As filed with the Securities and Exchange Commission on December 13, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
WATERFORD GAMING, L.L.C.
p WATERFORD GAMING FINANCE CORP.
(Exact name of registrant as specified in its charter)
Delaware 7999 06-146-5402
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
----------------------
914 Hartford Turnpike
P.O. Box 715
Waterford, CT 06385
(860) 442-4559
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------------------
Len Wolman
President
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
914 Hartford Turnpike
P.O. Box 715
(860) 442-4559
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies to:
Raymond Y. Lin
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
(212) 906-1200
----------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being
offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================
Proposed Proposed
Title of Each Offering Price Aggregate Amount of
Class of Securities Amount to be per Offering Registration
to be Registered Registered Note (1) Price (1) Fee
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
12 3/4% Senior Notes due 2003............. $65,000,000 100% $65,000,000 $22,413.79
==========================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<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.
PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 13, 1996
, 1996 OFFER TO EXCHANGE
12 3/4% Senior Notes due 2003
for all outstanding 12 3/4% Senior Notes due 2003
of
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
--------------------
The Exchange Offer will expire at 5:00 p.m, New York City time on ______,
1996 unless extended.
Waterford Gaming, L.L.C. (the "Company"), a Delaware limited liability
company, and Waterford Gaming Finance Corp., a Delaware corporation ("Finance"
and, together with the Company, the "Issuers") are hereby offering (the
"Exchange Offer"), 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 $1,000 principal amount of its 12 3/4% Senior Notes
due 2003 (the "Exchange Notes"), which exchange has 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 (the "Registration
Statement"), for each principal amount of its outstanding 12 3/4% Senior Notes
due 2003 (the "Private Notes"), of which $65,000,000 in aggregate principal
amount was issued on November 8, 1996 (the "Private Offering") and is
outstanding as of the date hereof. The form and terms of the Exchange Notes are
the same as the form and terms of the Private Notes except that (i) the exchange
will have been registered under the Securities Act, and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (ii) holders of
the Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreement (as defined herein), which
rights will terminate upon the consummation of the Exchange Offer. The Exchange
Notes will evidence the same indebtedness as the Private Notes (which they
replace) and will be entitled to the benefits of an indenture dated as of
November 8, 1996 governing the Private Notes and the Exchange Notes (the
"Indenture"). The Private Notes and the Exchange Notes are sometimes referred to
herein collectively as the "Notes." See "The Exchange Offer" and "Description of
Exchange Notes."
The Exchange Notes bear interest at the rate of 12 3/4% per annum, payable
semi-annually in arrears on May 15 and November 15 of each year, commencing May
15, 1997.
The Issuers will be required to make a mandatory redemption on each May 15
and November 15, commencing November 15, 1997, of the Exchange Notes in the
largest principal amount that is an integral multiple of $1,000, that may be
redeemed using 100% of Company Excess Cash as defined herein as of September 30
and March 31. The Exchange Notes are also mandatorily redeemable upon the
occurrence of certain events. See "Risk Factors." The Exchange Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after November 15, 1999 with Company Excess Cash at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of redemption. Upon a Change of Control (as defined herein), each
holder will have the right to require the Company to repurchase such holder's
Exchange 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 restriction described herein.
The Exchange Notes will be senior obligations of the Company. The Exchange
Notes will be secured by the pledge of subordinated notes (the "Subordinated
Notes") issued by the Mohegan Tribal Gaming Authority, the owner of the Mohegan
Sun, having principal and accrued interest of approximately $22.6 million and a
cash collateral account (the "Cash Collateral Account") into which the Company
will be required to deposit all cash received, including the proceeds of this
Offering and its share of the management fee income from the Manager. The
Manager has a contract to manage the Mohegan Sun for a management fee. The
Company will conduct no other operations.
Finance is a wholly owned subsidiary of the Company that was incorporated
for the sole purpose of serving as a co-Issuer of the Exchange Notes to
facilitate the Offering. Finance will not have any substantial operations or
assets of any kind and will not have any revenues. Prospective purchases of
Notes should not expect Finance to participate in servicing the interest and
principal obligations on the Exchange Notes. See "Description of Exchange Notes
- --Certain Covenants." The Issuers do not intend to apply for listing of the
Exchange Notes on any securities exchange or for the inclusion for the Exchange
Notes in any automated quotation system.
The Issuers will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on ______, 1996,
unless the Exchange Offering is extended by the Issuers in their sole discretion
(the "Expiration Date"). Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. Private Notes may be tendered only in integral
multiples of $1,000. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer--Conditions."
See "Risk Factors," beginning on page 17, for a discussion of certain
factors that investors should consider in connection with the Exchange Offer and
an investment in the Exchange 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.
---------------------
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 Issuers believe that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Issuers to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Issuers 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 the holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private Notes
wishing to accept the Exchange Offer must
<PAGE>
represent to the Issuers, as required by the Registration Rights Agreement, that
such conditions have been met. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Private Notes, where such Private Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Issuers believe that none
of the registered holders of the Private Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Issuers.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Issuers do not intend to list the Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the Notes will develop. To the extent
that a market for the Notes does develop, the market value of the Notes will
depend on market conditions (such as yields on alternative investments), general
economic conditions, the Issuer's financial condition and certain other factors.
Such conditions might cause the Notes, to the extent that they are traded, to
trade at a significant discount from face value. See "Risk Factors--Lack of
Public Market for Securities."
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The have indicated their intention to
make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of 120
days after the Expiration Date. See "The Exchange Offer--Resale of the Exchange
Notes" and "Plan of Distribution."
The Issuers will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
this Exchange Offer. See "The Exchange Offer--Resale of the Exchange Notes" and
"Plan of Distribution."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
No person is authorized in connection with the Exchange Offer to give any
information or to make any representation not contained in this Prospectus or
the accompanying Letter of Transmittal, and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Issuers. Neither the delivery of this Prospectus or the accompanying Letter of
Transmittal, nor any exchange made hereunder shall under any circumstances
create any implication that the information contained herein is correct as of
any date subsequent to the date hereof.
2
<PAGE>
Until __, 1996 (90 days after the date of this Prospectus), all dealers
offering transactions in the Exchange Notes, whether or not participating in the
Exchange Offer, may be required to deliver a prospectus in connection therewith.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
The Exchange Notes will be available initially only in book-entry form. The
Issuers expect that the Exchange Notes issued pursuant to the Exchange Offer
will be issued in the form of one or more fully registered global notes that
will be deposited with, or on behalf of, the Depository Trust Company ("DTC" or
the "Depositary") and registered in its name or in the name of Cede & Co., as
its nominee. Beneficial interests in the global note representing the Exchange
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants. After the initial
issuance of such global note, Exchange Notes in certificated form will be issued
in exchange for the global note only in accordance with the terms and conditions
set forth in the Indenture. See "Description of Exchange Notes--Book Entry,
Delivery and Form."
______________________
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and historical and pro forma financial data appearing elsewhere in
this Prospectus. All statements concerning the Mohegan Sun are forward-looking
and are qualified by the cautionary language contained under "Risk Factors" and
elsewhere. In conjunction with the Exchange Offer, prospective investors are
urged to read the Prospectus in its entirety.
Overview
Waterford Gaming, L.L.C. (the "Company") and Sun Cove Ltd., an affiliate of
Sun International Hotels Limited (together with its affiliates, "Sun
International") are the two managing general partners of Trading Cove Associates
(the "Manager"), the manager and developer of the Mohegan Sun Casino (the
"Mohegan Sun"), a gaming and entertainment complex located in southeastern
Connecticut that opened on October 12, 1996. The Mohegan Sun and Foxwoods
Resorts & Casino ("Foxwoods"), located approximately 10 miles away, are the only
two casinos offering slot machines and table games in the northeastern United
States that are currently legally authorized to operate outside of Atlantic
City, New Jersey. Pursuant to an agreement between the Manager and the Mohegan
Tribe of Indians of Connecticut (the "Mohegan Tribe"), the Manager manages the
Mohegan Sun for a management fee under a seven-year management agreement (the
"Management Agreement") based on a percentage of Net Revenues (as defined) which
begins at 40% of Net Revenues, and after achieving certain Net Revenue targets,
declines to 35%, and then to 30% for the amounts of Net Revenues above those
targets. The Company owns (i) 50% of the voting control of the Manager, (ii) an
approximate 45% economic interest in the Manager and (iii) approximately $22.6
million in principal and accrued interest of 15% Subordinated Notes due 2003
(the "Original Subordinated Notes") issued by the Mohegan Tribal Gaming
Authority (the "Authority"), the owner of the Mohegan Sun.
The Mohegan Sun
The Mohegan Sun is a 625,000 square foot comprehensive gaming and
entertainment complex located on a dramatically landscaped, heavily wooded
240-acre site on the banks of the Thames River in southeastern Connecticut. The
Mohegan Sun was developed according to a master plan for the site that
integrates all of the major requirements of a world-class gaming and
entertainment facility in a single comprehensive design. The master plan places
particular emphasis on direct highway access, convenient parking and a variety
of gaming and non-gaming entertainment amenities within the scope of a single
attractive unifying theme. The Mohegan Sun was also designed to achieve high
operating efficiency in patron traffic flow, food and beverage service and other
back-of-house functions.
The Mohegan Sun provides customers fast and direct access to the interstate
highway system through its own four-lane access road with a direct exit from
Connecticut Route 2A (a four lane expressway) which connects to I-395,
approximately one mile from the Mohegan Sun. Interstate 395 connects to I-95
approximately 9 miles away. Interstate 95 is the main interstate highway that
connects Boston, Providence and New York. In addition to easy access, the
Mohegan Sun provides approximately 7,500 parking spaces on its property
including 1,800 underground valet spaces and 1,300 spaces in a multi-level
parking garage.
The quality and the variety of the food and beverage service, together with
attention to personal service, is a hallmark of the Mohegan Sun. Patrons can
choose from over 20 restaurants and bars including a 680-seat buffet, three
specialty restaurants, a coffee shop, a
4
<PAGE>
delicatessen and ten fast food outlets. The facility also features the Wolf Den,
a 300-seat circular bar at the center of the casino floor that showcases live
entertainment. In addition, there are three retail stores, 11 retail carts and
KidsQuest, an approximately 20,000 square foot children's recreation and child
care area.
The Company believes the use of a thematic environment in the Mohegan Sun
is a differentiating factor in attracting visitors. The Mohegan Sun features a
circular casino separated into four themed quadrants designed to reflect a
separate seasonal theme -- winter, spring, summer and fall -- emphasizing the
importance of the seasonal changes to tribal life. An historical northeastern
Indian theme is conveyed throughout the facility using architectural features,
artistic details and the extensive use of natural elements such as timber, stone
and water. The circular design, with separate entrances for each themed
quadrant, is integrated into a traffic control design to provide fast and
convenient access from the various self-parking, valet parking and public
transportation loading areas to the gaming areas through their own separate
entrances. In addition to improving traffic flow, the Mohegan Sun's circular
design also improves the resort's operating efficiency. The two central kitchen
areas are located adjacent to the resort's 20 restaurants, thereby maximizing
efficiency and reducing waiting time for patrons.
The gaming area consists of over 150,000 square feet and features
approximately 2,670 slot machines (with the capacity for approximately 3,000
slot machines), ranging in denomination from twenty-five cents to $100, and
approximately 180 table games consisting primarily of blackjack, high stakes
poker, craps, roulette, baccarat and Caribbean stud poker. The facility also
features a 1,500 seat multi-use bingo/entertainment hall.
The Company estimates the total cost of developing, constructing, equipping
and opening the Mohegan Sun to be approximately $305 million, exclusive of
working capital and certain equipment operating leases. The source of funds
consists of (i) $175 million from the sale of 13 1/2% Senior Secured Notes with
Cash Flow Participation Interest (the "Authority Senior Secured Notes") issued
by the Authority, (ii) $40 million from the sale of Original Subordinated Notes,
(iii) $50 million in advances under a completion guarantee from Sun
International (the "Completion Guarantee") represented by the Floating Rate
Subordinated Notes due 2003 issued by the Authority (the "Completion Guarantee
Subordinated Notes," and, together with the Original Subordinated Notes, the
"Subordinated Notes"), and (iv) $40 million in equipment financing. In addition,
approximately $13 million of initial working capital has been provided by a bank
working capital facility.
The Market
The Company expects that the primary market for the Mohegan Sun will be
day-trip customers from New England and New York who reside within 150 miles of
the Mohegan Sun. According to market research reports, in 1995 there were
approximately 2.4 million adults living within 50 miles of the site, 10.8
million adults within 100 miles of the site and 21.4 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. In 1995, the median household income and
the per capita income of the population within this market were both
approximately 26% higher than the national averages, with a median household
income of $55,716 and a per capita income of $21,258 as compared to a national
median household income of $45,793 and a national per capita income of $17,363.
5
<PAGE>
The Company believes that the success of Foxwoods, which is approximately
10 miles east of the Mohegan Sun, is evidence of a strong gaming market in the
northeastern United States. Foxwoods is currently the largest gaming facility in
the United States measured by the number of total gaming positions. The Company
believes that Foxwoods is the most profitable casino in the United States,
generating reported slot machine revenue of $471 million and $574 million for
1994 and 1995, respectively. For the first nine months of 1996, Foxwoods
reported $472 million in slot machine revenues, as compared with $442 million
for the first nine months of 1995. Foxwoods' average win per machine per day for
1995 and the first nine months of 1996 was $407 and $406, respectively. Foxwoods
has generally maintained its win per machine while increasing its number of
machines. The Company believes these statistics are an indication of the
strength of the market available to the Mohegan Sun. In comparison, Atlantic
City reported the average win per machine per day of $282 and $258 in 1995 and
for the first nine months of 1996 respectively.
For the month of November 1996, in a press release, the Mohegan Sun
reported slot revenues of $25.9 million and an average win per machine per day
of $345.
The Company
The Company is a single purpose entity formed solely for the purpose of
holding the Partnership interests in the Manager and the Subordinated Notes. The
Manager is a partnership between the Company and Sun International, an
international gaming and resort company with properties in the Bahamas, the
Indian Ocean and France. The Company owns a 50% voting interest and a 45%
economic interest in the Manager. The principals of the Company have been
working with the Mohegan Tribe since 1992 and assisted the Mohegan Tribe in
obtaining federal recognition, negotiating a gaming compact with the State of
Connecticut and obtaining numerous governmental approvals and raising debt
financing in connection with the construction and development of the Mohegan
Sun. In the past year, the Company's management, together with its partners from
Sun International, have been supervising the construction and development of the
Mohegan Sun.
Overview Of Future Cash Flows. The Company will fund its operating debt
service and capital needs from cash flows from the Manager and payments under
the Subordinated Notes (to the extent interest on the Subordinated Notes is
payable in cash and to the extent of principal payments on the Subordinated
Notes) and from amounts in the Cash Collateral Account. Based upon the Company's
anticipated future operations, management believes these sources will be
sufficient to meet the Company's anticipated requirements for operating expenses
and scheduled payments of principal of and interest on the Notes. No assurance,
however, can be given that the operating cash flow will be sufficient for that
purpose.
The Manager will have only one source of revenue, management fees under the
Management Agreement. Management fees are payable monthly under the Management
Agreement, equal to a percentage of Net Revenues (as defined) of the Mohegan Sun
which begins at 40% of Net Revenues and, after achieving certain Net Revenue
targets, declines to 35% and then to 30% for the amounts of Net Revenues above
those targets. Net Revenues are generally equal to net income before management
fees under generally accepted accounting principles. In addition, the Manager is
required to fund $1.2 million per year ($100,000 per month) from its management
fees into a capital replacement reserve. The Management Agreement has a term of
seven years that commenced upon the opening of the Mohegan Sun, subject to a
one-time right of the Authority to buy-out the Management Agreement at the end
of the fifth year. If the Management Agreement is bought out after the fifth
year, the Company will use its share of the proceeds to redeem Notes.
6
<PAGE>
For a more detailed discussion of the payments to be made by the Manager,
and the related priority of such payments, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Sources of Revenues."
Interest accrues on the Subordinated Notes semi-annually. Interest is
deferred (and compounds semi-annually) until the Authority purchases or offers
to purchase at least 50% of its $175 million Authority Senior Secured Notes and
certain fixed charge coverage ratios are met. The Authority is required to offer
annually to purchase the Authority Senior Secured Notes with the sum of (i) 50%
of its Excess Cash Flow (as defined); (ii) the amount of Deferred Subordinated
Interest (as defined) and (iii) accrued and unpaid interest, if any, to the date
of closing of such Excess Cash Purchase Offer. If the holders of the Authority
Senior Secured Notes do not accept the offer, then such amount of the Excess
Cash must be offered to purchase the Subordinated Notes. In the event that the
Company receives an offer to purchase the Subordinated Notes, the Indenture
requires the Company to accept such offer in the same proportion as Sun
International. See "Description of Notes."
Sun International
Sun International is a publicly traded international resort and gaming
company, which develops and manages premier resort and casino properties. Sun
International, through its subsidiaries, currently operates resort hotels and
casinos in The Bahamas, the Indian Ocean and France and has several properties
under development. Sun International recently announced that it has entered into
an agreement and plan of merger with Griffin Gaming and Entertainment, Inc.
("Griffin") pursuant to which Griffin will be merged with and into a subsidiary
of Sun International which will operate the Resorts Hotel and Casino in Atlantic
City. Sun International's largest property is Atlantis, a 1,147-room resort and
casino located on Paradise Island, The Bahamas. Following its acquisition by Sun
International, Atlantis was redeveloped into an ocean-themed destination resort
through a $140 million initial development program. Seeking to capitalize on the
success of Atlantis, Sun International expects to commence construction of the
approximately $350 million Paradise Island expansion in the fourth quarter of
1996 creating a 3,000-room resort complex appealing to all market segments which
will include approximately 1,200 deluxe rooms, 1,100 mid-market rooms and 700
moderately-priced rooms.
Sun International's other current development project, which is
expected to be completed during 1996, is a new resort hotel under construction
on the Indian Ocean island of Mauritius, for which Sun International will
provide management services. Sun International currently manages eight hotels
containing in excess of 2,400 rooms and six casinos with an aggregate of over
200,000 square feet of gaming space containing more than 3,950 slot machines and
300 table games. After the Paradise Island expansion, the Paradise Island hotel
acquisition and renovation and the new resort hotel in Mauritius, Sun
International will manage eleven hotels containing in excess of 4,400 rooms and
six casinos with an aggregate of approximately 220,000 square feet of gaming
space containing approximately 5,000 slot machines and 350 table games.
The Reorganization
The Company, a Delaware limited liability company, was formed in September
1996 and is owned by Slavik Suites, Inc. ("Slavik") and LMW Investments Inc.
("LMW"). Prior to the offering of the Private Notes, Slavik and LMW were
partners of the Manager. In connection with the formation of the Company, Slavik
and LMW each contributed to the Company their interests in the Manager in
exchange for a 662/3% and a 331/3% ownership interest, respectively,
7
<PAGE>
of the Company. Upon consummation of the Offering of the Private Notes, (i)
$6,666,667 of the proceeds were distributed directly to Slavik for the purpose
of redeeming certain ownership interests in Slavik, and (ii) $3,333,333 of the
proceeds from the Offering of the Private Notes were distributed to LMW, which
will in turn loaned such proceeds to Len and Mark Wolman, as individuals, who
used such funds to purchase certain interests in Slavik. In addition to its
interest in the Manager, Slavik is an owner of certain hotel properties. The
Company used $10.6 million of the proceeds from the offering to purchase RJH
Development Corp.'s ownership interest in the Manager. See "Business--Material
Agreements--Trading Cove Associates Partnership Agreement." As a result of these
transactions (collectively referred to in this Prospectus as the
"Reorganization"), each of Slavik and LMW own approximately two-thirds and
approximately one-third of the Company, respectively, and the Company is the
Managing General Partner of the Manager and will own a 45% economic interest in
the Manager. In addition, in connection with the Reorganization the Manager
distributed approximately $850,000 in principal amount of Subordinated Notes to
the Company. As a result of the Reorganization, the only two Partners of the
Manager are the Company and Sun and each will has equal voting power.
8
<PAGE>
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER
The Exchange Offer............... The Issuers are hereby offering to exchange
$1,000 principal amount of Exchange Notes for
each $1,000 principal amount of Private Notes
that are properly tendered and accepted. The
Issuers will issue Exchange Notes on or
promptly after the Expiration Date. As of the
date hereof, there is $65,000,000 aggregate
principal amount of Private Notes outstanding.
See "The Exchange Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Issuers believe
that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes
may be offered for resale, resold and
otherwise transferred by a holder thereof
(other than (i) a broker-dealer who purchases
such Exchange Notes directly from the Issuers
to resell pursuant to Rule 144A or any other
available exemption under the Securities Act
or (ii) a person that is an affiliate of the
Issuers 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 the holder is acquiring Exchange Notes in
the ordinary course of its business and is not
participating, and had no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes.
Each broker-dealer that receives Exchange
Notes for its own account in exchange for
Private Notes, where such Private Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. See "The
Exchange Offer-Resale of the Exchange Notes."
