<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from inception to September 30, 1996
Commission file number 033-80655
MOHEGAN TRIBAL GAMING AUTHORITY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARACTER)
Non applicable 06-143633
----------------------------------------------------------
(State or other jurisdiction of (IRS employer
incorporation or organization) Identification No.)
Mohegan Sun Boulevard, P. O. Box 348, Uncasville, CT 06382
-----------------------------------------------------------
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860) 204-7190
Securities Registered Pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
--- ---
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No .
--- ---
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
INDEX
PART I. PAGE
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II.
Item 5. Market 6
Item 6. Selected Financial Data 6
Item 7. Management Discussion and Analysis 6
Item 8. Financial Statements and Supplementary Data 7
Item 9. Change in and Disagreements with Accountants 7
PART III.
Item 10. Executive Officers 8
Item 11. Executive Compensation 12
Item 12. Security Ownership 12
Item 13. Related Party Transactions 12
PART IV.
Item 14. Exhibits and Schedules 13
<PAGE>
PART I
------
ITEM 1 - BUSINESS
- -----------------
A. GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
The Mohegan Tribal Gaming Authority (the "Authority"), established in July
15, 1995, is an instrumentality of the Mohegan Tribe of Indians of
Connecticut (the "Tribe"). The Authority is developing a gaming and
entertainment facility (the "Mohegan Sun"). The Authority's year-end is
September 30.
The Authority has two major functions. The first, delegated to the
Authority's Management Board, was to engage Trading Cove Associates ("TCA"),
a Connecticut general partnership, to manage the development, operation,
management, promotion and construction of the Mohegan Sun and all related
development. The Management Board consist of the nine members of the Council
(the governing body of the Tribe). 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 between the Tribe and TCA (the
"Management Agreement") and consists of two members appointed by the Tribe
and two members appointed by TCA.
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. The Director is responsible for issuance and revocation
of gaming licenses and employs a staff that is responsible for performing
background investigation into gaming license applicants.
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 Sun 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.
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 U.S.
Secretary of the Interior.
<PAGE>
The Authority has engaged TCA to manage the development, construction and
operation of the Mohegan Sun. TCA is 50% owned by Sun Cove Ltd., an owned
affiliate of Sun International Hotels Limited ("Sun International") and 50%
by Waterford Gaming, LLC.
The Authority is financing the development of the Mohegan Sun with the
proceeds of the sale of $175.0 million of 13 1/2% Senior Notes due 2002 (the
"Senior Notes"), $40.0 million of Subordinated Notes due 2003 (the
"Subordinated Notes"), approximately $40.0 million available under
equipment lease financing (the "Equipment Financing") and approximately $13.0
million of senior indebtedness available for working capital purposes (the
"Working Capital Financing"). In addition, Sun International has provided a
$50.0 million secured completion guarantee to fund any cost overruns (the
"Secured Completion Guarantee").
B. NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
GENERAL
- -------
The Mohegan Sun is located on a heavily wooded 240-acre site on the banks of
the Thames River, in southeastern Connecticut. The Mohegan Sun's historical
northeastern Indian theme is conveyed through architectural features and the
use of natural design elements such as timber, stone, and water. The Mohegan
Sun is separated into four themed quadrants, each of which has its own unique
entrance and is 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 includes
approximately 150,000 square feet of gaming space, and is designed to
accommodate approximately 3,000 slot machines and 180 table games. At the
commencement of operation on October 12, 1996, the Authority had 2,500 slot
machines and 179 table games.
The Mohegan Sun food service includes a 680-seat buffet, three specialty
theme restaurants, a coffee shop, deli and a large food court. Multiple
full-service and floor service bars are located throughout the facility, plus
a lounge with live entertainment. For non-gaming entertainment, the Mohegan
Sun offers a children's recreation area and child care facilities.
