount of the Excess Cash Purchase Amount for the
prior year, PROVIDED such amount was (i) first offered to the Holders of the
Senior Notes under the covenant entitled "Excess Cash Purchase Offer," and not
accepted by the Holders of the Senior Notes and, to the extent not accepted by
the Holders of the Senior Notes, was offered to the holders of the Subordinated
Notes under clause (f) of this covenant and not accepted by them, or (ii) not
required to be offered to the Holders of the Senior Notes under the covenant
entitled "Excess Cash Purchase Offer"; or
(h) Restricted Investments in Resort Support Entities after the Resort
becomes Operating, not to exceed $2.0 million in the aggregate outstanding at
any one time; provided that such amounts correspondingly reduce the
distributions under foregoing clauses (a), (b) or (c);
PROVIDED, that at the time of, and after giving effect to, any Restricted
Payment permitted under clauses (b), (c), (g) or (h), no Payment Default shall
have occurred and be continuing or would occur as a consequence thereof or any
Blockage Period be in effect for any Payment Blockage Notice; and PROVIDED,
FURTHER that at the time of and after giving effect to, any Restricted Payment
permitted under clause (d), (e) or (f), no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof.
For purposes of determining the amount of Restricted Investments
outstanding at any time, all Restricted Investments shall be valued at their
fair market value at the time made (in each case as determined in good faith by
the Authority's Management Board), and no adjustments shall be made for
subsequent changes in fair market value.
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS
The Indenture provides that the Authority shall not, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become directly
or indirectly liable with respect to (collectively, "incur" and correlatively,
an "incurrence" of) any Indebtedness (including Acquired Indebtedness);
PROVIDED, HOWEVER, that the Authority may incur Indebtedness if:
(i) the Fixed Charge Coverage Ratio for the Authority's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date of such incurrence would have been at
least 2.50 to 1 if the date on which such Indebtedness is incurred is on or
prior to November 15, 1997, 2.75 to 1 if such date is after November 15, 1997
and on or prior to November 15, 1999 and 3.00 to 1 thereafter, in each case
determined on a pro forma basis (including a pro forma application of the net
proceeds
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therefrom), as if the additional Indebtedness had been incurred and application
of proceeds had occurred at the beginning of such four-quarter period;
(ii) such Indebtedness is expressly subordinated in right of payment to
the Senior Notes; and
(iii) such Indebtedness does not have a Weighted Average Life to Maturity
less than the Weighted Average Life to Maturity of the Senior Notes.
The foregoing limitations shall not apply to:
(a) the incurrence by the Authority of Indebtedness and letters of credit
for working capital purposes (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Authority under
the related reimbursement or other similar agreement) in an aggregate principal
amount not to exceed at any one time $25.0 million less any amount that is a
permanent reduction in principal for purposes of calculating Excess Cash Flow
which may be secured by a pari passu lien on the Note Collateral;
(b) the incurrence by the Authority of Indebtedness represented by the
Senior Notes and the Subordinated Notes or the incurrence of Subordinated
Indebtedness to evidence advances under the Secured Completion Guarantee
pursuant to the terms thereof;
(c) the incurrence by the Authority of Indebtedness represented by
Capital Lease Obligations or purchase money obligations; PROVIDED, that:
(A) the Authority may not incur Indebtedness with a principal amount
in excess of $40.0 million pursuant to this clause (c);
(B) the proceeds are used for the purpose of financing all or any
part of the purchase or lease of personal property or equipment used in the
business of the Authority;
(C) the term of any Indebtedness incurred pursuant to this clause
(c) at the time of incurrence is not less than four years; and
(D) the Weighted Average Life to Maturity of all Indebtedness
incurred pursuant to this clause (c) at the time of incurrence is not less
than two years;
(d) the incurrence by the Authority of Indebtedness the proceeds of which
are used to develop, design or construct a hotel or hotels with at least 200
rooms as part of the Resort; provided however, that the aggregate principal
amount of such Indebtedness (excluding any portion thereof that is original
issue discount) does not exceed $35.0 million; and provided that such
Indebtedness is not secured by any Note Collateral;
(e) the incurrence by the Authority of Indebtedness (the "Refinancing
Indebtedness") issued in exchange for, or the proceeds of which are used to
extend, refinance, renew, replace, or refund Indebtedness referred to in the
first paragraph of this covenant or in clauses (b), (c), (d) or (e), PROVIDED,
HOWEVER, that:
(A) the principal amount of such Refinancing Indebtedness shall not
exceed the principal amount of Indebtedness so extended, refinanced,
renewed, replaced, substituted or refunded (plus the amount of reasonable
expenses incurred and any premium paid in connection therewith or the
amount of any original issue discount),
(B) the Refinancing Indebtedness shall, if applicable, be subordinate
in right and priority of payment to the Senior Notes on terms at least as
favorable to the Holders of Senior Notes as those
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contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded, and
(C) the Refinancing Indebtedness shall have a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded; and
(f) Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Indenture to be outstanding.
The Indenture also provides that if this covenant authorizes the
incurrence of any Indebtedness that may be secured by a Pari Passu Lien on the
Note Collateral, the Trustee is authorized to enter into an intercreditor
agreement with the holder of such pari passu Indebtedness (the "Pari Passu
Debtholder") upon the request of the Authority that provides to the effect of at
least the following:
(a) the Lien of the Trustee on the Note Collateral shall be equal in
priority (regardless of the time or method of attachment or perfection) to the
Lien in favor of, or for the benefit of, such Pari Passu Debtholder for the sum
of (1) a principal amount of Indebtedness not to exceed the principal amount
permitted by the Indenture to be secured by a Pari Passu Lien and (2) any other
Obligations in respect of such principal amount of pari passu Indebtedness;
(b) such intercreditor agreement is solely for the purpose of
establishing the relative interests of the Pari Passu Debtholder and the Trustee
and the Holders of Senior Notes and is not for the benefit of any other party;
(c) the Trustee, so long as the principal amount of the outstanding
Senior Notes is greater than the principal amount outstanding on such pari passu
Indebtedness, shall have the sole right to take, enforce or exercise any right
or remedy, to take or exercise any action or election or to refrain from taking
or exercising any action with respect to any of the Note Collateral or the
Collateral Documents; and so long as the principal amount of the outstanding
Senior Notes is greater than the principal amount outstanding on such pari passu
Indebtedness, the Pari Passu Debtholder shall not, and shall not permit any of
its representatives to, take, enforce or exercise any right or remedy, to take
or exercise any action or election or to refrain from taking or exercising any
action with respect to any of the Note Collateral or any of its collateral or
security documents with respect to any of the Note Collateral; provided, that
the Pari Passu Debtholder may take or exercise any action or election or refrain
from taking or exercising any action with respect to any collateral that is not
Note Collateral or under any document that does not apply to the Note
Collateral; and provided, further, that the Trustee shall have no duty or
obligation to any Pari Passu Debtholder in taking or exercising any action or
election or in refraining from taking or exercising any action with respect to
any of the Note Collateral or the Collateral Documents;
(d) each of the Trustee and the Pari Passu Debtholder agree that any
money or funds realized with respect to the Note Collateral in connection with
the enforcement or exercise of any right or remedy with respect to any Note
Collateral following the acceleration of the Senior Notes shall be distributed
as follows: First, to the payment of all reasonable expenses in connection with
the collection, realization or administration of such funds or the exercise of
rights or remedies; Second, to each holder of Indebtedness secured by a Pari
Passu Lien on the Note Collateral, a proportion of such remaining money or funds
in the same proportion as the total outstanding obligations so secured held by
such holder bears to the total outstanding obligations so secured until all such
secured obligations have been paid in full; and Third, to the Authority or to
whosoever may be lawfully entitled to receive the same as a court of competent
jurisdiction may direct;
(e) the Trustee agrees that any amounts in the Cash Collateral Accounts
in the name of the Trustee shall be held for the ratable benefit of the Holders
of the Senior Notes and the Pari Passu Debtholders; and
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(f) each of the Trustee, the Holders of Senior Notes and the Pari Passu
Debtholders shall have the right to alter or amend their respective agreements
and documents with the Authority or the Tribe in accordance with their terms and
to release any Note Collateral from their respective Liens in accordance with
the terms of their respective agreements.
LIENS
The Indenture provides that the Authority will not directly or indirectly
create, incur, assume or suffer to exist any Lien, except Permitted Liens, on
any asset owned as of the Issuance Date or thereafter acquired by the Authority
or any income or profits therefrom, or assign or convey any right to receive
income therefrom.
LIQUIDATION OR DISSOLUTION
The Indenture provides that the Authority shall not sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more transactions. The Authority shall not consolidate or
merge with or into any other Person.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Authority shall not sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, the
Tribe, the Management Company or any Affiliate of the Tribe or of the Management
Company (each of the foregoing, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Authority than those that would have been obtained in a comparable
transaction by the Authority with an unrelated Person and
(ii) the Authority delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving aggregate
payments in excess of $2.0 million, a resolution adopted by a majority of
the disinterested members of the Management Board approving such Affiliate
Transaction and set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and
(b) with respect to any Affiliate Transaction involving aggregate
payments in excess of $5.0 million, a written opinion as to the fairness of
such Affiliate Transaction to the Authority from a financial point of view
issued by an Independent Financial Advisor with assets in excess of $1.0
billion.
The foregoing provisions shall not apply to the following: (i) Restricted
Payments permitted by the covenant of the Indenture entitled "Restricted
Payments" (ii) the Development and Construction Agreement or the Management
Agreement in effect on the Issuance Date or (iii) any management agreement for
any commercial operations not covered by the Management Agreement that does not
provide for any compensation to the Manager greater than 40% of Net Revenues
from such operations and which provides that such fees are subordinated to the
payment of the Senior Notes to the same extent as the Management Agreement
provides.
LINE OF BUSINESS
The Indenture provides that for so long as any Senior Notes are
outstanding, the Authority shall not engage in any business or activity other
than the Principal Business.
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RESTRICTIONS ON LEASING AND DEDICATION OF LEASED PROPERTY
The Indenture provides that the Authority shall not lease, sublease, or
grant a license, concession or other agreement to occupy, manage or use any
Note Collateral owned or leased by the Authority (each, a "Lease
Transaction"), other than the following Lease Transactions; PROVIDED that:
(1) no Default or Event of Default has occurred or is continuing
immediately after entering into such Lease Transaction (or immediately after
any extension or renewal of such Lease Transaction made at the option of the
Authority) and
(2) no gaming or casino operations may be conducted on any Note
Collateral that is the subject of such Lease Transaction other than by the
Authority:
(a) the Authority may enter into a Lease Transaction with respect to
any space on or within the Resort with any Person, PROVIDED that:
(i) such Lease Transaction will not interfere with, impair or
detract from the operations of the Resort and will, in the opinion of
the Authority, enhance the value and operations of the Resort;
(ii) such Lease Transaction is at a fair market rent (in light
of other similar or comparable prevailing commercial transactions)
and contains such other terms such that the Lease Transaction, taken
as a whole, is commercially reasonable and fair to the Authority in
light of prevailing or comparable transactions in other casinos,
hotels, attractions or shopping venues; and
(iii) such Lease Transaction complies with all applicable
law, including obtaining any consent of the BIA, if required;
(b) the Authority and the Tribe may enter into the Lease;
(c) the Authority may enter into a management or operating agreement
with respect to any Note Collateral, including any hotel (other than any
Note Collateral or space used for any casino or gaming operations) with
any Person; PROVIDED that:
(i) the manager or operator has experience in managing or
operating similar operations;
(ii) such management or operating agreement is on commercially
reasonable and fair terms to the Authority; and
(iii) such management or operating agreement is terminable
without penalty to the Authority upon no more than 90 days written
notice; and
(d) the Authority may enter into the Management Agreement and any
hotel management agreement with the Manager; PROVIDED THAT the
compensation to the Manager does not exceed 40% of the Net Revenues of
such operation and that such fees are subordinate to the payment of the
Senior Notes to the same extent as provided in the Management Agreement.
The Trustee shall enter into a leasehold non-disturbance agreement with
respect to any Lease Transaction permitted under clause (a) above, in the
event that the Trustee, on behalf of the Holders of Senior Notes, forecloses
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or takes possession of any Note Collateral. Such an agreement shall provide,
among other things, that any action taken with respect to any Note
Collateral, including any sale of Note Collateral, will be subject to the
terms of the Lease Transaction and will permit the lessee to cure certain
defaults under such Lease Transaction. No Lease Transaction may provide that
the Authority may subordinate its leasehold or fee interest to any lessee or
any financing party of any lessee.
CASH MAINTENANCE ACCOUNT
The Indenture provides that the Authority shall deposit into the Cash
Maintenance Account on a monthly basis, 1/12 of the amounts set forth below
for each year indicated plus any amounts deferred from any prior month
pursuant to the next paragraph, no later than 25 days after the end of such
calendar month:
YEAR AMOUNT
---- ------
1997 $6,000,000
1998 $6,000,000
1999 $6,000,000
2000 $6,000,000
2001 $6,000,000
2002 thereafter, such amount necessary to
keep at least $36,000,000 in the Cash
Maintenance Account.
To the extent that any amount required to be deposited into the Cash
Maintenance Account in any month exceeds the Cash Available for Cash
Maintenance Account for the prior month, then the deposit of such excess
amount may be deferred until the next succeeding month or months in which the
Cash Available for Cash Maintenance Account is sufficient. Amounts in the
Cash Maintenance Account may be withdrawn by the Trustee and applied for any
purpose set forth under the caption "Authorization of Receipt of Funds by the
Trustee Under the Collateral Documents."
The Authority has established the Cash Maintenance Account with an
Eligible Institution, which initially is the Trustee. Any amounts deposited
into the Cash Maintenance Account may be invested only in Cash or Cash
Equivalents. Provided that no Event of Default has occurred and is
continuing, the Authority may, from time to time, direct the investment of
the funds in the Cash Maintenance Account in Cash Equivalents. The Cash
Maintenance Account and any investments constituting funds thereof shall be
in the name of the Trustee for the ratable benefit of the Holders of the
Senior Notes. The Authority has granted and shall maintain a perfected, first
priority security interest in favor of the Trustee for the ratable benefit of
the Holders and a perfected, second priority security interest for the
ratable benefit of the holders of the Subordinated Notes in all amounts in,
or investments constituting amounts in, the Cash Maintenance Account. If an
Event of Default has occurred and is continuing, notwithstanding the second
priority security interest in favor of the holders of the Subordinated Notes,
the Trustee shall have the authority to direct any investments in the Cash
Maintenance Account, liquidate or sell any investments therein, to take
possession of any cash or investments therein and to hold such amounts as
additional Note Collateral, apply any such cash or investments to the payment
of principal and interest on the Senior Notes, maintain, repair or otherwise
protect the Note Collateral or the other rights of the Holders of the Senior
Notes or to take any other appropriate action or remedy.
Upon repayment in full of all obligations under the Senior Notes and the
Indenture and the discharge of the Indenture, if any amount of principal or
interest on the Subordinated Notes is then outstanding and unpaid, the
perfected second priority security interest in favor of the holders of the
Subordinated Notes shall become (and the Authority and the Trustee shall take
all action necessary to cause it to become) a perfected, first priority
security interest for the ratable benefit of the holders of the Subordinated
Notes to secure the obligations of the Authority under the Subordinated
Notes. If the Subordinated Notes have been discharged and paid in full, then
such amounts in the Cash Maintenance Account shall be returned to the
Authority or to whomsoever a court of competent jurisdiction may so direct.
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INTEREST AND EXCESS CASH FLOW ACCOUNT
The Indenture provides that the Authority deposit into the Interest and
Excess Cash Flow Account on a monthly basis the amount of fixed interest
accrued during the prior month on the Senior Notes, 50% of the Excess Cash
Flow for the prior month on the Senior Notes and 100% of all Deferred
Subordinated Interest for the prior month and the amount of Cash Flow
Participation Interest accrued for the prior month. The Authority shall
establish the Interest and Excess Cash Flow Account with an Eligible
Institution. Any amounts deposited into the Interest and Excess Cash Flow
Account may be invested only in Cash or Cash Equivalents. Provided that no
Event of Default has occurred and is continuing, the Authority may, from time
to time, direct the investment of the funds in the Interest and Excess Cash
Flow Account in Cash Equivalents. The Interest and Excess Cash Flow Account
and any investments constituting funds thereof shall be in the name of the
Trustee for the ratable benefit of the Holders of the Senior Notes and may be
withdrawn by the Trustee or upon the request of the Authority to (i) pay
interest on the Senior Notes, (ii) make an Excess Cash Purchase Offer, and
(iii) with respect to amounts deposited in respect of Excess Cash Flow, make
payments or expenditures that reduce Excess Cash Flow. Funds in the Interest
and Excess Cash Flow Account which were to be withdrawn to make an Excess
Cash Purchase Offer but which are not accepted in such an offer may be used
by the Authority as provided under the caption "Restricted Payments." The
Authority shall grant and maintain a perfected, first priority security
interest in favor of the Trustee for the ratable benefit of the Holders in
all amounts in, or investments constituting amounts in, the Interest and
Excess Cash Flow Account. If an Event of Default has occurred and is
continuing, the Trustee shall have the authority to direct any investments in
the Interest and Excess Cash Flow Account, liquidate or sell any investments
therein, or to take possession of any cash or investments therein and to hold
such amounts as additional Note Collateral, apply any such cash or
investments to the payment of principal and interest on the Senior Notes,
maintain, repair or otherwise protect the Note Collateral or the other rights
of the Holders of the Senior Notes or to take any other appropriate action or
remedy.
Upon repayment in full of all obligations under the Senior Notes and the
Indenture and the discharge of the Indenture, if any amount of principal or
interest on the Subordinated Notes is then outstanding and unpaid, the
amounts in the Interest and Excess Cash Flow Account shall be disbursed to an
escrow agent or trustee selected by the holders of the Subordinated Notes,
and reasonably acceptable to the Authority, as collateral to secure the
obligations of the Authority under the Subordinated Notes. If the
Subordinated Notes have been discharged and paid in full, then such amounts
in the Interest and Excess Cash Flow Account shall be returned to the
Authority or to whomsoever a court of competent jurisdiction may so direct.
MAINTENANCE OF INSURANCE
The Indenture provides that, until the Senior Notes have been paid in
full, the Authority shall maintain insurance with responsible carriers
against such risks and in such amounts as is customarily carried by similar
businesses with such deductibles, retentions, self insured amounts and
coinsurance provisions as are customarily carried by similar businesses of
similar size, including, without limitation, property and casualty, and shall
have provided insurance certificates evidencing such insurance to the Trustee
prior to the Issuance Date and shall hereafter provide such certificates
prior to the anniversary or renewal date of each such policy, which
certificate shall expressly state the expiration date for each policy listed.
The Authority shall furnish or cause to be furnished certified copies of the
policies.
Customary insurance coverage shall be deemed to include the following:
(i) workers' compensation insurance to the extent required to comply
with all applicable state, territorial, or United States laws and
regulations, or the laws and regulations of any other applicable jurisdiction;
(ii) comprehensive general liability insurance with minimum limits of $10
million;
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(iii) umbrella or bumbershoot liability insurance providing excess
liability coverages over and above the foregoing underlying insurance
policies up to a minimum limit of $50 million; and
(iv) property insurance protecting the property against loss or damage
by fire, lightning, windstorm, tornado, water damage, vandalism, riot,
earthquake, civil commotion, malicious mischief, hurricane, and such other
risks and hazards as are from time to time covered by an "all-risk" policy or
a property policy covering "special" causes of loss (such insurance shall
provide coverage of not less than 100% of actual replacement value (as
determined at each policy renewal based on the F.W. Dodge Building Index or
some other recognized means) of any improvements and with a deductible no
greater than $500,000 (other than earthquake insurance, for which the
deductible may be up to 10% of such replacement value)).
All insurance required under the Indenture (except workers'
compensation) shall name the Authority and the Trustee as additional
insureds, with losses in excess of $1 million payable jointly to the
Authority and the Trustee (unless a Default or Event of Default has occurred
and is then continuing, in which case all losses are payable solely to the
Trustee), with no recourse against the Trustee for the payment of premiums,
deductibles, commissions or club calls, and for at least 30 days notice of
cancellation. All such losses in excess of $1 million shall be deposited in
the Event of Loss Account to be established pursuant to Section 10.12 of the
Indenture and shall be pledged to the Trustee until released in accordance
with the terms of the applicable Collateral Document. All such insurance
policies shall be issued by carriers having an A.M. Best & Company, Inc.
rating of "A" or higher and a financial size category of not less than XII,
or if such carrier is not rated by A.M. Best & Company, Inc., having the
financial stability and size deemed appropriate by an opinion from a
reputable insurance broker. The Authority shall deliver to the Trustee on the
Issuance Date and each anniversary thereafter a certificate of an insurance
agent stating that the insurance policies obtained by the Authority comply
with this covenant and the related applicable provisions of the Collateral
Documents.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture prohibits the Authority from being required to register as
an "investment company" (as that term is defined in the Investment Company
Act of 1940, as amended), or from otherwise becoming subject to regulation
under the Investment Company Act of 1940.