9
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Registration Rights
Agreement........................ The Private Notes were sold by the Issuers on
November 8, 1996, to Bear Stearns & Co. Inc.
and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (collectively, the "Initial
Purchasers") pursuant to a Purchase Agreement,
dated November 5, 1996, by and among the
Issuers and the Initial Purchasers (the
"Purchase Agreement"). Pursuant to the
Purchase Agreement, the Issuers and the
Initial Purchasers entered into a Registration
Rights Agreement, dated as of November 15,
1996 (the "Registration Rights Agreement"),
which grants the holders of the Private Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such
rights, which will terminate upon the
consummation of the Exchange Offer. The
holders of the Exchange Notes will not be
entitled to any exchange or registration
rights with respect to the Exchange Notes. See
"The Exchange Offer--Termination of Certain
Rights."
Expiration Date.................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1996, unless the
Exchange Offer is extended by the Issuers in
their sole discretion, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended. See "The Exchange Offer-Expiration
Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the
Private Notes.................... The Exchange Notes will bear interest from and
including the date of issuance of the Private
Notes (November 8, 1996). Holders whose
Private Notes are accepted for exchange will
be deemed to have waived the right to receive
any interest accrued on the Private Notes. See
"The Exchange Offer-Interest on the Exchange
Notes."
Conditions to the Exchange
Offer............................ The Exchange Offer is subject to certain
customary conditions that may be waived by the
Issuers. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Private Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
10
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Procedures for Tendering
Private Notes.................... Each holder of Private Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with such Private
Notes and any other required documentation to
_________, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By
executing the Letter of Transmittal, the
holder will represent to and agree with the
Issuers that, among other things, (i) the
Exchange Notes to be acquired by such holder
of Private Notes in connection with the
Exchange Offer are being acquired by such
holder in the ordinary course of its business,
(ii) such holder has no arrangement or
understanding with any person to participate
in a distribution of the Exchange Notes, (iii)
that if such holder is a broker-dealer
registered under the Exchange Act or is
participating in the Exchange Offer for the
purposes of distributing the Exchange Notes,
such holder will comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction of the Exchange Notes
acquired by such person and cannot rely on the
position of the staff of the Commission set
forth in no-action letters (see "The Exchange
Offer--Resale of Exchange Notes"), (iv) such
holder understands that a secondary resale
transaction described in clause (iii) above
and any resales of Exchange Notes obtained by
such holder in exchange for Private Notes
acquired by such holder directly from the
Issuers should be covered by an effective
registration statement containing the selling
securityholder information required by Item
507 or Item 508, as applicable, of Regulation
S-K of the Commission and (v) such holder is
not an "affiliate," as defined in Rule 405
under the Securities Act, of the Issuers. If
the holder is a broker-dealer that will
receive Exchange Notes for its own account in
exchange for Private Notes that were acquired
as a result of market-making activities or
other trading activities, such holder will be
required to acknowledge in the Letter of
Transmittal that such holder will deliver a
prospectus in connection with any resale of
such Exchange Notes; however, by so
acknowledging and by delivering a prospectus,
such holder will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. See "The Exchange
Offer--Procedures
11
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Special Procedures for
Beneficial Owners................ Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Private
Notes in the Exchange Offer should contact
such registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. 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 Private Notes, either
make appropriate arrangements to register
ownership of the Private Notes in such owner's
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable
time and may not be able to be completed prior
to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery
Procedures....................... Holders of Private Notes who wish to tender
their Private Notes and whose Private Notes
are not immediately available or who cannot
deliver their Private Notes, the Letter of
Transmittal or any other documentation
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date
must tender their Private Notes according to
the guaranteed delivery procedures set forth
under "The Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of the Private Notes
and Delivery of the Exchange
Notes............................ Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Issuers
will accept for exchange any and all Private
Notes that are properly tendered in the
Exchange Offer prior to the Expiration Date.
The Exchange 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."
Withdrawal Rights................ Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. See
"The Exchange Offer--Withdrawal of Tenders."
12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Certain Federal Income Tax
Considerations................... For a discussion of certain material federal
income tax considerations relating to the
exchange of the Exchange Notes for the Private
Notes, see "Certain Federal Income Tax
Considerations."
Exchange Agent................... Fleet National Bank is serving as the Exchange
Agent in connection with the Exchange Offer.
13
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THE EXCHANGE NOTES
The Exchange Offer applies to $65,000,000 aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are the same as the form
and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture. For further information and
for definitions of certain capitalized terms used below, see "Description of
Exchange Notes."
Issuers................ Waterford Gaming, L.L.C. and Waterford Gaming Finance
Corp.
Securities Offered..... $65,000,000 aggregate principal amount of 12 3/4% Senior
Notes due 2003.
Maturity Date.......... November 15, 2003.
Interest............... The Exchange Notes will bear interest at the rate of 12
3/4% per annum, and such interest will be payable in
cash semi-annually in arrears on May 15 and November 15
of each year to the holders of record at the close of
business on the immediately preceding May 1 or November
1, commencing May 15, 1997. See "The Exchange
Offer--Interest on the Exchange Notes."
Mandatory Redemption... The Issuers will be require to make a mandatory
redemption at the prices set forth herein on each May 15
and November 15, commencing November 15, 1997 of the
Exchange Notes in the largest principal amount that is
an integral multiple of $1,000, that may be redeemed
using 100% of Company Excess Cash (as defined) as of
September 30 and March 31.
In the event that either the Company or Sun
International delivers an election to either buy or sell
the other party's interest in the Manager pursuant to a
Buy-Out Notice (as defined in the Partnership Agreement)
or be deemed to have delivered an election to sell such
interest and such election to buy or sell is
consummated, the Issuers will be required to make a
mandatory redemption of all the Exchange Notes then
outstanding, at the redemption prices set forth herein.
Such redemption shall be made on a date no more than 35
days after the date of the closing (as such term is
defined in the Partnership Agreement) under the option.
See "Description of Exchange Notes--Mandatory Redemption
with Excess Cash Flow or Upon Exercise of Buy/Sell
Option."
14
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Optional Redemption.... The Exchange Notes will be redeemable at the option of
the Company in whole or in part at any time on or after
November 15, 1999 with Company in whole or in part at
any time on or after November 15, 1999 with Company
Excess Cash at the redemption prices set forth herein
plus accrued and unpaid interest, and Liquidated
Damages, if any, thereon to the date of redemption. The
Company will also have the option to redeem the Notes at
any time if a holder is not found suitable by a Gaming
Regulatory Authority. See "Description of Exchange
Notes--Optional Redemption."
Ranking................ The Exchange Notes will be secured on an exclusive basis
by a pledge by the Company of its Subordinated Notes and
Cash and Cash Equivalents.
Change of Control...... Upon the occurrence of a Change of Control (as defined),
holder of the Exchange Notes will have the right, at
such Holder's option, pursuant to an irrevocable and
unconditional offer by the Company or Finance (the
"Change of Control Offer"), to require the Issuers to
repurchase all or any part of such Holder's Exchange
Notes (provided, however, that the principal amount of
such Exchange Notes must be $1,000 or an integral
multiple thereof) on a date (the "Change of Control
Purchase Date") that is no later than 35 Business Days
after the occurrence of such Change of Control, at a
cash price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof, together
with accrued interest and Liquidated Damages, if any, to
the Change of Control Purchase Date. The Change of
Control Offer shall be made within 10 Business Days
following a Change of Control and shall remain open for
20 Business Days following its commencement (the "Change
of Control Offer Period"). Upon expiration of the Change
of Control Offer Period, the Issuers promptly shall
purchase all Exchange Notes properly tendered in
response to the Change of Control Offer. See
"Description of Exchange Notes--Certain Covenants."
Certain Covenants...... The Indenture governing the Notes (the "Indenture")
restricts the Issuers' ability to, among other things,
(i) pay dividends or make other restricted payments or
investments, (ii) incur additional indebtedness, (iii)
create or incur or suffer to exist any liens on any of
its properties or assets, (iv) directly or indirectly
make any Asset Sale or (v) have any subsidiaries,
except, in the case of the Company, Finance.
15
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Covenants with Respect
to the Manager........ The Indenture contains covenants of the Issuers to cause
the Manager not to, among other things: (i) incur any
Indebtedness (except with respect to guarantees required
pursuant to certain hotel development agreements or
certain loans to the Manager), (ii) create or incur or
suffer to exist any Liens on any of its properties or
assets, (iii) directly or indirectly create, cause or
otherwise suffer to exist any consensual restriction or
encumbrance of any kind on the ability of the Manager to
pay dividends or made other distributions in respect of
its Equity Interests or to transfer any of its profits
or assets to the Company (except under the Operative
Documents (as defined)) or (iv) directly or indirectly
make any Asset Sale. In addition, the Company agrees,
and will causes the Manager to agree, not to terminate,
amend or waive any provisions of the Operative Documents
in a manner adverse to the economic interest of the
Holders without the consent of a majority of the
principal amount of the Exchange Notes outstanding.
Risk Factor
See "Risk Factors," on pages 17 through 27 hereof, for a discussion of
certain factors that should be considered in connection with the Exchange Offer
and an investment in the Exchange Notes.
16
- --------------------------------------------------------------------------------
<PAGE>
RISK FACTORS
An investment in the Exchange Notes is subject to a high degree of risk.
Prior to making an investment in the Exchange Notes, prospective investors
should read this entire Prospectus carefully and, in particular, should evaluate
the following risk factors.
Failure to Exchange Private Notes
Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, holders of Private Notes desiring to tender such Private Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Issuers are is under any duty to
give notification of defects or irregularities with respect to tenders of
Private Notes for exchange. Private Notes that are not tendered or are tendered
but not accepted will, following consummation of the Exchange Offer, continue to
be subject to the existing restrictions upon transfer thereof. In addition, any
holder of Private Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Private Notes, where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. To
the extent that Private Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Private Notes
could be adversely affected due to the limited amount, or "float," of the
Private Notes that are expected to remain outstanding following the Exchange
Offer. Generally, a lower "float" of a security could result in less demand to
purchase such security and could, therefore, result in lower prices for such
security. For the same reason, to the extent that a large amount of Private
Notes are not tendered or are tendered and not accepted in the Exchange Offer,
the trading market for the Exchange Notes could be adversely affected. See "Plan
of Distribution" and "The Exchange Offer."
Lack of Operations; Dependence on Mohegan Sun
The Company does not conduct any business operations, and will be
prohibited by the Indenture from conducting any business operations, other than
in connection with its role as a managing general partner of the Manager and
activities incidental to the ownership of the Subordinated Notes and the
issuance of the Notes. The Company has no material business or assets other than
its interests in the Manager and the Subordinated Notes. The Company's sole
source of revenues is from the operations of the Mohegan Sun through its share
of management fee income under the Management Agreement and payments under the
Subordinated Notes that it holds. The Mohegan Sun is a start-up business 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 the Manager, a partnership whose partners have substantial
experience in the development and management of resorts and gaming facilities,
there can be no assurance that the Mohegan Sun will generate sufficient revenues
for the Authority to be profitable or to service its debt obligations (including
its obligations under the Subordinated
17
<PAGE>
Notes) or pay sufficiently large management fees to service the Notes. The
operating results of the Mohegan Sun will depend, in part, on matters over which
the Authority and the Manager have no control including, without limitation,
general economic conditions, effects of competition and the actual number of
gaming customers and the amount wagered.
The ability of the Authority to meet its debt service requirements, and
consequently, the ability of the Company to meet its obligations under the
Notes, will be entirely dependent upon the performance of the Mohegan Sun, which
is subject to financial, economic, political, competitive, regulatory and other
factors, many of which are beyond its control. While the Company expects that
its future operating cash flow will be sufficient to cover its expenses,
including interest costs, the Company cannot give any assurance that it will be
able to do so.
Leverage; Effective Subordination
Upon completion of the Private Offering, the Company aggregated long-term
senior indebtedness of $65.0 million, consisting of the Notes. The Company's
sole source of revenues are from the operations of the Mohegan Sun through
distributions and payments from the Manager and payments from the Authority
under the Subordinated Notes that it holds.
The Mohegan Sun is also highly leveraged. The Authority expects to have
issued total debt of $305 million upon completion of the Mohegan Sun consisting
of (i) $175 million of Authority Senior Secured Notes, (ii) $40 million of
equipment financing, (iii) $40 million in principal plus accrued and unpaid
interest of Original Subordinated Notes, half of which will be held by the
Company and half of which will be held by Sun International, and (iv) $50
million in principal amount of the Completion Guarantee Subordinated Notes. The
Authority has (i) incurred approximately $13 million of senior working capital
financing and (ii) approximately $20 million in equipment operating leases.
Substantially all of the assets of the Authority secure the Authority Senior
Secured Notes and its working capital facility. In addition, the Authority is
permitted, under certain circumstances under the terms of the Authority Senior
Secured Notes, to incur additional indebtedness. The debt of the Authority will
be prior in right of payment under the Management Agreement and its Notes are
effectively subordinated to the debt of the Authority.
The degree to which the Authority is leveraged could have significant
consequences for the holders of the Notes, including, without limitation, the
following: (i) a substantial portion of the Authority's cash flow from
operations may be dedicated to fulfilling its payment obligations under its
indebtedness, including payments to certain capital reserve, sinking fund and
cash maintenance accounts required by the Authority Senior Secured Notes prior
to funds being made available to pay management fees or debt service on the
Subordinated Notes; and (ii) the Authority's high degree of leverage may make it
vulnerable to an economic downturn which may hamper the Mohegan Sun's ability to
meet expected operating results.
Reliance Upon the Manager and its Partners
The Mohegan Sun's profitability is largely dependent upon the efforts and
skills of the Manager, which has exclusive responsibility for developing,
marketing and managing the Mohegan Sun. No assurance can be given that the
operating results obtained by the management of Sun International or by the
principals of the Company in their other projects will be achieved by the
Mohegan Sun.
18
<PAGE>
Under the Management Agreement, significant decisions, such as the annual
budget and the employment of key management personnel, are made by the Business
Board which consists of two representatives of the Manager (Howard Kerzner, the
representative from Sun International and Len Wolman, the representative of the
Company) and two representatives of the Mohegan Tribe (Roland Harris and
Carlisle Fowler). Business Board decisions must be unanimous. Disputes are
resolved by binding arbitration. The success of the Mohegan Sun is dependent
upon a good working relationship among the Business Board's members. The
inability of the Business Board to reach consensus decisions may have a material
adverse effect on the business of the Mohegan Sun and the cash flows to the
Manager and the Company.
The Management Agreement is terminable by the Authority if the Manager
fails to perform any material duty or obligation after notice or if the
Manager's gaming license is withdrawn as a result of the conviction of any
director or officer of the Manager for a criminal felony or misdemeanor offense
directly related to the performance of the Manager's duties. If the Management
Agreement is terminated, the Manager, and indirectly, the Company will not be
entitled to further management fees.
Risks Associated with the Manager and the TCA Partnership Agreement
In the event of a bankruptcy of the Manager or bankruptcy or similar
proceeding with respect to the Authority, the Issuers will have no rights with
respect to the assets of either the Manager or the Authority. In the event of a
bankruptcy of the Manager, the Company will have the rights of an equity holder
in the Manager. The Company will not be an assignee of the Management Agreement
and accordingly will not have the right to perform under the Management
Agreement in the event that the Manager is unable to perform its obligations
thereunder, and the Management Agreement may be terminated for cause by the
Authority in the event of a failure to perform thereunder. In the event of a
bankruptcy or similar proceeding with respect to the Authority, the Company will
be a general unsecured creditor with respect to the Subordinated Notes, and the
Management Agreement may be subject to being rejected by the Authority.
The Issuers will not have a pledge of the Company's partnership interest
in the Manager. Accordingly, in the event of an acceleration under the indenture
governing the Notes, the trustee under the indenture will not be able to
foreclose upon the equity in the Manager without bringing suit against the
Company.
The partnership agreement with respect to the Manager requires consent by
both partners in order to take any action. Accordingly, the Company by itself
does not have the authority to cause the Manager to make any distributions.
Likewise, Sun International has the ability to block any action taken by the
Manager. While this partnership agreement requires the Manager to make
distributions of Excess Cash (as defined therein), such requirement is required
to be reduced by certain undefined, discretionary amounts, including
"foreseeable...needs of cash," "obligations to third parties," "adequate working
capital and reserves" and "the amount needed by the Partnership to...conduct its
business and carry out its purposes." If there is a dispute among the partners
as to the meaning of these provisions, it could result in no or limited
distributions being made by the Manager, which could have a material adverse
effect on the Company's ability to make required payments of interest, principal
and premium on the Notes.
Risks Associated with Buy/Sell Option Under TCA Partnership Agreement
19
<PAGE>
In the event of any dispute between the partners in the Manager, either
partner could invoke a buy/sell provision contained in the partnership
agreement. Pursuant to the buy/sell provision, the party invoking the buy/sell
provision would deliver a notice to the other party requiring it to elect either
to sell its interest or to buy the invoking party's interest, in each at the
price set forth in such notice. The party receiving the notice must make the
election within 45 days of receipt of the notice or be deemed to have accepted
the offer to sell. If the offer to buy is elected, the party must close the
purchase within 75 days of the end of the 45 day period. Any party may terminate
the option at any time prior to closing by accepting the position of the other
party. In the event Sun International were to invoke the buy/sell provision, the
Company could: buy Sun International's interest, sell its interest or agree with
Sun International on the point of dispute. If the Company were to decide that it
was advantageous to purchase the partnership interest at the price offered,
there can be no assurance that the Company would have or would be able to raise
sufficient funds to redeem the Notes and to pay the purchase price at which the
partnership interest was offered. If the Company were to accept the offer to
sell, it is possible that the offer would be insufficient to pay all amounts due
on the Notes and there can be no assurance that the Company would be able to
raise sufficient funds to redeem the Notes in such an event. If the Company were
to concur with Sun International's interpretation of the partnership agreement,
there can be no assurance that the interpretation would not have a material
adverse effect on the ability of the Company to pay principal, interest and
premium on the Notes.
The degree to which the Authority is leveraged could have significant
consequences for the holders of the Notes, including, without limitation, the
following: (i) a substantial portion of the Authority's cash flow from
operations may be dedicated to fulfilling its payment obligations under its
indebtedness, including payments to certain capital reserve, sinking fund and
cash maintenance accounts required by the Authority Senior Secured Notes prior
to funds being made available to pay management fees or debt service on the
Subordinated Notes; and (ii) the Authority's high degree of leverage may make it
vulnerable to an economic downturn which may hamper the Mohegan Sun's ability to
meet expected operating results.
Ability to Realize on Collateral and Enforce Management Agreement
Although the Company's obligation to repay the Notes is secured by a
pledge of approximately $22.6 million in principal and accrued interest of
Subordinated Notes and the cash and Cash Equivalents in the Cash Collateral
Account, the practical realization of value from these assets is subject to a
number of limitations, including the fact that the principal and interest on the
Subordinated Notes will be insufficient, without management fee income, to repay
all of the obligations under the Notes. In addition, realization upon the
collateral will require the ability of the Trustee to enforce payment under the
Subordinated Notes. The ability of the Trustee to enforce payment under the
Subordinated Notes will be dependent upon the availability of a court or other
forum with appropriate jurisdiction over the Mohegan Tribe and the authority
necessary to enforce such rights, and is subject to the prior rights of the
senior debt of the Authority.
The ability of the Trustee and/or the holders of the Notes to foreclose on
any of the collateral, upon the occurrence of an Event of Default or otherwise,
will be subject to the provisions of the documents governing the Collateral and,
in certain instances, to perfection and priority issues and to practical
problems associated with realization of security interests. Although the Mohegan
Tribe and the Authority have sovereign immunity and may not be sued without
their consent, the Mohegan Tribe and the Authority have granted a limited waiver
of sovereign
20
<PAGE>
immunity and consent to suit in connection with the Subordinated Notes and the
Management Agreement, including suits against the Authority to enforce the
obligation to repay the Subordinated Notes or to pay fees due under the
Management Agreement. In the event that such waiver of sovereign immunity is
held to be ineffective, the Trustee and the holders of the Notes could be
precluded from judicially enforcing their rights and remedies. Generally,
waivers of sovereign immunity have been held to be enforceable against Indian
tribes such as the Mohegan Tribe. In addition, the Company is not an assignee of
nor a party to the Management Agreement and accordingly has no standing to
enforce the Management Agreement.
The Mohegan Tribe has established the Gaming Disputes Court of the Mohegan
Tribe, which will have jurisdiction over disputes with respect to the Mohegan
Sun, including any disputes relating to the Subordinated Notes. See "Mohegan
Tribe of Indians of Connecticut--Gaming Disputes Court." The Management
Agreement provides that disputes shall be resolved by binding arbitration.
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 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 an arbitration, or to require that any plaintiff exhaust its remedies
in the Gaming Disputes Court or go to arbitration before bringing any action in
the federal or state court. Thus, there may be no federal or state court forum
with respect to a dispute with the Authority or the Mohegan Tribe relating to
the Subordinated Notes or the Management Agreement. 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 (as defined) occurs, any
forum will be available to the holders of the Notes with respect to the
enforcement of the Subordinated Notes other than the Gaming Disputes Court or an
arbitration panel with respect to the Management Agreement. Because the Tribal
Constitution and the laws of the Mohegan 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 Mohegan 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 Mohegan 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 Mohegan 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 Mohegan Tribe's Constitution prohibits the Mohegan 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 Mohegan Tribe's Constitution require
the affirmative vote of 75% of all registered voters of the Mohegan Tribe.