CURRENT STATUS
- --------------
Although Mohegan Sun commenced operations subsequent to year-end, the final
costs of developing, contructing, equipping and opening the Mohegan Sun have
not been finalized. The $318 million total budgeted project costs are based
on budgets prepared by the Authority with the assistance of Sun
International, TCA and the contractors. The Authority has entered into a
guaranteed maximum price contract with the general contractor, Morse Diesel
International, for the construction of Mohegan Sun. The final amount paid
under such contract, however, is subject to modification based upon the
occurrence of certain events, such as design change orders and costs
associated with
2
<PAGE>
certain types of delays. The Authority and Morse Diesel
International currently are negotiating whether certain costs incurred in
construction of the Mohegan Sun are covered under the guaranteed maximum
price or whether such cost increases are the result of change orders or other
events that could result in an increase in the contract price above the
guaranteed maximum price. The resolution of all or some of these issues in
favor of Morse Diesel International may result in the final cost of Mohegan
Sun exceeding its current budget. Based upon its review of the budget and the
open cost items, the Authority believes that the final, total cost of
developing, constructing, equipping and opening the Mohegan Sun will not
exceed the sum of the proceeds from the sale of the Senior Notes and the
Subordinated Notes and amounts available under the Secured Completion
Guarantee, the Equipment Financing and the Working Capital Financing.
However, there is no assurance that such costs will not exceed budgeted
amounts. As of December 4, 1996, the Authority has drawn $42 million under
the Secured Completion Guarantee and issued additional subordinated notes to
Sun International in principal amount equal of the amount of the draw. The
Authority may not obligate itself to pay development costs in excess of $325
million without the further consent of the National Indian Gaming Commission
(the "NIGC"). In the event the resolution of the issues with Morse Diesel
International result in total development costs being in excess of $325
million, the Authority would require the consent of the NIGC, and there can
be no assurances such consent would be given.
SEASONABILITY
- -------------
Mohegan Sun currently operates in an industry which reflects the conditions
that the seasons bring to Connecticut. The volume tends to peak in spring and
summer as tourists come to the east coast, while fall and winter seasons tend
to decline slightly as the climate changes.
COMPETITIVE CONDITIONS
- ----------------------
Because Mohegan Sun is marketed primarily to the day-trip customer, it
competes 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 Mohegan Sun site. Foxwoods is
located approximately 10 miles from the Mohegan Sun site and is currently the
largest gaming facility in the United States in terms of the number of slot
machines.
Currently, outside 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 seeking to establish
gaming operations in their respective states. The Oneida Tribe, which
operates a gaming facility in upstate New York, is seeking to expand its
operations. In addition, a number of Indian 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 of Mohegan Sun.
In addition, a number of states, including Connecticut, have investigated
legalizing casino gaming by non-Indians in one or more locations. In November
1995, the Connecticut state legislature rejected a proposal submitted by the
Pequot Tribe to develop a casino in Bridgeport, Connecticut. The Pequot
proposal has been submitted in response to a request for proposals made by
the State of Connecticut. Under the Compact, the Authority believes that if
Connecticut were to legalize 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 Mohegan Tribe would no
3
<PAGE>
longer be required to make payments to the State of Connecticut related to
slot machine revenues (see Note 6 to Financial Statements). The Authority is
unable to predict whether the Connecticut state legislature will accept any
other casino proposal and, if such proposal results in a casino being
contructed and opened, whether such casino will have a material adverse
effect on Mohegan Sun.
ITEM 2 - PROPERTIES
- -------------------
The Authority has entered into a 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 one additional 25 year term 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 of the Subordinated Notes, as described in Note 2 to
the Financial Statements, 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
additional parcel (See Note 1 to Financial Statements) 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 building
(40 years).
The Site for Mohegan Sun, located approximately one mile from the interchange
of I-395 and Connecticut Route 2A (which has been widened to a four-lane
expressway), is just outside Montville, Connecticut. As part of its
integrated development plan, the Authority has constructed a four-lane access
road (with its own exit) from Route 2A, giving patrons of the Mohegan Sun
direct access to Interstate 395 and Interstate 95, the main highway
connecting Boston, Providence, and New York.
4
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
The Authority does not have any legal proceedings pending as of September 30,
1996.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
5
<PAGE>
PART II
-------
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
- -------------------------------------------------------------------------------
Not applicable.
ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------
The Authority was organized in July 1995 and completed its first full fiscal
year on September 30, 1996. As a result of the Authority's brief operating
history, Selected Financial Data has been omitted from Item 6 and readers are
referred to the audited Financial Statements of the Authority contained
elsewhere herein under Item 8.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------
GENERAL
- -------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Proceeeds from the sale of the Senior Secured Notes and Subordinated Notes
along with amounts available under Working Capital Financing and the
Equipment Financing are the Authority's principal sources of liquidity for
the fiscal year ended September 30, 1996.
The cost of developing, constructing, equipping and opening the Mohegan Sun
is expected to total approximately $318.0 million, which consists of $305.0
million of project development costs and $13.0 million of initial working
capital.
Management has secured cash from Senior Secured Notes of $175.0 million,
Equipment Financing for up to $40.0 million, Subordinated Notes of $40.0
million, $50.0 million under the Secured Completion Guarantee provided by Sun
International and $13.0 million in Working Capital which are the Authority's
principal sources of liquidity.
For the period from inception, July 15, 1995, through September 30, 1996, the
Authority expended $230.5 million for the development of the Mohegan Sun which
included $14.9 million of interest paid on May 15, 1996, to the holders of the
Senior Notes.
In addition, on November 15, 1996, Mohegan Sun has made an interest payment
of $11.8 million to the holders of the Senior Notes. As of December 4, 1996,
the Authority has drawn $42.0 million under the Secured Completion Guarantee
and issued additional subordinated notes to Sun International in principal
amount equal to the amount of the draw.
6
<PAGE>
Management believes that with the commencement of operations at the Mohegan
Sun, on October 12, 1996, cash flow from operating activities will be sufficient
to pay for operations and service all debt incurred for the development of the
Mohegan Sun.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
See Index to Financial Statements on page 15.
ITEM 9 - CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
7
<PAGE>
PART III
--------
ITEM 10 - EXECUTIVE OFFICERS AND MEMBERS OF THE MANAGEMENT BOARD
- ----------------------------------------------------------------
MANAGEMENT
- ----------
The senior management for the Authority is responsible for the day to day
operations of Mohegan Sun. Generally, matters of policy pertaining to the
business of the Mohegan Sun must be approved by the Business Board.
The Authority has two major functions. The first, delegated to the
Authority's Management Board, was to engage TCA to manage the development,
operation, management, promotion and construction of the gaming enterprise
and all related development. The Management Board consist of the nine 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.
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. The Director of Regulation is responsible for issuance
and revocation of gaming licenses and employs a staff that is responsible for
performing background investigation into gaming license applicants.
The Senior Management of Mohegan Sun has been actively engaged in the gaming
and lodging industries over the past twenty years.
The following table provides information as of September 30, 1996 with
respect to each of (i) executive officers of the Authority and (ii) the
members of the Management Board.
Name Age Position
- ---- --- --------
Roland Harris............. 49 Chairman and member, Management Board
8
<PAGE>
Name Age Position
- ---- --- --------
Jayne Fawcett............. 59 Vice Chairman and member, Management Board
William J. Velardo........ 41 Executive Vice President and General Manager
George T. Papanier........ 39 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- Mr. 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. 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 as Fire Marshall and Inspector of the Town of
Griswold. Prior to assuming the Chairmanship of the Management Board, Mr.
Harris serves 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- Ms. 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.
WILLIAM J. VELARDO- Mr. Velardo 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. Velardo
was Chief Operating Officer for River City, a riverboat gaming joint venture in
New Orleans, Louisiana. From 1991 to
9
<PAGE>
1994, Mr. Velardo served as Senior Vice President, Casino Operations
at Trump Plaza Hotel and Casino in New Jersey. Mr. Velardo opened the Mirage
in Las Vegas and was Vice President, Table Games from 1989 to 1991. Mr.
Velardo also worked as Assistant Casino Manager and Pit Manager for Caesars
Tahoe and Caesars Palace.
GEORGE T. PAPANIER- Mr. Papanier has been Senior Vice President of Finance
and the Chief Financial Officer of the Authority since October 1995. He has
17 years 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- Mr. 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- Mr. Fowler has been the Treasurer and a member of the
Management Board since July 15, 1995 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- Mrs. 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.