COLLATERAL DOCUMENTS
The Indenture provides that the Authority will not amend, waive or
modify, or take or refrain from taking any action that has the effect of
amending, waiving or modifying, any provision of the Collateral Documents,
the Management Agreement or the Note Purchase Agreement to the extent that
such amendment, waiver, modification or action could have an adverse effect
on the rights of the Trustee or the Holders; PROVIDED, that:
(i) the Note Collateral may be released or modified as expressly provided
in the Indenture and in the Collateral Documents;
(ii) the Construction Budget may be amended as expressly provided in the
Disbursement and Escrow Agreement;
(iii) the Indenture, the Management Agreement and any of the Collateral
Documents may be otherwise amended, waived or modified as set forth under the
caption "Amendment, Supplement and Waiver" in the Indenture;
(iv) the Note Purchase Agreement may be amended in accordance with its
terms, provided such amendments do not:
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(a) cause or permit any principal, interest or premium on the
Subordinated Notes to be paid or to become due and payable at any time
earlier than such would become paid or due and payable without such
amendment;
(b) amend any terms of the subordination of the Subordinated Notes;
or
(c) amend any provision included therein expressly for the benefit
of the Senior Notes; and
(v) the Management Agreement may be amended with the consent of the
NIGC; PROVIDED THAT such amendment does not adversely affect the economic
rights of the Holders of the Senior Notes.
FURTHER ASSURANCES
The Indenture provides that the Authority will do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register, any and
all such further acts, deeds, conveyances, security agreements, mortgages,
assignments, estoppel certificates, financing statements and continuations
thereof, termination statements, notices of assignment, transfers,
certificates, assurances and other instruments as may be required from time
to time in order (i) to carry out more effectively the purposes of the
Collateral Documents, (ii) to subject to the Liens created by any of the
Collateral Documents any of the properties, rights or interests required to
be encumbered thereby, (iii) to perfect and maintain the enforceability
validity, effectiveness and priority of any of the Collateral Documents and
the Liens intended to be created thereby, and (iv) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm to the Trustee any of
the rights granted or now or hereafter intended by the parties thereto to be
granted to the Trustee, the Holders of the Senior Notes or under any other
instrument executed in connection therewith or granted to the Authority under
the Collateral Documents or under any other instrument executed in connection
therewith.
REPORTS
Under the terms of the Indenture, notwithstanding that the Authority may
not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Authority will file with the SEC all information, documents
and reports specified in Section 13 or 15(d) of the Exchange Act.
Under the terms of the Indenture, the Authority has agreed to file with
the Trustee and provide Holders of Senior Notes, within 15 days after the
Authority files the same with the SEC, copies of its annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rule or regulation prescribe) which
the Authority would be required to file with the SEC pursuant to Section 13
or 15(d) of the Exchange Act. Notwithstanding that the Authority may not be
required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting pursuant to
rules and regulations promulgated by the SEC, the Indenture requires the
Authority to continue to file with the SEC and provide the Trustee and
Holders of Senior Notes with, without cost to each such holder:
(i) within 90 days after the end of each fiscal year, annual reports on
Form 10-K (or any successor or comparable form) containing the information
required to be contained therein (or required in such successor or comparable
form);
(ii) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 10-Q (or any successor or
comparable form); and
(iii) promptly from time to time after the occurrence of an event
required to be therein reported, such other reports on Form 8-K (or any
successor or comparable form) containing the information required to be
contained therein (or required in any successor or comparable form);
PROVIDED, HOWEVER, that the Authority shall not be so obligated to file such
reports with the SEC if the SEC does not permit such filings.
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The Authority has also agreed to include in such reports the anticipated
completion date of the Resort and, in the case of quarterly reports, the Cash
Flow Participation Interest paid, the Cash Flow Participation Interest
Accrual amount and Cash Flow with respect to the most recently ended fiscal
quarter of the Authority, and in the case of annual reports, the audited Cash
Flow Participation Interest paid, the Cash Flow Participation Interest
Accrual amount and audited Cash Flow for the most recently ended fiscal year
and for each of the Semi-annual Periods ending in such fiscal year. The
Authority will in all cases, without cost to each recipient, provide copies
of such information to the Holders of the Senior Notes and, if they are not
permitted to file such reports with the SEC, shall make available such
information to prospective purchasers and to securities analysts and
broker-dealers upon their request.
The Authority has also agreed to file with the Trustee and provide to
Holders of Senior Notes, within 15 days after it files them with the NIGC,
copies of all reports which the Authority is required to file with the NIGC
pursuant to 25 C.F.R. Part 514.
Not later than the date of filing any quarterly or annual report, the
Authority has agreed to deliver to the Trustee an Officers' Certificate
stating that each Restricted Payment made in the prior fiscal quarter was
permitted and setting forth the basis upon which the calculations required by
the covenant in the Indenture relating to "Restricted Payments" were
computed, which calculations may be based upon the Authority's latest
available financial statements.
SECURITY
The Series A Senior Notes are, and the Series B Senior Notes will be,
secured by a first lien on the Note Collateral (which also will secure the
Working Capital Financing) owned by the Authority, whether now owned or
hereafter acquired, subject to Permitted Liens, which include, without
limitation, all of the assets comprising the Resort (other than any assets
which if pledged, hypothecated or given as collateral security would require
the Trustee or a holder or beneficial holder of the Senior Notes to be
licensed, qualified or found suitable and other than certain assets to the
extent such assets are permitted to be financed by Indebtedness permitted to
be incurred pursuant to the covenant in the Indenture entitled "Limitation on
Incurrence of Indebtedness" and such Indebtedness is permitted to be secured
pursuant to the covenant entitled "Liens" pursuant to clause (ii), (iii),
(ix) or (xi) of the definition of "Permitted Liens").
So long as no Event of Default has occurred and be continuing, and
subject to certain terms and conditions in the Indenture and the Collateral
Documents, the Authority is entitled to use the Note Collateral in a manner
consistent with normal business practices. Upon the occurrence and during the
continuance of an Event of Default, the Trustee may sell the Note Collateral
or any part thereof in accordance with the terms of the Collateral Documents.
All funds distributed under the Collateral Documents and received by the
Trustee for the benefit of the Holders of the Senior Notes shall be
distributed by the Trustee in accordance with the provisions of the Indenture.
Under the terms of the Collateral Documents, the Trustee may determine
the circumstances and manner in which the Note Collateral shall be disposed
of, including, but not limited to, the determination of whether to release
all or any portion of the Note Collateral from the Liens created by the
Collateral Documents and whether to foreclose on the Note Collateral
following an Event of Default. Subject to certain additional provisions set
forth in the Indenture, the Note Collateral may be released from the Lien and
security interest created by the Indenture and the Collateral Documents at
any time or from time to time upon the request of the Authority pursuant to
an Officers' Certificate certifying that all terms for release and conditions
precedent under the Indenture and under any applicable Collateral Document
have been met and specifying
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(i) the identity of the Note Collateral to be released and
(ii) the provision of the Indenture which authorizes such release.
The Trustee shall release (at the sole cost and expense of the Authority):
(i) Note Collateral that is the subject of an Asset Sale or that is
sold, transferred or otherwise disposed of (other than any Asset Sale to the
Tribe or any Affiliate of the Tribe); PROVIDED, such transaction is or will
be in accordance with provisions of the Indenture or the applicable
Collateral Document, including, without limitation, the requirement that the
net proceeds from such transaction or Asset Sale are or will be applied in
accordance with the Indenture;
(ii) Note Collateral that is condemned, seized or taken by the power of
eminent domain or otherwise confiscated pursuant to an Event of Loss;
PROVIDED that the Net Loss Proceeds, if any, from such Event of Loss are or
will be applied in accordance with the covenant described above under "Event
of Loss";
(iii) Note Collateral which may be released with the consent of
Holders of Senior Notes pursuant to the amendment provisions of the Indenture;
(iv) all Note Collateral (except as provided in the discharge and
defeasance provisions of the Indenture and, in particular, the funds in the
trust fund described in such provisions and any funds in any accounts
established under the caption "Cash Funds Pledge") upon discharge or
defeasance of the Indenture in accordance with the discharge and defeasance
provisions thereof;
(v) all Note Collateral upon the payment in full of all obligations of
the Authority with respect to the Senior Notes;
(vi) any amounts in the Cash Maintenance Account, Interest and Excess
Cash Flow Account, Net Receipts Accounts or any other cash or Cash
Equivalents held as security for the Senior Notes may be released in
accordance with the Indenture, the Cash Collateral Accounts Pledge and
Security Agreement or any other relevant Collateral Document; and
(vii) Note Collateral under the Leasehold Mortgage may be released
in accordance with the terms thereof.
The Indenture provides that the Net Proceeds of all Asset Sales and the
Net Loss Proceeds of all Events of Loss of assets constituting Note
Collateral (other than Permitted Investments), as well as Excess Proceeds, be
promptly and without any commingling deposited with the Trustee in a Cash
Collateral Account subject to a lien in favor of the Trustee for the benefit
of the Holders of the Senior Notes unless and until applied as permitted
under the covenant described under "Asset Sales" or "Events of Loss," as the
case may be. The Trustee shall release to the Authority any Excess Proceeds
or Excess Loss Proceeds, as the case may be, that remain after making an
offer to purchase the Senior Notes in compliance with the covenant described
under "Asset Sales" or "Events of Loss," as the case may be. Amounts so paid
to the Trustee shall be invested or released in accordance with the
provisions of the Indenture.
DISBURSEMENT AND ESCROW AGREEMENT
Pursuant to a Disbursement and Escrow Agreement entered into between the
Authority, the Trustee, First Fidelity Bank, n/k/a First Union Bank of
Connecticut (the "Escrow Agent"), the Manager, Sun International and Chicago
Title Insurance Company (the "Disbursement Agent"), the Authority has placed
all of the net proceeds of the Offering together with the net proceeds from
the sale of the Subordinated Notes (to the extent provided below) into the
Escrow Account, to be held in escrow and invested in cash or Cash Equivalents
by the Escrow Agent until needed from time to time to fund the construction
of the Resort pursuant to the terms of the Disbursement and Escrow Agreement.
All such funds will be held in the Escrow Account until disbursed in
accordance with a detailed line-item Construction Budget. To the extent any
net proceeds of the sale of Subordinated Notes remain subsequent to the
acquisition of the land on which the Resort will be constructed, such net
proceeds will be placed in the Escrow Account. Subject to certain exceptions
set forth in the Disbursement and Escrow Agreement, the Disbursement Agent
will authorize the disbursement of funds from the Escrow Account only upon
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the satisfaction of the disbursement conditions set forth in the Disbursement
and Escrow Agreement. Such conditions generally include that the Manager, on
behalf of the Authority, deliver a certificate certifying as to, among other
things, the application of the funds to be disbursed, the conformity of
construction undertaken to date with the plans and specifications, the
expectation that the Resort will be Operating by October 31, 1996, lien
releases and title insurance policies assuming that the Resort continues to
be subject only to Permitted Liens, if applicable, the accuracy of the
Construction Budget, the sufficiency of remaining funds to complete the
Resort within each line item allocation, compliance with line item budget
allocations taking into account allocations for contingencies and the absence
of an Event of Default under the Indenture and the satisfaction of certain
other conditions to disbursement set forth in the Disbursement and Escrow
Agreement. Such other conditions generally include, among other things, the
delivery of certificates by the project manager and the project architects, a
review by an independent third party of prior disbursements, an absence of an
event of default under the Disbursement and Escrow Agreement and the delivery
of certain other documents to the Disbursement Agent. In addition, prior to
any disbursements from the Escrow Account subsequent to the initial
disbursement, certain additional disbursement conditions will be required to
be satisfied by the Authority. Such additional conditions generally include
that the Disbursement Agent receive a title commitment or other satisfactory
assurances with respect to the condition of title to the Resort and that the
Disbursement Agent receive certain information relating to the contractors
who have worked on the Resort and lien releases from such contractors, if
appropriate.
The Disbursement and Escrow Agreement also provides that the
Construction Budget may be amended from time to time under certain
circumstances set forth therein. The Construction Budget may be amended only
upon the satisfaction of certain conditions set forth in the Disbursement and
Escrow Agreement. Such conditions generally include that the Authority
deliver a certificate certifying as to the reasonable necessity of the
amendment; the availability of funding to pay costs represented by any line
item increase; the continued reasonableness of the Construction Budget;
conformity with plans and specifications; the expectation that the Resort
will be Operating by October 31, 1996; the sufficiency of remaining funds to
complete the Resort within the line item allocations, including allocations
for contingencies; the absence of an Event of Default under the Indenture;
and certain other conditions if the unallocated reserve is zero. In addition,
prior to any amendment to the Construction Budget, certain additional
conditions will be required to be satisfied by the Authority. Such additional
conditions generally include that the Authority submit the proposed amendment
in writing and identify with particularity the availability of funds to pay
for any increased line item and the delivery of certificates to the
Disbursement Agent by the project manager and the project architects. In
addition, the Disbursement and Escrow Agreement will provide that
construction line items may only be reduced upon evidence of the occurrence
of certain savings and that unallocated reserves may be reduced by allocation
to other line items.
In addition, the Disbursement and Escrow Agreement provides that if any
funds remain in the Escrow Account on the date the Resort is Operating (which
shall have occurred on or before October 31, 1996) and the Resort shall have
generated at least $10 million of Cash Flow in one fiscal quarter, the
Disbursement Agent shall, upon the direction of the Authority, direct the
Escrow Agent, subject to certain exceptions set forth in the Disbursement and
Escrow Agreement, to disburse all remaining funds, if any, in the Escrow
Account to any account or accounts specified by the Authority.
The Disbursement and Escrow Agreement also provides that an event of
default shall exist thereunder if any of the following shall occur:
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(i) an Event of Default occurs and is continuing under the Indenture;
(ii) the project manager or project architect is unable to deliver the
certificates required to be delivered pursuant to the Disbursement and Escrow
Agreement and such failure continues for a period of 30 days;
(iii) the independent third party reviewing prior disbursements
reports an exception or such independent third party fails to deliver a
report within a certain amount of days after each disbursement request and
such failure continues for a period of 30 days;
(iv) any representation, warranty, certification or statement by the
Authority, project manager or project architect in the Disbursement and
Escrow Agreement or any certificate required to be delivered therein is
untrue in any material respect on the date given or made and such
untruthfulness continues for a period of 30 days;
(v) if at any time the amount remaining in the Escrow Account plus
certain other funds is less than the amount required in the Construction
Budget to cause the Resort to be Operating on or before October 31, 1996 and
such deficiency continues for a period of 30 days; and
(vi) the Authority fails to deliver certain other documents required by
the Disbursement and Escrow Agreement and such failure continues for a period
of 30 days.
Subject to certain exceptions set forth in the Disbursement and Escrow
Agreement and an amount up to $10.0 million to preserve the collateral and to
fund minimum operating expenses, if an event of default exists thereunder,
the Disbursement Agent is not permitted to authorize the disbursement of
funds from the Escrow Account.
The Authority will be deemed to have expended all remaining proceeds
from the Equity Contribution prior to expending any proceeds from the
Offering. All funds in the Escrow Account are pledged as security for the
repayment of the Senior Notes and under certain circumstances the funds in
the Escrow Account will be used to offer to redeem a portion of the Senior
Notes.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) the Authority defaults in payment when due and payable, upon
maturity, redemption or otherwise, of principal or premium, if any, on the
Senior Notes;
(ii) the Authority defaults for 30 days or more in the payment when due
of interest (including Cash Flow Participation Interest) and Liquidated
Damages, if any on the Senior Notes; PROVIDED, that payments of Cash Flow
Participation Interest that are permitted to be deferred as provided in the
Senior Notes shall not become due for this purpose until such payment is
required to be made pursuant to the terms of the Senior Notes;
(iii) failure by the Authority to comply, within the applicable cure
periods, if any, with the covenants and provisions described under the
captions "Offer to Repurchase Upon Change of Control," "Excess Cash Purchase
Offer," "Restricted Payments," "Asset Sales," "Events of Loss," "Use of
Proceeds," "Limitations on Incurrence of Indebtedness," "Governmental
Existence" or "Liquidation or Dissolution";
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(iv) the Authority or the Tribe (with respect to its obligations
hereunder) fails to observe or perform any other covenant, representation,
warranty or other agreement in the Indenture, the Notes or the Collateral
Documents for 60 days after written notice to the Authority by the Trustee or
to the Authority and the Trustee from Holders of at least 25% in principal
amount of the Senior Notes then outstanding;
(v) the Lease ceases to be in full force and effect or the Authority
defaults in the performance of any covenant set forth in the Lease, the
Leasehold Mortgage or any of the other Collateral Documents (which default is
not waived or cured);
(vi) a default occurs under any mortgage, indenture or instrument under
which there is issued or by which there is secured or evidenced any
Indebtedness for money borrowed by the Authority or the payment of which is
guaranteed by the Authority, whether such Indebtedness or guarantee now
exists, or is created after the Issuance Date, which default:
(a) is caused by a failure to pay when due principal of or premium,
if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness (a "Payment Cross-Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity or would constitute a default in the payment of such
issue of Indebtedness at final maturity of such issue and, in each case,
the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness under which a Payment Cross-Default
then exists or with respect to which the maturity thereof has been so
accelerated or which has not been paid at maturity, aggregates $7.5
million or more;
(vii) the entry of final judgments against the Authority aggregating
in excess of $7.5 million, which final judgments remain unpaid, undischarged
and unstayed for a period of more than 60 days;
(viii) breach by the Authority of any representation or warranty set
forth in the Lease or the Leasehold Mortgage or any of the Collateral
Documents, or the repudiation by the Authority of its obligations under, or
any judgment or decree by a court or governmental agency of competent
jurisdiction declaring the unenforceability of, the Lease or any of the
Collateral Documents for any reason that would materially impair the benefits
to the Trustee or the Holders of the Senior Notes thereunder;
(ix) certain events of bankruptcy or insolvency with respect to the
Authority;
(x) revocation, termination, suspension or other cessation of
effectiveness of any Gaming License which results in the cessation or
suspension of gaming operations for a period of more than 90 consecutive days
at the Resort;
(xi) cessation of gaming operations for a period of more than 90
consecutive days at the Resort (other than as a result of a casualty loss)
after the Resort becomes Operating; or
(xii) cessation of gaming operations for a period of more than 180
consecutive days as a result of a casualty loss after the Resort becomes
Operating except if the Authority is diligently pursuing reconstruction and
opening of the Resort.
The Trustee shall mail to the Holders of the Senior Notes notice of any
Default or Event of Default known to the Trustee within 90 days after such
Default or Event of Default occurs.
If any Event of Default (other than by reason of bankruptcy or
insolvency) occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the then outstanding Senior Notes may declare the
principal, premium, if any, interest (including all Cash Flow Participation
Interest accrued or deferred), Liquidated Damages and any other monetary
obligations on all the Senior Notes to be due and payable immediately.
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Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, with respect to the
Authority, all the principal, premium, if any, interest (including all Cash
Flow Participation Interest accrued or deferred) and other monetary
obligations on all outstanding Senior Notes will become due and payable
without further action or notice. Holders of the Senior Notes may not enforce
the Indenture or the Senior Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Senior Notes may direct the Trustee in its exercise of
any trust or power, including the exercise of any remedy under the Collateral
Documents. The Trustee may withhold from Holders of Senior Notes notice of
any continuing Default or Event of Default (except a Default or Event
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. In addition, the Trustee shall have
no obligation to accelerate the Senior Notes if in the best judgment of the
Trustee acceleration is not in the best interest of the Holders of the Senior
Notes.
In the case of any Event of Default occurring on or after November 15,
1999 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Authority with the intention of avoiding payment of the
premium that the Authority would have had to pay if the Authority then had
elected to redeem the Senior Notes pursuant to the optional redemption
provisions of the Indenture, then, upon acceleration of the Senior Notes, an
equivalent premium shall also become and be immediately due and payable to
the extent permitted by law. If an Event of Default occurs prior to November
15, 1999, by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Authority with the intention of avoiding the
prohibition on redemption of the Senior Notes prior to such date, then upon
acceleration of the Senior Notes, an additional premium shall also become and
be immediately due and payable in an amount, for each of the years beginning
on November 15th of the years set forth below, as set forth below (expressed
as a percentage of the principal amount that would otherwise be due but for
the provisions of this sentence):
YEAR %
---- -----
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 113.5
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 113.5
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 113.5
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 112.0
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 110.0
The Holders of a majority in aggregate principal amount of the Senior
Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Senior Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest (including Cash Flow Participation
Interest) on, premium, if any, or the principal of the Senior Notes.
Specific rights and remedies of the Trustee under the Collateral
Documents include the right of the Trustee or the appropriate Person under
federal or state law to sell the Note Collateral and to apply the net
proceeds to the Indebtedness evidenced by the Senior Notes in accordance with
the terms of the Indenture and the Collateral Documents. The Collateral
Documents will generally provide for the application of the internal laws of
the Tribe and/or the State of Connecticut, while the Indenture and the Senior
Notes will provide, with certain exceptions, for the application of the
internal laws of the State of New York. There is no certainty regarding
whether New York or Mohegan tribal law would be applied by any court with
respect to the enforcement of remedies under the Senior Notes, the Indenture,
or the Collateral Documents.