Amendment to any of such provisions of the Mohegan Tribe's Constitution or its
ordinances could adversely affect the ability of the holders of Notes to enforce
the obligations of the Authority with respect to the collateral securing the
Notes.
21
<PAGE>
Reliance on Single Market
It is anticipated that the Mohegan Sun will be heavily dependent upon the
patronage of persons living within a 150-mile radius of the Mohegan Sun for
recurring operational revenue. Any downturn in the economy of the region, or the
entrance of new gaming competitors into the Mohegan Sun's market or the
expansion of existing competitors, could have a material adverse effect on the
Authority's results of operations. See "--Competition."
Competition
The gaming industry is characterized by intense competition among entities
that, in many instances, have greater resources than the Mohegan Sun. Because
the 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 and the Oneida Indian casino, Turning
Stone, located near Syracuse, New York. Currently, Foxwoods is the only other
casino in operation within 150 miles of the site. However, Foxwoods is located
approximately 10 miles from the Mohegan Sun 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 does not
currently offer, including hotels and extensive non-gaming entertainment
facilities. Foxwoods has been in operation since 1992 and the Company believes
that Foxwoods' successful operation has enabled it to build financial resources
that are currently substantially greater than the Authority's or the Mohegan
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 the Indian Gaming Regulatory Act of 1988 ("IGRA"). In
Connecticut, only the Mohegan Tribe and the Pequot Tribe, which operates
Foxwoods, are federally recognized. In New York State, a number of tribes are
federally recognized, but only two tribes, the St. Regis Mohawks and the Onieda
Nation have gaming compacts with the State of New York. The Oneida Nation is
currently operating a casino, Turning Stone, near Syracuse, New York. 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 groups in Connecticut and elsewhere in New England are
seeking federal recognition as tribes in order to establish gaming operations.
The Company cannot predict whether any of these groups will be successful in
achieving recognition and 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 and New York, 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, if Connecticut legalizes any gaming
operations with slot machines or other commercial casino games, the Pequot Tribe
and the Mohegan Tribe will no longer be required to make payments to the State
of Connecticut related to slot machine revenues. In New York, an advisory panel
has recently recommended to the governor the legalization of a number of casinos
in upstate New York, including in the Catskill mountain region near New York
City. Any such casino would require additional approval by the state legislature
and/or the governor of the State of New York. Any casino operating in the region
could have a material adverse impact on the Mohegan Sun.
22
<PAGE>
Although the Mohegan Sun is dependent primarily upon gaming customers
residing within 150 miles of the Mohegan Sun, the Mohegan Sun also competes for
customers with casinos in Atlantic City, New Jersey, many of which have greater
resources and greater name recognition than the Mohegan Sun.
Construction Risks; Risk of Cost Overruns
Construction projects such as the Mohegan Sun are inherently subject to
significant development and construction risks, any of which could give rise to
cost overruns.
The anticipated construction costs for the Mohegan Sun are based on
budgets and schedule estimates prepared by the Authority with the assistance of
the Company, the Manager and their contractors. The Authority has entered into a
guaranteed maximum price contract with Morse Diesel International, Inc. ("Morse
Diesel") for the construction of the Mohegan Sun. The final amount 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. The Authority and Morse Diesel have certain cost matters that have not
been finalized as to whether such matters are covered under the guaranteed
maximum price or whether such cost increases are the result of change orders or
other events that would increase the contract price. The resolution of these
matters in favor of Morse Diesel may result in the final cost of the Mohegan Sun
to exceed its current budget. A portion of the proceeds of this Private Offering
will be held in the Cash Collateral Account and may be used to fund the
Company's share of any cost overruns, if any. Based upon its review of the
budget and the open cost items, the Company believes that the final construction
cost will not exceed the construction budget by an amount greater than the
available contingency. There is no assurance that construction costs for the
Mohegan Sun will not exceed budgeted amounts or the available contingency
including amounts in the Cash Collateral Account (as defined). Failure to
complete the Mohegan Sun within the budget may have a material adverse effect on
the results of operations and financial condition of the Authority, and
consequently, the Company.
In addition the Authority may not obligate itself to pay development costs
(exclusive of interest) in excess of $325.0 million without the further consent
of the National Indian Gaming Commission (the "NIGC"). The NIGC has reviewed and
consented to the current budgeted amounts. No assurance can be given that if
such additional amounts are required for completion of the Mohegan Sun, such
consent will be obtained.
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 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
23
<PAGE>
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 of the Mohegan Sun (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. In addition, extensive environmental studies were
conducted prior to the United States taking the Site into trust for the Mohegan
Tribe.
Although the Site currently meets state 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, ACMs were removed as part of the construction of the Mohegan Sun.
However, no assurance can be given that additional future asbestos removal will
not be necessary.
Lack of Experienced Personnel
The Company anticipates that approximately 5,000 full time employees will
be required to operate the Mohegan Sun. The required employees have been hired
and have completed their initial training. In selecting employees, the Authority
is obligated to give preference in hiring first to qualified members of the
Mohegan Tribe (and qualified spouses and children of members of the Mohegan
Tribe), and second to members of other Indian tribes. Although sufficient
numbers of employees have been hired including many experienced casino operating
and management personnel, a large number of the employees have no experience
with casino operations and as a result, the initial quality of service may be
affected. As a result, employee turnover may be high, especially in the initial
period, and the Authority may be required to hire and train additional
employees.
24
<PAGE>
Highly Regulated Industry
Gaming on Indian land is regulated by federal, state and tribal
governments. The Management Agreement was approved by the NIGC. The Indenture,
the Notes, the Note Purchase Agreement for the Subordinated Notes, and all
related exhibits and schedules were or will be reviewed by the NIGC. The NIGC
has advised the Authority that although the NIGC must review these documents, it
has no authority to directly approve or disapprove those agreements. In
addition, all contracts with Indians relative to Indian land must be reviewed
and approved by the Bureau of Indian Affairs of the Department of Interior (the
"BIA"), exercising authority delegated by the Secretary of the Interior, which
approval has been obtained for all contracts of the Tribe. The Company believes
that the Management Agreement, the Note Purchase Agreement, the Notes and the
Indenture are in compliance with all applicable federal Indian laws and
regulations. Notwithstanding the foregoing, if a court of competent jurisdiction
later holds that the NIGC has the authority and responsibility to approve an
agreement, and if such approval cannot then be obtained or if such court
determines that notwithstanding any such approval from the NIGC or the BIA that
such agreement violated applicable federal law or regulations, such agreement
could be held to be void, and any payments from the Authority or the Mohegan
Tribe pursuant to such agreements (including payments in respect of the
Management Agreement or the Subordinated Notes) could be ordered returned.
In addition, gaming on Indian land may be adversely affected by changes in
the law. 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 of the Mohegan Sun. 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
Company believes that Connecticut is unlikely to make gaming against public
policy due to the amount of revenues derived from gaming activities currently
being received by the State.
Prior to opening the Mohegan Sun, each of the partners of the Manager,
including the Company and its shareholders, and certain employees of the Mohegan
Sun were required to be licensed by relevant tribal and state authorities. Mr.
Len Wolman, chairman of the Company, Mr. Mark Wolman, a director of the Company,
and Mr. Solomon Kerzner, chairman of Sun International, have applied for and
received permanent gaming licenses from the Commissioner of Revenue Services of
the State of Connecticut which are subject to renewal annually. Certain other
executives of each of Sun International and the Company have received temporary
licenses. The Company believes that if any of these individuals are denied a
gaming license, that such denial will not have a material adverse effect on the
Company. As each employee who is required to be licensed is hired, the Authority
or the Manager will cause such employee to apply for all required licenses.
In addition, a former partner, Leisure Resort Technology, Inc., holds a
five per cent beneficial interest in the Manager. The Manager has been advised
that certain parties have acquired interests in Leisure and such acquisitions
are subject to review by the Connecticut Commission of Revenue Services. No
assurance can be given that all such parties will submit to, or pass, any such
review. The failure of such parties to submit to or pass review would require
the
25
<PAGE>
Manager to terminate the interest of Leisure. Pursuant to its agreement to
withdraw as a partner from the Manager, Leisure holds its beneficial interest
subject in all respects to the approval, regulations and requirements of the
NIGC and the applicable State of Connecticut regulating agencies.
Lack of Public Market for the Securities
As of the date hereof, the only registered holder of Private Notes is Cede
& Co., as the nominee of DTC. Prior to the offering of the Private Notes, there
had been no market for the Notes and there can be no assurance that such a
market will develop, or if such market develops, as to the liquidity of such
market. The Exchange Notes will not be listed on any securities exchange, but
the Private Notes are eligible for trading in the National Association of
Securities Dealers, Inc.'s Private Offerings, Resales and Trading through
Automatic Linakges (PORTAL) market. The Initial Purchasers have advised the
Issuers that they currently intend to make a market in the Notes, as permitted
by applicable laws and regulations; however, the Initial Purchasers are not
obligated to do so and may discontinue such market making at any time without
notice to the holders of the Notes. In addition, such market making activities
may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statement (as defined in the Registration Rights Agreement).
Accordingly, there can be no assurance that a trading market for the 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 Notes.
There can be no assurance that, if a market for the Notes were to develop, such
a market would not be subject to similar disruptions. See "The Exchange Offer"
and "Plan of Distribution."
Fraudulent Transfer Considerations
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if the
Company, at the time it issued the Notes, (a) incurred such indebtedness with
the intent to hinder, delay or defraud creditors, or (b) (i) received less than
reasonably equivalent value or fair consideration and (ii) (A) was insolvent at
the time of such incurrence, (B) was rendered insolvent by reason of such
incurrence (and the application of the proceeds thereof), (C) was engaged or was
about to engage in a business or transaction for which the assets remaining with
the Company constituted unreasonably small capital to carry on their business,
or (D) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature, then, in each case, a court of
competent jurisdiction could avoid, in whole or in part, the Notes, or in the
alternative, subordinate the Notes to existing or future indebtedness of the
Company. The measure of insolvency for purposes of the foregoing would likely
vary depending upon the law applied in such case. Generally, however, the
Company would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at a fair valuation,
or if the present fair salable value of its assets was less than the amount that
would be required to pay the probable liabilities on its existing debts,
including contingent liabilities, as such debts become absolute and matured.
Management of the Company believes that, for purposes of the Bankruptcy Code and
state fraudulent transfer or conveyance laws, the Notes are being issued without
the intent to hinder, delay or defraud creditors and for proper purposes and in
good faith, that the Company will receive reasonably equivalent value or fair
consideration therefor, and that after the issuance of the Notes and the
application of the net proceeds therefrom, including the $10.6 million
distribution to the members of the Company to retire certain indirect
26
<PAGE>
interests of the Manager, the Company will be solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as they
mature. However, there can be no assurance that a court passing on such issues
would agree with the determination of the Company's management.
27
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Private Notes were sold by the Issuers on November 8, 1996 (the
"Closing Date") to the Initial Purchasers pursuant to the Purchase Agreement.
The Initial Purchasers subsequently sold the Private Notes to (i) "qualified
institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities Act
("Rule 144A"), in reliance on Rule 144A and (ii) a limited number of
institutional "accredited investors" ("Accredited Institutions"), as defined in
Rule 501(a)(1),(2), (3) or (7) under the Securities Act. As a condition to the
sale of the Private Notes, the Issuers and the Initial Purchasers entered into
the Registration Rights Agreement on November 8, 1996. Pursuant to the
Registration Rights Agreement, the Issuers agreed that, unless the Exchange
Offer is not permitted by applicable law or Commission policy, it would (i) file
with the Commission a Registration Statement under the Securities Act with
respect to the Exchange Notes within 45 days after the Closing Date, (ii) use
its best efforts to cause such Registration Statement to become effective under
the Securities Act within 120 days after the Closing Date and (iii) use its best
efforts to consummate the Exchange Offer within 150 days after the Closing Date.
A copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement. The Registration Statement is intended to satisfy
certain of the Issuers's obligations under the Registration Rights Agreement and
the Purchase Agreement.
Resale of the Exchange Notes
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Issuers believe that a holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Issuers to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such holder that is an "affiliate" of the Issuers within the meaning of Rule 405
under the Securities Act) who exchanges Private Notes for Exchange Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in a
distribution of the Exchange Notes, will be allowed to resell Exchange Notes to
the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of the Exchange Notes or is a broker-dealer,
such holder cannot rely on the position of the staff of the Commission
enumerated in certain no-action letters issued to third parties and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Private Notes, where such Private Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Private Notes where such Private Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. Pursuant to the Registration Rights Agreement, the Issuers
have agreed to make this Prospectus,
28
<PAGE>
as it may be amended or supplemented from time to time, available to
broker-dealers for use in connection with any resale for a period of 120 days
after the Expiration Date. See "Plan of
Distribution."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Issuers will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Private Notes surrendered pursuant
to the Exchange Offer. Private Notes may be tendered only in integral multiples
of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Private Notes except that (i) the exchange will be registered under
the Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to any of the rights of holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as
the Private Notes (which they replace) and will be issued under, and be entitled
to the benefits of, the Indenture, which also authorized the issuance of the
Private Notes, such that both series of Notes will be treated as a single class
of debt securities under the Indenture.
As of the date of this Prospectus, $65,000,000 in aggregate principal
amount of the Private Notes are outstanding and registered in the name of Cede &
Co., as nominee for DTC. Only a registered holder of the Private 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 Private
Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Issuers
intend to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations of the Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Private
Notes when, as and if the Issuers have given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Private Notes for the purposes of receiving the Exchange Notes from
the Issuers.
Holders who tender Private 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
Private Notes pursuant to the Exchange Offer. The Issuers will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "The Exchange Offer-Fees and Expenses."
Expiration Date; Extensions; Amendments
29
<PAGE>
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
_______, 1996, unless the Issuers, in their 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 Issuers will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof and (iii) issue a press release or
other public announcement which shall include disclosure of the approximate
number of Private Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Issuers may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Issuers shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "The Exchange Offer--Conditions" 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. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Exchange Offer is amended in a manner determined by the Issuers to constitute a
material change, the Issuers will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Issuers will extend the Exchange Offer for a period of five to ten business
days, 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 ten business day period.
Interest on the Exchange Notes
The Exchange Notes will bear interest at a rate equal to 12 3/4% per
annum. Interest on the Exchange Notes will be payable semi-annually in arrears
on each May 15 and November 15, commencing May 15, 1997. Holders of Exchange
Notes will receive interest on May 15, 1996 from the date of initial issuance of
the Exchange Notes, plus an amount equal to the accrued interest on the Private
Notes from the date of initial delivery to the date of exchange thereof for
Exchange Notes. Holders of Private Notes that are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on the Private
Notes.
Procedures for Tendering
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Private Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
30
<PAGE>
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE 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, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE
SENT TO THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private 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. 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 Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "The Exchange Offer--Withdrawal of Tenders"), as the case may be,
must be guaranteed by an Eligible Institution (as defined below) unless the
Private Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box titled "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 made 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 which is
a member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Private Notes listed therein, such Private 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 Private
Notes.
If the Letter of Transmittal or any Private Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting
31
<PAGE>
in a fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Issuers, evidence satisfactory to the Issuers
of their authority to so act must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be determined
by the Issuers in their sole discretion, which determination will be final and
binding. The Issuers reserves the absolute right to reject any and all Private
Notes not properly tendered or any Private Notes the Issuers's acceptance of
which would, in the opinion of counsel for the Issuers, be unlawful. The Issuers
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Private Notes. The Issuers'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 Private Notes must be
cured within such time as the Issuers shall determine. Although the Issuers
intends to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Issuers, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Issuers have no present plan to acquire any Private Notes that
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Private Notes that are not tendered pursuant to the
Exchange Offer, the Issuers reserve the right in its sole discretion to purchase
or make offers for any Private Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "--Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder of Private Notes will represent to the Issuers
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in certain no-action letters,
(iv) such holder understands that a secondary resale transaction described in
clause (iii) above and any resales of Exchange Notes obtained by such holder in
exchange for Private Notes acquired by such holder directly from the Issuers
should be covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Issuers. If the holder is a
broker-dealer that will receive Exchange Notes for such holder's own account in
exchange for Private Notes that
32
<PAGE>
were acquired as a result of market-making activities or other trading
activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, such holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
Return of Private Notes
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Private Notes at the Depositary 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 Depositary's systems may make
book-entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, 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 pursuant to the
guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Issuers (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of such Private Notes and the principal amount
of Private Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or a facsimile thereof), together
with the certificate(s) representing the Private Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and any
33
<PAGE>
other documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in proper
form for transfer and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five New York Stock Exchange trading
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 Private Notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes 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 Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Private Notes) and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private 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 Issuers in their sole discretion,
whose determination shall be final and binding on all parties. Any Private Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Private Notes so withdrawn are validly retendered. Properly withdrawn
Private Notes may be retendered by following one of the procedures described
above under "The Exchange Offer--Procedures for Tendering" at any time prior to
the Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, the Issuers shall
not be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Issuers determine in their sole discretion that any of these
conditions are not satisfied, the Issuers may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Private Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Issuers will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed
34
<PAGE>
to the registered holders of the Private Notes, and the Issuers will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Termination of Certain Rights
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to the Issuers's continuing obligations (i) to indemnify such holders (including
any broker-dealers) and certain parties related to such holders against certain
liabilities (including liabilities under the Securities Act), (ii) to provide,
upon the request of any holder of a transfer-restricted Private Note, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Private Notes pursuant to Rule 144A, (iii) to use its
best efforts to keep the Registration Statement effective to the extent
necessary to ensure that it is available for resales of transfer-restricted
Private Notes by broker-dealers for a period of up to 120 days from the
Expiration Date and (iv) to provide copies of the latest version of the
Prospectus to broker-dealers upon their request for a period of up to 120 days
after the Expiration Date.
Additional Interest
In the event of a Registration Default (as defined below), the Issuers are
required to pay as Liquidated Damages (as defined in the Registration Rights
Agreement) to each holder of Transfer Restricted Securities (as defined below).
If (a) neither an Exchange Offer Registration Statements, nor a Shelf
Registration Statement is filed on or before the 45th day following the Closing
Date, (b) neither of such registration statements is declared effective by the
Commission on or prior to the 180th day after the Closing Date (the
"Effectiveness Target Date"), (c) an Exchange Offer Registration Statement
becomes effective, and the Issuers fail to consummate the Exchange Offer within
45 days of the earlier of the effectiveness of such registration statement or
the Effectiveness Target Date, or (d) the Shelf Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Notes during the period specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Issuers will pay liquidated damages
("Liquidated Damages") to each holder of the Notes, with respect to the first
90-day period immediately following the occurrence of such Registration Default
in an amount equal to $.05 per week per $1,000 principal amount of the Notes
held by such holder. Upon a Registration Default, Liquidated Damages will accrue
at the rate specified above until such Registration Default is cured and the
amount of Liquidated Damages will increase by an additional $.05 per week per
$1,000 principal amount of Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount of Notes
(regardless of whether one or more than one Registration Default is
outstanding). All accrued Liquidated Damages will be paid by the Issuers on May
15 and November 15 of each year to the holders of Notes.
The filing and effectiveness of the Registration Statement of which this
Prospectus is a part and the consummation of the Exchange Offer will eliminate
all rights of the holders of Private
35
<PAGE>
Notes eligible to participate in the Exchange Offer to receive damages that
would have been payable if such actions had not occurred.
Exchange Agent
Fleet National Bank has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail, by Overnight By Facsimile:
Delivery or by Hand:
Fleet National Bank Fleet National Bank
CT OP TO6D Attn: Patricia Williams
Attn: Patricia Williams (860) 986-7920
150 Windsor Street
Hartford, CT 06120
Fees and Expenses
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Issuers and are estimated in the aggregate to be
approximately $_____. Such expenses include registration fees, fees and expenses
of the Exchange Agent and the Trustee, accounting and legal fees and printing
costs, among others.
The Issuers will pay all transfer taxes, if any, applicable to the
exchange of Private Notes pursuant to the Exchange Offer. If, however, a
transfer tax is imposed for any reason other than the exchange of the Private
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. If satisfactory evidence of payment of such taxes or
exemption
36
<PAGE>
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Consequence of Failures to Exchange
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Private Notes may be resold only (i) to a person whom the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Issuers so requests), (v) to the Issuers
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
Tax and Accounting Treatment
The Issuers will recognize no gain or loss as a result of the Exchange
Offer. The expenses of the Exchange Offer will be amortized over the term of the
Exchange Notes.