SHIRLEY WALSH- Mrs. 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- Mr. Brown has been a member of the Management Board since October
1995 and serves as the secretary liaison for the Council. Prior to joinng the
Council, he served as a law enforcement officer for eight years. Mr. Brown
worked with the Tribe's
10
<PAGE>
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- Mr. 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 a Pfizer until his
retirement in 1990. He 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- Mr. 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- Mr. 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.
11
<PAGE>
ITEM 11 - EXECUTIVES COMPENSATION
- ---------------------------------
The Authority does not offer their executive offers stock option or stock
appreciation right plans.
The following table set for compensation paid or accrued during the year-end
September 30, 1996, to the Executive Officers:
SUMMARY COMPENSATION TABLE
--------------------------
Fiscal
Name and Principal Position Year Ended Salary
- --------------------------- ---------- --------
William J. Velardo 1996 $270,078
Executive Vice President
Mitchell Grossinger Etess 1996 $159,411
Senior Vice President Marketing
George T. Papanier 1996 $146,105
Senior Vice President Finance
and Chief Financial Officer
ITEM 12 - SECURITY OWNERSHIP
- ----------------------------
The Gaming Authority has no outstanding voting securities.
ITEM 13 - RELATED PARTY TRANSACTIONS
- ------------------------------------
Mohegan Sun is managed by Trading Cove Associates, a partnership owned
equally by Waterford Gaming LLC and a wholly-owned subsidiary of Sun
International. Some employees of the Authority are tribal members.
Additionally, it is the intention of the Authority to provide contracts or
services to the members of the Tribe when compatible to the local market.
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. Roland Harris, Chairman of the
Management Board of the Authority, is the founder and president of the Harris
and Clark, Inc. As of September 30, 1996, the Authority had paid
approximately $547,706 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.
12
<PAGE>
PART IV
-------
ITEM 14 - EXHIBITS AND SCHEDULES
- --------------------------------
Exhibit
No. Description
- ------- -----------
3.1 Constitution of the Mohegan Tribe of Indians of Connecticut
(the "Tribe") ratified by Tribal vote on April 12, 1996
{**Exhibit 3.1}*
3.2 Ordinance No. 95-7/15-1 of the Tribe for Gaming on Tribal
Lands, enacted on July 20, 1995 {**Exhibit 3.2}*
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 {**Exhibit 4.1}*
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 {**Exhibit 4.2}*
4.3 Registration Rights Agreement dated as of September 29, 1995
among the Authority and the initial Purchasers {**Exhibit 4.3}*
10.1 The Mohegan Tribe--State of Connecticut Gaming Mohegan Compact
between the Tribe and the State of Connecticut (the "Compact")
{**Exhibit 10.1}*
10.2 Agreement dated April 25, 1994 between the Tribe and the State
of Connecticut resolving certain land claims (the "Resolution
Agreement") {**Exhibit 10.2}*
10.3 Memorandum of Understanding April 25, 1994 between the Tribe
and the State of Connecticut regarding implementation of the
Compact and the Resolution Agreement {**Exhibit 10.3}*
10.4 Agreement between the Tribe and the Town of Montville,
Connecticut {**Exhibit 10.4}*
- ---------------------
* Incorporated herein by reference to the specified Exhibit to the
Authority's Registration Statement on Form S-1 (Registration No. 33-80655).
13
<PAGE>
Exhibit
No. Description
- ------- -----------
10.5 Land Lease dated September 29, 1995 between the Tribe and the
Authority; Amendment of Land Lease dated September 29, 1995
{**Exhibit 10.5}*
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 {**Exhibit 10.6}*
10.7 Amended and Restated Gaming Facility Development and
Construction Agreement dated September 1, 1995 between the Tribe
and Trading Cove Associates ("TCA") {**Exhibit 10.7}*
10.8 Amended and Restated Gaming Facility Management Agreement
dated August 30, 1995 between the Tribe and TCA {**Exhibit
10.8}*
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 {**Exhibit 10.9}*
10.10 Note Purchase Agreement dated as of September 29, 1995 between
the Authority and Sun {**Exhibit 10.10}*
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 {**Exhibit 10.11}*
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 {**Exhibit 10.12}*
10.13 Pledge Agreement dated September 29, 1995 between Sun
International Investments Limited and First Fidelity Bank
{**Exhibit 10.13}*
24.1 Consent of Independent Public Accounts of the Authority
(as filed on page F-1 of 10-K)
27 Financial Data Schedule
- ---------------------
* Incorporated herein by reference to the specified Exhibit to the
Authority's Registration Statement on Form S-1 (Registration No. 33-80655).