The right of the Trustee to realize upon and sell the Note Collateral is
likely to be significantly impaired by applicable bankruptcy and insolvency
laws if a proceeding under such laws were commenced in respect of the
Authority or any Guarantor. Such laws may impose limitations or prohibitions
on the exercise of rights and remedies under the Collateral Documents for a
substantial or indefinite period of time.
The Indenture provides that, following an Event of Default that permits
the taking of possession of the Resort by the Trustee on the appointment of a
receiver pursuant to the Leasehold Mortgage (or after such action is taken),
the Trustee shall be authorized to recommend that the Authority retain one or
more experienced operators of casinos to manage the casino located at the
Resort on behalf of the Holders of the Senior Notes; PROVIDED, HOWEVER, THAT
any such operator shall have all necessary legal qualifications (including
without limitation all Gaming Licenses and approvals of the NIGC and the
Tribe to manage the casino located at the Resort).
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Due to restrictions upon gaming activities on tribal lands, however, the
Trustee may incur delays or possibly frustration in its effort to operate or
to sell all or a portion of the Note Collateral. Operators of gaming
facilities on tribal lands are required to be licensed and are required by
applicable Gaming Regulatory Authorities to file applications, be
investigated and be found suitable. Only the Tribe may operate gaming
activities. Such requirements for governmental approval may delay or preclude
a sale of the Note Collateral to a potential buyer at a foreclosure sale or
sales. This may effectively limit the number of potential bidders and may
delay such sales, either of which could adversely affect the sale price of
the Note Collateral. Moreover, the gaming industry could become subject to
different or additional regulations during the term of the Senior Notes,
which could further adversely affect the practical rights and remedies that
the Trustee would have upon the occurrence of an Event of Default.
The Authority is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Authority is required,
within five Business Days, upon becoming aware of any Default or Event of
Default or any default under any document, instrument or agreement
representing Indebtedness of the Authority, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND MEMBERS
Neither the Tribe nor any officer or office holder, employee, agent,
representative, or member of the Authority or the Tribe, as such, shall have
any liability for any obligations of the Authority under the Senior Notes,
the Indenture or the Collateral Documents, as applicable, or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Senior Note waives and releases all such
liability, which waivers and releases are part of the consideration for
issuance of the Senior Notes. To the extent such waivers and releases purport
to waive liabilities under the federal securities laws, however, they are
void under the Securities Act.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The obligations of the Authority under the Indenture (other than certain
obligations) will terminate and the Note Collateral will be released upon
payment in full of all of the Senior Notes. The Authority may, at its option
and at any time, elect to have all of its obligations discharged with respect
to the outstanding Senior Notes ("Legal Defeasance") and cure all then
existing Events of Default except for:
(i) the rights of Holders of outstanding Senior Notes to receive
payments in respect of the principal of, premium, if any, and interest
(including Cash Flow Participation Interest, if any) on such Senior Notes
when such payments are due;
(ii) the Authority's obligations with respect to the Senior Notes
concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an
office or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Authority's obligations in connection therewith; and
(iv) the Legal and Covenant Defeasance provisions of the Indenture.
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In addition, the Authority may, at its option and at any time, elect to
have the obligations of the Authority released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Senior Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Senior Notes. In addition, the Note Collateral will be
released upon Covenant Defeasance or Legal Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Authority must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Senior Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants as evidenced by a certificate delivered to the
Trustee, to pay the principal of, premium, if any, and interest (including
the maximum amount payable as Cash Flow Participation Interest, if any) due
on the outstanding Senior Notes on the stated maturity date or on the
applicable redemption date, as the case may be, of such principal, premium,
if any, or interest (including Cash Flow Participation Interest, if any) on
the outstanding Senior Notes on the stated maturity or on the applicable
redemption date, as the case may be and the Authority must specify whether
the Senior Notes are being defeased to maturity or to a particular redemption
date;
(ii) in the case of Legal Defeasance, the Authority shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions
and exclusions:
(a) the Authority has received from, or there has been published by,
the United States Internal Revenue Service a ruling; or
(b) since the Issuance Date of the Indenture, there has been a
change in the applicable U.S. federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel in the United
States shall confirm that, subject to customary assumptions and
exclusions, the Holders of the outstanding Senior Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Legal Defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Authority shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the outstanding Senior Notes will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing with respect to certain Events of Default on the date of such
deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Authority is a party or
by which the Authority is bound;
(vi) the Authority shall have delivered to the Trustee an opinion of
counsel to the effect that, after the 91st day following the deposit and as
of the date of such opinion and subject to customary assumptions and
exclusions following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally under any applicable United
States, law;
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(vii) the Authority shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Authority with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Authority or others; and
(viii) the Authority shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion of
counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the
Indenture, the Senior Notes or the Collateral Documents may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the Senior Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for Senior
Notes), provided that any required governmental approval is obtained,
including that of the NIGC and subject to certain provisions in the
Indenture, any existing Default or Event of Default (other than a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest (including Cash Flow Participation Interest, if any) on the Senior
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of the Indenture or the Senior
Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Senior Notes (including consents
obtained in connection with a tender offer or exchange offer for Senior
Notes).
Without the consent of each holder of Senior Notes affected, an
amendment or waiver may not (with respect to any Senior Notes held by a
non-consenting holder of Senior Notes):
(i) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Senior Note or alter or waive the provisions with respect to the redemption of
the Senior Notes (provided, however, that the term "redemption" does not apply
to any provision with respect to any Repurchase Offer);
(iii) reduce the rate of or change the time for payment of interest,
(including Cash Flow Participation Interest) and Liquidated Damages, on any
Senior Note;
(iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest (including Cash Flow Participation Interest and
Liquidated Damages, if any) on the Senior Notes (except a rescission of
acceleration of the Senior Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Senior Notes and a waiver
of the payment default that resulted from such acceleration);
(v) make any Senior Note payable in money other than that stated in
the Senior Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past monetary Defaults or the rights of Holders of Senior Notes to
receive payments of principal of or premium, if any, or interest (including
Cash Flow Participation Interest), if any on the Senior Notes;
(vii) release all or substantially all of the Note Collateral from
the Lien of the Indenture or the Collateral Documents; or
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(viii) make any change in the provisions with respect to "Waiver of
Past Defaults" or "Rights of Holders of Senior Notes to Receive Payment" or
the foregoing amendment and waiver provisions.
Without the consent of Holders of at least 662.3% of the outstanding
principal amount of the Senior Notes, the Authority may not amend, alter or
waive the provisions with respect to "Offer to Repurchase Upon Change of
Control."
Notwithstanding the foregoing, without the consent of any Holder of
Senior Notes, and provided that any required governmental approval, including
that of the NIGC, is obtained, the Authority and the Trustee together may
amend or supplement the Indenture, the Senior Notes, the Management Agreement
or the Collateral Documents to:
(i) cure any ambiguity, defect or inconsistency;
(ii) provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(iii) comply with the covenants of the Authority or the Tribe in the
Indenture;
(iv) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes, or that does not adversely
affect the legal rights under the Indenture of any such holder;
(v) comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act; or
(vi) enter into additional or supplemental Collateral Documents.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Authority, to obtain payment of claims in
certain cases, or to realize on certain leased property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy, available to the
Trustee, subject to certain exceptions. The Indenture provides that in case
an Event of Default shall occur (which shall not be cured), the Trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent person in the conduct of his own affairs. Subject to such provisions,
the Trustee is under no obligation to exercise any of its rights or powers
under the Indenture at the request of any holder of Senior Notes, unless such
holder shall have offered to the Trustee security and indemnity satisfactory
to it against any loss, liability or expense.
GOVERNING LAW
The Indenture and the Senior Notes are subject to certain exceptions,
governed by and construed in accordance with the internal laws of the State
of New York, without regard to the choice of law rules thereof. The
Collateral Documents are governed, subject to certain exceptions, by the laws
of the Tribe.
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ADDITIONAL INFORMATION
Any Holder of the Senior Notes may obtain a copy of the Indenture and
the Collateral Documents without charge by writing to the Authority at 67
Sandy Desert Road, Uncasville, Connecticut 06382, Attention: Roland Harris
and Carlisle Fowler, Business Board Members, and Chief Ralph Sturges.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person
merged with or into such specified Person, including Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or
into such specified Person and (ii) Indebtedness encumbering any asset
acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or
otherwise; PROVIDED, HOWEVER, that for purposes of the covenant entitled
"Transactions with Affiliates," beneficial ownership of 10% or more of the
voting securities of a Person shall be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET SALE" means the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the
Authority (each referred to in this definition as a "disposition") other than
(i) a disposition of inventory or other goods held for sale or disposition in
the ordinary course of business, (ii) any disposition that is a Restricted
Payment permitted under the covenant entitled "Restricted Payments" or that
is a dividend or distribution permitted under the covenant entitled
"Restricted Payments" or any Investment that is not prohibited thereunder or
any disposition of cash or Cash Equivalents, (iii) any single disposition, or
related series of dispositions, of assets with an aggregate fair market value
of less than $500,000, (iv) any Event of Loss and (v) any lease or sublease
permitted as described under the covenant entitled "Restrictions on Leasing
and Dedication of Leased Property." It is acknowledged that the Authority is
prohibited from making an Asset Sale of Key Project Assets.
"AUTHORITY" means the Mohegan Tribal Gaming Authority together with any
subdivision, agency, subunit or Subsidiary thereof and any successor and
assignee thereto.
"BOARD OF DIRECTORS" means, as the context requires, the Management
Board of the Authority or any authorized committee of the Management Board of
the Authority.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability
on the balance sheet in accordance with GAAP.
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"CAPITAL STOCK" means with respect to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated)
in the profits or losses of such Person, including, (i) if such Person is a
partnership, partnership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, such
partnership or (ii) with respect to the Authority, any interest,
participation in the profits and losses of the Authority or its business
other than fees paid to the Manager under the Management Agreement, amounts
paid to the state of Connecticut under the Compact or the memorandum of
understanding thereunder, Cash Flow Participation Interest on the Senior
Notes, or any fees for goods and services provided to the Authority in the
ordinary course of business and which is measured by revenues or income.
"CASH AVAILABLE FOR CASH MAINTENANCE ACCOUNT" means, with respect to any
period, the Cash Flow of the Authority for such period less (i) Interest
Expense of the Authority for such period (ii) principal payments on
Indebtedness of the Authority made in respect of such period (other than
pursuant to an Excess Cash Purchase Offer) and (iii) Minimum Priority
Payments to the Tribe for such period; Cash Available for Cash Maintenance
Account shall be calculated without any deduction for deposits into the Cash
Maintenance Account or deposits in respect of Excess Cash Flow into the
Interest and Excess Cash Flow Account.
"CASH COLLATERAL ACCOUNTS PLEDGE AND SECURITY AGREEMENT" means the Cash
Collateral Accounts Pledge Agreement among the Trustee, the Authority and the
Manager dated as of the Issuance Date.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
commercial bank having capital and surplus in excess of $300 million, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered into with
any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group and in
each case maturing within one year after the date of acquisition and (vi)
investment funds investing solely in securities of the types described in
clauses (ii) - (v) above.
"CASH FLOW" means, with respect to any Person for any period, the Net
Revenue of such Person for such period, plus (a) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset
Sale (to the extent such losses were deducted in computing such Net Revenue),
plus (b) provision for taxes based on income or profits of such Person for
such period, to the extent such provision for taxes was used in computing
such Net Revenue, plus (c) Interest Expense of such Person for such period,
plus (d) Depreciation and Amortization Expense of such Person for such period
to the extent such depreciation and amortization were deducted in computing
such Net Revenue, in each case, as determined in accordance with GAAP.
"CASH FLOW PARTICIPATION INTEREST" means as of any payment date, Cash
Flow Participation Interest on the Senior Notes accrued through the Accrual
Period last ended (including any Accrual Period that ends on such payment
date) and any Cash Flow Participation Interest previously accrued and the
payment of which has been permitted to be deferred.
"CASH MAINTENANCE ACCOUNT" means the cash collateral account required to
be established by the covenant entitled "Mandatory Cash Maintenance Account"
and the provision entitled "Cash Funds Pledge."
"CHANGE OF CONTROL" means the occurrence of any of the following: (i)
the Authority ceases to be a wholly-owned unit, instrumentality or
subdivision of the government of the Tribe, (ii) the Authority ceases to have
the exclusive legal right to operate gaming operations of the Tribe, (iii)
the Authority fails to retain in full force and effect at all times all
material governmental consents, permits or legal rights necessary for the
operation of the Resort and such failure continues for a period of 90
consecutive days, (iv) TCA or any other entity in which Sun International
owns, directly or indirectly, at least 50% of the Capital Stock ceases to be
the manager of the Resort or fails to hold any material governmental consent
or permit required to manage the Resort and such failure continues for a
period of 90 consecutive days or (v) Sun International fails to own, directly
or indirectly, at least 50% of the Capital Stock of the Manager.
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"COLLATERAL AGENT" means any person appointed by the Trustee as a
collateral agent hereunder.
"COLLATERAL DOCUMENTS" means, collectively, the Leasehold Mortgage, Cash
Collateral Accounts Pledge and Security Agreement, Disbursement and Escrow
Agreement, Secured Completion Guarantee or any other agreements, instruments,
financing statements or other documents that evidence, set forth or limit the
Lien of the Trustee in the Note Collateral.
"COMMENCEMENT DATE" means the earlier of (i) October 31, 1996 and (ii)
the first day that the Resort becomes Operating.
"COMPACT" means the tribal-state Compact entered into between the Tribe
and the State of Connecticut pursuant to the Indian Gaming Regulatory Act of
1988, PL 100-497, 25 U.S.C. 2701 ET SEQ. as the same may, from time to time,
be amended, or such other Compact as may be substituted therefor.
"COMPLETED" means, with respect to the Resort, the first time that (i)
all Liens (other than Permitted Liens or Liens which relate to Disputed
Amounts (as defined in the Secured Completion Guarantee) guaranteed by the
Guarantor (as defined in the Secured Completion Guarantee) under Section 2.5
of the Secured Completion Guarantee) relating to the construction of the
Resort have been paid, (ii) the general contractor and the project architect
for the Resort, or an independent construction expert appointed by the
Guarantor and acceptable to the Trustee, shall have delivered a certificate
to the Trustee certifying that the Resort is complete in all material
respects in accordance with the Plans therefor and in compliance with all
applicable laws, ordinances and regulations (including gaming laws,
ordinances and the Compact requirements) with respect to the physical
structure, health and safety, environmental and hazardous materials, fire,
equipment, security and physical operating (gaming and other) requirements of
the Resort, and (iii) the Resort is in a condition (including installation of
furnishings, fixtures and equipment sufficient for the Minimum Facilities and
provision of adequate initial operating capital including all operating
supplies, sufficient coin for the slot machines, sufficient operating cash
for the other games and trained employees (or sufficient funds to hire and
train such employees) so that the Resort is fit to receive guests in the
ordinary course of business.
"CONSTRUCTION BUDGET" means itemized schedules setting forth on a line
item basis all of the costs (including financing costs) estimated to be
incurred in connection with the financing, design, development, construction,
equipping and opening of the Resort, as such schedules are delivered to the
Disbursement and Escrow Agents as of the Issuance Date and as amended from
time to time in accordance with the Disbursement and Escrow Agreement.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DEFERRED SUBORDINATED INTEREST" means any interest on Subordinated
Indebtedness that is not currently payable in cash or that is not permitted
to be paid in cash under the governing agreements, including any amortization
of original issue discount.
"DEPRECIATION AND AMORTIZATION EXPENSE" means with respect to any Person
for any period, the total amount of depreciation and amortization expense and
other noncash charges (excluding any noncash item that represents an accrual,
reserve or amortization of a cash expenditure for a future period and
excluding non-cash Interest Expense) of such Person for such period as
defined in accordance with GAAP.
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"DEVELOPMENT AND CONSTRUCTION AGREEMENT" means the Amended and Restated
Gaming Facility Development and Construction Agreement between the Tribe and
the Manager, substantially in the form delivered to the Trustee on the
Issuance Date.
"DISBURSEMENT AND ESCROW AGREEMENT" means the Disbursement and Escrow
Agreement among the Authority, the Trustee, First Fidelity Bank (n/k/a First
Union Bank of Connecticut), as Escrow Agent, the Manager, Sun International
and Chicago Title Insurance Company, as Disbursement Agent, substantially in
the form delivered to the Trustee on the Issuance Date. See "Material
Agreements--Disbursement and Escrow Agreement."
"DOLLARS" and "$" mean lawful money of the United States of America.
"ELIGIBLE INSTITUTION" means (i) the Trustee, (ii) an Affiliate of the
Trustee or (iii) a commercial banking institution that is federally chartered
or organized under the laws of the State of Connecticut, is not Affiliated
with or chartered by the Tribe, has combined capital and surplus in excess of
$500 million, conducts banking operations in the State of Connecticut and
whose debt is rated "A" (or higher) according to Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"ESCROW ACCOUNT" shall have the meaning set forth in the Disbursement
and Escrow Agreement.
"ESCROW AGENT" shall have the meaning set forth in the Disbursement and
Escrow Agreement.
"EVENT OF LOSS" means, with respect to any property or asset (tangible
or intangible, real or personal), any of the following: (i) any loss,
destruction or damage of such property or asset; (ii) any institution of any
proceedings for the condemnation or seizure of such property or asset or for
the exercise of any right of eminent domain; (iii) any actual condemnation,
seizure or taking by exercise of the power of eminent domain or otherwise of
such property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or (iv) any settlement in
lieu of clause (ii) or (iii) above.
"EXCESS CASH FLOW" means, with respect to any period, an amount equal to
the Cash Flow of the Authority for such period, less (i) all Management Fees
accrued for such period (whether or not distributed), (ii) principal payments
on Indebtedness of the Authority during such period (other than principal
payments (a) pursuant to an Excess Cash Purchase Offer, (b) which are funded
from the proceeds of Indebtedness permitted to be incurred under the
Indenture or (c) on the Working Capital Financing that do not permanently
reduce indebtedness under the Working Capital Financing), (iii) the
Authority's share of deposits into the Replacement Reserve Account (but not
more than $1.8 million per fiscal year) commencing with the first full fiscal
year after the commencement of operations of the Resort, (iv) all other
capital expenditures not funded from the Replacement Reserve Account (but not
more than $5.0 million per fiscal year), (v) any amounts set aside in the
Cash Maintenance Account for such fiscal period, (vi) Interest Expense of the
Authority for such period and (vii) taxes, if any, payable to the federal
government or the State of Connecticut.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"EXCHANGE OFFER" means the registration by the Authority under the
Securities Act of the Series B Senior Notes pursuant to a registration
statement pursuant to which the Authority is obligated to offer the holders
of all outstanding Transfer Restricted Securities the opportunity to exchange
all such outstanding Transfer Restricted Securities held by such holders for
Series B Senior Notes in an aggregate principal amount equal to the aggregate
principal amount of the Transfer Restricted Securities tendered in such
exchange offer by such holders.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of the Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period. In the event that the Authority
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings) subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness as if the same had occurred at the beginning of
the applicable four-quarter period. For purposes of making the computation
referred to above, acquisitions, dispositions and discontinued operations (as
determined in accordance with GAAP) that have been made by the Authority,
including all mergers, consolidations and dispositions, during the
four-quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be calculated on a pro forma basis
assuming that all such acquisitions, dispositions, discontinued operations,
mergers, consolidations (and the reduction of any associated fixed charge
obligations resulting therefrom) had occurred on the first day of the
four-quarter reference period.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (i) the Interest Expense of such Person for such period and (ii) the
Interest Expense of such Person that was capitalized during such period, and
(iii) to the extent not included above, any Interest Expense on Indebtedness
of another Person that is Guaranteed by the referent Person or secured by a
lien on assets of the referent Person (whether or not such Guarantee or lien
is called upon).
"FIXED INTEREST" means, interest at the rate of 13 1/2% per annum of the
principal amount of the Senior Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession.
"GAMING" means any and all activities defined as Class II or Class III
Gaming under IGRA or authorized under the Compact.
"GAMING DISPUTES COURT" means the Gaming Disputes Court of the Tribe, as
established pursuant to Article XIII, Section 2 of the Tribe's Constitution.
"GAMING ENTERPRISE" means any commercial enterprise of the Authority,
including, without limitation, any hotel or hotel resort property, any gaming
operation, any restaurant or other entertainment or other commercial
enterprise.
"GAMING FACILITY MANAGEMENT AGREEMENT" means that certain Amended and
Restated Gaming Facility Management Agreement between the Tribe and the
Manager dated August 30, 1995 which shall be assigned by the Tribe to the
Authority on or before the Issuance Date. See "Material
Agreements--Management Agreement."
"GAMING LICENSE" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct gaming activities of the
Tribe or the Authority including without limitation, all such licenses
granted under the Tribal Gaming Ordinance, and the regulations promulgated
pursuant thereto, and other applicable federal, state, foreign or local laws.
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"GAMING REGULATORY AUTHORITY" means any agency, authority, board,
bureau, commission, department, office or instrumentality of any nature
whatsoever of the United States or foreign government, any state, province or
any city or other political subdivision, whether now or hereafter existing,
or any officer or official thereof, including without limitation, any
division of the Authority or any other agency with authority to regulate any
gaming operation (or proposed gaming operation) owned, managed or operated by
the Tribe or the Authority.