37
<PAGE>
USE OF PROCEEDS
The Issuers will not receive any proceeds from the Exchange Offer. The net
proceeds received by the Company from the offering of the Private Notes, after
deducting discounts and commissions and estimated fees and expenses, were
approximately $61.5 million. The Company used approximately $25.1 million to
purchase $19.2 million in principal amount of Original Subordinated Notes of the
Authority plus accrued interest and accrued Additional Amounts (as defined). In
addition, in connection with the Reorganization, the Manager distributed
approximately $850,000 in principal amount of Original Subordinated Notes to the
Company. The Original Subordinated Notes bear interest at 15% per annum. The
Completion Guarantee Subordinated Notes bear interest at the prime rate
announced by the Chase Manhattan Bank plus one percent per annum. In addition to
the interest rate borne on the Subordinated Notes that is paid by the Authority,
the Manager is obligated to pay additional interest on the Subordinated Notes to
cause the effective rate to be 26 1/2% per annum. As a holder of the
Subordinated Notes, the Company will be entitled to payment of this additional
interest on its Subordinated Notes.
In addition, the Company used $10.6 million to directly purchase the
interests of a 12 1/2% partner of the Manager and $10.0 million was distributed
to the members of the Company for the purpose of causing certain indirect
ownership interests in the Manager not held by the members of the Company to be
retired. See "The Reorganization." The Company now holds a 45% economic interest
in the Manager. The balance of the proceeds (approximately $15.8 million) were
deposited into the Cash Collateral Account. The Company will be required to
deposit all revenues into the Cash Collateral Account which was pledged to
secure the Exchange Notes. Amounts in the Cash Collateral Account are available
for to pay interest, principal and/or premium on the Notes or to fund the
Company's share of any required advances to the Authority.
38
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 and as adjusted to give effect to (i) the Private Offering
and the application of the net proceeds therefrom and (ii) the Reorganization.
November 8, 1996
----------------------------
Actual As Adjusted
---------- ----------
(in thousands)
Cash and cash equivalents ......................... $ 1 $ 15,801
========== ========
Long term debt:
12 3/4% Senior Notes due 2003 .................. $ -- $ 65,000
---------- --------
Total long-term indebtedness ................... -- 65,000
Members equity (deficit) .......................... $ 1 (6,899)
---------- --------
Total capitalization ........................... $ 1 $ 58,101
========== ========
39
<PAGE>
THE MOHEGAN SUN
The Mohegan Sun, which commenced operations on October 12, 1996, is a
625,000 square foot comprehensive gaming and entertainment complex located on a
dramatically landscaped, heavily wooded 240-acre site on the banks of the Thames
River in southeastern Connecticut. The Mohegan Sun, together with Foxwoods,
located approximately 10 miles away, are the only two casinos offering slot
machines and table games in the northeastern United States that are currently
legally authorized to operate outside of Atlantic City, New Jersey.
Comprehensive Master Plan
The Mohegan Sun was developed according to a master plan for the site that
integrates all of the major requirements of a world-class gaming and
entertainment facility in a single comprehensive design. The master plan places
particular emphasis on creating direct highway access, providing convenient
parking and developing a variety of non-gaming entertainment amenities within
the scope of a single attractive unifying theme. The master plan has been
designed to accommodate expansion, including additional parking and hotel
accommodations.
The Company believes the use of an overall thematic environment in the
Mohegan Sun is a differentiating factor in attracting visitors. The Mohegan Sun
features a circular casino separated into four themed quadrants designed to
reflect a separate seasonal theme -- winter, spring, summer and fall --
emphasizing the importance of the seasonal changes to tribal life. An historical
northeastern Indian theme is conveyed throughout the facility using
architectural features, artistic details and the extensive use of natural
elements such as timber, stone and water. The circular design, with separate
entrances for each themed quadrant, is integrated into the traffic control
design to provide fast and convenient access from the various self-parking,
valet parking and public transportation loading areas to the gaming areas
through their own separate entrances.
Convenient Access
The Mohegan Sun provides customers fast and direct access to the
interstate highway system through its own four-lane access road with a direct
exit from Connecticut Route 2A (a four lane expressway) which connects to I-395,
approximately one mile from the Mohegan Sun. Interstate 395 connects to I-95
approximately 9 miles away. Interstate 95 is the main highway connecting Boston,
Providence and New York. In addition, the Mohegan Sun provides approximately
7,500 parking spaces on its property including 1,800 underground valet spaces
and 1,300 spaces in a multi-level parking garage.
The Casino
The gaming area consists of over 150,000 square feet, divided into four
quadrants around the Wolf Den, an open bar and entertainment area that forms the
centerpiece of the casino. The casino features approximately 2,670 slot machines
(with the capacity for approximately 3,000 slot machines), with denominations
ranging from twenty-five cents to $100, and approximately 180 table games
featuring blackjack, poker, craps, roulette, Caribbean stud poker, baccarat,
mini-baccarat and pai gow poker. Each of the four quadrants has a separate
identifying seasonal decor, a separate customer service center/change bank, a
beverage service bar and restrooms.
40
<PAGE>
Two high limit gaming and lounge areas, with private food and beverage service,
are reserved for premium players.
The facility also features a 22,500 square foot, 1,500 seat multi-use high
stakes bingo hall. When not in use for high stakes bingo, this room can seat
2,000 patrons for special events such as boxing, concerts and headliner
entertainment.
Entertainment and Dining
The Mohegan Sun features a variety of non-gaming entertainment. The
entertainment venues include:
The Wolf Den. The centerpiece of the Casino is the Wolf Den, a 300-seat
entertainment venue that is visible from the entire casino. The center of
the Wolf Den is a stage area designed to resemble a 40-foot stone mountain
that features top name dance and show bands and headliner performers. The
Wolf Den also features a 16-foot video screen that shows originally created
videos, music videos and sporting events.
Bingo Room. Live entertainment and special events, such as boxing, are
featured in the multi-use hall adjacent to the casino. The multi-use hall
features high stakes bingo when not in use for special events.
KidsQuest(R). This approximately 20,000 square foot children's
entertainment facility provides licensed supervised child care in a
creative and exciting environment. Parents can leave their children at
KidsQuest, for an hourly fee, to play in mazes and slides, enjoy Barbie
Land, Lego blocks, movies and other dynamic activities.
The quality and the variety of the food service, together with attention
to personal service, are expected to be a hallmark of the Mohegan Sun. Patrons
are able to choose from over 20 restaurants and bars including:
The Longhouse. The Longhouse was the traditional meeting house of the
Mohegan elders. This 150-seat restaurant features grilled and roasted aged
prime beef complemented by a variety of fresh seafood in a wooded, rustic
setting.
Pompeii and Caesar. Chief Uncas, the historical leader of the Mohegan
people, believed in the importance of learning from other cultures and
named two of his sons after these Roman generals. In his honor, old world
quality meets contemporary new world flair in this 150-seat Italian fare
venue.
Bamboo Forest. This 150-seat Asian specialty restaurant slices, dices and
stirfries creatively prepared foods from the Far East. Bamboo Forest's
discerning clientele feast on traditional and innovative Chinese, Thai,
Malay and Vietnamese inspired cuisine.
Seasons Buffet. Six hundred eighty guests may enjoy lunch and dinner at the
Seasons Buffet, featuring fresh-carved meats, special selections from
Mohegan Sun's specialty restaurants, pizza and bread fresh-baked in the
buffet's wood burning ovens and fresh grilled meat, fish and sausages.
Weekend breakfasts, Sunday brunch, and late night buffets round out the
Seasons Buffet's offerings.
41
<PAGE>
Mohegan Territory. Non-stop food complements the gaming at this 24-hour
350-seat casual restaurant. The Mohegan Territory offers popular selections
from all of the Mohegan Sun's restaurants in one setting, including prime
rib, fresh seafood, sandwiches, burgers, Chinese dishes, desserts and fresh
bakery selections.
The Cove. This lounge area offers a variety of seafood selections and will
give patrons the opportunity to sample appetizers from the menus of the
Longhouse, Pompeii and Caesar and the Bamboo Forest.
Chief's Deli. A 150-seat casual restaurant complete with old-fashioned
counter service. The open-style kitchen showcases the Mohegan Sun's
sandwich chefs as they create gigantic corned beef, pastrami or customized
deli-style offerings. A selection of daily homemade entrees such as yankee
pot roast or chicken pot pie will complement the deli style sandwiches. For
dessert, the Chief's Deli will offer a display of cakes, pies and pastries.
Bow & Arrow. The gaming continues on the big screens at Mohegan Sun's
sports bar, featuring televised sports, congenial bartenders, courteous
servers and snacks.
Mohegan Grounds. Mohegan Grounds is a cafe that features fresh-brewed
coffees and teas, espresso and cappuccino at any time of day or night.
Food Court. The Food Court offers everything from hot dogs to chicken to
submarine sandwiches to soups to pizza to Chinese food, all served from ten
easy access food outlets centered around a skylit atrium with a running
stream, a waterfall, bridges and trees.
Uncas Grille. Serving Mohegan Sun's approximately 5,000 employees, the
Uncas Grille features a variety of dining, refreshment and breaktime snack
items, 24-hours a day. Featured are hot and cold sandwiches, pizza, soup,
salad bar and fresh grilled selections, extending employees the same
courtesy and flair that patrons receive throughout the Mohegan Sun.
In addition, the Mohegan Sun provides three retail stores and 11 retail
carts. One of the stores features traditional Mohegan and other Indian crafts
and the other stores feature items with the Mohegan Sun logo and convenience and
gift shop items.
Market
The primary market for the Mohegan Sun is day-trip customers from New
England and New York who reside within 150 miles of the Mohegan Sun. According
to market research reports, in 1995 there were approximately 2.4 million adults
living within 50 miles of the site, 10.8 million adults within 100 miles of the
site and 21.4 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.
In 1995, the median household income and the per capita income of the population
within this market were both approximately 26% higher than the national
averages, with a median household income of $55,716 and a per capita income of
$21,258 as compared to a national median household income of $45,793 and a
national per capita income of $17,363.
The Company believes that the success of Foxwoods, which is approximately
10 miles east of the Mohegan Sun, is evidence of a strong gaming market in the
northeastern United States.
42
<PAGE>
Foxwoods is currently the largest gaming facility in the United States measured
by the number of total gaming positions. The Company believes that Foxwoods is
the most profitable casino in the United States, generating reported slot
machine revenue of $471 million and $574 million for 1994 and 1995,
respectively. For the first nine months of 1996, Foxwoods reported $472 million
in slot machine revenues, as compared with $442 million for the first nine
months of 1995. Foxwoods' average win per machine per day for 1995 and the first
nine months of 1996 was $407 and $406, respectively. Foxwoods has generally
maintained its win per machine while steadily increasing its number of machines.
The Company believes these statistics are an indication of the strength of the
market available to the Mohegan Sun. In comparison, Atlantic City reported the
average win per machine per day of $282 and $258 in 1995 and for the first nine
months of 1996, respectively.
For the month of November 1996, in a press release, the Mohegan Sun
reported slot revenues of $25.9 million and an average win per machine per day
of $345.
Marketing Strategy
The Mohegan Sun employs a comprehensive marketing program designed to
establish the Mohegan Sun as a premier entertainment facility for the entire
family. The Mohegan Sun seeks to distinguish itself by emphasizing a uniquely
themed gaming environment, a superior food and beverage experience in a variety
of settings, ease of access and attention to personal service.
The Company believes that the Mohegan Sun's primary target market is
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, which
includes most of the New York City and Boston metropolitan areas. The Mohegan
Sun does not intend to market heavily to visitors outside its primary target
market unless it expands to include lodging facilities.
Consistent with its emphasis on the day-trip market, the Mohegan Sun
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 seeks accommodate premium high-stakes players,
it does not initially expect to spend significant resources targeting the more
demanding and costly premium player market.
The Mohegan Sun seeks to create market awareness and customer loyalty
through a wide variety of activities including:
Advertising. The Mohegan Sun utilizes a diverse media approach combining
television, radio and print media in target market areas. The emphasis is
on reach and frequency. Special attention is paid to media that reaches
tourists visiting the southeastern Connecticut tourist attractions. The
initial advertising is focusing on building consumer awareness and the
strengths of the property -- spectacular design, convenience location, easy
access, gaming opportunities, unique entertainment and diverse food and
beverage offerings.
Public Relations. Through regular press releases and special media events,
the Mohegan Sun is striving to create an active presence in the news with
emphasis on the electronic and print media.
43
<PAGE>
Area Tourism. Regional marketing targets southeastern Connecticut tourists
with an emphasis on participating with local marketing groups, the charter
bus market, brochure distribution points such as visitor centers and
sponsorship opportunities.
Sponsorships. The Mohegan Sun will sponsor major expositions and sporting
and entertainment events to position it as a first class entertainment
resort.
Slot Marketing. The cornerstones to successful slot marketing are customer
service, complimentaries, an exemplary product and a "user-friendly"
players' club. The Mohegan Sun features special slot hosts that provide
service and that special "personal touch", complimentaries as a benefit to
the players club, and a "state-of-the-art" product with each machine having
a bill validator.
Ethnic Marketing. Focussed primarily on the strong Asian-American gaming
market in the Northeast, the Mohegan Sun offers multi-lingual hosts, food,
special events, Asian language advertising and special group transportation
via motorcoach.
Bus Marketing. The Mohegan Sun marketing department concentrates on
efficiently and profitably attracting customers from the motorcoach market.
A separate motorcoach patron entrance makes access and loading fast and
convenient.
Special Events and Entertainment. Special events and entertainment will be
used to reward loyal customers of the Mohegan Sun as well as to attract new
patrons. Gaming tournaments, drawings, giveaways and "high end" specialty
events will be featured. Top name entertainment will be featured in the
Wolf Den and sporting events and high impact entertainment will be featured
in the multi-use bingo hall.
Database Marketing. Use of a customer database to build customer loyalty
and generate repeat business will be a key marketing tool. The customer
database from the players club (which will collect data from both slot and
table game play) will enable the Mohegan Sun to target the specific
interests of groups of customers.
Competition
The gaming industry is characterized by intense competition among entities
that, in many instances, have greater resources than the Mohegan Sun. Because
the 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 the Mohegan Sun. However, Foxwoods is located
approximately 10 miles from the Mohegan Sun 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 does not
currently plan to offer, including hotels and extensive entertainment
facilities. Foxwoods has been in operation since 1992 and the Company believes
that Foxwoods' successful operation has enabled it to build financial resources
that are currently substantially greater than the Authority's or the Manager's
financial resources.
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 Connecticut, only the Mohegan Tribe and the
Pequot Tribe, which operates Foxwoods, are
44
<PAGE>
federally recognized. In New York State, a number of tribes are federally
recognized, but only two tribes, the St. Regis Mohawks and the Onieda Nation
have gaming compacts with the State of New York. The Oneida Nation is currently
operating a casino, Turning Stone, near Syracuse, New York. 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 Company 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 and New York, 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, if Connecticut legalizes any gaming
operations with slot machines or other commercial casino games, the Pequot Tribe
and the Mohegan Tribe will no longer be required to make payments related to
slot machine revenues. In New York, an advisory panel has recommended to the
legislature the legalization of a number of casinos in upstate New York,
including in the Catskill mountain region near New York City. Any such casino
would require additional approval by the state legislature and/or the governor
of the State of New York.
Employees
The Company anticipates that approximately 5,000 full time employees will
be required to operate the Mohegan Sun. The required employees have been hired
and have completed their initial training. In selecting employees, the Authority
is obligated to give preference in hiring first to qualified members of the
Mohegan Tribe (and qualified spouses and children of members of the Mohegan
Tribe), and second to members of other Indian tribes. Although sufficient
numbers of employees have been hired, including many experienced casino
operating and management personnel, a large number of the employees have no
experience with casino operations and as a result, the initial quality of
service may be affected. As a result, employee turnover may be high, especially
in the initial period, and the Authority may be required to hire and train
additional employees.
Legal Proceedings
None of the Mohegan Tribe, the Authority, the Manager the Company or
Finance is a party to any pending material litigation. Urban Design Group, an
architectural design consultant that was discharged from the project, has filed
suit against the Authority and the Manager seeking $270,000 in damages.
45
<PAGE>
THE COMPANY
The Company was organized in September 1996 as a Delaware limited
liability company. The Company is a newly created single purpose entity formed
solely for the purpose of holding the partnership. The Company's interest in the
Manager and the Subordinated Notes comprise the only material assets of the
Company. Finance, a Delaware corporation was organized in October 1996. The
principal executive offices of the Company and Finance are located at 914
Hartford Turnpike, P.O. Box 715, Waterford, Connecticut 06385 and its telephone
number is (860) 442-4559.
The Limited Liability Company Agreement of the Company (the "LLC
Agreement") provides for the property, affairs and business of the Company to be
managed by a four member Board of Directors which consists of two directors
appointed by Slavik and two directors appointed by LMW (the "Board of
Directors"). A quorum for the Board of Directors requires all four members. The
members initial capital contributions to the Company consists of all of the
interests in the Manager owned by Slavik and LMW as well as certain Subordinated
Notes. See "Prospectus Summary--The Reorganization." Additional capital
contributions may be made to the Company by its members on a pro rata basis. If
it is determined that the Company requires additional funds, such funds may be
loaned to the Company by certain members pursuant to the terms set forth in the
LLC Agreement; however, the Indenture for the Notes prohibits the Company from
incurring additional indebtedness. The LLC Agreement also provides that any
disputes which arise under the LLC Agreement and which remain unresolved after
30 days will be settled through arbitration.
LMW, one of the two members of the Company, is a development firm based in
southeastern Connecticut. LMW is owned by Len Wolman and Mark Wolman, each of
whom have extensive experience in construction and hotel management. Mr. Len
Wolman, who is the President and Chief Executive Officer of Waterford Hotel
Group, Inc. ("Waterford Hotel Group"), has twenty years of experience in
hospitality property development, including management experience associated
with major hotel operators such as Westin, Hyatt, Four Seasons, Sheraton,
Holiday Inn and Marriott. When Mr. Wolman joined the Waterford Hotel Group in
1986, it had one hotel under management. Under Mr. Wolman's leadership,
Waterford Hotel Group has grown to have eighteen properties under management in
eight states today. Mr. Mark Wolman is the founder of Wolman Construction, which
does commercial and residential construction throughout southeastern
Connecticut. Mr. Mark Wolman has over sixteen years of experience in land
development and construction and currently serves on the Board of Directors of
the Builders Association of Eastern Connecticut and served as president of the
association in 1993.
The other member of the Company, Slavik, was one of the first developers
of "way-of-life" communities (i.e. communities with a mix of single-family and
multiple family housing, golf courses or marinas and supportive office and
commercial facilities) and owns over 4,900 apartment units which it has
developed and built. Slavik also develops and manages hotels. The principals of
Slavik are Mr. Stephan Slavik, Sr. and Mr. Del Lauria. Mr. Slavik is the
Managing Member of Slavik Enterprises, LLC, a residential development company
that has developed and constructed more than 6,000 single family homes, 15,000
multiple-family housing units and several planned developments. Mr. Lauria is
the Executive Vice President of Slavik.
46
<PAGE>
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
The following unaudited pro forma balance sheet as of November 8, 1996
reflects (i) the Private Offering and the application of the net proceeds
therefrom and (ii) the Reorganization. The information has been prepared as if
the Private Offering and the Reorganization had occurred at September 30, 1996.
November 8, 1996
----------------
Pro Forma
----------------
(in thousands)
ASSETS
Cash ........................................................ $ 15,801
Investment in Trading Cove Associates(1)(2) ................. 13,700
Investment in Original Subordinated Notes(3) ................ 25,100
Deferred debt costs ......................................... 3,500
--------
Total assets ............................................ $ 58,101
========
LIABILITIES AND MEMBERS' EQUITY
12 3/4% Senior Notes due 2003 ............................... $ 65,000
Members' equity (deficit)(1)(4) ............................. (6,899)
--------
Total liabilities and members' equity ................... $ 58,101
========
- ----------
(1) Includes initial capital contribution by LMW and Slavik of each of their
interests in the Manager, recorded at book value of $3.1 million.
(2) Includes the purchase of the partnership interest of RJH Development Corp.
for $10.6 million, which will be amortized over the seven year term of the
Management Agreement. See "Prospectus Summary--The Reorganization."
(3) Includes principal, accrued interest and accrued Additional Amounts (as
defined) on Subordinated Notes to be purchased from Sun International
concurrently with the Private Offering.
(4) Reflects the distribution of $10.0 million of the proceeds from the Private
Offering to LMW and Slavik for the purpose of facilitating the acquisition
of certain interests in Slavik by Messrs. Len and Mark Wolman in connection
with the Reorganization. See "Use of Proceeds."
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Company's financial statements, the notes
thereto, and certain other financial information included elsewhere in the
Prospectus.
Development Activities
The Company, in its role as a managing general partner of the Manager, was
responsible for the design and development of the Mohegan Sun and oversees its
day-to-day operations. The operations of the Company, or its predecessors, have
been limited to negotiating the Management Agreement and assisting the Mohegan
Tribe and the Authority in obtaining federal recognition, negotiating the
Tribal-State Compact with the State of Connecticut, obtaining financing for the
development of the Mohegan Sun and applying for the appropriate gaming and other
licenses and governmental approvals required.
The Company has been recently formed and is in the development stage and
has capitalized all costs. Accordingly, the Company does not have any historical
operating revenues or income.