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-1
Balance Sheets of Mohegan Tribal Gaming Authority as of
September 30, 1996 and 1995 F-2-F-3
Statement of Cash Flows of Mohegan Tribal Gaming Authority
as of September 30, 1996 and 1995 F-4
Notes to Financial Statements of Mohegan Tribal Gaming Authority F-5-F-13
15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Mohegan Tribal Gaming Authority:
We have audited the accompanying balance sheets of the Mohegan Tribal Gaming
Authority (a development state entity) as of September 30, 1996 and 1995, and
cash flows for the period of inception (July 15, 1995) to September 30, 1996.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Mohegan Tribal Gaming
Authority as of September 30, 1996 and 1995, and its cash flows for the
period from inception (July 15, 1995) to September 30, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
November 27, 1996
F-1
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
-------------------------------
BALANCE SHEETS
--------------
AS OF SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
-----------------------------------------------
(in thousands)
--------------
ASSETS SEPTEMBER 30, SEPTEMBER 30,
------ 1996 1995
---- ----
CURRENT ASSETS:
Cash $ 7,437 $ --
Restricted cash 5,100 213,300
Deposits 5,900 --
Inventory 819 --
Other current assets 2,135 --
-------- --------
Total Current Assets 21,391 213,300
-------- --------
CAPITALIZED PROPERTY COSTS:
Deferred lease cost 30,081 --
Leasehold interest under construction 220,578 --
Furniture, fixture & equipment 14,259 --
-------- --------
Total Capitalized Property
Costs 264,918 --
-------- --------
OTHER ASSETS:
Pre-opening costs 11,186 --
Deferred financing costs 9,286 11,352
Organizational costs 700 700
-------- --------
Total Other Assets 21,172 12,052
-------- --------
Total Assets $307,481 $225,352
-------- --------
-------- --------
The accompanying notes to financial statements are an integral part of these
statements.
F-2
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
-------------------------------
BALANCE SHEETS
--------------
AS OF SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
-----------------------------------------------
(in thousands)
--------------
LIABILITIES SEPTEMBER 30, SEPTEMBER 30,
----------- 1996 1995
---- ----
CURRENT LIABILITIES:
Construction retainage $ 9,738 $ --
Current maturities of long-term debt 250 --
Accounts payable 33,077 10,352
Accrued interest 15,232 --
Accrued liabilities 1,208 --
Credit line 4,749 --
Other current liabilities 227 --
-------- --------
Total Current Liabilities 64,481 10,352
-------- --------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 5)
NON-CURRENT LIABILITIES:
Senior notes 175,000 175,000
Subordinated notes 67,000 40,000
Other long-term debt, net of
current maturities 1,000 --
-------- --------
Total Non-Current Liabilities 243,000 215,000
-------- --------
Total Liabilities $307,481 $225,352
-------- --------
-------- --------
The accompanying notes to financial statements are an integral part of these
statements.