"GOVERNMENT SECURITIES" means securities that are (i) direct obligations
of the United States of America for the timely payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such Government Security or a specific payment of principal of or
interest on any such Government Security held by such custodian for the
account of the holder of such depository receipt; PROVIDED, HOWEVER, that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the Government
Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
"GROSS REVENUES" means all revenues of any nature derived directly or
indirectly by the Authority, including without limitation, gaming revenues,
interest earned on bank accounts, food and beverage sales and other rental or
receipts from lessees, sublessees, licensees and concessionaires (but not the
gross receipts of such lessees, sublessees, licensees or concessionaires) and
revenue recorded for promotional allowances, determined in accordance with
GAAP consistently applied.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"HOLDER" means a Person in whose name a Senior Note is registered.
"IGRA" means the Indian Gaming Regulatory Act of 1988, PL100-497, U.S.C.
2701 ET SEQ. as same may, from time to time, be amended.
"INDEBTEDNESS" means, with respect to any Person, (i) any indebtedness
of such Person, whether or not contingent (a) in respect of borrowed money,
including accrued and unpaid Cash Flow Participation Interest, (b) evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof), (c) representing the balance
deferred and unpaid of the purchase price of any property (including Capital
Lease Obligations), except any such balance that constitutes an accrued
expense or trade payable, or (d) representing any Hedging Obligations, if and
to the extent any of the foregoing indebtedness (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, (ii) to the extent not
otherwise included, any obligation by such Person to be liable for, or to
pay, as obligor, guarantor or otherwise, on the Indebtedness of another
Person (other than by endorsement of negotiable instruments for collection in
the ordinary course of business) and (iii) to the extent not otherwise
included, Indebtedness of another Person secured by a Lien on any asset of
such Person (whether or not such Indebtedness is assumed by such Person).
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"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Management Board, (i) qualified to perform the task for which
it has been engaged and (ii) disinterested and independent with respect to
the Authority and each Affiliate of the Authority.
"INITIAL PERIOD" means the period, if any, beginning on the Commencement
Date and ending on the day prior to the first day that the Resort becomes
Operating.
"INTEREST AND EXCESS CASH FLOW ACCOUNT" means the Interest and Excess
Cash Flow Account established under the covenant entitled "Interest and
Excess Cash Flow Account" and the provision entitled "Cash Funds Pledge."
"INTEREST EXPENSE" means, with respect to any period, the sum of (i)
interest expense of such Person for such period, whether paid or accrued, to
the extent such expense was deducted in computing Net Revenue (including,
without limitation, Cash Flow Participation Interest on the Senior Notes,
amortization of original issue discount and deferred financing fees, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of Capital Lease Obligations, and net
payments (if any) pursuant to Hedging Obligations, excluding amortization of
deferred financing fees), (ii) capitalized interest of such Person for such
period, whether paid or accrued, to the extent such expense was deducted in
computing Net Revenue and (iii) commissions, discounts and other fees and
charges paid or accrued with respect to letters of credit and bankers'
acceptance financing.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans
(including Guarantees), advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"ISSUANCE DATE" means the closing date for the sale and original
issuance of the Series A Senior Notes.
"KEY PROJECT ASSETS" means (i) the Lease and any real property or
interest in real property held in trust for the Tribe by the United States,
(ii) any improvements to the leasehold estate under the lease or such real
property and (iii) any business records of the Authority or the Tribe.
"LEASE" means the Land Lease between the Tribe and the Authority,
substantially in the form delivered to the Trustee on the Issuance Date, as
the same may be amended in accordance with the terms thereof and of the
Indenture. See "Material Agreements--Land Lease."
"LEASEHOLD MORTGAGE" means that certain Open-End Construction-Permanent
Leasehold Mortgage Deed, Assignment of Leases and Rents and Security
Agreement, executed by the Authority to encumber certain property in favor of
the Trustee, for the ratable benefit of the Holders of Senior Notes, as the
same may be amended in accordance with the terms thereof and of the
Indenture. See "Material Agreements--Leasehold Mortgage Deed."
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment on the Senior
Notes are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue on the interest that was due for the intervening
period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
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"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"MANAGEMENT AGREEMENT" means the Amended and Restated Gaming Facility
Management Agreement or any successor management agreement thereto.
"MANAGEMENT BOARD" means the Management Board of the Authority or any
authorized committee of the Management Board of the Authority, as applicable.
"MANAGEMENT COMPANY" or "MANAGER" means TCA or a successor permitted
pursuant to the Indenture.
"MANAGEMENT FEE" means the Management Fee under the Management Agreement.
"MINIMUM FACILITIES" means, with respect to the Resort, at least 2,500
operating slot machines, 150 operating table games, operating restaurants
with 1,200 seats, 5,000 usable parking spaces, adequate access to the local
highway system and all banking, coin, security and other ancillary equipment
and facilities necessary to operate the Resort on a 24 hour per day, seven
days a week basis.
"MINIMUM PRIORITY PAYMENT" has the meaning set forth in the Gaming
Facility Management Agreement.
"MONTHLY CASH FLOW PARTICIPATION INTEREST" means, with respect to any
month and any principal amount of the Senior Notes, the product of 5% of the
Authority's Cash Flow for such month times a fraction, the numerator of which
is the principal amount outstanding of the Senior Notes and the denominator
of which is $175,000,000.
"NET LOSS PROCEEDS" means the aggregate cash proceeds received by the
Authority in respect of any Event of Loss, including, without limitation,
insurance proceeds, condemnation awards or damages awarded by any judgment,
net of the direct costs in recovery of such proceeds (including, without
limitation, legal, accounting, appraisal and insurance adjuster fees) and any
taxes paid or payable as a result thereof.
"NET PROCEEDS" means the aggregate cash proceeds received by the
Authority in respect of any Asset Sale, net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking or brokerage fees, and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions), amounts required to be applied to the repayment of Indebtedness
secured by a Lien (other than the Senior Notes) on the asset or assets that
are the subject of such Asset Sale and any reserve for adjustment in respect
of the sale price of such asset or assets.
"NET RECEIPTS ACCOUNT" means the Depository Account established pursuant
to the Management Agreement.
"NET REVENUE" means the sum of Net Revenue From Gaming Operations plus
Net Revenue From Other Operations.
"NET REVENUE FROM GAMING OPERATIONS" means Gross Gaming Revenue (Win)
(as defined in the Gaming Facility Management Agreement) from Class III
Gaming, less all Class III gaming related Operating Expenses (excluding any
Management Fee) determined in accordance with GAAP consistently applied.
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"NET REVENUE FROM OTHER OPERATIONS" means gross revenues of the
Authority from all sources other than Gaming, such as food and beverage,
entertainment and retail, less all related Operating Expenses, excluding any
related Management Fee payable to the Manager and less the retail value of
Promotional Allowances (as defined in the Management Agreement) plus gross
revenues from Class II gaming operations less any Class II gaming related
Operating Expenses determined in accordance with GAAP consistently applied
and less the following revenues actually received by the Authority and
included in gross revenues: (i) any gratuities or service charges added to a
customer's bill; (ii) any credits or refunds made to customers, guests or
patrons; (iii) any sums and credits received by the Authority for lost or
damaged merchandise; (iv) any sales, excise, gross receipt, admission,
entertainment, tourist or other taxes or charges (or assessments equivalent
thereto, or payments made in lieu thereof) which are received from patrons
and passed on to a governmental or quasi-governmental entity; (v) any
proceeds from the sale or other disposition of furnishings and equipment or
other capital assets; (vi) any fire and extended coverage insurance proceeds
other than for business interruption; (vii) any condemnation awards other
than for temporary condemnation; (viii) any proceeds of financing or
refinancing; and (ix) any interest on the Replacement Reserve Fund (as
defined in the Management Agreement), all determined in accordance with GAAP
consistently applied, and 25 U.S.C. Section 2703(9).
"NIGC" means the National Indian Gaming Commission.
"NOTE COLLATERAL" means (i) the Escrow Account, the Replacement Reserve
Account, the Cash Maintenance Account, the Net Receipts Account, the Interest
and Excess Cash Flow Account and any and all other accounts at any time
identified as Collateral in any Collateral Document, all funds at any time on
deposit in any such account, all investments of any such funds and all
interest and dividends thereon, and (ii) all other assets, now owned or
hereafter acquired, of the Authority defined as Collateral in any Collateral
Document or the Indenture, which will initially include the Gross Revenues
and other cash referred to in the provision entitled "Cash Funds Pledge," the
leasehold interest and all personal property owned by the Authority with
certain exceptions, but shall specifically exclude the land held in trust for
the Tribe by the United States, and excluding any real property interest
therein, including the buildings, improvements and fixtures thereon, other
than the leasehold interest pursuant to the Lease.
"OBLIGATIONS" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the Offering of the Senior Notes by the Authority.
"OFFICER" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice President of such Person and, in the
case of the Authority, shall include members of the Management Board.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Authority by two Officers of the Authority, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Authority that meets the requirements of
Section 12.05 of the Indenture.
"OPERATING" means, with respect to the Resort, the first time that (i)
all Gaming Licenses have been granted and have not been revoked or suspended,
(ii) all Liens (other than Liens created by the Collateral Documents or
Permitted Liens) related to the construction of the Resort have been paid or,
if payment is not yet due or if such payment is contested in good faith by
the Authority, sufficient funds remain in the Collateral Account to discharge
such Liens, (iii) the general contractor and the architect of the Resort
shall have delivered a certificate to the Trustee certifying that the Resort
is complete in all material respects in accordance with the Plans therefor
and all applicable building laws, ordinances and regulations, (iv) the Resort
is in a condition (including installation of furnishings, fixtures and
equipment) to receive guests in the ordinary course of business, and (v)
gaming and other operations in accordance with applicable law are open to the
general public and are being conducted at the Resort with respect to at least
the Minimum Facilities for such Resort.
"OPERATING EXPENSES" means all operating expenses of the Authority with
respect to any commercial enterprise, determined in accordance with GAAP
consistently applied. Operating Expenses shall include, without limitation:
(i) all accrued interest expense (whether or not distributed and whether or
not deposited, including deposits into the Interest and Excess Cash Flow
Account) with respect to the Senior Notes and the Subordinated Notes; (ii)
depreciation and amortization and (iii) any bond premium under the Indenture.
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"OWNERSHIP INTEREST" means, with respect to any Person, Capital Stock of
such Person or any interest which carries the right to elect or appoint any
members of the Management Board or the Board of Directors or other executive
office of such Person.
"PARI PASSU LIEN" means a Lien on the Note Collateral that ranks pari
passu with the Lien of the Trustee for the ratable benefit of the Holders
pursuant to any arrangement in form and substance satisfactory to the Trustee
that provides that the Trustee, (i) has the sole authority to exercise any
remedy or right with respect to the Note Collateral, (ii) shall be required
to act in respect of any remedy or right with respect to the Note Collateral
or under the Collateral Documents only upon the direction of the holders of a
majority of the principal amount of the Indebtedness secured by the Note
Collateral, and (iii) does not act as trustee, fiduciary or agent, and shall
have no duty to act for the benefit of any holder of any Indebtedness so
secured (other than the Senior Notes).
"PAYMENT DEFAULT" means (i) any failure to pay when due, any principal,
premium or interest on the Senior Notes, whether at stated maturity, upon
acceleration, upon redemption or in connection with a Repurchase Offer, in
each case, without giving effect to any grace period, or (ii) any failure to
deposit any required amounts into the Cash Maintenance Account or in the
Interest and Excess Cash Flow Account.
"PERMITTED INVESTMENTS" means (a) any Investments in Cash Equivalents;
and (b) other Investments in any Person that do not exceed in the aggregate
$50,000 at any time outstanding.
"PERMITTED LIENS" means (i) Liens to secure Indebtedness permitted by
the terms of the Indenture under clause (d) of the second paragraph of the
covenant entitled "Limitations on Incurrence of Indebtedness" on the hotel
assets (excluding any lien on the fee title and the reversionary interest of
the United States and the Tribe in the Premises, the Improvements and the
Appurtenant Rights as such terms are defined in the Leasehold Mortgage) or
revenues financed by such Indebtedness or on after acquired personal property
or intangibles used in connection with such hotel; (ii) Liens in favor of the
Tribe representing the ground lessor's interest under the Lease; (iii) Liens
on property existing at the time of acquisition thereof by the Authority;
PROVIDED, that such Liens were in existence prior to the contemplation of
such acquisition; (iv) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business; (v) Liens to
secure Indebtedness (including capital lease obligations) permitted by the
Indenture, covering only the assets acquired with such Indebtedness; (vi)
Liens existing on the date of the Indenture; (vii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; PROVIDED, HOWEVER that any reserve or
other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor; (viii) Liens securing Indebtedness permitted
under Section 4.09(e) of the Indenture; PROVIDED THAT such Liens are no more
extensive than the liens securing the Indebtedness so extended, refinanced,
renewed, replaced or refunded thereby; (ix) Liens incurred in the ordinary
course of business of the Authority with respect to obligations that do not
exceed $250,000 at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not
in the aggregate materially detract from the value of the property and
materially impair the use thereof in the operation of business by the
Authority; and (x) Pari Passu Liens on the Note Collateral to secure
indebtedness permitted by clause (a) of the second paragraph of the covenant
described under the caption "Limitations on the Incurrence of Indebtedness";
provided, however, it is acknowledged that Permitted Liens will not include
any Lien on the land held in trust for the Tribe by the United States or any
real property interest therein, including the buildings, improvements and
fixtures, other than the leasehold interest pursuant to the Lease, or which
will give the Holder thereof a proprietary interest in any gaming activity as
prohibited by Section 11(b)(2)(A) of IGRA.
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"PERMITTED PROCEED USES" means (i) to fund interest (including Cash Flow
Participation Interest, if any) payments on the Senior Notes, (ii)
repurchases of Senior Notes pursuant to an Asset Sale Offer, a Change of
Control Offer, an Excess Cash Purchase Offer or an Event of Loss Offer, (iii)
Project Costs relating to the Resort in accordance with the Disbursement and
Escrow Agreement, and (iv) the repayment of amounts advanced to or paid on
behalf of the Tribe or the Authority for (a) any fees and expenses in
connection with obtaining and retaining any Gaming Licenses necessary to
conduct gaming operations at the Resort, (b) the equipping of the Resort in
accordance with the Disbursement and Escrow Agreement, and (c) administrative
and operating expenses of the Authority and/or the Tribe necessary to
develop, construct, and begin operations at the Resort, including without
limitation, pre-opening expenses and initial working capital or bankroll.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PLANS" means all drawings, plans and specifications prepared by or on
behalf of the Authority, as the same may be amended or supplemented from time
to time, and, if required, submitted to and approved by the appropriate
Gaming Regulatory Authorities, which describe and show the Resort and the
labor and materials necessary for construction thereof.
"PRINCIPAL BUSINESS" means the Class II and Class III casino Gaming (as
such terms are defined in IGRA) and resort business and any activity or
business incidental, directly related or similar thereto, or any business or
activity that is a reasonable extension, development or expansion thereof or
ancillary thereto, including any hotel, entertainment, recreation or other
activity or business designed to promote, market, support, develop, construct
or enhance the casino gaming and resort business operated by the Authority.
"PROJECT COSTS" means, (i) all costs of developing, designing,
constructing, equipping and furnishing the Resort, including costs related to
land acquisition, professional services, pre-opening costs and initial
operating capital, (ii) all start-up and operating costs of the Authority
until the Resort becomes Completed, and (iii) all financing fees and
expenses, interest payments and any scheduled principal prior to the date the
Resort becomes Completed, provided that all Project Costs shall be allocated
in accordance with GAAP, consistently applied.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Issuance Date, by and among the Authority and the other
parties named on the signature pages thereof, substantially in the form
delivered to the Trustee on the Issuance Date.
"REPLACEMENT RESERVE ACCOUNT" means a deposit account established,
maintained and controlled by the Trustee and designated by the Authority and
TCA as the Reserve Account established pursuant to Section 4.12 of the Gaming
Facility Management Agreement.
"RESORT" means the multi-amenity gaming and entertainment resort
proposed to be constructed in Montville, Connecticut as described in this
Prospectus as set forth in the Plans, as the Plans may be amended pursuant to
the Indenture and the Collateral Documents, but excluding (i) any obsolete
personal property or real property improvement determined by the Authority to
be no longer useful or necessary to the operations or support of the Resort
(other than Key Project Assets) and (ii) any equipment leased from a third
party in the ordinary course of business.
"RESORT SUPPORT ENTITY" means any Person who provides goods or services
to the Resort or whose operations are ancillary to, in support of, or useful
to the operations of the Resort.
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"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"SECURED COMPLETION GUARANTEE" means the completion guarantee of Sun
International substantially in the form delivered to the Trustee on the
Issuance Date.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEMI-ANNUAL PERIOD" means each period that begins on April 1 and ends
on the next succeeding September 30 or each period that begins on October 1
and ends on the next succeeding March 31.
"SENIOR NOTES" means, collectively, the Series A Senior Notes and, when
issued under the Exchange Offer, the Series B Senior Notes.
"SERIES A SENIOR NOTES" means the Authority's Series A Senior Secured
Notes due November 15, 2002 to be issued pursuant to the Indenture.
"SERIES B SENIOR NOTES" means the Authority's Series B Senior Secured
Notes due November 15, 2002 to be issued pursuant to the Indenture or in the
Exchange Offer.
"SUBORDINATED INDEBTEDNESS" means the Indebtedness evidenced by the
Subordinated Notes and any other Indebtedness of the Authority which is
expressly by its terms subordinated in right of payment to the Senior Notes.
"SUBORDINATED NOTES" means the Subordinated Notes due 2003 issued by the
Authority pursuant to the Note Purchase Agreement dated as of the Issuance
Date between the Authority and Sun International.
"SUBSIDIARY" means (i) any instrumentality or subdivision or subunit of
the Authority that has a separate legal existence or status or whose property
and assets would not be bound by the terms of the Indenture or the Collateral
Documents or (ii) with respect to any Person, any corporation, association or
other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a
combination thereof. The Tribe and any other instrumentality of the Tribe
that is not also an instrumentality of the Authority shall not be a
Subsidiary of the Authority.
"SUN INTERNATIONAL" means Sun International Hotels Limited, a Bahamian
corporation or any of its affiliates.
"TCA" means Trading Cove Associates, a Connecticut general partnership.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which the Indenture is qualified
under the TIA.
"TRANSFER RESTRICTED SECURITIES" means securities that bear or are
required to bear the legend set forth in Section 2.06 of the Indenture.
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"TRIBAL GAMING ORDINANCE" means the ordinance and any amendments
thereto, and all related or implementing ordinances, including without
limitation, the Gaming Authority Ordinance, enacted on July 15, 1995 which
are enacted by the Tribe to authorize and regulate gaming on the Mohegan
Reservation pursuant to IGRA.
"TRIBE" means the Mohegan Tribe of Indians of Connecticut, a sovereign
tribe recognized by the United States of America pursuant to 25 C.F.R.
Section 83.
"TRUSTEE" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of the Indenture and
thereafter means the successor serving thereunder.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness, at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (b) the
then outstanding principal amount of such Indebtedness, as the case may be.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following description is a general summary of the principal federal
income tax matters of general application relating to the Exchange Offer.
Such description is based upon the current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. The statements
of law and legal conclusions contained herein are based on the opinion of
Neal, Gerber & Eisenberg, special tax counsel to the Authority. There can be
no assurance that the Internal Revenue Service (the "IRS") will not take a
contrary view, and no ruling from the IRS has been or will be sought.
Legislative, judicial or administrative changes or interpretations may occur
that could alter or modify the statements and conclusions set forth herein.
Any such changes or interpretations may or may not be retroactive and could
affect the tax consequences to the Senior Note holders participating in the
Exchange Offer.
The following summary is for general information only. The tax treatment
of a Senior Note holder may vary depending upon its particular situation.
Certain Senior Note holders (including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign corporations
and persons who are not citizens or residents of the United States) may be
subject to special rules not discussed below. EACH HOLDER OF THE SENIOR
NOTES IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES OF SUCH HOLDER'S EXCHANGING SERIES A SENIOR NOTES FOR SERIES B
SENIOR NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR
FOREIGN TAX LAWS.
EXCHANGE OF SERIES B SENIOR NOTES FOR SERIES A SENIOR NOTES
The exchange of Series B Senior Notes for Series A Senior Notes pursuant
to the Exchange Offer should not be treated as an "exchange" for federal
income tax purposes because the Series B Senior Notes should not be
considered to differ materially in kind or extent from the Series A Senior
Notes. Rather, the Series B Senior Notes received in the Exchange Offer by a
holder of Series A Senior Notes should be treated as a continuation of the
Series A Senior Notes in the hands of such holder. As a result, there should
be no federal income tax consequences to holders electing to exchange Series
A Senior Notes for Series B Senior Notes pursuant to the Exchange Offer. If,
however, such transactions were treated as an "exchange" for federal income
tax purposes, the transaction should constitute a recapitalization for
federal income tax purposes. Under the rules applicable to
recapitalizations, holders of Series A Senior Notes exchanging such Senior
Notes for Series B Senior Notes generally should not recognize any gain or
loss upon such exchange.