Overview Of Future Cash Flows
The Company expects to fund its operating debt service and capital needs
from cash flows from the Management Agreement and the Subordinated Notes (to the
extent interest is payable in cash on the Subordinated Notes and to the extent
of principal payments on the Subordinated Notes) and from amounts in the Cash
Collateral Account. Based upon the Company's anticipated future operations,
management believes that available cash flow from these sources will be
sufficient to meet the Company's anticipated requirements for operating expenses
and payments of principal of and interest on the Notes. No assurance, however,
can be given that the operating cash flow will be sufficient for that purpose.
The following is a summary of the anticipated cash flows of the Company from the
Mohegan Sun based upon its contractual arrangements. The summary is qualified by
reference to the more detailed summary of the contractual arrangements described
under "Material Agreements."
Sources of Revenues. The Company has only two sources of revenues:
distributions on its partnership interest in the Manager and debt service
payments on the Subordinated Notes.
The Manager will have only one source of revenue, management fees under
the Management Agreement. The management fees are calculated in three tiers
based upon Net Revenues of the Mohegan Sun set forth below (in thousands):
48
<PAGE>
<TABLE>
<CAPTION>
========================================================================
I II III
------------------------------------------------------------------------
Revenues in Tier I plus Revenues in Tiers I
40% of Net Revenues 35% of Net Revenues &
up to between II plus 30% of Net
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
amounts set forth above, 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 means the amount of the Gross Revenues of the facility 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 (ie., 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, the
Manager is required to calculate and report to the Mohegan Tribe, the gross
revenues, operating expenses and Net Revenues.
In addition, the Manager is required to fund $1.2 million per year
($100,000 per month) from its management fees into a capital replacement
reserve. The Management Agreement has a term of seven years that commences upon
the opening of the Mohegan Sun, subject to a right of the Authority to buy-out
the Management Agreement after the fifth year. If the Management Agreement is
bought out after the fifth year, the Company will use its share of the proceeds
to redeem Notes.
Upon receipt of the management fees, the Manager is required to make a
number of different types of payments to its partners. Some of these payments
are one-time non-recurring payments (the "Nonrecurring Payments") and others are
required on a continuing basis (the "Continuing Payments"). The payments marked
with an asterisk below are Non-recurring Payments and the others are Continuing
Payments.
The following table sets forth the priority of payments from the Manager:
*1. Return of capital contributions made after September 24, 1995. These
capital contributions aggregated $1.1 million and are to be repaid to
the partners, 50% to the Company and 50% to Sun International.
2. Payment of an amount equal to 11 1/2% per annum on the Original
Subordinated Notes. These payments will be made semi-annually to the
holders of the Original Subordinated Notes, 50% to the Company and 50%
to Sun International.
49
<PAGE>
3. Payment of an amount equal to the difference between 26 1/2% and the
reference rate of Chase Manhattan Bank plus 1.0% on the first $15.0
million advanced under the Completion Guarantee (the "First Tranche
Completion Guarantee Subordinated Notes"). This amount will be paid
semi-annually pari passu with the amounts under paragraph 4. Upon
funding of the First Tranche Completion Guarantee Subordinated Notes,
this amount will be paid to Sun International. However, these amounts
become payable to the Company as it purchases its share of the First
Tranche Completion Guarantee Subordinated Notes over three years.
4. Payment of an amount equal to the reference rate of Chase Manhattan
Bank plus 1.0% on the First Tranche Completion Guarantee Subordinated
Notes to the extent the Authority is not permitted to pay interest
thereon. This amount will be paid semi-annually pari passu with the
amount under paragraph 3. When the Authority can pay such interest,
payment under this paragraph 4 shall be reduced accordingly. In
addition, to the extent the Manager has paid amounts otherwise payable
by the Authority, the holders will be required to repay the Manager.
5. Payment of an amount equal to the difference between 26 1/2% and the
reference rate of Chase Manhattan Bank plus 1.0% on the amounts
advanced under the Completion Guarantee in excess of the First Tranche
Completion Guarantee Subordinated Notes (which is expected to total
$35.0 million) (the "Second Tranche Completion Guarantee Subordinated
Notes"). This amount is paid semi-annually to Sun International.
*6. Return of capital contributions made before September 24, 1995. These
capital contributions aggregated approximately $7.0 million and are
repaid to the partners, 50% to the Company and 50% to Sun
International. Approximately $2.2 million of these capital
contributions will be deemed returned at the closing of this Private
Offering upon the distribution by the Manager of the $1.7 million in
principal amount of Original Subordinated Notes together with accrued
interest and accrued Additional Amounts, 50% to Sun International and
50% to the Company.
*7. Payment of a Development Services Fee to Sun International equal to 3%
of total development costs (less land acquisition costs) of the
Mohegan Sun plus $25,000 (estimated to be $8.3 million).
8. Payment of a monthly Management Services Fee equal to the lesser of 1%
of the gross revenues of the Mohegan Sun and 25% of sum of the Excess
Cash of the Manager (as defined in the Partnership Agreement) plus the
Organizational and Administrative Fee (as defined) and the Marketing
and Casino Operations Fee (as defined). After deducting operating
expenses (which will be the following amounts: $2.0 million if the
Mohegan Sun's EBITDA (as defined) is $200.0 million or less, $3.0
million of the Mohegan Sun's EBITDA is $200.0 million but less than
$225.0 million, and $4.0 million if the Mohegan Sun's EBITDA is
greater than $225.0 million) the remaining amounts will be distributed
in amounts equal to 50% to Sun International and the remainder to the
Company.
*9. Payment of a Completion Guarantee Fee to Sun International equal to 2%
of the total development costs (less land acquisition costs) of the
Mohegan Sun (approximately $5.5 million).
10. Payment of an amount equal to the state and federal income tax
liability of the Manager as if it were an individual paying federal
income tax and the higher of Michigan or Connecticut taxes. This
amount will be paid 50% to Sun International, 45% to the Company and
5% to a former partner.
11. All remaining fees and Excess Cash distributed 50% to Sun
International, 45% to the Company and 5% to a former partner.
50
<PAGE>
The Company has an obligation to purchase one-half ($7.5 million) of the
aggregate principal amount of the outstanding First Tranche Completion
Subordinated Guarantee Notes in three equal annual installments beginning in
October 1997.
Interest accrues on the Subordinated Notes semi-annually. Interest is
deferred (and compounds semi-annually) until the Authority retires or offers to
purchase at least 50% of its $175 million Authority Senior Secured Notes. The
Authority is required to offer annually to purchase the Authority Senior Secured
Notes with 50% of its Excess Cash Flow (as defined). If the holders of the
Authority Senior Secured Notes do not accept the offer, then such amount of the
Excess Cash Flow must be offered to purchase the Subordinated Notes. In the
event that the Company receives an offer to purchase Subordinated Notes (other
than in connection with a Change of Control), the Indenture requires the Company
to accept such offer to purchase Subordinated Notes in the same proportion as
Sun International.
Liquidity and Capital Resources
The initial capital of the Company consists of the partnership interests
in the Manager contributed by Slavik and LMW in forming the Company. See "The
Reorganization". In connection with the offering of the Private Notes, the
Company used approximately $25.1 million to purchase $19.2 million in principal
amount of Original Subordinated Notes of the Authority plus accrued and unpaid
interest and Additional Amounts. In addition, in connection with the
Reorganization the Manager distributed approximately $850,000 in principal
amount of Subordinated Notes to the Company.
If construction costs exceed the current budget or if additional amenities
or facilities are constructed, the Manager may determine to loan the Authority
funds for such purposes, although it does not have any obligation to do so. The
Company currently believes that the completion costs of the Mohegan Sun are
within the current budget or can be funded through the $50.0 million completion
guarantee, but construction costs may increase, and no assurance can be given
that the Authority will be able to obtain sufficient funds if it is required to
do so. A portion of the proceeds of the Private Offering were placed in the Cash
Collateral Account and are available to fund the Company's share of any
additional funding required by the Manager, if any. See "Description of
Notes--Certain Covenants--Limitation on Restricted Payments."
51
<PAGE>
MANAGEMENT
The Mohegan Sun is managed by the Manager pursuant to the Management
Agreement. The Management Agreement provides that significant business
decisions, such as approving the annual budget, will be made by the Business
Board, which consists of two representatives from the Manager (one from the
Company, Mr. Len Wolman, and one from Sun International, Mr. Howard Kerzner) and
two representatives from the Authority. Decisions of the Business Board must be
made unanimously.
The Manager is managed by two managing general partners, the Company and
Sun International. Generally, most decisions require the unanimous decision of
both managing general partners.
The following sections set forth the management personnel of the Company,
Finance, Sun International and the Authority. The information concerning Sun
International and the Authority has been derived from publicly filed
information.
The Company
The following tables set forth certain information with respect to persons
who are members of the Company's Board of Directors of the Company and Finance
or who are executive officers of the Company or Finance.
Name Age Position
---- --- --------
Len Wolman................. 41 Chairman of the Board and Chief
Executive Officer
Del J. Lauria.............. 48 Director and Chief Financial Officer
Stephan F. Slavik, Sr...... 76 Director
Mark Wolman................ 38 Director
Len Wolman. Mr. Wolman has been the Chairman of the Board of Directors and
the Chief Executive Officer of the Company since its formation. Mr. Wolman is
also the Chairman of the Board of Directors and the Chief Executive Officer of
the Waterford Hotel Group, Inc. since 1986. Under Mr. Wolman, Waterford Hotel
Group, Inc. has grown from one hotel management contract to 18 properties in
eight states. Mr. Wolman was actively involved in the development and
construction of the Mohegan Sun. Mr. Wolman was instrumental in formation of the
relationship of the Manager and the Mohegan Tribe and has been actively working
with the Mohegan Tribe in connection with obtaining federal recognition,
acquiring the site for the Mohegan Sun and obtaining the financing to construct
the Mohegan Sun. Mr. Wolman is the brother of Mark Wolman. Mr. Wolman has served
as President and Chief Executive Officer of Finance since its inception.
Del J. Lauria. Mr. Lauria became a director of the Company and Chief
Financial Officer upon its formation. Mr. Lauria is also the Executive Vice
President of Slavik Suites, Inc. From 1980 to 1982, Mr. Lauria served first as
Chief Financial Officer of the Formidable Group, Inc., a real estate management
company. In 1982, Mr. Lauria was promoted to Executive Vice President of the
Formidable Group, Inc. and served in that position until joining Slavik Suites,
Inc. in 1991. Prior to joining the Formidable Group, Inc., Mr. Lauria was
associated with the accounting firm now known as Deloitte & Touche and is a
certified public accountant. Mr. Lauria has served as Treasurer of Finance since
its inception.
52
<PAGE>
Stephan F. Slavik, Sr. Mr. Slavik became a Director of the Company upon
its formation. Mr. Slavik is the Managing Member of Slavik Enterprises, LLC, a
residential development company that has developed and constructed more than
6,000 single family homes, 15,000 multiple-family housing units and several
planned communities in Michigan and Florida. Slavik Enterprises is currently
active in the development, building and ownership of over 4,900 apartment units.
Mark Wolman. Mr. Wolman became a Director of the Company upon its
formation. Mr. Wolman has been the President of Wolman Construction since its
formation in 1988. Wolman Construction is a residential and commercial
development and construction firm based in eastern Connecticut and is actively
involved in developing the Mohegan Sun. Mr. Wolman has been working with the
Mohegan Tribe since 1992 and has been instrumental in assisting the Mohegan
Tribe obtain a number of governmental approvals in connection with the
development and construction of the Mohegan Sun. Mr. Wolman is the brother of
Len Wolman.
The Company's directors and officers will not be compensated by the
Company, but will receive compensation as part of the operating expenses
deducted from the Management Services Fee. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Sun International
Sun International, drawing upon its gaming and resort expertise, has
assembled an experienced management team to oversee the development and
operation of the Mohegan Sun. This team includes:
Name Age Position
---- --- --------
Solomon Kerzner............ 60 Chairman and Chief Executive
Howard B. Kerzner.......... 32 President
Charles Adamo.............. 35 Executive Vice President -- General Counsel
John R. Allison............ 50 Executive Vice President --
Chief Financial Officer
Kevin DeSanctis............ 42 Chief Operating Officer --
North America & Caribbean
William C. Katz............ 44 Executive Vice President --
Project Development International
- -----------------------------
Solomon Kerzner. Mr. Kerzner has been Chairman and Chief Executive Officer
of Sun International since October 1993 and from October 1993 to June 1996 was
President. Mr. Kerzner is one of the visionary leaders of the resort and gaming
industries. Prior to founding Sun International, Mr. Kerzner pioneered the
concept of an entertainment and gaming destination resort designed and managed
to appeal to multiple market segments by developing Sun City, the Lost City and
the Carousel. Mr.
Kerzner is the father of Howard Kerzner.
Howard B. Kerzner. Mr. Kerzner is the President of Sun International. Mr.
Kerzner joined Sun International in May 1995 as Executive Vice President --
Corporate Development. Prior to that time, he was Director - Corporate
Development of Sun International Investments Limited ("SIIL") from September
1992. Previously, Mr. Kerzner worked for Lazard Freres & Co. from September
1991. Prior to that time Mr. Kerzner worked for the First Boston Corporation.
Mr. Kerzner is the son of Solomon Kerzner.
Charles D. Adamo. Mr. Adamo is Executive Vice President and General
Counsel of Sun International. Mr. Adamo joined Sun International in May 1995 as
General Counsel. Prior to that time, he was Group Legal Advisor of SIIL from
September 1994. Previously, Mr. Adamo was engaged in the
53
<PAGE>
practice of law at the firm of Cravath, Swaine & Moore in New York from 1986.
Mr. Adamo is admitted to the bar in the State of New York.
John R. Allison. Mr. Allison is the Executive Vice President -- Chief
Financial Officer of Sun International. Mr. Allison joined Sun International in
May 1995 as Chief Financial Officer. Mr. Allison joined SIIL in March 1994 as
Group Financial Director. From December 1987 until February 1994, Mr. Allison
was Chief Financial Officer -- South African operations of Sun International,
Inc., a resort and management holding company with interest in approximately 27
hotels in southern Africa. Prior to that, 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. Mr. DeSanctis is the Chief Operating Officer - North
America & Caribbean. Mr. DeSanctis joined Sun International in July 1995 as
President, Gaming. 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 gaming industry.
William C. Katz. Mr. Katz is the Executive Vice President -- Project
Development. Mr. Katz joined Sun International in May 1995 as Executive Vice
President -- Project Development. Prior to that time, he was Vice President --
Project Development for Americas & Caribbean for SIIL from September 1994. 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, Fort Lauderdale, Florida. From 1989 to 1991,
Mr. Katz was Project Executive for Stolte, Inc., Miami, Florida.
The Authority
The following tables provides information as of September 1, 1996 with
respect to each of (i) the executive officers of the Authority and (ii) the
members of the Management Board of the Authority (the "Management Board"). See
"Mohegan Tribe of Indians of Connecticut--Tribal Gaming Authority."
Name Position
- ---- --------
Roland Harris.................... Chairman and member, Management Board
Jayne Fawcett.................... Vice Chairman and member, Management
Board
William J. Valardo............... Executive Vice President and General Manager
George T. Papanier............... Senior Vice President and Chief Financial
Officer
Mitchell Grossinger Etess........ Senior Vice President, Marketing
James Allen...................... Vice President, Development
Marie Haggerty .................. Vice President, Human Resources
Carlisle Fowler.................. Treasurer and member, Management Board
Loretta Roberge.................. Corresponding Secretary and member,
Management Board
54
<PAGE>
Name Position
- ---- --------
Shirley Walsh.................... Recording Secretary and member, Management
Board
Mark Brown....................... Member, Management Board
Courtland Fowler................. Member, Management Board
Maynard Strickland............... Member, Management Board
Glen R. LaVigne.................. 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 Planner, 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 and as Fire Marshall and Inspector of the Town of Griswold. Prior to
assuming the Chairmanship of the Management 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 Mohegan 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 Mohegan Tribe's
public relations.
William J. Valardo. Mr. 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 was Vice President, Table Games of the Mirage in Las Vegas from its
opening in 1989 until 1991. Mr. Valardo also worked as Assistant Casino Manager
and Pit Manager for Caesars Tahoe and Caesars Palace.
George T. Papanier. Mr. 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. 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.
James Allen. Mr. Allen has been Vice President, Development, since
September 1995 and prior to that served as General Manager of Bullwhackers Black
Hawk Casino in Black Hawk, Colorado. Prior
55
<PAGE>
to his employment with Bullwhackers Black Hawk Casino, Mr. Allen served as Vice
President of Hotel Operations at Trump Plaza in Atlantic City, New Jersey, where
he was responsible for all areas of the hotel. Mr. Allen has been in the gaming
industry for sixteen years and has held a variety of positions.
Marie Haggerty. Ms. Haggerty has been Vice President, Human Resources,
since September 1995. Prior to her employment with the Authority, Ms. Haggerty
served as Vice President of Human Resources at River City Joint Venture in New
Orleans, Louisiana, where she was responsible for all areas of Human Resources,
as well as Wardrobe and Retail Operations. Ms. Haggerty served as Senior Vice
President of Human Resources at Trump Plaza in Atlantic City from 1986 to 1995
before moving to New Orleans. Ms. Haggerty also held various Human Resources
positions with Caesars Atlantic City from its pre-opening phase in 1978 through
1986 when she joined Trump Plaza. Ms. Haggerty has a total of eighteen years of
experience in the gaming industry.
Carlisle Fowler. Mr. Fowler has been the Treasurer and a member of the
Management Board since July 15, 1995 and has been active in the Mohegan 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.
Loretta Roberge. Ms. Roberge has been Corresponding Secretary and a member
of the Management Board since July 15, 1995. Ms. Roberge has served as a
paraprofessional at the Mohegan School for 24 years, working with children with
special needs. Active in the Mohegan Tribe's community all her life, Ms. 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 Mohegan Tribe.
Shirley Walsh. Ms. 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. Ms. Walsh has worked for the Mohegan Tribe in various
capacities for almost four years. Prior to that time, she was employed for 13
years by a local certified public accountant. Ms. Walsh chaired the Mohegan
Tribe's Election Committee from 1994 to 1995 and serves on the Bingo, Glad and
Sad and the Wigwam Committee of the Mohegan Tribe.
Mark Brown. Mr. Brown has been a member of the Management Board since
October 1985 and serves as the security liaison for the Tribal Council. Prior to
joining the Tribal Council, he served as a law enforcement officer for eight
years. Mr. Brown worked with the Mohegan Tribe's historian during the period in
which the Mohegan Tribe was working to obtain federal recognition and also
served on the Constitutional Review Board from 1993 to 1994. Mr. Brown has
co-chaired the Mohegan 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 Mohegan 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 Mohegan
Tribe's Cemetery Committee. Mr. Fowler also was on the committee that drafted
the first constitution of the Mohegan 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 was born and raised in the Mohegan Tribe community, continuing a long
family tradition of tribal involvement.
56
<PAGE>
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.
57
<PAGE>
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
Mohegan Tribe currently has approximately 1,100 members. Although it only
recently received federal recognition, the Mohegan Tribe has lived in a cohesive
community since time immemorial in what is today southeastern Connecticut. The
Mohegan Tribe historically has cooperated with the United States and is proud of
the fact that members of the Mohegan Tribe have fought on the side of the United
States in every war from the Revolutionary War to Desert Storm. The Mohegan
Tribe believes that this philosophy of cooperation exemplifies its approach to
developing the Mohegan Sun.
Although the Mohegan Tribe is a sovereign entity, it has sought to work
with, and gain the support of local communities in establishing the Mohegan Sun.
For example, the Mohegan 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 Mohegan Tribe has been sensitive to
the concerns of the local community in developing the Mohegan Sun. This
philosophy of cooperation, rather than confrontation, has enabled the Mohegan
Tribe to build a unique alliance among local, state and federal officials to
achieve its goal of building the Mohegan Sun.
Governance
The Mohegan Tribe's Constitution provides for the governance of the
Mohegan Tribe by a Tribal Council (the "Council"), consisting of nine members
and a Constitutional Review Board (the "Board"), consisting of seven members.
All members of the Council and the board serve terms of five years except in the
event that the Chair of the Council has been elevated to the position of
Lifetime Chief. A Lifetime Chief serves for life, unless the Lifetime Chief
resigns from office or is deemed incompetent and removed from office in
accordance with tribal custom. On February 22, 1992, Chief Ralph Sturges was
elected to the position of Lifetime Chief of the Mohegan Tribe; however, Chief
Sturges has resigned his position as Chair and a member of the Council.
The legislative and executive powers of the Mohegan Tribe are vested in
the Council. The members of the Council are elected by the registered voters of
the Mohegan Tribe and must be at least 18 years of age prior to the date of the
election. The powers of the Council are set forth in the Mohegan Tribe's
Constitution and include the legislative and executive powers to establish a
departmental structure of 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 expire during October
2000. As of November 1996, the members of the council were:
Tribal Council
Name Age
---- ---
Mark Brown........................................................ 38
Jayne Fawcett..................................................... 59
Carlisle Fowler................................................... 66
Courtland Fowler.................................................. 68
Roland Harris..................................................... 55
Loretta Roberge................................................... 64
Shirley Walsh..................................................... 51
58
<PAGE>
Maynard Strickland................................................ 48
Glenn R. LaVigne.................................................. 36
The Board is the Mohegan Tribe's traditional "council of elders." Six
members of the Board must be registered voters of the Mohegan Tribe who are at
least 55 years of age. The members of the Board are elected by the registered
voters of the Mohegan Tribe. The seventh member of the Board is appointed by the
Council. Any case or controversy arising under the Mohegan Tribe's Constitution
must be submitted to the Board for determination, except those matters which
relate to the Mohegan Sun, including, the Authority Senior Secured Notes and the
Subordinated Notes, which are required to be submitted to the Gaming Disputes
Court. The decision of the Board on such matters is final. The Board is not
permitted to issue advisory opinions. The term of each of the Board members
expires during October 1999.