F-3
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
-------------------------------
STATEMENT OF CASH FLOW
----------------------
FOR THE PERIOD FROM INCEPTION (JULY 15, 1995)
---------------------------------------------
THROUGH SEPTEMBER 30, 1996
--------------------------
(in thousands)
--------------
PRE-OPENING ACTIVITIES:
Increase in inventory $ (819)
Increase in deposits (5,900)
Increase in other current assets (2,135)
Increase in construction retainage 9,738
Increase in accounts payable 33,077
Increase in accrued liabilities and interest 16,440
Increase in other current liabilities 727
---------
Net cash provided by pre-opening activities 51,128
---------
INVESTING ACTIVITIES
Deferred lease cost (30,081)
Leasehold interest under construction (220,578)
Net equipment additions (14,259)
Pre-opening costs (11,186)
Deferred financing costs (9,286)
Organizational costs (700)
---------
Net cash used in investing activities (286,090)
---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 247,499
---------
Net cash provided by financing activities 247,499
---------
Net increase in cash and cash equivalents 12,537
---------
CASH AND CASH EQUIVALENTS, at beginning of period --
---------
CASH AND CASH EQUIVALENTS, at end of period 12,537
---------
---------
SUPPLEMENTAL INFORMATION:
INTEREST PAID $ 14,925
---------
---------
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY:
- ----------------------------------------------------------------
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES:
- -------------------------------------------------------------------
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 is developing a gaming and entertainment facility
(the "Mohegan Sun"). The Authority's year-end is September 30.
The Tribe and the Authority have entered into a land lease ("Lease") (see
Note 3) pursuant to which the Tribe is leasing to the Authority certain land
located in southeastern Connecticut on which the Mohegan Sun 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.
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 Sun. TCA is 50% owned
by Sun Cove, an affiliate of Sun International Hotels Limited ("Sun
International"), and 50% by Waterford Gaming, LLC.
The Authority is financing the development of the Mohegan Sun with the
proceeds of the sale of senior notes, subordinated notes and equipment and
working capital financing as described in Note 2. The total cost of
development and construction of Mohegan Sun and working capital is estimated
to be $318 million, all of which has been obtained as of the balance sheet
date as follows (000's):
Senior Notes $175,000
Subordinated Notes 40,000
Subordinated Notes: Secured
Completion Guarantee 50,000
Working Capital Financing 13,000
Equipment Financing 40,000
--------
$318,000
--------
--------
F-5
<PAGE>
The Secured Completion Guarantee provides that, subject to certain
qualifications, Sun International will provide up to $50.0 million to fund
any cost overruns incurred in connection with the construction, development,
equipping and opening of the Mohegan Sun. The Guarantee terminates on
September 30, 1997, or, if certain other criteria are met as agreed upon by
the Authority and Sun International. Any draws on the Guarantee are 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 are payable under the same terms as the subordinated
notes (see Note 2).
USE OF ESTIMATES IN THE PRESENTATION OF FINANCIAL STATEMENTS -
- --------------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCING INSTRUMENTS -
- -------------------------------------
The Authority's carrying amount of financial instruments including cash,
payables and debt, approximate fair market value.
DEVELOPMENT STAGE ENTERPRISE -
- ------------------------------
The Authority is classified as a Development Stage enterprise as defined by
Statement of Financial Accounting Standards No. 7.
CASH EQUIVALENTS -
- ------------------
For purposes of the Financial Statements, the Authority has considered all
investments with maturities of three months or less to be cash equivalents.
RESTRICTED CASH
- ---------------
Included in restricted cash are approximately $850,000 held as collateral for
road construction permits and land required for the completion of the
Authority's roadway access and approximately $4.3 million in working capital
for the impressment of the slot machines.
F-6
<PAGE>
DEPOSITS AND OTHER CURRENT ASSETS
- ---------------------------------
The Authority has expended approximately $5.9 million in deposits for items
relating to the development of the Mohegan Sun that will be refunded in full
during the first quarter of fiscal 1997.
INVENTORIES
- -----------
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
CAPITALIZED PROPERTY COSTS -
- ----------------------------
Capitalized property costs consist of (i) deferred lease costs related to the
payment made by the Authority on behalf of the Tribe for the acquisition of
the Site, (ii) leasehold interest costs which represent costs incurred
through the balance sheet date for the construction of the Mohegan Sun and
(iii) 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 40-50 years
Equipment 5-7 years
DEFERRED LEASE COST -
- ---------------------
Deferred lease cost consists of the following (000's):
Acquisition cost of the site $28,581
Acquisition cost of additional
parcel 1,500
-------
$30,081
-------
-------
The Site and the additional parcel 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 the issuance of the senior notes
and the subordinated notes. Organization costs represent primarily legal
costs incurred in the organization of the Authority.