LIQUIDATED DAMAGES
The Liquidated Damages described under "The Exchange Offer--Registration
Rights Agreement" should be taxable to the holder of Senior Notes as ordinary
income in accordance with the such holder's method of accounting for tax
purposes. The IRS, however, may take a different position, which could affect
the timing and amount of a holder's income.
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PLAN OF DISTRIBUTION
This Prospectus may be used by the Initial Purchasers and/or certain
broker-dealers in connection with offers and sales of the Senior Notes in
market-making transactions in the over-the-counter market at negotiated
prices related to prevailing market prices at the time of sale. The Initial
Purchasers and/or such broker-dealers may act as principal or agent in such
transactions.
The Authority has been advised that it is the position of the staff of
the Commission that any broker-dealer that receives Series B Senior Notes for
its own account pursuant to the Exchange Offer in exchange for Series A
Senior Notes acquired by such broker-dealer as a result of market-making or
other trading activities must deliver a prospectus in connection with any
resale of such Series B Senior Notes. The Authority agrees that for a period
of one year after the Expiration Date, it will ensure that this Prospectus,
as it may be amended or supplemented from time to time, meets the
requirements of the Securities Act and is available to any broker-dealer for
use in connection with any such resale of such Series B Senior Notes (other
than a resale of an unsold allotment relating to the original placement of
the Series A Senior Notes).
The Authority will not receive any proceeds from any sale of Series B
Senior Notes by broker-dealers. Series B Senior Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time at prices determined at the time of sale directly to
purchasers or to or through brokers or dealers who may receive compensation
in the form of commissions or concessions from any such broker-dealer and/or
the purchasers of any such Series B Senior Notes. Any broker-dealer that
resells Series B Senior Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in
a distribution of such Series B Senior Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B Senior Notes and any commission or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
delivering a prospectus, a broker-dealer will be not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
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LEGAL MATTERS
Certain legal matters regarding the validity of the Series B Senior
Notes will be passed upon for the Authority by Rome, McGuigan, Sabanosh &
Klebanoff, P.C., Hartford, Connecticut, and by Hobbs, Straus, Dean & Walker,
Washington, D.C. Certain tax matters will be passed upon by Neal, Gerber &
Eisenberg, Chicago, Illinois, special tax counsel to the Authority.
INDEPENDENT ACCOUNTANTS
The balance sheet of the Authority included in this Prospectus and
Registration Statement has been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in their report with respect
thereto.
AVAILABLE INFORMATION
The Authority is not currently subject to the periodic reporting and
other informational requirements of the Exchange Act. The Authority has
agreed that, whether or not it is required to do so by the rules and
regulations of the Commission, for so long as any of the Senior Notes remain
outstanding, it will furnish to the holders of the Senior Notes and file with
the Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Authority were required to file such forms, including a "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
and, with respect to the annual information only, a report thereon by the
Authority's certified independent accountants and (ii) all reports that would
be required to be filed with the Commission on Form 8-K if the Authority were
required to file such reports. In addition, for so long as any of the Senior
Notes remain outstanding, the Authority has agreed to make available to any
prospective purchaser of the Senior Notes or beneficial owner of the Senior
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
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GLOSSARY AND INDEX OF DEFINED TERMS
Accrual Period: The period during which each installment of
Cash Flow Participation Interest is calculated
to accrue, which is defined under the
Indenture as the period from, but not
including, the most recent date to which Cash
Flow Participation Interest has been paid or
provided for or through which Cash Flow
Participation Interest had been calculated and
deferred (or from and including the earlier of
October 31, 1996 or the first day the Mohegan
Sun Casino commences operations, if no
installment of Cash Flow Participation
Interest has been paid, provided for or
deferred) to and including, either (i) the
last day of the next Semi-annual Period, if
the corresponding principal of the Senior
Notes has not become due and payable, or
(ii) the date of payment, if the corresponding
principal of the Senior Notes has become due
and payable (whether at stated maturity, upon
acceleration, upon maturity of repurchase
obligation or otherwise).
Amounts Required for Amounts required to cause the Mohegan Sun
Completion: Casino to be Completed, including, without
limitation, (i) all regularly scheduled
payments of principal and interest on any
indebtedness (other than the Senior Notes),
(ii) all regularly scheduled payments of
interest (but not principal) due on the Senior
Notes, (iii) all costs and cost overruns of
construction (E.G., costs of labor, materials,
equipment and supplies, taxes, utilities,
assessments, insurance and maintenance
expenses), (iv) all operating costs of the
Authority, and (v) all other amounts or funds
required.
BIA: Bureau of Indian Affairs of the Department of
the Interior.
Business Board: Each of two different advisory and oversight
boards established under each of the
Development Agreement and the Management
Agreement which, in the case of the Management
Agreement, consists of two members appointed
by the Authority and two members appointed by
TCA and, in the case of the Development
Agreement, consists of an equal number of
representatives of the Authority and TCA.
Cash Flow: With respect to a specified period, the Net
Revenue for such period, plus (i) an amount
equal to any extraordinary loss plus any net
loss realized in connection with an Asset Sale
(to the extent such losses were deducted in
computing such Net Revenue), plus
(ii) provision for taxes based on income or
profits for such period, to the extent such
provision for taxes was used in computing such
Net Revenue, plus (iii) Interest Expense for
such period, plus (iv) Depreciation and
Amortization Expense for such period to the
extent such depreciation and amortization were
deducted in computing such Net Revenue, in
each case, as determined in accordance with
GAAP.
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Cash Flow Participation As of any payment date, Cash Flow Participation
Interest: Interest on the Senior Notes accrued through the
Accrual Period last ended (including any Accrual
Period that ends on such payment date) plus any
Cash Flow Participation Interest previously accrued
and with respect to which payment has been
permitted to be deferred.
Cash Maintenance The account established by the Authority
Account: pursuant to the Indenture into which the
Authority is obligated to deposit up to $6
million per year, up to a maximum deposit at
any time of $36 million, which amount may be
applied by the Trustee, upon an event of
default under the Indenture, to satisfy the
Authority's obligations under the Senior
Notes.
Change of Control: The occurrence of any of the following:
(i) the Authority ceases to be a wholly-owned
unit, instrumentality or subdivision of the
government of the Tribe, (ii) the Authority
ceases to have the exclusive legal right to
operate gaming operations of the Tribe,
(iii) the Authority fails to retain in full
force and effect at all times all material
governmental consents, permits or legal rights
necessary for the operation of the Mohegan Sun
Casino and such failure continues for a period
of 90 consecutive days, (iv) TCA or any other
entity in which Sun International owns,
directly or indirectly, at least 50% of the
capital stock ceases to be the manager of the
Mohegan Sun Casino or fails to hold any
material governmental consent or permit
required to manage the Mohegan Sun Casino and
such failure continues for a period of 90
consecutive days or (v) Sun International
fails to own, directly or indirectly, at least
50% of the Capital Stock of TCA.
Change of Control Offer: An offer required to be made by the Authority
upon a Change of Control to purchase all or
any part (equal to $1,000 or an integral
multiple thereof) of the Senior Notes at a
price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and
unpaid interest (including Cash Flow
Participation Interest) and Liquidated
Damages, if any, to the date of purchase. The
Authority shall not be required to make such
an offer to purchase (i) if the Change of
Control event ceases prior to the closing of
such offer or (ii) if on or before the 120th
day after the Change of Control, which Change
of Control arises under either clause (iv) or
(v) of the definition thereof, TCA is replaced
as the manager (or the Authority is using its
best efforts to effect such a replacement)
with a Person with experience and reputation
comparable to Sun International.
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Completed: With respect to the Mohegan Sun Casino, the
first time that (i) all liens (other than
Permitted Liens or Liens which relate to
Disputed Amounts (as defined in the Secured
Completion Guarantee) guaranteed by Sun
International under Section 2.5 of the Secured
Completion Guarantee) relating to the
construction of the Mohegan Sun Casino have
been paid, (ii) the general contractor and the
project architect for the Mohegan Sun Casino,
or an independent construction expert
appointed by the Sun International and
acceptable to the Trustee, shall have
delivered a certificate to the Trustee
certifying that the Mohegan Sun Casino is
complete in all material respects in
accordance with the plans therefor and in
compliance with all applicable laws,
ordinances and regulations (including gaming
laws, ordinances and the Mohegan Compact
requirements) with respect to the physical
structure, health and safety, environmental
and hazardous materials, fire, equipment,
security and physical operating (gaming and
other) requirements of the Mohegan Sun Casino,
and (iii) the Mohegan Sun Casino is in a
condition (including installation of
furnishings, fixtures and equipment sufficient
for the Minimum Facilities and provision of
adequate initial operating capital including
all operating supplies, sufficient coin for
the slot machines, sufficient operating cash
for the other games and trained employees (or
sufficient funds to hire and train such
employees) so that the Mohegan Sun Casino is
fit to receive guests in the ordinary course
of business.
Deferred Subordinated Any interest on Subordinated Indebtedness that
Interest: is not currently payable in cash or that is
not permitted to be paid in cash under the
governing agreements.
DEP: Department of Environmental Protection of the
State of Connecticut.
DOT: Department of Transportation of the State of
Connecticut.
Equipment Financing: The up to $40 million of vendor or third party
financing to be incurred by the Authority with
respect to certain equipment, including gaming
equipment, for use at the Mohegan Sun Casino,
which will be senior secured obligations of
the Authority and will rank PARI PASSU in
right of payment with any existing and future
senior Indebtedness of the Authority.
Escrow Account: The account established by the Escrow Agent
pursuant to Section 2 of the Disbursement and
Escrow Agreement dated as of September 29,
1995 into which all of the net proceeds of the
issuance of the Series A Senior Notes were
deposited, pending disbursement by the Escrow
Agent in accordance with the terms thereof.
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Event of Loss: With respect to any property or asset
(tangible or intangible, real or personal),
any of the following: (i) any loss,
destruction or damage of such property or
asset; (ii) any institution of any proceedings
for the condemnation or seizure of such
property or asset or for the exercise of any
right of eminent domain; (iii) any actual
condemnation, seizure or taking by exercise of
the power of eminent domain or otherwise of
such property or asset, or confiscation of
such property or asset or the requisition of
the use of such property or asset; or (iv) any
settlement in lieu of clause (ii) or
(iii) above.
Event of Loss Purchase An offer made by the Authority following an
Offer: Event of Loss to all holders of Senior Notes
to purchase the maximum principal amount of
Senior Notes that is an integral multiple of
$1,000 and that may be purchased out of Excess
Loss Proceeds in excess of $50 million at an
offer price in cash in an amount equal to 100%
of the principal amount thereof, plus accrued
and unpaid interest (including Cash Flow
Participation Interest and Liquidated
Damages), if any, to the date fixed for the
closing of such offer, in accordance with the
procedures set forth in the Indenture.
Excess Cash Flow: The Cash Flow of the Authority for a specified
period, less (i) all management fees to be
paid to TCA under the Management Agreement
that have accrued for such period (whether or
not distributed), (ii) principal payments on
Indebtedness of the Authority during such
period (other than principal payments
(a) pursuant to an Excess Cash Purchase Offer,
(b) which are funded from the proceeds of
Indebtedness permitted to be incurred under
the Indenture or (c) on the Working Capital
Financing that do not permanently reduce
indebtedness under the Working Capital
Financing), (iii) the Authority's share of
deposits into the Replacement Reserve Account
(but not more than $1.8 million per fiscal
year) commencing with the first full fiscal
year after the commencement of operations of
the Mohegan Sun Casino, (iv) all other capital
expenditures not funded from the Replacement
Reserve Account (but not more than
$5.0 million per fiscal year), (v) any amounts
set aside in the Cash Maintenance Account for
such fiscal period, (vi) interest expense of
the Authority for such period, whether paid,
accrued or capitalized, and (vii) taxes, if
any, payable to the federal government or the
State of Connecticut.
Excess Cash Purchase The offer required to be made by the Authority
Offer: within 120 days after the last day of each
fiscal year of the Authority, beginning with
the fiscal year ending September 30, 1997, to
purchase outstanding Senior Notes in an amount
equal to the sum of (i) 50% of the Excess Cash
Flow for such fiscal year, (ii) 100% of the
amount of the Deferred Subordinated Interest
for such fiscal year and (iii) accrued
interest to the purchase date and Liquidated
Damages, if any, on such principal at the
purchase prices set forth in the Indenture
(which are expressed as a percentage of the
principal amount).
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Excess Loss Proceeds: Any net proceeds from an Event of Loss with
respect to Note Collateral that has a fair
market value (or replacement cost, if greater)
in excess of $500,000 that are not within, 360
days after any such Event of Loss, applied by
the Authority (or are not permitted to be
applied) to the rebuilding, repair,
replacement or construction of improvements to
the Mohegan Sun Casino. To the extent that
the aggregate amount of Senior Notes tendered
pursuant to an Event of Loss Offer is less
than the Excess Loss Proceeds, such remaining
Excess Loss Proceeds shall be released to the
Authority, subject to the terms of the Cash
Collateral Accounts Pledge and Security
Agreement, and the Authority may use any such
remaining Excess Loss Proceeds so released for
any lawful purpose.
Exchange Agent: First Fidelity Bank, n/k/a First Union Bank of
Connecticut, as exchange agent in connection
with the Exchange Offer.
Exchange Offer: The offer by the Authority to exchange $175
million aggregate principal amount of Series B
Senior Notes for an equal principal amount of
Series A Senior Notes.
Expiration Date: The termination date for the Exchange Offer,
which shall be 5:00 p.m., New York City time,
June 21, 1996 unless extended by the Authority
in its sole discretion, being the date prior to
which Series A Senior Notes must be validly
tendered and not withdrawn in order to be
accepted by the Authority for exchange.
Fixed Charge Coverage With respect to a specified period, the ratio
Ratio: of the Cash Flow for such period to the Fixed
Charges for such period. In the event that the
Authority incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving
credit borrowings) subsequent to the
commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but
prior to the event for which the calculation
of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence,
assumption, guarantee or redemption of
Indebtedness as if the same had occurred at
the beginning of the applicable four-quarter
period. For purposes of making the computation
referred to above, acquisitions, dispositions
and discontinued operations (as determined in
accordance with GAAP) that have been made by
the Authority, including all mergers,
consolidations and dispositions, during the
four-quarter reference period or subsequent to
such reference period and on or prior to the
Calculation Date shall be calculated on a pro
forma basis assuming that all such
acquisitions, dispositions, discontinued
operations, mergers, consolidations (and the
reduction of any associated fixed charge
obligations resulting therefrom) had occurred
on the first day of the four-quarter reference
period.
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Fixed Interest: Interest at the rate of 13 1/2% per annum of
the principal amount of the Senior Notes then
outstanding from the date of issuance of
Senior Notes to the date of payment of such
principal amount of such Senior Note. Fixed
Interest on the Series A Senior Notes is, and
the Series B Senior Notes will be, computed on
the basis of a 360-day year, consisting of
twelve 30-day months.
Gaming Regulatory Any agency, authority, board, bureau,
Authority: commission, department, office or
instrumentality of any nature whatsoever of
the United States or foreign government, any
state, province or any city or other political
subdivision, whether now or hereafter
existing, or any officer or official thereof,
including without limitation, any division of
the Authority or any other agency with
authority to regulate any gaming operation (or
proposed gaming operation) owned, managed or
operated by the Tribe or the Authority.
IGRA: The Indian Gaming Regulatory Act of 1988, as
amended.
Indebtedness: With respect to any Person, (i) any
indebtedness of such Person, whether or not
contingent (a) in respect of borrowed money,
including accrued and unpaid Cash Flow
Participation Interest, (b) evidenced by
bonds, notes, debentures or similar
instruments or letters of credit (or
reimbursement agreements in respect thereof),
(c) representing the balance deferred and
unpaid of the purchase price of any property
(including capital lease obligations), except
any such balance that constitutes an accrued
expense or trade payable, or (d) representing
any hedging obligations, if and to the extent
any of the foregoing indebtedness (other than
letters of credit and hedging obligations)
would appear as a liability upon a balance
sheet of such Person prepared in accordance
with GAAP, (ii) to the extent not otherwise
included, any obligation by such Person to be
liable for, or to pay, as obligor, guarantor
or otherwise, on the Indebtedness of another
Person (other than by endorsement of
negotiable instruments for collection in the
ordinary course of business) and (iii) to the
extent not otherwise included, Indebtedness of
another Person secured by a lien on any asset
of such Person (whether or not such
Indebtedness is assumed by such Person).
Indenture: The Indenture governing the Senior Notes,
dated as of September 29, 1995.
Initial Purchasers: Bear, Stearns & Co. Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation,
collectively, as the initial purchasers on
September 29, 1995 of the Series A Senior
Notes.
Interest and Excess Cash The account established by the Authority
Flow Account: pursuant to the Indenture into which the
Authority is required to deposit, on a monthly
basis, an amount equal to the accrued interest
on the Senior Notes and the Subordinated Notes
and 50% of Excess Cash Flow, which amounts
will be used to pay interest on the Senior
Notes and fund Excess Cash Purchase Offers.
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Liquidated Damages: Monetary damages the Authority is obligated to
pay to the holders of Senior Notes under
certain circumstances if the Authority fails
to comply with the registration requirements
of the Registration Rights Agreement.
Minimum Priority Payment: The $50,000 minimum monthly payment required
to be made by TCA to the Authority under the
Management Agreement, which payment is
chargeable against the Authority's share of
Net Revenue and is required to be made to the
Authority for any month during which any
gaming is conducted at the Mohegan Sun Casino.
Net Receipts Account: The depository account established pursuant to
the Management Agreement into which TCA is
required to deposit, on a daily basis, all
cash collected from the operation of the
Mohegan Sun Casino.
Net Revenues: As used in the Management Agreement, the
amount of the gross revenues of the Mohegan
Sun Casino less operating expenses and certain
specified categories of revenue, such as
income from any financing or refinancing,
taxes or charges received from patrons on
behalf of and remitted to a governmental
entity, proceeds from the sale of capital
assets, insurance proceeds and interest on the
Replacement Reserve Account. Net Revenues
also include Net Gaming Revenues, which are
equal to the amount of the "net win" from
Class III Gaming operations (I.E., the
difference between gaming wins and losses)
less all gaming-related operational expenses
(excluding the management fee).
NIGC: The National Indian Gaming Commission, an
independent governmental agency within the
U.S. Department of Interior exercising primary
federal regulatory responsibility over Indian
gaming.
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Note Collateral: All of collateral that, pursuant to the terms
of the Indenture, secures the Authority's
obligations under the Senior Notes (and may
secure the Working Capital Financing),
consisting primarily of: (i) the Escrow
Account, the Replacement Reserve Account, the
Cash Maintenance Account, the Net Receipts
Account, the Interest and Excess Cash Flow
Account and any and all other accounts at any
time identified as Collateral in the
Indenture, the Disbursement and Escrow
Agreement or any collateral document related
thereto, all funds at any time on deposit in
any such account, all investments of any such
funds and all interest and dividends thereon,
and (ii) a first priority leasehold mortgage
(the "Leasehold Mortgage") on the 25-year
ground lease from the Tribe to the Authority
with respect to the Site (the "Lease"), (ii) a
first priority security interest in all of the
Authority's furniture, trade fixtures and
equipment, accounts receivable, general
intangibles, inventory and other personal
property (other than personal property
permitted to be financed and secured, as
described elsewhere herein, or personal
property that is not permitted by applicable
law to secure the Senior Notes), (iii) a first
priority security interest in the proceeds of
the Series A Senior Notes which remain on
deposit in the Escrow Account and (iv) an
assignment of material construction contracts
pursuant to which the Mohegan Sun Casino is to
be constructed.
Offering: The offer and sale by the Initial Purchasers
on September 29, 1995 of the Series A Senior
Notes to institutional accredited investors
and qualified institutional buyers.
Person: Any individual, corporation, partnership,
joint venture, association, joint-stock
company, trust, unincorporated organization,
government or any agency or political
subdivision thereof or any other entity.
Replacement Reserve The account established pursuant to the
Account: Management Agreement into which the Authority
and TCA have agreed to deposit, on a monthly
basis, up to an aggregate of $3 million per
year, which amount will be used to fund
replacement capital expenditures for the
Mohegan Sun Casino.
Senior Notes: Collectively, the 13 1/2% Series A Senior
Secured Notes of the Authority due November
15, 2002 and the 13 1/2% Series B Senior Notes
of the Authority due November 15, 2002, which
have been registered under the Securities Act
of 1933, as amended.
Secured Completion The $50 million secured completion guarantee
Guarantee: given by Sun International pursuant to that
Secured Completion Guarantee dated September
29, 1995 in favor of the Trustee, to fund any
cost overruns incurred by the Authority in
connection with constructing, equipping and
opening the Sun Mohegan Casino, which
guarantee is secured by a $15 million
irrevocable letter of credit and a pledge of
1,500,000 Ordinary Shares of Sun
International.
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Semi-annual Period: Each period that begins on April 1 and ends on
the next succeeding September 30 or each
period that begins on October 1 and ends on
the next succeeding March 31.