Constitutional Review Board
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 Mohegan Tribe established the Mohegan Tribal Gaming
Authority. The Mohegan Constitution provides that the Authority shall exercise
all governmental and proprietary powers of the Mohegan Tribe over all
gaming-related development. Presently, the members of the Authority's Management
Board are the same as the members of the Council.
The Authority has two major functions. The first, delegated to the
Authority's 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.
The Management Board also selects tribal representations 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 member appointed by the Mohegan Tribe and two members appointed
by the Manager.
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 throughout the promulgation and enforcement of
appropriate regulation. The Director of Regulation serves at the pleasure of the
Management Board. The Director of Regulation 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.
Gaming Disputes Court
On July 20, 1995, the Council enacted the 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
59
<PAGE>
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.
The Mohegan Constitution and the tribal ordinance establishing the Gaming
Dispute Court give the Court exclusive jurisdiction for the Mohegan Tribe over
all disputes related to gaming. This includes jurisdiction over all disputes or
controversies related to gaming between any person or entity and the Authority,
the Mohegan Tribe, or the Manager. The Gaming Disputes Court has jurisdiction
over all disputes arising out of the Authority's regulatory powers, including
licensing actions. By ordinance, the Mohegan Tribe has adopted the substantive
law of the State of Connecticut as the applicable law of the Gaming Dispute
Court. The Mohegan Tribe has also adopted all of the Connecticut's rules of
civil and appellate procedure and 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 Connecticut Supreme
Court pursuant to Connecticut General Statute 52-434(a)(4), all of whom 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.
CERTAIN TRANSACTIONS
The Reorganization
The Company, a Delaware limited liability company, was formed in September
1996 and is owned by Slavik and LMW. Prior to the offering of the Private Notes,
Slavik and LMW were partners of the Manager. In connection with the formation of
the Company, Slavik and LMW each contributed to the Company their partnership
interests in the Manager in exchange for a 662/3% and a 331/3% ownership
interest, respectively, of the Company. Upon consummation of the Private
Offering, (i) $6,666,667 of the proceeds from the offering of the Private Notes
was distributed directly to Slavik for the purpose of redeeming certain
ownership interests in Slavik, and (ii) $3,333,333 of the proceeds from the
offering of the Private Notes was distributed to LMW, which will in turn loaned
such proceeds to Len and Mark Wolman, as individuals, who used such funds to
purchase certain interests in Slavik. In addition to its partnership interest in
the Manager, Slavik is an owner of certain hotel properties. The Company used
$10.6 million of the proceeds from the offering of the Private Notes to purchase
RJH Development Corp.'s ownership interest in the Manager. See
"Business--Material Agreements--Trading Cove Associates Partnership Agreement."
As a result of the Reorganization, each of Slavik and LMW own approximately
two-thirds and approximately one-third of the Company, respectively, and the
Company became a Managing General Partner of the Manager and owns a 45% economic
interest in the Manager. Following the Reorganization, the only two Partners of
the Manager are the Company and Sun and each has equal voting power.
Related Party Transactions
Under the partnership agreement with the Manager, Sun International is
entitled to a development fee equal to 3% of the total cost of the Mohegan Sun
(exclusive of land acquisition costs).
60
<PAGE>
Pursuant to a subcontract, Wolman Construction will receive 20.83% of the
development fee plus $25,000. Wolman Construction is owned by Mr. Len Wolman,
Chairman of the Board of the Company and Mr. Mark Wolman, a director of the
Company.
Slavik and/or the other principals of the Company have interests or may
acquire interests in hotels in eastern Connecticut which have or may have
arrangements with the Mohegan Sun to reserve and provide hotel rooms to patrons
of the Mohegan Sun.
61
<PAGE>
MATERIAL AGREEMENTS
The following discussion summarizes significant terms of certain material
agreements which affect the operations of the Mohegan Sun. 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 to
prospective investors upon request without charge by writing to the Company.
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
The Mohegan Tribe and the State of Connecticut entered into The Mohegan
Tribe - State of Connecticut Gaming Mohegan Compact (the "Mohegan Compact") to
authorize and regulate certain Class III Gaming operations on lands owned by the
Mohegan 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 Mohegan 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 Mohegan 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 Mohegan Tribe may conduct 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 Mohegan
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 Mohegan 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 Mohegan Tribe
for the reasonably necessary costs attributable to its regulation of the
Mohegan Tribe's gaming operations and for the provision of law enforcement
in accordance with the Mohegan Compact.
(7) The Mohegan 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.
62
<PAGE>
(8) In order to beneficially effect health and safety, the Mohegan
Tribe shall enact fire, building, sanitary and health ordinances and
regulations no less rigorous than laws and regulations of the State of
Connecticut.
(9) Service of alcoholic beverages within any gaming facility will be
subject to regulation by the State of Connecticut.
(10) The Mohegan 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 Mohegan Tribe and the State of Connecticut entered into a
memorandum of understanding, as amended (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 Mohegan 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 Mohegan 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 Mohegan Tribe's gaming operations, by
$2,500,000 in the third year of the Mohegan Tribe's gaming operations, and
by $2,500,000 in the fourth year of the Mohegan Tribe's gaming operations.
This represents the settlement of the land claims of the Mohegan Tribe.
(3) The Mohegan 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 Mohegan Tribe.
(4) For each fiscal year commencing July 1, the minimum contribution
of the Mohegan 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.
Development Agreement
General. The Mohegan Tribe and the Manager entered into an Amended and
Restated Gaming Facility Development and Construction Agreement (the
"Development and Construction Agreement") providing for the design,
construction, furnishing and site development of the Mohegan Sun by the Manager.
The Mohegan Tribe has assigned its rights and obligations in this agreement to
the Authority. The Manager and the Authority have consented to this assignment.
Exclusive Rights of the Manager; Conditions to the Manager's Obligation.
Subject to certain design and budget approval rights retained by the Mohegan
Tribe and the Tribal Council under the Development Agreement, the Mohegan Tribe
has granted to the Manager the exclusive right to design, engineer, develop,
construct, furnish and maintain the Mohegan Sun and any related facilities that
are owned by the Mohegan Tribe or any of its instrumentalities, including the
Authority.
63
<PAGE>
Business Board. Under the Development Agreement, certain decision-making
authority and oversight duties are delegated to a committee comprised of an
equal number of representatives of the Mohegan Tribe and the Manager (the
"Development Agreement Business Board") but in no event more than four persons.
The Development Agreement Business Board is responsible for various matters,
including, without limitation, the selection and approval of architects and/or
engineers (the "Architect"), the approval of one or more contractors and/or
construction managers, selected by the Manager, the establishment of design,
construction and furnishing budgets, which are subject to approval by the Tribal
Council, and the procurement of trade fixtures, furnishings and equipment
("Furnishings"). In addition, the Development Agreement Business Board is
responsible for establishing a program implementing the Manager's and the
Mohegan Tribe's objectives, schedule requirements and design criteria with
respect to the Mohegan Sun.
Construction Budgets; Funding Requirements; Cost Overruns. With the
assistance of the architect, the Development Agreement Business Board is
responsible for the preparation of budgets for the design, construction and
furnishing of the Mohegan Sun, which will be subject to the approval of the
Tribal Council (the "Tribal Council"). This budget is subject to revision from
time to time by the Manager, in its capacity as Manager under the Management
Agreement (as hereinafter defined) and with prior notice to the Tribal Council,
to reflect unpredicted significant changes or events or to include significant,
additional or unanticipated expenses. Development Agreement 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 Mohegan Tribe's
representatives on the Development Agreement Business Board may require Tribal
Council approval of any other budget adjustment that varies from the terms of
the Development Agreement.
Currently, the Mohegan Tribe and the Manager have estimated that the total
costs for development and construction of the Mohegan Sun will be approximately
$305 million, exclusive of working capital and equipment operating leases. If
there are any cost overruns related to the construction of the Mohegan Sun, the
Manager has agreed to assist the Mohegan Tribe in obtaining additional funds
necessary to finance such overrun, up to a maximum total for the principal
amount of all Project Costs of $325.0 million for the Mohegan Sun.
Design Phase - Architect Selection; Plans and Specifications. The
Development Agreement provides that the construction of the Mohegan Sun is
divided into two phases: a "Design Phase" and a "Construction Phase." The Design
Phase consisted of the engagement of the architect, who was employed and
directly compensated by the Mohegan Tribe, 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"). The Mohegan Tribe assigned to the Manager its
responsibilities under any architectural and/or engineering agreements to allow
the Manager to directly supervise and administer directly the duties of the
Architect and/or engineer thereunder. Adjustments to budgets in excess of five
percent required the approval of the Development Agreement Business Board.
The Development Agreement provides that the design and construction of the
Mohegan Sun must comply with all federal and Connecticut statutes and
regulations that otherwise would apply if the Mohegan Sun was located outside
the jurisdictional boundaries of the Mohegan Tribe.
Construction Phase - Contractor Selection; Employment Preference; the
Manager Oversight. The Construction Phase consisted of the selection of
contractors and subcontractors and the commencement and completion of
construction. Morsel Diesel was selected as the general contractor. Following
the Manager's review of proposals from prospective contractors, the Development
Agreement Business Board to negotiated and awarded contracts to the qualified
applicants of its choosing. All contractors were engaged and paid directly by
the Mohegan Tribe. In addition, as required by the Development Agreement,
subcontractors were selected in accordance with certain provisions of the
Management Agreement, which requires, among other things, that employment
preference be given to members of the
64
<PAGE>
Mohegan Tribe, their spouses and children, and business entities controlled by
members of the Mohegan Tribe, who or which, in the Manager's opinion, possess
sufficient skills and competence.
The Manager is responsible for the administration and supervision of all
contracts and agreements with contractors and will act as the Mohegan Tribe's
representative, with full power and authority to act on behalf of the Mohegan
Tribe, in connection with any such contracts that are approved by the
Development Agreement Business Board. Specifically, the Manager will be
responsible for control and charge of all persons performing work on the site of
the Mohegan Sun, inspecting the progress of construction, determining completion
dates and reviewing contractor payment requests submitted to the Mohegan Tribe.
The Mohegan Tribe, 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 the Manager will have the authority to reject any work that does not comply
with the applicable contracts.
Furnishings. Furnishings for the Mohegan Sun will be purchased by the
Mohegan Tribe from vendors selected by the Development Agreement Business Board
or leased on terms arranged by the Manager and approved by the Development
Agreement Business Board. The Manager has agreed to use good business practices
and, where appropriate, competitive bidding with respect to the procurement of
Furnishings.
Termination, Default and Disputes. Each party has the right to terminate
the Development Agreement in the event that a material breach 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 Mohegan Tribe and the Manager 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, the Mohegan
Tribe and the Manager have entered into the Amended and Restated Gaming Facility
Management Agreement (the "Management Agreement"), pursuant to which the Mohegan
Tribe has retained and engaged the Manager as an independent contractor to
develop, operate, manage and maintain the Mohegan Sun and to train members of
the Mohegan Tribe and others in the management of the Mohegan Sun. The Mohegan
Tribe has assigned its rights and obligations in this agreement to the
Authority. The Authority and the Manager 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 Mohegan Tribe 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 Mohegan Tribe must (i) fully pay and satisfy
certain outstanding indebtedness, including all indebtedness under the Authority
Senior Secured Notes and the Subordinated Notes, (ii) give notice of 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, (iii) enter into
discussion with the Manager to determine the option price on commercially
reasonable terms, (iv) execute and deliver to the Manager a full release of all
of the Managers 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 the Manager pursuant to the Management
Agreement.
Under the Management Agreement, the Mohegan Tribe has granted to the
Manager the exclusive right and obligation to develop, manage, operate and
maintain the Mohegan Sun and all other related facilities that are owned by the
Mohegan Tribe or any of its instrumentalities, including the Authority and
65
<PAGE>
to train members of the Mohegan Tribe and others in the management of the
Mohegan Sun. 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 Mohegan Tribe and the Manager 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, the Manager has agreed to
use its best efforts to promote and manage the Casino and the Mohegan Tribe has
agreed that, except as required by law, it will not adopt any amendments to its
gaming ordinances that would materially adversely affect the Manager's right to
operate and maintain the Mohegan Sun. The Management Agreement provides that
neither the Mohegan Tribe nor any of its agents, affiliates or representatives
will impose any taxes, fees, assessments or other charges on payments of any
debt service to the Manager or any lender, on the Mohegan Sun or the revenues
therefrom or on the management fee payable to the Manager thereunder and, if any
such tax is imposed, the Manager has the right to obtain compensation from the
Mohegan Tribe in equal amount to the amount of the tax.
Management Agreement 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 Mohegan Tribe
and of the Manager (the "Management Agreement Business Board") but in no event
more than four persons. Actions by the Management Agreement Business Board
require the unanimous approval of its members or their respective designees. The
Mohegan Tribe and the Manager have agreed that, in the event that the Management
Agreement 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 the Manager. The Management
Agreement provides that the Manager will be responsible for the day-to-day
management, operation and maintenance of the Mohegan Sun, including the
establishment of operating days and hours. The Management Agreement authorizes
the Manager to select a general manager ("General Manager") to fulfill its
responsibilities thereunder. Any General Manager selected by the Manager is
subject to approval by the Mohegan Tribe, by resolution of the Tribal Council or
its designee, and may be removed at the Mohegan Tribe's request, by resolution
of the Tribal Council and with the consent of the Manager, which consent may not
be unreasonably withheld. As manager of the Mohegan Sun, the Manager has agreed
to operate the facility in compliance with all Tribal legal requirements and
other applicable laws and that the Manager and all of the Managers executive
officers shall be licensed by the Mohegan Tribe pursuant to the Mohegan Tribe's
Gaming Ordinance.
Under the Management Agreement, the Mohegan 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 Mohegan 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
Mohegan Tribe which impairs contractual obligations.
The Management Agreement provides that the General Manager shall have the
authority to enter into contracts for the operation of the Mohegan Sun on behalf
of the Mohegan Tribe. Any contracts that require annual expenditures in excess
of $25,000 or that are entered into with affiliates of the Manager must be
approved by the Management Agreement Business Board. With respect to contracts
for the supply of goods and services, the Manager is required to give preference
to members of the Mohegan Tribe, their spouses and children, and business
entities controlled by Mohegan Tribe members. In addition, the Manager has
agreed to assist the Mohegan Tribe in obtaining funding necessary for the
operation of the Mohegan Sun and will be responsible for the marketing,
advertisement and promotion thereof. The Manager will have the right to sell
alcoholic beverages and tobacco products at the Mohegan Sun in accordance with
the Mohegan Compact and Tribal legal requirements.
66
<PAGE>
Pursuant to the Management Agreement, subject to the law enforcement
authority of the Mohegan Tribe, the Manager will be responsible for all aspects
of the security and surveillance at the Mohegan Sun. The parties have agreed
that the Mohegan Tribe will have 24-hour access to the entire Mohegan Sun,
including all security and surveillance facilities and records. In addition, the
Manager will be responsible for maintaining, on behalf of the Mohegan Tribe,
adequate insurance coverage for the Mohegan Sun, including "all risk," general
commercial liability, workers' compensation, employer liability and such other
policies of insurance as the Management Agreement Business Board may reasonably
request from time to time. All such policies will name the Manager as an
additional insured party and/or loss payee to the extent provided in the
Management Agreement.
The Manager will be responsible for defending or settling any legal claim
brought against the Manager or the Mohegan Tribe in connection with the
operation of the Mohegan Sun and will also be responsible for bringing legal
claims relating to the Mohegan Sun on behalf of the Mohegan Tribe. However, the
Management Agreement 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, such proceedings will be supervised by the
Management Agreement Business Board with notice to and consultation with the
Tribal Council.
Mohegan Sun Employees; Employment Preference. Pursuant to the Management
Agreement, the Manager will have the exclusive responsibility and authority to
select, retain, train and discharge all employees hired to perform services at
the Mohegan Sun; however, all employees will be employees of the Mohegan Tribe
and not the Manager. The Mohegan Tribe will have the right to select inspectors,
who will be responsible for verifying the daily gross revenues of the Mohegan
Sun and who will report directly to the Mohegan Tribe. Subject to the approval
of the Tribal Council, the Manager will also have the right to engage its own
employees and the employees of its affiliates to provide services for the
Mohegan Sun; however, neither the Manager 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 Mohegan Tribe, members of
the Mohegan Tribe, their spouses and children will be given preference in
recruiting, employment and training with respect to all job categories in
connection with the operation of the Mohegan Sun, including management
positions. Pursuant to the terms of the Management Agreement, however, no member
or employee of the government of the Mohegan Tribe may be employed without a
waiver by the Mohegan Tribe and such federal agencies as may be required by law.
The Manager has agreed to conduct applicable background investigations with
respect to each applicant for employment at the Mohegan Sun.
The Manager 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, the Manager 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 Tribal Council and include a grievance procedure to promote
fair and uniform standards for members of the Mohegan Tribe employed at the
Mohegan Sun. The Manager 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 is substantially complete and open to the public
(the "Commencement Date") and not less than 60 days prior to the commencement of
each full or partial fiscal year thereafter, the Manager must submit to the
Tribal Council, for its approval, a detailed proposed operating budget for the
facility for the ensuing fiscal year. Under the Management Agreement, the
Manager is required to meet with the Tribal Council to discuss the proposed
budget and the Tribal Council is obligated to review the budget on a
line-by-line basis. The Tribal Council may not unreasonably withhold or delay
its approval of a budget proposed by the Manager and the Management Agreement
establish specific procedures and time
67
<PAGE>
limits for the Tribal Council to object to any budget submitted for its
approval. In the event that the Manager and the Tribal Council 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 Tribal
Council, the Manager 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 will require approval of the
Business Board, and the Mohegan Tribe's representative(s) to the Business Board
may require written approval of the Mohegan Tribe for any budget modification
that varies from the terms of the Management Agreement.
In addition to an annual operating budget, the Manager 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 in accordance with sound
business practices for the ensuing fiscal year. The approval and dispute
resolution provisions applicable to capital budgets are the same is those for
operating budgets. The Manager will be responsible for the design and
installation of all capital replacement items, and the Mohegan Tribe has agreed
to expend such amounts as are necessary to maintain the Mohegan Sun in
compliance with all legal requirements and to correct any emergency conditions.
In addition, the Mohegan Tribe 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 and maintain its competitiveness.
Pursuant to the terms of the Management Agreement, the Manager 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 the
Reserve Fund which remains unused at the end of any fiscal year will be carried
forward to the following year. Each of the Manager and the Mohegan Tribe will be
required to make monthly contributions to the Reserve Fund at the rate of 60%
from the Mohegan Tribe and 40% from the Manager up to a combined total of $3
million per year from both parties. Deposits by the Mohegan Tribe to the Reserve
Fund will be deemed capital expenditures and will not reduce amounts
distributable as Net Revenues; however, deposits made by the Manager will reduce
Net Revenues payable to the Manager under the Management Agreement. In addition,
proceeds from the sale of capital items no longer needed for the operation of
the Mohegan Sun 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, the Manager 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 Tribe. Under the
Management Agreement, the Business Board is authorized to establish such bank
accounts, for the benefit of the Mohegan Tribe, as the Manager shall deem
necessary for the operation of the Mohegan Sun. The accounts are also subject to
the terms of the indenture for the Authority Senior Secured Notes, which
provides for the establishment of a security interest in the accounts, and
requires that the accounts be opened in the name of such trustee. The Management
Agreement provides for the establishment of depositary and disbursement accounts
and authorizes the Manager to pay from the disbursement accounts such funds as
are necessary to cover the operating expenses of the Mohegan Sun, debt service
payments under the Authority Senior Secured Notes, the Development Agreement
fees payable to the Manager under the Management Agreement and disbursements to
the Mohegan Tribe. The Manager 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, the Manager will be responsible
for the installation of internal control systems
68
<PAGE>
for the monitoring of all funds, which systems will be subject to approval by
the Business Board and review by the Mohegan Tribe. The Mohegan Tribe is
entitled to appoint an inspector, who will have the right to inspect and oversee
such internal control systems at all times and will have full access to the
"hard count" (ie., coins and tokens) and "soft count" (ie., non-coin revenues
and credits) rooms as well as to the closed-circuit television system required
to be installed by the Manager to monitor the cash-handling activities at the
Mohegan Sun.