F-7
<PAGE>
Beginning on the opening date of the Mohegan Sun, 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
RETAINAGE
- ---------
Retainage consists of amounts withheld from construction draws for the
General and Infrastructure contractor to ensure adequate performance and
completion of the development of Mohegan Sun and is expected to be remitted
in the 1997 fiscal year.
2. DEBT
- -------
A. 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 in an aggregate amount of 5.0% of the
Authority's Cash Flow 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 and commenced 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 Sun 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.
B. The Authority has obtained $67.0 million of subordinated financing from
Sun International and Waterford Gaming LLC in the form of two notes. The
first note for $40.0 million (Subordinated Notes) bears interest at 15% per
year, paid semi-annually. The second note for $27.0 million (Secured
Completion Guarantee) bears interest at 1% over prime. Both are due 2003;
however, principal cannot be paid until the Senior Notes have been paid in
full, unless certain conditions are met.
C. The Authority has obtained a mortgage note payable of approximately $1.3
million from a local bank to fund property purchased for the development of
Mohegan Sun payable in yearly payments of $250,000 for 5 years.
F-8
<PAGE>
D. The Authority has obtained two lines of credit totaling $13.0 million.
The line of credit for $12.5 million, obtained from Fleet Bank, offers LIBOR
and Base rate options (9.25% as of September 30, 1996). The maximum
borrowings under the Fleet line of credit shall be reduced by $2,000,000 on
April 1, 1997 and by an additional $2,000,000 on each one month anniversary
date thereafter. The second line of credit for $500 thousand was obtained
from Norwich Savings bears interest at a rate of 7 3/4%. As of September 30,
1996, $4.8 million was outstanding under both lines of credit. These amounts
were used for the impressment of slot machines and Bingo operations.
Long-term debt consists of the following(000's):
Senior Secured Notes (A) $175,000
Subordinated Notes (B) 67,000
Mortgage Note Payable (C) 1,250
Line of Credit (D) 4,749
--------
Total Debt 247,999
Less Current Maturities 4,999
--------
$243,000
--------
--------
The above described debt is secured by substantially all the assets of the
Authority.
REPAYMENTS OF DEBT FOR NEXT FIVE YEARS
Year ending
September 30, Amounts
- ------------- -------
(000's)
1997 $ 4,999
1998 250
1999 250
2000 250
2001 250
THEREAFTER 242,000
--------
$247,999
--------
--------
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 Sun, which is subject to financial, economic, political,
competitive, and other factors, many of which are beyond the Authority's
control.
F-9
<PAGE>
The amount of interest capitalized in leasehold interest under construction
on the balance sheet for the period from inception to September 30, 1996, was
approximately $30.2 million.
3. LEASE AGREEMENTS-
- ---------------------
As discussed in Note 1, the Authority has entered into a 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. These 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).
The Authority leases various equipment and vehicles under operating
leases. Future minimum lease payments under the noncancelable operating
leases are as follows:
Amounts
-------
(000's)
1997 $3,664
1998 3,650
1999 3,421
2000 3,041
Thereafter -0-
--------
$13,776
========
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.
F-10
<PAGE>
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 Sun by TCA. The
total cost of the Mohegan Sun 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 Sun. 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 Sun 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 Sun's net revenues (as defined). 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 Sun. The Tribe has assigned its rights in and delegated its
obligations under the Management Agreement to the Authority.
The Authority has entered into a guaranteed maximum price contract with the
general contractor, Morse Diesel International, for the construction of the
Mohegan Sun. The final amount paid under such contract, however, is subject
to modification based upon the occurrence of certain events, such as design
change orders and costs associated with certain types of delays. The
Authority and Morse Diesel International currently are negotiating whether
certain costs incurred in construction or the Mohegan Sun are covered under
the guaranteed maximum price or whether such cost increases are the result of
change orders or other events that could result in an increase in the
contract price above the guaranteed maximum price. The resolution of all or
some of these issues in favor of Morse Diesel International may result in the
final cost of Mohegan Sun exceeding its current budget. Based upon its review
of the budget and the open cost items, the Authority believes that the final,
total cost of developing, constructing, equipping and opening the Mohegan Sun
will not exceed the sum of the proceeds from the sale of the Senior Notes and
the Subordinated Notes and amounts available under the Secured Completion
Guarantee, the Equipment Financing and the Working Capital Financing.