Subordinated Notes: The $40 million principal amount of
Subordinated Notes due 2003 issued by the
Authority to Sun International pursuant to
that certain Note Purchase Agreement dated as
of September 29, 1995, together with any
additional subordinated notes that may be
issued by the Authority to Sun International
pursuant to the Secured Completion Guarantee.
Subordinated Indebtedness: Indebtedness evidenced by the Subordinated
Notes and any other Indebtedness of the
Authority which is expressly by its terms
subordinated in right of payment to the Senior
Notes.
Terminating Event: Any event that terminates Sun International's
Obligations under the Secured Completion
Guarantee, including (i) any Congressional,
Tribal or other governmental action that
results in a substantial diminution of the
gaming operations proposed to be conducted at
the Mohegan Sun Casino, (ii) September 30,
1997 (iii) the date immediately prior to the
acceleration of amounts due on the Senior
Notes, (iv) the repayment of the Senior Notes
in full, (v) the termination or
unenforceability, in any material respect, of
the Management Agreement or the Lease, or
(vi) the termination or repudiation of the
Management Agreement by the Authority.
Trustee: First Fidelity Bank, n/k/a First Union Bank of
Connecticut, as trustee under the Indenture,
and any successor serving thereunder.
Working Capital Financing: The approximately $12.5 million of third party
financing to be incurred by the Authority,
prior to opening the Mohegan Sun Casino, for
working capital purposes. In the event the
Authority requires additional working capital,
the Indenture permits up to $25 million in
Working Capital Financing, which will be
senior secured obligations of the Authority
and will rank PARI PASSU in right of payment
with any existing and future senior
Indebtedness of the Authority.
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INDEX OF DEFINED TERMS
The following terms are defined on the page of the Prospectus indicated
directly opposite such term:
<TABLE>
<CAPTION>
Defined Term Page No.
- ------------ --------
<S> <C>
Accrual Period . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ACMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Affiliate Transaction . . . . . . . . . . . . . . . . . . . . . .. 101
Appurtenant Rights . . . . . . . . . . . . . . . . . . . . . . . . 68
Architect . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 72
Asset Sale Offer . . . . . . . . . . . . . . . . . . . . . . . . . 93
ASTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Atlantis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Authority Official . . . . . . . . . . . . . . . . . . . . . . . . 79
Beneficial Owner(s) . . . . . . . . . . . . . . . . . . . . . . .. 30
the BIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
Book-Entry Confirmation . . . . . . . . . . . . . . . . . . . . .. 29
Book-Entry Transfer Facility . . . . . . . . . . . . . . . . . . . 29
Business Board (pursuant to the Development Agreement) . . . . . . 72
Business Board (pursuant to the Management Agreement) . . . . . .. 51
Buyout Option . . . . . . . . . . . . . . . . . . . . . . . . . .. 73
Calculation Date . . . . . . . . . . . . . . . . . . . . . . . . . 121
Carousel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Change of Control Payment Date . . . . . . . . . . . . . . . . . . 92
Change of Control Payment . . . . . . . . . . . . . . . . . . . .. 92
Change of Control Offer . . . . . . . . . . . . . . . . . . . . .. 92
Church Parcel . . . . . . . . . . . . . . . . . . . . . . . . . .. 50
CJM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45
Clean-up Standard Regulations . . . . . . . . . . . . . . . . . .. 48
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Commencement Date . . . . . . . . . . . . . . . . . . . . . . .. . 75
the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Construction Budget . . . . . . . . . . . . . . . . . . . . . . .. 7
</TABLE>
-143-
<PAGE>
<TABLE>
<CAPTION>
Defined Term Page No.
- ------------ --------
<S> <C>
Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 50
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . .. 114
DCD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 44
DEP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 47
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32
Development Agreement . . . . . . . . . . . . . . . . . . . . . .. 71
Disbursement Agent . . . . . . . . . . . . . . . . . . . . . . . . 108
DJA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45
DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
EDSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Effectiveness Target Date . . . . . . . . . . . . . . . . . . . .. 26
EIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
Elders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Eligible Institution . . . . . . . . . . . . . . . . . . . . . . . 30
Environmental Assessment . . . . . . . . . . . . . . . . . . . . . 49
Equipment Financing . . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page
Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Event of Loss Offer . . . . . . . . . . . . . . . . . . . . . . .. 94
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 17
Excess Cash Offer Price . . . . . . . . . . . . . . . . . . . . .. 95
Excess Cash Purchase Amount . . . . . . . . . . . . . . . . . . .. 95
Excess Cash Purchase Offer . . . . . . . . . . . . . . . . . . . . 14
Excess Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 93
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Offer Registration Statement . . . . . . . . . . . . . .. 26
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page
Fixed Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 89
FONSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
Force Majeure Event . . . . . . . . . . . . . . . . . . . . . . .. 21
Foxwoods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . .. 72
</TABLE>
-144-
<PAGE>
<TABLE>
<CAPTION>
Defined Term Page No.
- ------------ --------
<S> <C>
Gaming Disputes Court . . . . . . . . . . . . . . . . . . . . . .. 54
General Manager . . . . . . . . . . . . . . . . . . . . . . . . .. 74
Gross Revenue . . . . . . . . . . . . . . . . . . . . . . . . . .. 77
IGRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page
Initial Purchasers . . . . . . . . . . . . . . . . . . . . . . . . 9
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 130
Lease Transaction . . . . . . . . . . . . . . . . . . . . . . . .. 102
Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12
Leased Property . . . . . . . . . . . . . . . . . . . . . . . . .. 64
Leasehold Mortgage . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 113
LEHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . 7
Management Board . . . . . . . . . . . . . . . . . . . . . . . . . 51
Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Mohegan Sun Casino . . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page (ii)
Mohegan Compact . . . . . . . . . . . . . . . . . . . . . . . . .. 5
Morse Diesel . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
NEPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
the NIGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Note Purchase Agreement . . . . . . . . . . . . . . . . . . . . .. 83
NOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
NRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22
Pari Passu Debtholder . . . . . . . . . . . . . . . . . . . . . .. 99
Payment Cross-Default . . . . . . . . . . . . . . . . . . . . . .. 111
</TABLE>
-145-
<PAGE>
<TABLE>
<CAPTION>
Defined Term Page No.
- ------------ --------
<S> <C>
Personal Property . . . . . . . . . . . . . . . . . . . . . . . .. 68
Phase III Assessment . . . . . . . . . . . . . . . . . . . . . . . 48
Plans and Specifications . . . . . . . . . . . . . . . . . . . . . 72
Refinancing Indebtedness . . . . . . . . . . . . . . . . . . . . .. 99
Registration Default . . . . . . . . . . . . . . . . . . . . . . .. 27
Registration Statement . . . . . . . . . . . . . . . . . . . . . .. 2
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . 9
Reserved Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . 97
Rockwell . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 44
Secretary of the Interior . . . . . . . . . . . . . . . . . . . . . 63
Section 81 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 59
Secured Completion Guarantee . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page (ii)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page
Semi-Annual Period. . . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page (ii)
Senior Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page
Series A Senior Notes . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page
Series B Senior Notes . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page
Shelf Registration Statement. . . . . . . . . . . . . . . . . . . . 26
SII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SIIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15
SNM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Southern Sun . . . . . . . . . . . . . . . . . . . . . . . . . . .. 38
Space Leases . . . . . . . . . . . . . . . . . . . . . . . . . . .. 68
STC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
STC Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 60
Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page (ii)
</TABLE>
-146-
<PAGE>
<TABLE>
<CAPTION>
Defined Term Page No.
- ------------ --------
<S> <C>
Sun International . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page (ii)
TCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
the Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page
the Pequot Tribe. . . . . . . . . . . . . . . . . . . . . . . . . . 3
the Tribe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page
the NYSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . .. Prospectus outside
front cover page
Town. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Town Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .. 63
Tribal-State Compact . . . . . . . . . . . . . . . . . . . . . . .. 58
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . 88
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
UNC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
USTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 48
VOCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
Working Capital Financing . . . . . . . . . . . . . . . . . . . . . Prospectus outside
front cover page
</TABLE>
-147-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
MOHEGAN TRIBAL GAMING AUTHORITY
PAGE
----
Independent Auditors' Report. . . . . . . . . . . . . . . F-2
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . F-3
Notes to Balance Sheet. . . . . . . . . . . . . . . . . . F-4
F-1
<PAGE>
[Letterhead of Arthur Andersen LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Tribal Council
Mohegan Tribe of Indians of Connecticut:
We have audited the accompanying balance sheet of the Mohegan Tribal Gaming
Authority (a development stage entity) as of March 31, 1996. This financial
statement is the responsibility of the Authority's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Mohegan Tribal Gaming
Authority as of March 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 25, 1996
F-2
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS LIABILITIES
<S> <C> <C> <C>
RESTRICTED CASH $134,437 ACCOUNTS PAYABLE $ 17,450
-------- CONSTRUCTION RETAINAGE 3,306
ACCRUED INTEREST 15,039
CURRENT PORTION OF LONG-TERM DEBT 21
CAPITALIZED PROPERTY COSTS:
Deferred lease cost 29,260
Leasehold interest under construction 73,661 SENIOR NOTES 175,000
Equipment 1,105
--------
104,026
-------- OTHER LONG-TERM DEBT 321
OTHER ASSETS: SUBORDINATED NOTES 40,000
Pre-opening costs 3,437
Deferred financing costs 8,537
Organizational costs 700
-------- COMMITMENTS AND CONTINGENCIES
12,674 (Note 5)
-------- --------
Total Assets $251,137 Total Liabilities $251,137
======== ========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO BALANCE SHEET
MARCH 31, 1996
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE AUTHORITY -
The Mohegan Tribal Gaming Authority (the "Authority"), established on July
15, 1995, is an instrumentality of the Mohegan Tribe of Indians of
Connecticut (the "Tribe"). The Authority intends to develop a gaming and
entertainment facility (the "Mohegan Casino"). The Authority's year-end
will be September 30.
The Tribe and the Authority have entered into a land lease ("Lease")
pursuant to which the Tribe is leasing to the Authority certain land
located in southeastern Connecticut on which the Mohegan Casino is being
constructed (the "Site"). The Site is a portion of a parcel of land that
has been acquired and held in trust for the Tribe by the United States of
America, with the Tribe retaining perpetual rights to the use of the Site.
See Note 3.
The Tribe established the Authority with the exclusive power to conduct
and regulate gaming activities for the Tribe. Under the Indian Gaming
Regulatory Act of 1988, as amended ("IGRA"), federally recognized Indian
tribes are permitted to conduct full-scale casino gaming operations on
tribal-land, subject to, among other things, the negotiation of a tribal
state compact with the affected state. The Tribe and the State of
Connecticut have entered into such a compact (the "Compact") that has been
approved by the Secretary of the Interior.
The Authority has engaged Trading Cove Associates ("TCA") to manage the
development, construction and operation of the Mohegan Casino. TCA is
50% owned by a subsidiary of Sun International Hotels Limited ("Sun
International"). The remaining partners of TCA are hotel and real estate
developers and operators located primarily in the northeastern United
States.
The Authority is financing the development of the Mohegan Casino with the
proceeds of the sale of senior notes, subordinated notes and equipment
financing, as described in Note 2. The total cost of development and
construction of the Mohegan Casino and working capital is estimated to be
$312.5 million, of which $300 million has been obtained as of the balance
sheet date. If additional financing is not obtained, the Authority will
draw funds under the Secured Completion Guarantee (the "Guarantee")
provided by Sun International. The Guarantee provides that, subject to
certain qualifications, Sun International will provide up to $50 million
to fund any cost overruns incurred in connection with the construction,
development, equipping and opening of the Mohegan Casino. The Guarantee
terminates on September 30, 1997, or if certain other criteria are met as
agreed upon by the Authority and
F-4
<PAGE>
Sun International. Any draws on the Guarantee will be evidenced by
additional subordinated notes issued by the Authority to Sun
International. These additional subordinated notes will bear interest
at the prime rate plus 1% and be payable under the same terms as the
subordinated notes discussed in Note 2.
DEVELOPMENT STAGE ENTERPRISE -
The Authority is classified as a Development Stage enterprise as defined
by Statement of Financial Accounting Standards No. 7.
CASH -
Included in cash is approximately $130 million held in escrow as required
by the Senior Notes (see Note 2). Disbursements from the escrow account
can only occur upon submission of a disbursement request (as defined) to
the Escrow Agent, and such funds disbursed can only be used for payment of
costs and expenses as contemplated in the original or amended budgets as
referred to in the Disbursement and Escrow Agreement.
CAPITALIZED PROPERTY COSTS -
Capitalized property costs consist of deferred lease costs related to the
payment made by the Authority on behalf of the Tribe for the acquisition
of the Site (see Note 3), leasehold interest costs which represent costs
incurred through the balance sheet date for the construction of the
Mohegan Casino (see Note 3) and equipment (primarily furniture and
computers) that are being used in connection with the pre-opening
activities of the Authority. Upon the commencement of operations, these
costs will be depreciated or amortized, as applicable, on a straight-line
basis over the following estimated useful lives:
Deferred lease cost 50 years
Leasehold interest cost 40 years
Equipment 5-7 years
DEFERRED LEASE COSTS -
Deferred lease costs consist of the following (000's):
Acquisition cost of the site $23,385
Acquisition cost of additional
parcels (note 2) 5,875
The Site and the additional parcels were acquired from third parties
unrelated to the Tribe or the Authority. The Authority will not be
reimbursed by the Tribe for these payments.
OTHER ASSETS -
Other assets consist of pre-opening, deferred financing and organization
costs. Pre-opening costs are mainly payroll and related benefits and
general office overhead incurred through the balance sheet date. Deferred
financing costs have been incurred in connection with obtaining the senior
notes and the subordinated
F-5
<PAGE>
notes. Organization costs represent primarily legal costs incurred in the
organization of the Authority. Beginning on the opening date of the
Mohegan Casino, these costs will be amortized on a straight-line basis over
the following estimated useful lives:
Pre-opening costs 12 months
Deferred financing costs 7 years
Organization costs 5 years
2. DEBT:
The Authority has issued $175 million in Senior Notes due 2002 (the
"Senior Notes") with fixed interest payable at a rate of 13-1/2%
per annum and Cash Flow Participation Interest (as defined) in an
aggregate amount of 5.0% of the Authority's Cash Flow (as defined) up to a
limit, during any two consecutive semi-annual periods, ending
September 30, of $250 million of the Authority's Cash Flow. Fixed
interest is payable semi-annually commencing May 15, 1996. No Cash
Flow Participation Interest shall be payable with respect to any period
prior to the earlier of the first day the Mohegan Casino commences
operations or October 31, 1996. The aggregate amount of Cash Flow
Participation Interest payable will be reduced pro rata for reductions
in outstanding principal amount of Senior Notes. The payment of Cash Flow
Participation Interest may be deferred if the Authority's Fixed Charge
Coverage Ratio (as defined) is less than 2 to 1. The Senior Notes are
redeemable at set prices as set forth in the Senior Notes after November
15, 1999 at the option of the Authority. Upon the occurrence of certain
events (as specified in the Indenture for the Senior Notes) each holder
of Senior Notes can require the Authority to repurchase the Notes at
prices specified in the Senior Notes. Beginning with fiscal year ending
September 30, 1997, the Authority will be required, under certain
circumstances, to offer to purchase, at set prices, certain amounts of
Senior Notes then outstanding.
The Authority has obtained $40 million of subordinated financing from Sun
International in the form of two notes. These notes bear interest at 15%
per year, paid semi-annually and are due in 2003; however, these notes
cannot be paid until the Senior Notes have been paid in full.
The Authority has also obtained a commitment for gaming equipment financing
of up to $40 million from Sodek Gaming, Inc. The terms of this agreement
provides for an interest rate of 2% over prime, commencing from the date of
delivery of the equipment. Principal payments will be over 48 months
commencing 30 days after full use of the Mohegan Casino has commenced.
The above described debt is secured by substantially all the assets of the
Authority.
The Tribe has acquired an additional parcel of land adjacent to the Site
("Additional Parcel") that will be used to expand the access road to the
Mohegan Casino. The lease between the Tribe and the Authority, with
respect to The Site, has been amended to include
F-6
<PAGE>
the Additional Parcel. The annual rent under the Lease remains at $1.00
(see Note 3), but the Authority has made the initial downpayment of
$250,000 and assumed the promissory note ($350,000) with respect to the
Additional Parcel. The terms of the promissory note provide for monthly
payments of principal and interest (8%) of $4,246 commencing on January 1,
1996, with a final payment due on December 1, 2005. This promissory note
is secured by a mortgage on the Additional Parcel.
Repayments of debt for the next five years and thereafter follows:
Year Ending
September 30, Amount
--------------- --------
(000's)
1996 $ 21
1997 25
1998 23
1999 21
2000 18
Thereafter 215,234
--------
$215,342
========
The ability of the Authority to meet its debt service requirements will be
entirely dependent upon the completion and future successful performance
of the Mohegan Casino, which is subject to financial, economic, political,
competitive, and other factors, many of which are beyond the Authority's
control.
3. LEASE AGREEMENT:
As discussed in Note 1, the Authority has entered into the Lease with the
Tribe with respect to the Site. The initial term of the Lease is 25 years,
with an option to extend the term for an additional 25 years provided that
the Authority is not in default under the Lease. The Lease also provides
that all improvements constructed on the Site will become the property of
the Tribe and subject to the Lease. The Lease is a net Lease requiring
that the Authority be responsible for all costs of operating,
constructing, maintaining, repairing, replacing and insuring the leased
property, plus paying the Tribe an annual rent of $1.00. In addition to
the rent, the Authority has used the proceeds from the issuance of the
Subordinated Notes, described in Note 2, to acquire the Site on behalf of
the Tribe. Due to these payments and other terms of the Lease described
above, expenditures made by the Authority in connection with the
acquisition of the Site and the Additional Parcel have been recorded as
deferred lease costs and related improvements have been reflected as
leasehold interests for financial reporting purposes. The deferred lease
costs will be amortized on a straight-line basis over the term of the
Lease, plus the option period (a total of 50 years). The leasehold
interest will be amortized on a straight-line basis over the estimated
life of the buildings (40 years).
F-7
<PAGE>
4. INCOME TAXES:
The Tribe is an "Indian Tribal Government" within the meaning of sections
7701(a)(40) and 7871 of the Internal Revenue Code of 1986, as amended. As
such, the Authority has tax-exempt status with respect to federal and state
income and certain excise taxes.
5. COMMITMENTS AND CONTINGENCIES:
The Tribe, by itself and acting through the Authority, and TCA have
entered into an Amended and Restated Gaming Facility Development and
Construction Agreement ("the Construction Agreement") providing for the
design, construction, furnishing and site development of the Mohegan
Casino by TCA. The total cost of the Mohegan Casino, as outlined in the
Construction Agreement, is not to exceed $325 million. The Tribe has
assigned its rights and obligations in the Agreement to the Authority.
The Tribe has entered into a seven-year Amended and Restated Gaming
Facility Management Agreement ("the Management Agreement") with TCA to
provide for the management of the Mohegan Casino. Under the terms of the
Management Agreement, the Tribe has granted TCA the exclusive right and
obligation to develop, manage, operate and maintain the Mohegan Casino and
all other related facilities that are owned by the Tribe or any of its
instrumentalities. The Management Agreement authorizes TCA to pay itself a
monthly management fee from the Mohegan Casino's net revenues. The
management fee under the Management Agreement is expressed as a percentage
of net revenues, which ranges from 30% to 40%, depending on the level of
the net revenues generated by the Mohegan Casino. The Tribe has assigned
its rights in and delegated its obligations under the Agreement to the
Authority.
The Tribe's Compact with the State of Connecticut stipulates that a portion
of the revenues earned on slot machines will be paid to the State of
Connecticut. For each twelve-month period commencing July 1, 1995 the
minimum contribution of the Tribe to the State of Connecticut shall be the
lesser of (a) 30% of gross revenues from slot machines, or (b) the greater
of (i) 25% of gross revenues from slot machines or (ii) $80,000,000. These
payments will not be required if the State of Connecticut legalizes any
other gaming operations with slot machines to be operated in the State of
Connecticut (other than on certain Indian lands). No payments have been
made or are due as of the balance sheet date. When such payments become
payable, they will be reflected as operating expenses of the Authority.
The Tribe has entered into an agreement with the Town of Montville,
Connecticut (the "Town") pursuant to which the Tribe has agreed to pay to
the Town (i) an annual payment of $500,000 to compensate the Town for the
financial impact of removing the Site from the Town's tax rolls and
jurisdiction and (ii) a one-time fee of $3 million to make improvements to
the Town's water system, which improvements are necessitated by the
development and operation of the Mohegan Casino. The one time payment is
due and the annual payments commence one year after the commencement of
slot machine gaming activities.
F-8
<PAGE>
It is anticipated that these payments will be made by the Authority on
behalf of the Tribe. When that occurs, the one-time fee of $3,000,000 for
the improvement of the Town's water system will be capitalized as part of
leasehold interest (see Note 3), while the annual payments of $500,000 will
be treated as operating expenses of the Authority since they are effectively
in lieu of property taxes that would be the responsibility of the Authority
under the Lease. It is not anticipated that the Tribe will reimburse the
Authority for these payments.