The Management Agreement requires the Manager to maintain, in accordance
with generally accepted accounting principles, books and records reflecting the
operations of the Mohegan Sun and to prepare monthly, quarterly and annual
statements for the Mohegan Tribe. An annual audit of the Mohegan Sun will be
conducted by a nationally-recognized independent certified public accounting
firm with experience in the casino industry. In addition, the Mohegan Tribe's
inspector or any other authorized agent of the Mohegan Tribe, the NIGC and the
BIA 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 the Manager 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 plus Revenues in Tiers I
40% of Net Revenues 35% of Net Revenues &
up to between II plus 30% of Net
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
amounts set forth above, 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 means the amount of the Gross Revenues of the facility 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 (ie., 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, the
Manager is required to calculate and report to the Mohegan Tribe, the gross
revenues, operating expenses and Net Revenues.
69
<PAGE>
Class II Gaming conducted at the Mohegan Sun is not subject to the
Management Agreement; the Agreement does not provide for the Manager to manage
any Class II Gaming or to share in any Class II Gaming revenues.
As and when received by the Manager, all revenues from Mohegan Sun
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 Mohegan
Tribe, on a monthly basis to cover operating expenses and required deposits to
the Reserve Fund. In addition, the Manager 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 Budgets--Replacement Reserve
Fund" and "--Bank Accounts and Accounting Procedures; Inspection by Mohegan
Tribe."
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 Mohegan Tribe as a
"Minimum Priority Payment," chargeable against the Mohegan Tribe's
distribution of Net Revenues. In the event that Net Revenues for any given
month are less than the Minimum Priority Payment, the Manager will be
required to fund any deficiency and will be entitled to reimbursement by
the Mohegan Tribe 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 is suspended
or terminated for the full month.
(2) current principal and other debt service payments, including
sinking funds or any required deposit to the accounts for the benefit of
the Authority Senior Secured Notes (exclusive of interest, which is paid as
an operating expense);
(3) recoupment payment to the Manager for funds advanced in prior
periods and reimbursement of amounts advanced by the Manager (including any
Minimum Priority Payment deficiencies funded by the Manager pursuant to
Item (1), above; all such funds are charged without interest against the
Mohegan Tribe's share of Net Revenues);
(4) deposits to the Reserve Fund by the Mohegan Tribe and the Manager;
and
(5) payment of the Management Fee to the Manager.
All remaining Net Revenues, if any, and cash shall be distributed to the
Mohegan Tribe, subject to restrictions on distributions to the Mohegan Tribe in
the indenture governing the Authority Senior Secured Notes. In the event of
liquidation all disbursements will be subordinate to repayment of the Authority
Senior Secured Notes.
Liens; Taxes. Under the Management Agreement, the Mohegan Tribe and the
Manager have represented and warranted to the other that it will not act in any
way to cause any party, other than the Manager, the holders of Authority Senior
Secured Notes and holders of the Subordinated Notes to become a lienholder of
the leased property or the Mohegan Sun, or to allow any party to obtain any such
interest under the Management Agreement without the prior consent of the Manager
or the Mohegan Tribe, as the case may be, and, if required, the United States.
In addition, the Mohegan Tribe and the Manager have agreed to keep the leased
property and the Mohegan Sun free and clear of any liens, whether resulting from
the construction of the Mohegan Sun or otherwise.
70
<PAGE>
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 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 of
the Mohegan Sun. The Mohegan Tribe has agreed not to impose any taxes, fees,
assessments or other charges (i) on payments of any debt service to the Manager
or any other lender furnishing financing to the Mohegan Sun, and (ii) on the
salaries, benefits or dividends paid to any of the Managers' partners, officers,
employees or affiliates or any employees of the Mohegan Sun. The Management
Agreement provides that the Mohegan Tribe shall have the right, however, to
assess license fees that reflect reasonable regulatory costs incurred by the
Mohegan Tribe.
Relationship between Tribe and the Manager. Under the Management
Agreement, the Manager agrees not to unduly interfere in or attempt to
improperly influence the internal governmental affairs of the Mohegan Tribe.
Furthermore, the Manager 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 Mohegan Tribe or their relatives (a "Tribe Official").
In addition, the Manager may not offer any promotional allowances (e.g.,
complimentary meals, drinks, accommodations or gaming tokens) to any member of
the Tribal government. Similarly, no officer of the Mohegan Tribe or family
member of any officer or member of the Mohegan Tribe may be employed at the
Mohegan Sun without a written waiver by the Mohegan Tribe and, if required under
applicable law, the NIGC or other applicable government agency. Furthermore, no
Tribe Official may have any direct or indirect interest in the Mohegan Sun
greater than the interest of any other member of the Mohegan Tribe, except for
minimal equity ownership in the Manager, its partners, parents, subsidiaries or
affiliates. Pursuant to the Management Agreement, the Manager has agreed to
guarantee to the Mohegan Tribe 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 the sole benefit of the Mohegan Tribe and the
Authority and is not for the benefit of any holder of the Authority's Notes.
Damage, Condemnation or Impossibility of the Enterprise. In the event that
the Mohegan Sun is damaged or destroyed, taken by condemnation (or sold under
threat thereof), or if gaming at the Mohegan Sun is legally prohibited, the
Management Agreement provides that the Manager will have certain options with
respect to the continuation of gaming operations under the Management Agreement.
First, the Manager will have the option to retain its obligations under the
Management Agreement and commence or recommence the operation of the Mohegan Sun
if, at some point during the term of the Management Agreement, commencement or
recommencement is legally and commercially feasible.
Second, if the Mohegan Sun is damaged, destroyed or condemned, and the
Business Board elects to apply insurance or condemnation proceeds to the repair
or replacement thereof, the Manager may elect within 60 days to reconstruct such
facility. In the event that the insurance or condemnation proceeds are
insufficient to fund such reconstruction, the Manager may, at its option, elect
to provide additional funds to finance the reconstruction, subject to the
approval of the Mohegan Tribe, the BIA and the NIGC, as appropriate. Such funds
will constitute a loan to the Mohegan Tribe, will be secured by the revenues of
the Mohegan Sun 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, such proceeds will be applied first to amounts due under the
Authority's Senior Secured Notes, second, to the Subordinated Notes and other
outstanding indebtedness of the Authority, third, to any undistributed Net
Revenues and, fourth, to the Mohegan Tribe and the Manager in accordance with
their respective interests.
71
<PAGE>
The Manager will have the option to use the Mohegan Sun for any other
business purposes reasonably incidental to a Class III Gaming facility. In the
event that the Mohegan Sun is to be used for any purpose other than gaming, the
Manager and the Business Board will be required to obtain all approvals
necessary under applicable law.
In the event of the failure of the Mohegan Sun 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 the Manager will have the right
to terminate its obligations. Following such termination, the Manager will
remain entitled to undistributed Net Revenues in accordance with the terms of
the terminated Management Agreement. However, in the event that the Manager
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, during such period. In addition, during any period
of cessation of operation of the Mohegan Sun, 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 Mohegan Tribe may terminate the
Management Agreement if the Manager has its gaming license withdrawn as a result
of the conviction of any director or officer of the Manager for a criminal
felony or misdemeanor offense directly related to the performance of the
Manager'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 Mohegan Tribe shall retain title to the Mohegan Sun.
Following such termination, the Manager 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 unlawful. For a
description of the Managers' rights in the event of such a termination, see
"--Damage, Condemnation or Impossibility of the Enterprise." Similarly, the
Manager 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 the Manager of its obligations under such agreement or if the
Managers performance would jeopardize any licenses or approvals previously
obtained by the Manager.
Waiver of Tribal Sovereign Immunity; Arbitration. Under the Management
Agreement, the Mohegan Tribe has waived sovereign immunity for the purposes of
permitting, compelling or enforcing arbitration and to be sued by the Manager 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 parties have agreed that all disputes and claims arising out of
the Management Agreement or the Mohegan 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 Mohegan Tribe's waiver of immunity is limited to enforcement of money
damages from undistributed or future Net Revenues of the Mohegan Sun (or, under
certain conditions, net revenues of other gaming operations of the Mohegan
Tribe). Funds earned and paid over to the Mohegan Tribe as the Mohegan Tribe'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.
72
<PAGE>
Trading Cove Associates Partnership Agreement
General. In September 1994, Sun Cove, Ltd. (an affiliate of Sun
International), a Connecticut corporation ("Sun Cove"), RJH Development Corp., a
New York corporation ("RJH"), Leisure Resort Technology, Inc., a Connecticut
corporation ("Leisure"), Slavik and LMW entered into an Amended and Restated
Partnership Agreement (the "Partnership Agreement"), to form the Trading Cove
Associates Partnership (the "Manager") in order to, among other things: (i)
admit Sun Cove as a partner; (ii) act as the exclusive agent of the Mohegan
Tribe to manage and develop an entertainment and gaming facility (the
"Facility") on the Mohegan Tribe Reservation; and (iii) engage in any other
activities incidental or related to the foregoing. In February 1995, the parties
entered into an Acknowledgment and Release Agreement whereby Leisure withdrew
from the Manager for all purposes, except that Leisure retained a 5% "Beneficial
Interest" in the Manager. Leisure's Beneficial Interest is defined as the right
to receive certain distributions of Excess Cash and the Organizational and
Administrative Fee on the earlier to occur of (i) 14 years from the date of
commencement of the Management Agreement and (ii) the termination of the
Management Agreement. Following the Private Offering and Reorganization, and
pursuant to (i) a First Amendment to Amended and Restated Partnership Agreement
of Trading Cove Associates, dated October 22, 1996, effective as of the date of
the closing of the Private Offering, and (ii) an Agreement for Purchase and Sale
of Partnership Interest, dated September 12, 1996 whereby RJH agrees to sell and
the Company agrees to buy RJH's partnership interest for $10.6 million, the
Company, (referred to below as the "Original Partner") and Sun Cove will be the
only Partners in the Manager. Recently, the Manager has been advised that
certain parties have acquired interests in Leisure and such acquisitions are
subject to review by the Connecticut Commission of Revenue Services. See "The
Reorganization" and "Use of Proceeds."
Term. The term of the Manager continues until the first to occur of: (i)
December 31, 2040; (ii) a final disposition of the Facility (or any alternative
facility that may be developed or acquired pursuant to the terms of the
Partnership Agreement); (iii) the decision of the Managing Partners to terminate
the Manager; and (iv) any other event which results in dissolution of the
Manager.
Capitalization. In connection with its entry into the partnership, Sun
Cove made a capital contribution in an amount sufficient to equal a 50%
partnership interest. The Partnership Agreement provides for additional capital
contributions ("Additional Contributions") which have been made by the Partners,
in the amount of $1,100,000 in the aggregate. In the event that the Manager
requires additional funds, and subject to unanimous approval by the Partners,
the Partners may make loans (the "Loans") on a pro rata basis, based on their
respective partnership interests. Such Loans are non-recourse and unsecured and
bear interest at an annual rate of 2% above the prime rate. In the event that
the Company issues a capital call and Sun Cove does not make the requested
Additional Contribution within 30 days, generally Sun Cove is automatically
deemed to have withdrawn from the Manager. In such event, Sun Cove is not
entitled to any return of any of its previous capital contributions or
Additional Contributions, but it is generally entitled to receive repayment of
any Loans.
In the event that the Company and Sun Cove determine that additional
monies are required in excess of the Additional Contributions, such partners may
issue a call for an additional capital contribution (the "Additional Capital
Contribution"). In the event that the Sun Cove and the Company issue a capital
call and Sun Cove does not make the requested Additional Capital Contribution
within 30 days, generally Sun Cove is automatically deemed to have withdrawn
from the Manager. In such event, Sun Cove is not entitled to any return of any
of its previous capital contributions or Additional Contributions, but it is
generally entitled to receive repayment of any Loans.
In the event that an Additional Capital Contribution is required and if
the Company elects not to make such contributions, then Sun Cove may, at its
election, pay such contributions, which payment shall be deemed, at the election
of Sun Cove, to be either (i) a loan to the Company or (ii) a Capital
73
<PAGE>
Contribution by Sun Cove, thereby increasing Sun Cove's partnership interest and
diluting the Company's partnership interest.
No Partner is obligated to restore a capital account deficit.
Distributions. Subject to certain special allocations which are intended
to comply with certain federal tax regulations, the Manager's profits and losses
are generally allocated among the Partners pro rata in accordance with their
percentage interest in the partnership. In the event that the Manager has Excess
Cash (as defined below), as determined at least on a monthly basis, the Managing
Partners are required to make distributions as follows: first, to the Partners,
pro rata based on their respective percentage interests in an amount generally
intended to be sufficient to provide for the payment of each Partner's federal
and state income taxes, second, to Sun Cove for the payment of certain fees in
connection with the development of the Facility and third, the balance to the
Partners, pro rata based on their respective percentage interests. "Excess Cash"
is that portion of cash which exceeds the amount needed to the Manager to (i)
service its debts and other obligations to third parties, (ii) pay certain fees
required by the Partnership Agreement, (iii) maintain adequate working capital
and other reserves, (iv) to conduct its business and (v) repay Loans.
Other Activities. The Partners are required to bring to the attention of
the Partnership all opportunities to manage or operate (i) any gaming activities
on Native American reservations and involving Native Americans or (ii) any other
gaming activity within 100 miles of the Mohegan Sun. The Partners have agreed to
discuss such opportunities on a good faith basis to achieve mutually
satisfactory arrangements to deal with such opportunities. In the event that the
Partners are unable to achieve a mutually satisfactory agreement relating to an
opportunity, no Partner may participate in such activity without the prior
consent of the non-participating Partners. To the extent that the Partners agree
to pursue additional gaming opportunities together pursuant to this provision,
they have agreed to form a new entity (other than the Manager) to pursue such
opportunities. See "Description of Notes--Certain Covenants--Limitation on
Activities of the Issuers."
Management. Upon consummation of the Private Offering, the Company and Sun
Cove will be the Managing Partners of the Manager, and as such, have the full,
exclusive and absolute right, power and authority to manage and control the
Partnership and the property, assets and business thereof. All decisions
relating to the management of the Manager require unanimous agreement between
the Company and Sun Cove.
The Partnership Agreement provides that Howard Kerzner will serve as the
designated representative of Sun Cove in its capacity as Managing Partner. In
the absence of Mr. Kerzner, John Allison will serve as Sun Cove's designated
representative. Each designated representative has the right, power and
authority to act for and on behalf of and to bind Sun Cove with respect to all
matters relating to the partnership. The Partnership Agreement grants Mr.
Kerzner the right to appoint a proxy upon written notice to the other Original
Partners Managing Partners. Len Wolman will serve as the designated
representative of the Company.
Buy/Sell Option in the Event of a Dispute. In the event that a dispute
arises under the Partnership Agreement, upon notice by one disputing party to
the other, the parties have ten days to resolve the dispute. If the dispute is
not resolved in such ten day period then, in accordance with specific notice
procedures set forth in the Partnership Agreement, either party has the right to
deliver a buy-out notice ("Buy-Out Notice") to the other to require such party
to elect to either (i) sell their partnership interest to the party delivering
the notice (at a price and under the terms set forth in such Buy-Out Notice (the
"Buy-Out Price")), or (ii) have the other party or its designee purchase the
interest of the party giving notice at the Buy-Out Price. In the event that the
party receiving the Buy-Out Notice fails to respond, such party is deemed to
have agreed to sell its partnership interest to the party delivering such notice
at
74
<PAGE>
the Buy-Out Price specified therein. See "Risk Factors--Certain Risks Related to
the Manager and the Partnership Agreement."
Fees. The Partnership Agreement provides for the payment of the following
fees: (i) a "Management Services Fee" of 1% of gross revenues of the Facility
(but not to exceed 25% of the Excess Cash plus the Organizational and
Administrative Fee and the Marketing and Casino Operations Fee) to be paid 50%
to Sun Cove and 50% to the Company after payment by the Manager of operating
expenses which will be $2.0 million if the Mohegan Sun's EBITDA (as defined) is
$200.0 million or less, $3.0 million of the Mohegan Sun's EBITDA is $200.0
million but less than $225.0 million, and $4.0 million if the Mohegan Sun's
EBITDA is greater than or equal to $225.0 million; (ii) a "Marketing and Casino
Operations Fee" equal to (a) 1.5% of gross revenues of the Facility in excess of
$300 million and (b) 2.0% of gross revenues in excess of the Facility in excess
of $400 million, to be paid to an affiliate of Sun Cove for marketing and casino
operations consulting services pursuant to the Management Agreement; (iii) an
"Organizational and Administrative Fee" equal to (a) 1.5% of gross revenues of
the Facility in excess of $300 million and (b) 2.0% of gross revenues of the
Facility in excess of $400 million, to be paid to the Company and a former
partner for certain organizational and administrative services including
advising the Mohegan Tribe in connection with the regulatory approval process
relating to the development of the Facility and certain other tribal activities;
and (iv) a "Development Services Fee" equal to 3% of the total development costs
of "Phase One" of the Facility to be paid to an affiliate of Sun Cove for making
available it expertise, plans and employees to enable the Partnership to perform
its obligations under the Development Agreement. In connection with the
Development Services Fee, Sun Cove has agreed to enter into a construction
contract with Wolman Construction Company (an affiliate of LMW) pursuant to
which Sun Cove will be obligated to pay approximately 21% of the Development
Services Fee to Wolman Construction Company.
Assignment of Partnership Interest. Subject to the following exceptions,
Sun Cove is generally prohibited from assigning its partnership interest. Sun
Cove may assign its interest to (i) certain of its affiliates and (ii) to any
party making a bona fide written offer to purchase any or all of Sun Cove's
partnership interest if, after offering its interest to the Original Partners at
the same price and on the same terms and conditions as set forth in such written
offer, the Original Partners elect not to purchase Sun Cove's partnership
interest.
Subject to the following exceptions, the Original Partners are generally
prohibited from assigning its partnership interest. The Original Partners may
assign their interests (i) to an affiliate of such Original Partner with the
consent of a majority of the remaining Original Partners, (ii) to any party
making a bona fide written offer to purchase all, but not less than all, of such
Original Partner's partnership interest if, after offering its interest first to
the non-selling Original Partners at the same price and on the same terms and
conditions as set forth in such written offer and, in the event that such
non-selling Original Partners, next to Sun Cove at the same price and on the
same terms and conditions as set forth in such written offer, the Original
Partners or Sun Cove, as the case may be, elect not to purchase Sun Cove's
partnership interest.
Withdrawal. Except as otherwise permitted by the Partnership Agreement, no
Partner may withdraw from the partnership with out the consent of the remaining
Partners. In the event that a Partner withdraws from the partnership in
violation of the Partnership Agreement, such Partner will be liable to the
remaining Partners for all damages cause by such withdrawal and shall
immediately cease to have any rights (including rights to receive any monies) in
the partnership.
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 $40.0 million aggregate principal amount of 15% Subordinated
Notes due 2003 (the "Original Subordinated Notes") at an aggregate
75
<PAGE>
purchase price equal to 100% of the principal amount thereof. In addition, to
evidence advances under the Completion Guarantee, it is expected that the
Authority will issue up to $50.0 million of floating rate Subordinated Notes due
2003 (the "Completion Guarantee Subordinated Notes", which collectively with the
Original Subordinated Notes are hereinafter referred to as the "Subordinated
Notes") to Sun International under the Note Purchase Agreement. The Subordinated
Notes are subordinate in right of payment to the Authority's Senior Secured
Notes.
Interest. The Original Subordinated Notes bear 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
Completion Guarantee Subordinated Note bears interest at the rate per annum then
most recently announced by Chase Manhattan Bank of New York as its prime rate at
New York, New York plus 1 % per annum, which rate shall be set and revised at
six month intervals. Installments of interest will 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 maturity of repurchase obligation,
upon repurchase or otherwise) upon such maturity of such principal amount of the
Subordinated Notes. Interest on the Subordinated Notes will be computed on the
basis of a 360-day year, consisting of twelve 30-day months. Each installment of
interest will be 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 with respect to the most recently ended semi-annual period shall
be deferred unless (i) $87.5 million in aggregate principal amount of the
Authority Senior Secured Notes have been repurchased or retired (for purposes of
such determination, the aggregate principal amount of the Authority Senior
Secured Notes offered to be repurchased in any required 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 (as defined) 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 Authority Senior Secured 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 Fixed Charge 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 Authority Senior Secured
Notes and the related 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" generally means
the ratio of cash flow to fixed charges (including any capitalized interest
expense) for any entity.
The Subordinated Notes will be 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 will be 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.
76
<PAGE>
Subordination. The Subordinated Notes will rank subordinate in right of
payment to the prior payment of all obligations related to the Authority Senior
Secured 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 Authority Senior Secured 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 Authority Senior Secured 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 Authority Senior
Secured Notes and no other Default or Event of Default has occurred and is
continuing under the Authority Senior Secured Notes, (ii) payments of principal
and premium, if any, and interest 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 (as defined) 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 Authority Senior Secured Notes shall be entitled to receive
payment in full of all obligations in respect of the Authority Senior Secured
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 Authority Senior Secured 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 Authority Senior Secured Notes and pay over such amounts to the
holders of the Authority Senior Secured Notes as their interests may appear.
Mandatory Redemption. The Authority will 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
Authority Senior Secured 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 to (i) require such holder or beneficial owner to dispose of such holder's
or beneficial owner's Subordinated Notes within 30 days of the receipt of such
notice of such finding by the gaming regulatory authority or (ii) 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
77
<PAGE>
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
Authority's Senior Secured Notes.