However, there is no assurance that such costs will not exceed budgeted
amounts. As of December 4, 1996, the Authority has drawn $42 million under
the Secured Completion Guarantee and issued additional subordinated notes to
Sun International in principal amount equal to the amount of the draw. The
Authority may not obligate itself to pay development costs in excess of $325
million without the further consent of the National Indian Gaming Commission
(the "NIGC"). In the event the resolution of the issues with Morse Diesel
International result in total development costs
F-11
<PAGE>
being in excess of $325 million, the Authority would require the consent of
the NIGC, and there can be no assurances such consent would be given.
The Authority has established a Cash Maintenance Account as a way of
accumulating funds to protect the Bond Holders in the event of a default. For
the calendar years ended 1997-2001, the annual deposit required is $6.0
million per year and thereafter, such amount necessary to keep at least $36.0
million in the Cash Maintenance Account.
The Authority also has established an Interest and Excess Cash Flow Account
into which it must place the fixed interest accrued during each month on the
Senior Debt and the Subordinated Debt, 50% of the Excess Cash Flow (as
defined) generated by the Mohegan Sun in the previous month and the Cash Flow
Participating interest accrued for the prior month. These amounts are to be
used to pay current interest and to provide funds for redemption of Senior
Debt as provided in the Indenture. If the Senior Debt holders decline
redemption, these funds may be used to redeem the subordinated debt, with any
remaining balance available for distribution to the Tribe.
The Authority shall also make a minimum monthly payment to the Tribe of
$50,000. In addition, the Authority may make a monthly payment to the Tribe
with respect to net revenues (as defined), generated by the Mohegan Sun in
the preceding month. Such amount shall only be made after certain other
minimum Priority Payments and required deposits in to certain reserve
accounts (as defined) have been made. No payments have been made or are due
as of September 30, 1996.
6. COMPACT WITH THE STATE OF CONNECTICUT
- ----------------------------------------
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 September 30, 1996.
7. TOWN OF MONTVILLE
- --------------------
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 $3.0 million to make improvements to
the Town's water system, which improvements are necessitated by the
development and operation of the Mohegan Sun. The one-time payment is due
F-12
<PAGE>
and the annual payments commence one year after the commencement of slot
machine gaming activities.
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 $3.0 million for
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.
8. SUBSEQUENT EVENTS
- --------------------
As of September 30, 1996, the Authority has entered into or is negotiating
various commitments to obtain (through purchase or under capital or operating
leases) approximately $56.9 million worth of assets. Also, the Authority has
drawn down an additional $6 million on the working capital line of credit
subsequent to September 30, 1996.
Mohegan Sun plans on implementing a 401(k) plan during the second quarter of
fiscal 1997.
Mohegan Sun opened to the general public on October 12, 1996.
F-13
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be on its
behalf by the undersigned, thereunto duly authorized.
MOHEGAN TRIBAL GAMING AUTHORITY
-------------------------------
Date: December 30, 1996 By: /s/ Roland Harris
----------------------------- ---------------------------------
Roland Harris,
Business Board Member
Date: December 30, 1996 By: /s/ Len Wolman
----------------------------- ---------------------------------
Len Wolman,
Business Board Member
Date: December 30, 1996 By: /s/ William J. Velardo
----------------------------- ---------------------------------
William J. Velardo,
Executive Vice President
Date: December 30, 1996 By: /s/ George T. Papanier
----------------------------- ---------------------------------
George T. Papanier, CFO and
Senior Vice President of Finance
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 12,537
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 819
<CURRENT-ASSETS> 21,391
<PP&E> 264,918
<DEPRECIATION> 0
<TOTAL-ASSETS> 307,481
<CURRENT-LIABILITIES> 64,481
<BONDS> 243,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 307,481
<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>