F-9
<PAGE>
[ALTERNATIVE PROSPECTUS PAGE]
MOHEGAN TRIBAL GAMING AUTHORITY
13 1/2% SERIES B SENIOR SECURED NOTES DUE 2002
WITH CASH FLOW PARTICIPATION INTEREST
This Prospectus may be used by certain broker-dealers (collectively, the
"broker-dealers") in connection with offers and sales of 13 1/2% Series B Senior
Secured Notes Due 2002 With Cash Flow Participation Interest (the "Series B
Senior Notes") that were received by such broker-dealers for their own accounts
pursuant to an exchange offer in exchange for 13 1/2% Series A Senior Secured
Notes due 2002 With Cash Flow Participation Interest that were acquired by such
broker-dealers as a result of market-making or other trading activities. The
Mohegan Tribal Gaming Authority will not receive any proceeds from the sale of
Series B Senior Notes.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SERIES B SENIOR
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is May __, 1996.
<PAGE>
[ALTERNATIVE PROSPECTUS PAGE]
PLAN OF DISTRIBUTION
This Prospectus may be used by certain broker-dealers (collectively, the
"broker-dealers") in connection with offers and sales of 13 1/2% Series B Senior
Secured Notes Due 2002 With Cash Flow Participation Interest (the "Series B
Senior Notes") that were received by such broker-dealers for their own accounts
in exchange for 13 1/2% Series A Senior Secured Notes due 2002 With Cash Flow
Participation Interest that were acquired by such broker-dealers as a result of
market-making or other trading activities (the "Exchange Offer"). The Mohegan
Tribal Gaming Authority will not receive any proceeds from the sale of Series B
Senior Notes.
Series B Senior Notes received by a broker-dealer for its own account
pursuant to the Exchange Offer may be sold by such broker-dealer from time to
time at prices determined at the time of sale directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such Series B Senior Notes. Any broker-dealer that resells Series B Senior
Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such
Series B Senior Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Series B Senior Notes
and any commission or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. By delivering a
prospectus, a broker-dealer will be not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
[ALTERNATIVE PROSPECTUS PAGE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representation in connection with the Series B Senior
Notes other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Authority. This Prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than those to which it
relates, nor does it constitute an offer to sell, or the solicitation of any
offer to buy, to any person in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Authority since the date
hereof or that the information contained herein is correct as of any time
subsequent to the date hereof.
------------
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
The Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Business and Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Mohegan Tribe of Indians of
Connecticut. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Government Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . 55
Material Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Description of Senior Notes. . . . . . . . . . . . . . . . . . . . . . . 87
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . . 130
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . 130
Glossary and Index of Defined Terms. . . . . . . . . . . . . . . . . . . 131
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . F-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MOHEGAN TRIBAL
GAMING AUTHORITY
13 1/2% SERIES B SENIOR SECURED
NOTES DUE 2002 WITH CASH
FLOW PARTICIPATION INTEREST
-------------------
PROSPECTUS
-------------------
May __, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate (except the Commission registration fee) of
the fees and expenses payable by the registrant in connection with the issuance
and distribution of the Series B Senior Notes.
Securities and Exchange Commission
registration fee. . . . . . . . . . . . . . . . . . . . . . . . . .$ 60,345
Legal fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Accountants' fees . . . . . . . . . . . . . . . . . . . . . . . . . 69,353
Trustee's fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
Blue sky qualification fees and expenses. . . . . . . . . . . . . . 6,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,802
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$220,000
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
All current and former officers, employees and members of the Authority
are entitled to be indemnified by the Authority pursuant to Section 7 of
Mohegan Tribal Ordinance No. 95-7/15-1, the ordinance that established the
Authority, "against reasonable expenses actually and necessarily incurred by
that person in connection with the defense of any action, suit or proceeding
in which that person is made a party by reason of being, or having been, such
officer, employee or member of the Authority." Indemnification is not
available in the event of an adjudication of liability for negligence or
misconduct in the performance of duty or for actions beyond the scope of
employment. The Authority also may reimburse such persons for the reasonable
costs of settlements of actions, suits or proceedings (so long as such
settlements do not involve findings of neglect, misconduct or ultra vires
acts) deemed by the Management Board to be in the best interests of the
Authority.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES
On September 29, 1995, the Authority issued and sold $175,000,000
aggregate principal amount of Series A Senior Notes on the terms set forth
elsewhere in this Registration Statement. The Series A Senior Notes were
sold to Bear, Stearns & Co. Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchasers (collectively, the "Initial Purchasers"),
for resale to qualified institutional buyers in reliance on Rule 144A under
the Securities Act and to a limited number of institutional accredited
investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act. The aggregate offering price for the sale of the Series A
Senior Notes to the Initial Purchasers was $175,000,000, and the Authority
paid an aggregate of $5,250,000 to the Initial Purchasers in discounts and
commissions.
II-1
<PAGE>
Concurrently with the sale of the Series A Senior Notes, the Authority
sold to Sun International $40 million principal amount of subordinated notes
due 2003 (the "Subordinated Notes"). The Subordinated Notes were sold at an
aggregate purchase price equal to the principal amount thereof and the
Authority did not pay any broker fees or commissions in connection therewith.
The Authority has committed to issue additional subordinated notes to Sun
International in principal amount equal to the amount of funds provided by
Sun International, if any, pursuant to the Secured Completion Guarantee, but
not to exceed an aggregate of $50 million.
The Series A Senior Notes and the Subordinated Notes are the only
securities sold by the Authority within the past three years that were not
registered under the Securities Act.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
See attached Exhibit Index.
(b) FINANCIAL STATEMENT SCHEDULES.
See attached Index to Financial Statement Schedules.
Item 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information
in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unissued at
the termination of the Exchange Offer.
II-2
<PAGE>
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in, the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted against the registrant by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THE MOHEGAN TRIBAL GAMING AUTHORITY HAVE DULY CAUSED THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE TOWN OF MONTVILLE, STATE OF CONNECTICUT, ON
MAY 13, 1996.
MOHEGAN TRIBAL GAMING AUTHORITY
By: /s/ Roland Harris
------------------------------------------
Roland Harris
Chairman, Management Board, Duly Authorized
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY
13, 1996 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
Signature Title
/s/ Mark Brown
- ----------------------------------- Member, Management Board
Mark Brown
/s/ Jayne Fawcett
- ----------------------------------- Vice Chair and Member, Management
Jayne Fawcett Board
/s/ Carlisle Fowler
- ----------------------------------- Treasurer and Member, Management
Carlisle Fowler Board
/s/ Courtland Fowler
- ----------------------------------- Member, Management Board
Courtland Fowler
/s/ Roland Harris
- ----------------------------------- Chairman and Member, Management
Roland Harris Board (Principal Executive
Officer)
/s/ Loretta Roberge
- ----------------------------------- Corresponding Secretary and
Loretta Roberge Member, Management Board
II-4
<PAGE>
Signature Title
/s/ Maynard Strickland
- ----------------------------------- Member, Management Board
Maynard Strickland
/s/ Shirley Walsh
- ----------------------------------- Recording Secretary and
Shirley Walsh Member, Management Board
/s/ George Papanier
- ----------------------------------- Senior Vice President, Chief
George Papanier Financial Officer (Principal
Financial and Accounting
Officer)
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQ.
NO. DESCRIPTION PAGE NO.
*3.1 Constitution of the Mohegan Tribe of Indians of
Connecticut (the "Tribe")
*3.2 Ordinance No. 95-7/15-1 of the Tribe for Gaming
on Tribal Lands, enacted on July 20, 1995
*4.1 Indenture dated as of September 29, 1995 among
the Mohegan Tribal Gaming Authority of the Tribe
(the "Authority"), the Tribe and First Fidelity
Bank, as trustee
*4.2 Purchase Agreement dated September 21, 1995
among Bear, Stearns & Co. Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation
(collectively, the "Initial Purchasers"), the
Authority and the Tribe
*4.3 Registration Rights Agreement dated as of
September 29, 1995 among the Authority and the
initial Purchasers
5.1 Opinion of Hobbs, Straus, Dean & Walker, counsel
to the Authority, regarding the validity of the
Series B Senior Notes
5.2 Opinion of Rome McGuigan, Sabanosh & Klebanoff,
P.C., counsel to the Authority, regarding the
validity of the Series B Senior Notes
*8.1 Opinion of special tax counsel to the Authority
regarding certain tax matters
*10.1 The Mohegan Tribe--State of Connecticut Gaming
Mohegan Compact between the Tribe and the State
of Connecticut (the "Compact")
*10.2 Agreement dated April 25, 1994 between the Tribe
and the State of Connecticut resolving certain
land claims (the "Resolution Agreement")
*10.3 Memorandum of Understanding dated April 25, 1994
between the Tribe and the State of Connecticut
regarding implementation of the Compact and the
Resolution Agreement
*10.4 Agreement between the Tribe and the Town of
Montville, Connecticut
*10.5 Land Lease dated September 29, 1995 between the
Tribe and the Authority; Amendment of Land Lease
dated September 29, 1995
*10.6 Open-End Construction--Permanent Leasehold
Mortgage Deed, Assignment of Leases and Rents
and Security Agreement dated as of September 29,
1995 between the Tribe and First Fidelity Bank,
as trustee
*10.7 Amended and Restated Gaming Facility Development
and Construction Agreement dated September 1,
1995 between the Tribe and Trading Cove
Associates ("TCA")
*10.8 Amended and Restated Gaming Facility Management
Agreement dated August 30, 1995 between the
Tribe and TCA
*10.9 Secured Completion Guarantee dated as of
September 29, 1995 by Sun International Hotels
Limited ("Sun") in favor of First Fidelity Bank,
as trustee
*10.10 Note Purchase Agreement dated as of September
29, 1995 between the Authority and Sun
- -----------------
*Previously filed.
E-1
<PAGE>
EXHIBIT SEQ.
NO. DESCRIPTION PAGE NO.
*10.11 Cash Collateral Accounts Pledge and Security
Agreement dated as of September 29, 1995 among
First Fidelity Bank, as trustee, TCA, Sun, the
Authority and the Tribe
*10.12 Disbursement and Escrow Agreement dated as of
September 29, 1995 among First Fidelity Bank, as
escrow agent, Chicago Title Insurance Company,
as disbursement agent, First Fidelity Bank, as
trustee, TCA, Sun and the Authority
*10.13 Pledge Agreement dated September 29, 1995
between Sun International Investments Limited
and First Fidelity Bank
24.1 Consent of Independent Public Accountants of the
Authority
24.2 Consent of counsel to the Authority (included in
Exhibits 5.1 and 5.2)
*24.3 Consent of special tax counsel to the Authority
(included in Exhibit 8.1)
25.1 Statement of Eligibility of Trustee on Form T-1
27.1 Article 5 Financial Data Schedule
*99 Form of Letter of Transmittal
- -----------------
*Previously filed.
E-2
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF HOBBS, STRAUS, DEAN & WALKER]
May 3, 1996
Mohegan Tribal Gaming Authority
27 Church Lane
Uncasville, Connecticut 06382
Re: Mohegan Tribal Gaming Authority Series B
Senior Secured Notes Due 2002
Ladies and Gentlemen:
We have acted as counsel to the Mohegan Tribal Gaming Authority (the
"Authority"), an instrumentality of the Mohegan Tribe of Indians of
Connecticut (the "Tribe"), in connection with the preparation and filing with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), of a Registration Statement on Form S-1 (Registration
No. 33-80655) (the "Registration Statement"). The Registration Statement
relates to up to $175,000,000 principal amount of Series B Senior Secured
Notes due 2002 of the Authority (the "Series B Notes") that will be issued
under and subject to the terms and conditions of that certain Indenture dated
as of September 29, 1995 (the "Indenture") among the Authority, the Tribe and
First Fidelity Bank (n/k/a First Union Bank of Connecticut), as the trustee
(the "Trustee"), in exchange for an equal principal amount of outstanding
Series A Senior Secured Notes due 2002 of the Authority (the "Series A
Notes") in accordance with the Indenture and upon the terms and subject to
the conditions of the Exchange Offer (as defined in the Registration
Statement).
As such counsel, we have examined the Indenture and such certificates of
public officials, tribal documents and records and other certificates, and
have made such investigations of law, as we have deemed necessary in order to
render the opinions hereinafter set forth. As to various questions of fact
material to our opinion, we have relied, without independent investigation,
upon the representations made in the Indenture and in certificates of the
Tribe and the Authority.
We have assumed, without independent investigation, the authenticity of
all documents submitted to us as originals, the genuineness of all
signatures, the legal capacity of natural persons and the conformity to the
originals of all documents submitted to us as copies. We also have assumed,
without independent investigation, that the Indenture examined by us has been
duly and validly authorized, executed and delivered by, and is the legal,
valid and binding on and enforceable against, the parties thereto, other than
the Tribe and the Authority, and that the Series B notes will be duly
authorized, executed and authenticated by the Trustee in accordance with the
terms of the Indenture.
<PAGE>
Our opinions expressed below are limited to the matters of federal law
relating to Indian tribes and of tribal law, provided, however, that we
express no opinion of any kind as the laws of the State of Connecticut and to
other applicable federal law; as to such matter, you have relied solely upon
the opinion of Rome, McGuigan, Sabanosh, & Klebanoff, P.C.
Based upon and subject to the foregoing, it is our opinion that the
Indenture has been duly and validly authorized, executed and delivered by the
Tribe and the Authority and that the Series B Notes will constitute valid and
binding obligations of the Authority entitling the holders thereof to the
benefits of the Indenture, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting enforcement of creditors' rights generally and
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
In connection with the foregoing opinion, we have assumed, and we
express no opinion thereon, that the Registration Statement shall have become
effective under the Act, the securities or Blue Sky laws of certain states
shall have been complied with, and the Series B Notes shall have been issued
in exchange for the Series A Notes in accordance with the Indenture and upon
the terms and subject to the conditions of the Exchange Offer
It is also our opinion that the limited waivers of sovereign immunity
from unconsented suit, by the Tribe and the Authority, contained in the
Indenture are in compliance in all material respects with all applicable law,
and are enforceable against the Tribe and the Authority in accordance with
their respective terms, and no further action is required to make them
effective. We draw to your attention that the federal courts may not have
jurisdiction over disputes not arising under federal law, and the state
courts may not have jurisdiction over any disputes arising on the Mohegan
Reservation. Moreover, the federal and state courts, under the doctrines of
comity and exhaustion of tribal remedies, may be required to defer to the
jurisdiction of the Gaming Disputes Court, or to require that any plaintiff
exhaust its remedies in the Gaming Disputes Court before bringing an action
in the federal or state court. Thus, there may be no federal or state court
forum with respect to a dispute relating to the Series B Notes or the
Indenture. Moreover, the Tribe and the Authority have not waived their
sovereign immunity from private civil suits for violations of federal
securities laws, and the Tribe and the Authority may not be "persons" under
the federal Bankruptcy Act, and, consequently, may not be able to be a debtor
under the federal bankruptcy laws.
<PAGE>
This opinion may be relied upon by the addressee only; other persons
wishing to rely on this opinion must first obtain our express written
permission to do so.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.
Sincerely,
HOBBS, STRAUS, DEAN & WALKER
/s/ Jerry C. Straus
By: Jerry C. Straus
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF ROME, MCGUIGAN, SABANOSH & KLEBANOFF, P.C.]
May 3, 1996
Mohegan Tribal Gaming Authority
27 Church Lane
Uncasville, CT 06382
Re: Mohegan Tribal Gaming Authority Series B
Senior Secured Notes due 2002
Ladies and Gentlemen:
We have acted as counsel to the Mohegan Tribal Gaming Authority (the
"Authority"), an instrumentality of the Mohegan Tribe of Indians of
Connecticut (the "Tribe"), in connection with the preparation and filing with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), of a Registration Statement on Form S-1 (Registration
No. 33-80655) (the "Registration Statement"). The Registration Statement
relates to up to $175,000,000 principal amount of Series B Senior Secured
Notes due 2002 of the Authority (the "Series B Notes") that will be issued
under and subject to the terms and conditions of that certain Indenture dated
as of September 29, 1995 (the "Indenture") among the Authority, the Tribe and
First Fidelity Bank (n/k/a First Union Bank of Connecticut), as the trustee
(the "Trustee"), in exchange for an equal principal amount of outstanding
Series A Senior Secured Notes due 2002 of the Authority (the "Series A
Notes") in accordance with the Indenture and upon the terms and subject to
the conditions of the Exchange Offer (as defined in the Registration
Statement).
As such counsel, we have examined the Indenture and such certificates of
public officials, tribal documents and records and other certificates, and
have made such investigations of law, as we have deemed necessary in order to
render the opinions hereinafter set forth. As to various questions of fact
material to our opinion, we have relied, without independent investigation,
upon the representations made in the Indenture and in certificates of the
Tribe and the Authority.
<PAGE>
We have assumed, without independent investigation, the authenticity of
all documents submitted to us as originals, the genuineness of all
signatures, the legal capacity of natural persons and the conformity to the
originals of all documents submitted to us as copies. We also have assumed,
without independent investigation, that the Indenture examined by us has been
duly and validly authorized, executed and delivered by, and is the legal,
valid and binding on and enforceable against, the parties thereto, other than
the Tribe and the Authority, and that the Series B Notes will be duly
authorized, executed and authenticated by the Trustee in accordance with the
terms of the Indenture.
Our opinions expressed below are limited to the laws of the State of
Connecticut and to applicable federal law, provided, however, that we express
no opinion of any kind as to matters of federal law relating to Indian tribes
and of tribal law (except to the extent that the Tribe has adopted the laws
of the State of Connecticut as tribal law); as to such matter, you have
relied solely upon the opinion of Hobbs, Straus, Dean & Walker.
Based upon and subject to the foregoing, it is our opinion that the
Indenture has been duly and validly authorized, executed and delivered by the
Tribe and the Authority and that the Series B Notes will constitute valid and
binding obligations of the Authority entitling the holders thereof to the
benefits of the Indenture, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting enforcement of creditors' rights generally and
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
In connection with the foregoing opinion, we have assumed, and we
express no opinion thereon, that the Registration Statement shall have become
effective under the Act, the securities or Blue Sky laws of certain states
shall have been complied with, and the Series B Notes shall have been issued
in exchange for the Series A Notes in accordance with the Indenture and upon
the terms and subject to the conditions of the Exchange Offer.
We draw to your attention that the Indenture provides that the law
(exclusive of conflict of law principles) of the State of New York shall
govern and be used to construe the Indenture and the Series B Notes. In any
proceedings brought in the State of Connecticut and in which the State of
Connecticut has subject matter Jurisdiction, the law of the State of New York
as the governing law of the Indenture and the Series B Notes would be
recognized and applied. If the Series B Notes were governed by the laws of
the State of Connecticut, the opinions expressed herein as to the
enforceability thereof would not differ.
This opinion may be relied on by the addressee only; other persons
wishing to rely on this opinion must first obtain our express written
permission to do so.
<PAGE>
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.
Very truly yours,
ROME, MCGUIGAN, SABANOSH &
KLEBANOFF, P.C.
/s/ Lewis B. Rome
By:_________________________
Lewis B. Rome
A Principal
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in or made a part of this registration statement.
/s/ Arthur Andersen LLP
Hartford Connecticut
May 9, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee pursuant to
Section 305(b)(2)
------
FIRST UNION BANK OF CONNECTICUT
(Exact name of trustee as specified in its charter)
CONNECTICUT STATE BANK
(Jurisdiction of incorporation or organization if not a U.S. national bank)
06-0547320
(I.R.S. Employer Identification No.)
10 STATE HOUSE SQUARE, HARTFORD, CONNECTICUT 06103-3698
(Address of trustee's principal executive offices) (zip code)
NOT APPLICABLE
(Name, address and telephone number of agent for service of process)
MOHEGAN TRIBAL GAMING AUTHORITY
(Exact name of obligor as specified in its charter)
NOT APPLICABLE 06-1436334
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ROLAND HARRIS, CHAIRMAN, MANAGEMENT BOARD
67 SANDY DESERT ROAD
UNCASVILLE, CONNECTICUT 06382
(Address of principal executive offices) (zip code)
131/2% SERIES B SENIOR SECURED NOTES DUE 2002
(Title of indenture securities)
Item 1. General Information.
Furnish the following information as to the trustee:
<PAGE>
(a) Name and address of each examining or supervising authority to which
it
is subject.
Connecticut Commissioner of Banking, 262 Constitution Plaza,
Hartford, Connecticut 06115
Board of Governors of the Federal Reserve System, Washington D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 have been omitted
pursuant to General Instruction B.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this statement of eligibility
and qualification.
1. A copy of the articles of association of the trustee as now in effect.
2. A copy of the certificate of authority to commence business.
3. Not Applicable. Authorization of the trustee to exercise corporate
trust powers is contained in articles of association.
4. A copy of the bylaws of the trustee as now in effect.
5. Not Applicable
6. Consent of trustee required by Section 321(b) of the Trust Indenture
Act of 1939.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
First Union Bank of Connecticut, a Connecticut State-chartered bank,
incorporated and existing under the laws of the State of Connecticut, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and State of
Connecticut on the 19th day of March, 1996.
FIRST UNION BANK OF CONNECTICUT
By: /s/ W. Jeffrey Kramer
-------------------------------------------
W. Jeffrey Kramer
Its Vice President
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<PAGE>
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
FIRST UNION BANK OF CONNECTICUT
AS AMENDED AND RESTATED JANUARY 1, 1996
FIRST: The name of the corporation is FIRST UNION BANK OF
CONNECTICUT.
SECOND: The nature of the business to be transacted, or the purposes
to be promoted or carried out by the corporation are as follows:
To transact a general banking business as a state bank and trust
company and, in the conduct of such business, to engage in any lawful act
or activity for Connecticut and to possess and exercise all the powers and
privileges granted by The Banking Law of Connecticut or by any other law of
Connecticut, together with any powers incidental thereto, so far as such
powers and privileges are necessary or convenient to the conduct, promotion
or attainment of the business or purposes of the corporation, including,
without limiting the generality of the foregoing, the power to:
(a) Receive deposits, including deposits of public funds or money
held in a fiduciary capacity;
(b) Receive for safekeeping or otherwise all kinds of personal
property;
(c) Act as trustee, receiver, executor or administrator or as
guardian or conservator of the estate, but not of the person, of
any person;
(d) Act as transfer agent or registrar of stocks and bonds;
(e) Act as agent, fiscal agent or trustee for any corporation, for
holders of bonds, notes or other securities or for the state or
any political subdivision thereof or taxing district therein;
(f) Lend money with or without security and issue letters of credit
for any lawful purpose;
(g) Borrow money and pledge assets therefor;
(h) Conduct a safe deposit business as permitted by applicable law;
and
<PAGE>
(i) Invest its assets in investment securities as permitted by
applicable law.
To transact such business and to exercise all rights, privileges,
powers and franchises possessed by any entity with which the corporation or
a predecessor of the corporation has merged or consolidated.
THIRD: The principal office of the corporation is located in the city
of Stamford, State of Connecticut.
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is six million (6,000,000) common
shares, and the par value of each such share is Five Dollars ($5.00),
amounting in the aggregate to thirty million dollars ($30,000,000), which
shares shall be transferable according to such rules as may be established
by the Board of Directors of the corporation.
FIFTH: (a) the name, address and business of each incorporator of the
corporation are as follows:
NAME ADDRESS BUSINESS
Union Trust Company Church and Elm Streets Bank and Trust Company
New Haven, Connecticut 06505
Union Trust Company 180 Fairfield Avenue Bank and Trust Company
Bridgeport, Connecticut 06904
(b) the name, address and occupation of each prospective initial
director of the corporation are as follows:
NAME ADDRESS OCCUPATION
Carl Bennett Greenbriar Lane Chairman and President,
Stamford, Connecticut 06903 Caldor, Inc.
D. Allan Bromley 35 Tokeneke Drive Henry Ford II Professor
and Director of
North Haven, Connecticut A. W. Wright
06473 Nuclear Structure
Laboratory Yale
University
Gino P. Giusti 236 West Haviland Lane President and Director,
Stamford, Connecticut 06903 Texasgulf Inc.
J. Robert Gunther Uncas Circle - Sachems Head Chairman and President
Guilford, Connecticut 06437 George Schmitt & Co.,
Inc.
Eric R. Hansen 31 Arrowhead Way Vice President of
Darien, Connecticut 06820 Northeast Bancorp, Inc.
and President of Union
Trust Company
Robert W. Harcke 8 Point Road Chairman, Universal Wire
Niantic, Connecticut 06357 Products, Inc.
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<PAGE>
John M. Henske 104 Beachside Avenue Chairman and Chief
Green Farms, Connecticut Executive Officer
06436 Olin Corporation
Robert E. Ix Walsh Lane Chairman and Chief
Greenwich, Connecticut Executive Officer,
06830 Cadbury Schweppes
U.S.A. Inc.
O. Haydn Owens, Jr. 410 North Cedar Road Vice President, The
Fairfield, Connecticut Southern New England
06430 Telephone Co.
Kenneth A. Randall 13 Valley Road President, The Conference
New Canaan, Connecticut Board, Inc.
06840
Thomas F. Richardson Marchant Road Chairman and President
West Redding, Connecticut Northeast Bancorp, Inc.
06896 and Chairman and Chief
Executive Officer, Union
Trust Company
Audrey M. Sargent 18 Wepawaug Road None
Woodbridge, Connecticut
06525
Theodore F. Talmage 11406 Lost Tree Way Retired
North Palm Beach, Florida
33403
Henry H. Townshend, Jr. 709 Townsend Avenue Retired
New Haven, Connecticut
06512
Paul E. Waggoner Vineyard Point Road Director, The Connecticut
Guilford, Connecticut 06437 Agricultural Experiment
Station
A. Porter Waterman Parsonage Road President, Weepor
Greenwich, Connecticut 06830 Corporation
Howard R. Weckerley 17 Cove Road Retired
River Hills Plantation
Clover, South Carolina 29710
SIXTH: (A) INDEMNIFICATION OF DIRECTORS
The corporation shall, to the fullest extent permitted by applicable
banking, corporate and other law and regulations, indemnify any person who
is or was a director of the corporation from and against any and all
expenses, liabilities or other losses arising in connection with any
action, suit, appeal or other proceeding, by reason of the fact that such
person is or was serving as a director of the corporation and may, to the
fullest extent permitted by applicable banking, corporate and other law and
regulation, advance monies to such persons for expenses incurred in
defending any such action, suit, appeal or other proceeding on such terms
as the corporation's Board of Directors shall determine. The corporation
may purchase insurance for the purpose of indemnifying such persons and/or
reimbursing the corporation upon payment of indemnification
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<PAGE>
to such persons to the extent that indemnification is authorized by the
preceding sentences, except that insurance coverage shall not be available
in connection with a formal order by a court or judicial or governmental
body assessing civil money penalties against such person or in the event
that such coverage would be prohibited by applicable banking, corporate and
other law or regulations.
(B) INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS
The corporation shall indemnify any person who is or was an officer,
employee or agent of the corporation or who is or was a director, general
partner, trustee or principal of another entity serving as such at the
request of the corporation from and against any and all expenses,
liabilities or other losses arising in connection with any action, suit,
appeal or other proceeding, by reason of the fact that such person is or
was serving as an officer, employee or agent of the corporation or as a
director of another entity at the request of the corporation to the extent
authorized by the corporate policy of the corporation, as adopted and
modified from time to time by the shareholder of the corporation, except to
the extent that such indemnification would be prohibited by applicable
banking, corporate and other law or regulation. The corporation may advance
monies to such persons for expenses incurred in defending any such action,
suit, appeal or other proceeding in accordance with the corporate policy of
the corporation, as adopted and modified from time to time by the
shareholder of the corporation, except to the extent that such advancement
would be prohibited by applicable banking, corporate and other law or
regulation. The corporation may purchase insurance for the purpose of
indemnifying such persons and/or reimbursing the corporation upon payment
of indemnification to such person to the extent that indemnification is
authorized by the preceding sentence, except that insurance coverage shall
not be available in connection with a formal order by a court or judicial
or governmental body assessing civil money penalties against such person or
in the event that such coverage would be prohibited by applicable banking,
corporate and other law or regulation.
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<PAGE>
EXHIBIT 2
STATE OF CONNECTICUT
DEPARTMENT OF BANKING
260 CONSTITUTION PLAZA - HARTFORD, CT 06103
John P. Burke
Commissioner
CERTIFICATION
I, John P. Burke, Banking Commissioner of the State of Connecticut, do
hereby certify that FIRST UNION BANK OF CONNECTICUT, is a state bank and trust
company duly organized and existing under the laws of the State of Connecticut,
and located in STAMFORD, Connecticut.
In Testimony Whereof, I have hereunto set my hand and affixed my seal at
Hartford, Connecticut, this 21st day of March, 1996.
[S E A L]
/s/ John P. Burke
-----------------------------
John P. Burke
Banking Commissioner
TEL: (203) 240-8299
FAX: (203) 240-8178
AN EQUAL OPPORTUNITY EMPLOYER
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BYLAWS
OF
FIRST UNION BANK OF CONNECTICUT (EFF. 1/1/96)
(FORMERLY FIRST FIDELITY BANK;
FORMERLY UNION TRUST COMPANY)
STAMFORD, CONNECTICUT
AS ADOPTED OCTOBER 12, 1993
ARTICLE I
MEETINGS OF STOCKHOLDERS
ANNUAL MEETING
1. The Annual Meeting of the stockholders of the Company shall be held on such
date between February 1 and April 1 in each year as the Board of Directors
shall designate and at such hour as shall be specified in the notice of
such meeting. The Annual Meeting shall be held at the principal office of
the Company in the Town of New Haven, or such other place within or without
the State of Connecticut as the Board of Directors may designate.
SPECIAL MEETINGS
2. A special meeting of the stockholders shall be called when ordered by a
majority of the Board of Directors or the Chief Executive Officer or when
requested in writing by the holders of record of not less than one-tenth of
the capital stock issued and outstanding.
NOTICE OF MEETINGS
3. Written notice of each stockholders' meeting stating the time, place and
purpose or purposes of the meeting, shall be mailed to each stockholder
entitled to vote at such meeting at his address as shown on the books of
the Company at least ten (10) days before the date of said meeting.
QUORUM
4. At all meetings of the stockholders there shall be present, either in
person or by proxy, stockholders representing a majority of the capital
stock of the Company issued and outstanding, in order to constitute a
quorum for the election of directors or the transaction of other business.
In the absence of a quorum, a majority in interest of the stockholders
present in person or by proxy may adjourn the meeting from time to time,
without further notice, until a quorum shall attend, and thereupon any
business may be
<PAGE>
transacted which might have been transacted at the meeting originally
called.
VOTING
5. At all meetings of the stockholders, each stockholder shall be entitled to
vote, in person or by proxy, one vote for each share of stock standing in
his name on the books of the Company on the record date set for such
meeting.
ARTICLE II
DIRECTORS
GENERAL POWERS
1. The property, affairs and business of the Company shall be managed and
controlled by its Board of Directors, which may exercise all of the
corporate powers of the Company except such as are by law, the Articles of
Incorporation of the Company or the Bylaws expressly conferred upon or
reserved to the stockholders.
NUMBER, TERM OF OFFICE AND QUALIFICATIONS
2. The number of directors of the Company shall be not less than nine (9) nor
more than twenty-five (25). They shall be elected at the Annual Meeting and
shall hold office for one (1) year and until their successors are duly
elected and qualified.
VACANCIES
3. In case of any vacancy among the directors from any cause, the remaining
directors at any regular or special meeting may elect a successor to hold
office until the next Annual Meeting of the stockholders and until his
successor is duly elected and qualified.
ORGANIZATION MEETING OF THE BOARD OF DIRECTORS
4. The Board of Directors at their first meeting after the Annual Meeting of
the stockholders shall elect or appoint officers at or above the level of
senior vice president to serve during the ensuing year.
REGULAR MEETINGS
5. Regular meetings of the Board of Directors shall be held at least quarterly
on such days and time as the Board of Directors may from time to time
determine. No notice of such regular meetings need be given.
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<PAGE>
SPECIAL MEETINGS
6. Special meetings of the Board of Directors shall be called when ordered by
the Chief Executive Officer or when requested in writing by any five
directors, at such time and place as may be designated in such order or
request, and the Secretary of the Company shall give reasonable notice
thereof to each director either by mail, telegraph, facsimile, telephone or
in person. A waiver of notice in writing signed by any director whether
before or after such meeting shall be considered equivalent to proper
notice to such director.
QUORUM
7. A majority of the number of directors serving at the time shall constitute
a quorum at any meeting.
COMPENSATION OF DIRECTORS
8. All directors who are not also officers of the Company or any of its
affiliates shall be entitled to a reasonable fee for attendance at meetings
of the Board and of Committees of the Board, such fee to be fixed from time
to time by a resolution of the Board of Directors or of the Executive
Committee.
TERM OF DIRECTORS
9. No person who shall have attained the age of 70 years as of January first
in any year shall be eligible to be elected a Director or to be re-elected
a Director.
COMMUNICATIONS EQUIPMENT
10. Any or all directors may participate in a meeting of the Board or committee
thereof by means of conference telephone or any means of communication by
which all persons participating in the meeting are able to hear each other.
ACTION WITHOUT MEETING
11. Any action required or permitted to be taken by the Board or committee
thereof by law, the Company's Articles of Incorporation, or these Bylaws
may be taken without a meeting, if, prior or subsequent to the action, all
members of the Board or committee shall individually or collectively
consent in writing to the action. Each written consent or consents shall be
filed with the minutes of the proceedings of the Board or committee. Action
by written consent shall have the same force and effect as a unanimous vote
of the directors, for all purposes. Any certificate or other documents
which relates to action so taken shall state that the action was
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<PAGE>
taken by unanimous written consent of the Board or committee without a
meeting.
ARTICLE III
COMMITTEES
EXECUTIVE COMMITTEES
1. There shall be an Executive Committee which, when the Board of Directors is
not in session, shall have and may exercise all the powers of the Board
that lawfully may be delegated. The Executive Committee shall meet at such
times as the members shall agree and whenever called by the Chairman of the
committee. The Executive Committee shall consist of such number of
directors, not less than. four, as the Board shall from time to time
appoint. A quorum for all meetings of the Executive Committee shall be a
majority of the members. The Board of Directors may appoint a Chairman of
the Executive Committee; in his absence or if no such appointment is made,
the President of the Company shall be its Chairman.
The Executive Committee shall keep a record of its proceedings which shall
be reported to the Board of Directors at its next regular meeting.
In the event of the absence of any member at a meeting, any other director
may be called to serve in his place with full power to act.
OTHER COMMITTEES
2. The Board of Directors shall have the power to appoint, or to authorize the
appointment of, such other committees as it may deem advisable, to
determine the powers, duties, authority and functions of such committees,
to provide for the selection of the members thereof and to determine their
term or tenure of service.
ARTICLE IV
OFFICERS
OFFICERS
1. The Board of Directors shall have the power to appoint a Chairman of the
Board, one or more Vice Chairmen of the Board, a Chief Executive Officer, a
President, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Vice Presidents, a Secretary, a Treasurer, an
Auditor, one or more Trust Officers and such other officers as from time to
time may be elected or appointed by the Board of Directors. The Board may
by resolution authorize the President to appoint other officers with such
titles and duties as he
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<PAGE>
may designate. All officers shall be subject to removal at any time with or
without cause by the affirmative vote of a majority of the whole Board of
Directors. If any office shall become vacant, the Board of Directors may
fill such vacancy. Any officer may hold more than one office, except as
otherwise provided by law.
In its discretion, the Board of Directors may leave unfilled any offices
except those of President, Secretary and Treasurer.
CHIEF EXECUTIVE OFFICER
2. The Board of Directors shall designate who shall be the Chief Executive
Officer of the Company and who shall substitute for him during his absence
or disability. If all of the persons so designated are absent or disabled,
any other senior officer designated by the Executive Committee or by the
Board of Directors as such shall be the Chief Executive Officer. The Chief
Executive Officer shall have general charge of the business of the Company.
POWERS AND DUTIES OF OFFICERS
3. All officers shall perform such duties and possess such powers as shall
pertain to their respective offices, as may be imposed by law, as may be
set forth in these Bylaws, and as may be, from time to time, prescribed by
the Board of Directors or by the Chief Executive Officer.
ARTICLE V
CAPITAL STOCK
1. Transfer of shares shall be made upon the books of the Company by the
holder in person, or by power of attorney, duly executed, witnessed and
filed with the Secretary or other proper officer of the Company, upon
surrender of the certificate or certificates of such shares. In case of the
loss or destruction of a certificate another may be issued in its place
upon proof of loss or destruction which shall be satisfactory to the Board
of Directors.
ARTICLE VI
EMERGENCIES
1. In the event of any emergency caused by enemy action,nuclear disaster or
accident, storm, fire, flood, explosion or other cause (the continuation of
any such event being referred to herein as a "State of Emergency" declared
by the President of the United States or the person performing his
functions, Governor of the State or any Federal or State banking regulatory
agency having jurisdiction over the Company), of
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<PAGE>
sufficient severity to prevent the conduct and management of the affairs
and business of the Company as contemplated by these Bylaws other than this
paragraph 1, then during the existence of such State of Emergency,
(a) The requirement of these Bylaws as to notice and place of directors'
meetings shall be waived and the Board of Directors shall have the
power, in the absence or disability of any officer or upon the refusal
of any officer to act, to delegate and prescribe such officer's powers
and duties to any other officer, or to any director; any powers
granted to the Board of Directors pursuant to this paragraph (a) may
be exercised as provided in paragraph (b) below:
(b) Any two or more members of the Executive Committee shall constitute a
quorum of that Committee during such State of Emergency for the full
conduct and management of the affairs and business of the Company in
accordance with the provisions of Article m of these Bylaws. In the
event that two members of the then incumbent Executive Committee do
not present themselves at the Head Office or Acting Head Office, and
only for the period during which two such members are not present, an
interim committee consisting of all of the remaining directors present
at such office and willing to serve shall perform the functions of the
Executive Committee for the full conduct and management of the affairs
and business of the Company in accordance with the foregoing
provisions of this Section; provided, however, that no action may be
taken by such interim committee present and voting at a meeting
attended by no less than two such members; and
(c) The business ordinarily conducted at the Head Office or any branch
office of the Company may be relocated elsewhere in suitable quarters,
in addition to or in lieu of its normal location, as may be designated
by the Board of Directors or by the Executive Committee or by such
interim committee as may be conducting the affairs of the Company
pursuant to paragraph (b) above.
Actions taken pursuant to this Section are subject to conformity with any
governmental directives issued during any such State of Emergency. Actions taken
pursuant to this Section may be ratified at the next annual meeting of
stockholders or at a special meeting called for that purpose; however, failure
to ratify shall not render any action duly taken pursuant to this Section
illegal or invalid as against third persons who have acquired rights or incurred
disabilities in reliance thereon.
2. To the full extent permitted by applicable law, the Company will indemnify
any director, officer or employee of the
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<PAGE>
Company for any actions taken in good faith by such person during any State
of Emergency pursuant to this Article VI or any resolution adopted in
accordance herewith.
ARTICLE VII
CORPORATE SEAL
SEAL
1. The seal, an impression of which appears below, is the seal of the Company
as adopted by the Board of Directors:
[Seal]
The Chairman of the Board, the Vice Chairman, the Chief Executive Officer,
the President, Senior Executive Vice President, Executive Vice President,
Senior Vice President, Vice President, each Assistant Vice President, the
Chief Financial Officer, the Secretary, each Assistant Secretary, each
Trust Officer, or each Assistant Trust Officer shall have the authority to
affix the corporate seal of this Company and to attest to the same.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
FISCAL YEAR
1. The fiscal year of the Company shall be the calendar year.
EXECUTION OF INSTRUMENTS
2. All agreements, contracts, indentures, mortgages, deeds, conveyances,
transfers, certificates, declarations, receipts, discharges, releases,
satisfactions, settlements, petitions, schedules, accounts, affidavits,
bonds, undertakings, proxies and other instruments or documents may be
signed, executed, acknowledged, verified, delivered or accepted in behalf
of the Company by the Chairman of the Board, or Vice Chairman, or Chief
Executive Officer, or the President, or Senior Executive Vice President, or
Executive Vice President, or Senior Vice President, or Vice President, or
Assistant Vice President, or Chief Financial Officer, or the Secretary, or
Assistant Secretary, or, if in connection with the exercise of fiduciary
powers of the Company, by any of said officers or by any Trust Officer or
Assistant Trust Officer, to the extent authorized by the corporate policy
of the Company, as adopted and modified from time to time. Any such
instruments may also be executed, acknowledged, verified, delivered, or
accepted in
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<PAGE>
behalf of the Company in such other manner and by such other officers as
the Board may from time to time direct.
VOTING SHARES OF OTHER CORPORATIONS
3. The Chairman, Vice Chairman, or President are authorized to vote, represent
and exercise on behalf of this Company all rights incident to any and all
shares of stock of any other corporation standing in the name of the
Company. The authority granted herein may be exercised by such officers in
person or by proxy or by power of attorney duly executed by said officer.
ARTICLE IX
AMENDMENTS
1. These Bylaws may be altered, amended, or added to by the stockholders at
any annual or special meeting or to the extent permitted by law, by the
Board of Directors at any meeting, provided in either case notice thereof
has been given.
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<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939 in connection with the 131/2% Series B Senior Secured Notes due 2002 of
the Mohegan Tribal Gaming Authority, First Union Bank of Connecticut hereby
consents that reports of examinations of Federal, state, territorial or district
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
FIRST UNION BANK OF CONNECTICUT
By: /s/ W. Jeffrey Kramer
----------------------------------
W. Jeffrey Kramer
Its Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
BALANCE SHEET OF THE AUTHORITY AS OF MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 134,437
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 134,437
<PP&E> 104,026
<DEPRECIATION> 0
<TOTAL-ASSETS> 251,137
<CURRENT-LIABILITIES> 35,816
<BONDS> 215,342
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 251,137
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