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
Authority Senior Secured Notes, the Authority will be required to offer 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 will not be required to make an
offer 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 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 a repurchase offer has been made to the holders of the
Authority's Senior Secured Notes. A "Change of Control" means any of the
following: (i) the Authority ceases to be a wholly owned unit, instrumentality
or subdivision of the government of the Mohegan Tribe; (ii) the Authority ceases
to have the exclusive legal right to operate gaming operations of the Mohegan
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; (iv) the Manager or any other entity in which Sun
International owns, directly or indirectly, at least 50% of the capital stock
ceases to be the Manager or fails to hold any material governmental consent or
permit required to manage the Mohegan Sun; or (v) Sun International fails to own
directly or indirectly, at lease 50% of the capital stock of the Manager.
Cash Maintenance Account; Security Interest. The Authority will be
obligated to make monthly deposits into the Cash Maintenance Account as provided
for under the indenture for the Authority Senior Secured Notes.
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 Authority Senior Secured 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, will not impair or prevent
the Authority from transferring amounts in the Cash Maintenance Account to the
holders of the Authority Senior Secured Notes in accordance with the terms of
the Indenture, free and clear of such second priority security interest. Upon
full repayment of the Authority Senior Secured 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 Authority Senior Secured 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 the Authority Senior Secured Notes tendered pursuant to any
Excess Cash Purchase Offer required to be made pursuant to the indenture for the
Authority Senior Secured Notes 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
78
<PAGE>
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 $320 million.
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 Authority Senior Secured Notes or any portion thereof,
such refinancing indebtedness shall have a weighted average life to maturity not
less than that of the Authority Senior Secured Notes.
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 its Senior Secured Notes.
Events of Default. Under the Note Purchase Agreement, Events of Default
include the following:
(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, premium, if any, and interest on the Subordinated Notes to be due and
payable immediately; provided, however, that no such declaration may be made
unless all obligations under the Authority Senior Secured 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 Authority Senior Secured 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 will
contain legal defeasance and covenant defeasance provisions that are
substantially similar to those under the indenture for the Authority Senior
Secured Notes.
79
<PAGE>
Omnibus Financing Agreement
In connection with the development, construction and management of the
Mohegan Sun the Manager and Sun International entered into an Omnibus Financing
Agreement (the "Omnibus Agreement"), in September 1995. Pursuant to the Omnibus
Agreement, Sun International agreed to (i) acquire the Original Subordinated
Notes, (ii) provide a Completion Guarantee in which Sun International guaranteed
that the Mohegan Sun project would be completed, (the "Completion Guarantee"),
(iii) pledge certain shares of its stock as collateral for the Completion
Guarantee and (iv) post a letter of credit (the "Letter of Credit") in an amount
up to $15 million to support its obligations under the Completion Guarantee. In
exchange, the Authority agreed to (i) issue the Completion Guarantee
Subordinated Notes to Sun International when Sun International is required to
pay funds under the Completion Guarantee, and (ii) pay certain fees as described
below.
On the Original Subordinated Notes, the Authority shall pay interest at an
annual rate of 15% and the Manager shall pay additional interest at an annual
rate of 11.5%. Subject to certain priorities set forth in the Omnibus Agreement,
to the extent that the Manager does not receive sufficient Management Fees to
pay the full amount of any additional payments due the Manager shall pay the
entire Management Fee as partial payment of the additional payments on the
Subordinated Notes and any portion which remains outstanding shall be deferred
until the Manager receives sufficient Management Fees.
On the Completion Guarantee Subordinated Notes, which may be issued in two
tranches, the Authority shall pay annually a "Base Interest Rate" equivalent to
the prime interest rate plus one percent. The Manager shall pay annually,
additional interest equal to the difference between 26 1/2% and the Base
Interest Rate. In the event that the indenture for the Authority Senior Secured
Notes prohibits the Authority from making interest payments on the Completion
Guarantee Subordinated Notes, the Omnibus Agreement provides that the Manager
will pay the Authority's portion of such interest (the "Deferred Interest
Amount") on the $15.0 million of First Tranche Completion Guarantee Subordinated
Notes, subject to the Manager's right to receive a credit from the Authority for
Deferred Interest Amounts.
The Omnibus Agreement provides for the payment of certain additional fees
to Sun International, including reimbursement for out-of-pocket expenses
incurred by Sun International, all of which have been paid.
The Omnibus Agreement provides that payments required to be made by the
Manager out of the Management Fees shall be prioritized as follows:
(a) First, to return capital contributions made by the Partners of the
Manager after September 24, 1995, the closing date of the sale of the
Subordinated Notes;
(b) Second, to pay additional payments due on the Original Subordinated
Notes;
(c) Third, to pay Deferred Interest Amounts and additional interest due on
First Tranche Completion Guarantee Subordinated Notes on a pari passu
basis;
(d) Fourth, to pay additional payments due on the Second Tranche
Completion Guarantee Subordinated Notes;
(e) Fifth, to return capital contributions made by the Partners of the
Manager before September 24, 1995, the closing date of the sale of the
Original Subordinated Notes;
(f) Sixth, to pay the Development Services Fee;
(g) Seventh, to pay the Management Service Fee;
80
<PAGE>
(h) Eighth, to pay the Completion Guarantee Fee;
(i) Ninth, to pay the Partners, pro rata based on their respective
Percentage Interest, an amount equal to state and federal income tax
obligations;
(j) Tenth, to pay the Organizational and Administrative Fee and the
Marketing and Casino Operations Fee on a pari passu basis; and
(k) Eleventh, to distribute the Excess Cash in the manner set forth in the
Partnership Agreement. See "Trading Cove Associates Partnership
Agreement --Distributions."
The Omnibus Agreement was amended on October 19, 1996. Under such
amendment, the Company has the obligation to purchase from Sun International, on
each of October 12, 1997, October 12, 1998 and October 12, 1999, a portion of
the outstanding principal amount of First Tranche Completion Guarantee
Subordinated Notes owned by Sun International. In addition, Sun International
has the obligation to notify the Company of its decision with respect to any
Remaining Excess Cash Purchase Offer.
13 1/2% Senior Notes due 2002 with Cash Flow Participation Interest
General. The Authority has issued $175.0 million in aggregate principal
amount of 13 1/2% Senior Notes due 2002 (the "Authority Senior Secured Notes")
with Cash Flow Participation Interest (the "Senior Note Participation Interest")
to finance the development, construction, equipping and opening of the Mohegan
Sun. The Authority Senior Secured Notes rank senior in right of payment to all
subordinated indebtedness of the Authority and pari passu in right of payment
with certain working capital and equipment financing. The Authority Senior
Secured Notes are secured by a first lien certain cash collateral accounts owned
by the Authority and, with certain exceptions, all of the assets of the Mohegan
Sun, including the leasehold interest of the Authority in the Mohegan Sun.
Senior Note Participation Interest. The Senior Note Participation Interest
is payable on each interest payment date, in an aggregate amount equal to 5.0%
of the Authority's Cash Flow (as defined below), up to a limit of $250.0 million
of the Authority's Cash Flow during any two consecutive semi-annual periods
ending on September 30; provided that no Senior Note Participation Interest is
payable with respect to any period prior to the earlier of the first day the
Mohegan Sun commences operations and October 31, 1996. Payment of all or a
portion of any of the Senior Note Participation Interest may be deferred if (a)
such payment will cause the Authority's "Fixed Charge Coverage Ratio," which is
defined in the indenture governing the Authority Senior Secured Notes (the
"Authority Senior Secured Note Indenture") generally as the ratio of cash flow
to fixed charges (including any capitalized interest expense) for any person) to
be less than 2.0:1 on a pro forma basis and (b) the principal of the Authority
Senior Secured Notes corresponding to such Senior Note Participation Interest
has not then matured and become due and payable.
Mandatory Redemption. The Authority will not be required to make any
mandatory redemption or sinking fund payments with respect to the Authority
Senior Secured Notes.
Optional Redemption. Unless otherwise required by the any gaming
regulatory authority, the Authority Senior Secured Notes may not be redeemed
prior to November 15, 1999. Thereafter, the Authority may redeem the Authority
Senior Secured Notes in whole or in part, at its option at the redemption prices
set forth in the Authority Senior Secured Note Indenture.
Offer to Purchase upon a Change of Control. Upon a change of control,
subject to certain limitations, each holder of the Authority Senior Secured
Notes will have the right, at such holder's option, to require the Authority to
repurchase such holder's Authority Senior Secured Notes at 101% of
81
<PAGE>
the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any to the date of repurchase.
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 Authority Senior Secured Notes in an
amount equal to the sum of (i) 50% of the Excess Cash Flow (defined as an amount
equal to the cash flow of the Authority for any given period, less (a) the
Management Fees for such period, (b) interest expense and principal payments on
indebtedness of the Authority for such period, (c) amounts set aside in the Cash
Maintenance Account for such period, (d) amounts for the payment of federal and
state for such period, and (e) certain other amounts (not to exceed $6.8
million) for such fiscal year, (ii) 100% of the amount of 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 below (expressed as a percentage of the principal amount).
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 Authority Senior Secured
Notes following certain asset sales. In addition, the Authority may be required
to purchase outstanding Authority Senior Secured Notes following certain events
of loss.
Certain Covenants
Use of Proceeds. The Authority Senior Secured Note Indenture requires the
Authority to use the net proceeds from the sale of the Authority Senior Secured
Notes to, among other things, fund interest payments on the Authority Senior
Secured Notes, fund project costs relating to the construction of the Mohegan
Sun, and to repay certain amounts advanced to or paid on behalf of the Mohegan
Tribe or the Authority for fees and expenses incurred in connection with
obtaining a gaming license, and certain administrative and operating expenses of
the Mohegan Tribe and the Authority relating to the Mohegan Sun.
Cash Maintenance Account. Generally, the Authority Senior Secured Note
Indenture requires the Authority to deposit into a cash maintenance account, on
a monthly basis, beginning in 1997 through 2001, $6.0 million annually, and
thereafter such amount as necessary to keep at least $36.0 million in such cash
maintenance account.
Gaming Licenses. The Authority Senior Secured Note Indenture requires the
Authority to 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 Mohegan Sun.
Restricted Payments. Subject to certain exceptions, the Authority Senior
Secured Note Indenture prohibits the Authority from making certain restricted
payments, including: (i) the purchase, redemption, defeasance or other
acquisition or retirement of value of any Subordinated Indebtedness and the
payment of any interest on the Subordinated Notes; (ii) any general distribution
to the members of the Mohegan Tribe; (iii) subject to the next sentence, the
payment of the Management Fee; and (iv) any payment in respect of repayment or
reimbursement of any obligations under the Secured Completion Guarantee. The
Authority Senior Secured Note Indenture permits the Authority to pay the
Management Fee, however
82
<PAGE>
such payment is subordinated to all payments required under the terms of the
Authority Senior Secured Note Indenture.
Incurrence of Indebtedness. Subject to certain exceptions, the Authority
Senior Secured Note Indenture provides that the Authority will not directly or
indirectly incur any additional indebtedness unless: (i) the Authority's Fixed
Charge Coverage Ratio is at least 2.5 to 1 if the date on which the indebtedness
is incurred is prior to November 15, 1997, at least 2.75 to 1 if the date on
which the indebtedness is incurred is after November 15, 1997 and prior to
November 15, 1998 and at least 3.00 to 1 thereafter; (ii) such indebtedness is
expressly subordinated in right of payment to the Authority Senior Secured Notes
and (iii) such indebtedness does not mature prior to the maturity date of the
Authority Senior Secured Notes.
Certain Additional Covenants. The Authority Senior Secured Note Indenture
restricts the ability of the Authority to incur liens, lease property, engage in
transactions with affiliates, engage in certain business activities and requires
the Authority to maintain certain additional accounts and agreements.
Hotel/Resort Management Agreement
General. In July 1994, the Mohegan Tribe and the Manager entered into an
agreement (the "Hotel/Resort Management Agreement") to provide for the
management of a hotel for the Mohegan Sun (the "Hotel"). The Hotel/Resort
Management Agreement grants the Manager the exclusive right and obligation to
develop, maintain and operate the Hotel. In return for its services, the Manager
will receive a fee equivalent to forty percent (40%) of the Hotel's net
revenues, gross revenues less operating expenses, ("Hotel Net Revenues").
Financing. In order to finance the development, design, construction and
furnishing of the Hotel and to provide start-up and working capital, the Mohegan
Tribe and a third party lender will enter into a separate loan agreement (the
"Loan Agreement"). In addition, a separate agreement between the Mohegan Tribe
and the Manager, provides for the Manager to construct and develop the Hotel
facilities (the "Hotel/Resort Development and Construction Agreement").
Management Fee; Reimbursement and Disbursement. The Hotel/Resort
Management Agreement authorizes the Manager to pay itself a monthly management
fee equivalent to forty percent (40%) of the Hotel's Net Revenues. Hotel Net
Revenues will be disbursed in the following order: (i) principal, interest and
other payments due under the Loan Agreement, (ii) reimbursements for any amounts
advanced by the Manager, (iii) payments to the Reserve Fund (as defined below)
by the Manager and the Mohegan Tribe, and (iv) management fees. All remaining
Hotel Net Revenues will be distributed to the Mohegan Tribe.
Term, Termination and Default. The term of the Hotel/Resort Management
Agreement is fourteen (14) years, beginning five days following the date on
which (i) the property on which the Hotel is to be built has been secured by the
Mohegan Tribe and (ii) the Hotel/Resort Management, Development and
Construction, and Loan Agreements have been approved by the BIA and the Mohegan
Tribe.
Hotel Business Board. Under the Hotel/Resort Management Agreement, certain
decision-making authority and oversight duties are delegated to a committee
comprised of an equal number of representatives of the Mohegan Tribe and of the
Manager (the "Hotel Business Board"). Actions taken by the Hotel Business Board
require unanimous approval of its members or their respective designees.
Management Duties and Related Obligations of the Manager. The Hotel/Resort
Management Agreement provides that the Manager will be responsible for
day-to-day management, operation and maintenance of the Hotel. Subject to
approval by the Mohegan Tribe, the Manager is authorized to select a general
manager to fulfill its responsibilities under the Hotel/Resort Management
Agreement. The
83
<PAGE>
Manager, on behalf of the Mohegan Tribe, shall maintain at all times during
construction and operation of the Hotel insurance policies that meet the
approval of the Mohegan Tribe.
Hotel Employees; Employment Preferences. Pursuant to the Hotel Management
Agreement, the Manager will have the exclusive responsibility and authority to
select, train, determine compensation, and discharge all employees of the Hotel;
however, all employees will be employees of the Mohegan Tribe and not the
Manager. In selecting employees, the Manager will give preference to qualified
members of the Mohegan Tribe; thereafter, preference will be given to qualified
members of other federally recognized Indian tribes. Subject to the approval of
the Mohegan Tribe, the Manager will also have the right to use employees of the
Manager, or any of its subsidiaries or affiliates, to provide services to the
Hotel ("Off-Site Employees"). In entering into contracts for the supply of goods
and services for the Hotel, the Manager shall give preference to qualified
members and certified business entities of the Mohegan Tribe.
Operating and Capital Budgets; Replacement Reserve Funds. Prior to the
first date that the Hotel is substantially complete and open to the public, and
not less then sixty (60) days prior to the commencement of each full or partial
fiscal year thereafter, the Manager shall submit to the Mohegan Tribe, for its
approval, a detailed operating budget. In addition to an annual operating
budget, the Manager is required to submit a recommended capital budget for
furnishings, equipment and ordinary capital replacement items. Likewise, the
Mohegan Tribe has agreed to expend funds to cover repairs, modernizations,
improvements, and other necessary capital replacements. The Hotel/Resort
Management Agreement further requires the Manager to establish a replacement
reserve fund (the "Reserve Fund"), which may be used to pay for any approved
budgeted capital expenditures. The Manager and the Mohegan Tribe will be
required to make monthly contributions to the Reserve Fund.
Liens; Taxes. The Mohegan Tribe has agreed not to impose any taxes, fees,
assessments or other charges (i) on payments of any debt service to the Manager
or any other lender furnishing financing to the Hotel, (ii) on revenues from the
Hotel, (iii) on management fees, or (iv) on the salaries, benefits, or dividends
paid to any of the Manager's partners, officers, employees or affiliates or any
employees of the Hotel.
84
<PAGE>
GOVERNMENT REGULATION
General
In addition to a variety of generally applicable state and federal laws
governing business operations, the Mohegan Sun 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 Mohegan Sun 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 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 Mohegan Sun or the Company. Changes in
such laws or regulations could have a material adverse impact on the Mohegan
Sun's operations, and consequently, on the Company. 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 Mohegan Tribe or the United States Congress, the
laws of the State of Connecticut do not apply to the Mohegan Tribe or the
Authority. Under the federal law that recognizes the Mohegan Tribe, the Mohegan
Tribe consented to the extension of Connecticut criminal law and Connecticut
state traffic controls over the Mohegan Sun site.
Waiver of Sovereign Immunity; Jurisdiction; Exhaustion of Tribal Remedies.
Indian tribes enjoy sovereign immunity from unconsented suit similar to that of
the states and the United States. In order to sue an Indian tribe (or an agency
or instrumentality of an Indian tribe, such as the Authority), 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 Subordinated Notes and the Management Agreement,
the Mohegan Tribe has 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 to enforce repayment
of the Subordinated Notes, and any arbitration action to enforce the Management
85
<PAGE>
Agreement. The Mohegan Tribe has also adopted a constitutional restraint against
any action by the Mohegan Tribe or its officers which impairs contractual
obligations. In the 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 Mohegan 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 Mohegan Tribe. In addition, unless the
decisions of the Gaming Disputes Court or other tribunals of the Mohegan 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 managements 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. 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 Mohegan 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 Mohegan Tribe's
ordinances and regulations regarding gaming.
86
<PAGE>
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 (iii) the protection of the environment and the
public health and safety. The Mohegan 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, South Dakota, Wisconsin and Washington.
Among the issues being litigated are the constitutionality of the provision of
IGRA which entitles tribes to sue in federal court to force states to negotiate
Tribal-State Compacts. The United States Supreme Court has recently ruled that
the Eleventh Amendment to the United States Constitution immunizes states from
suit by Indian tribes in federal court unless the state consents to such suit.
As a result, certain provisions of IGRA have been ruled unconstitutional.
87
<PAGE>
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 and Kansas 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 and Kansas cases, the courts held that compacting is a legislative
function under the respective state constitutions. The court in the New Mexico
case also 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 Company 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 Mohegan 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 Mohegan Tribe could
conduct gaming.
NIGC and BIA Approvals
The Authority operates, and the Manager manages, the Mohegan Sun, which is
located on lands held in trust for the Mohegan Tribe by the United States of
America and which are leased by the Mohegan Tribe to the Authority. Such leases,
and modifications or amendments to such lease, must be approved by the BIA
pursuant to 25 U.S.C. ss.415 and 25 C.F.R. ss.162. In addition, 25 U.S.C. ss. 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.
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 evolving. Both Section 81 and IGRA have been the subject
of litigation and may be subject to further judicial or legislative
interpretation.
IGRA requires that the Management Agreement must be approved by the
Chairman of the NIGC. The Management Agreement has been approved by the Chairman
of the NIGC. Documents that are collateral to the Management Agreement must be
reviewed by the NIGC. The NIGC advised the tribe that although it must review
such collateral documents, it has no authority to directly approve or disapprove
such agreements. The Company does not believe that the Notes or the Indenture is
a collateral document that is subject to review by the NIGC. The Company
believes that the Indenture, the Notes, the Management Agreement and the
Subordinated Note documents are in compliance with all applicable federal Indian
laws and regulations and has received all approvals that the NIGC and the BIA
have advised are required. However, the rules and regulations relating to Indian
gaming have only
88
<PAGE>
recently been promulgated and the NIGC and BIA have had little or no experience
reviewing documents relative to a public bond financing. If a court of competent
jurisdiction later holds that the NIGC or the BIA has the authority and
responsibility to approve any document, and if such approval cannot then be
obtained, or if such approval was obtained, but that such document violated
applicable federal law or regulation, then such document could be held to be
void, and any payments from the Authority or the Mohegan Tribe pursuant to such
agreements could be ordered returned.
Licensing
Prior to opening the Mohegan Sun, each of the partners of the Manager, and
the shareholders of the Company and certain employees of the Mohegan Sun were
required to be licensed by relevant tribal and state authorities. Each of the
partners of the Manager and each of the shareholders of the Company has applied
for and received temporary gaming licenses from the Commissioner of Revenue
Services of the State of Connecticut. Mr. Len Wolman, Mr. Mark Wolman and Mr.
Solomon Kerzner have each received permanent gaming licenses that are subject to
renewal. As each employee who is required to be licensed is hired, the Authority
or the Manager will cause such employee to apply for all required licenses.
89
<PAGE>
PRINCIPAL SECURITY HOLDERS
The following table sets forth the beneficial ownership interest in the
Company, as adjusted to reflect the Reorganization, by each person known by the
Company to beneficially own 5% or more of the outstanding Company interests.
Finance is a wholly-owned subsidiary of the Company.
Name of % Ownership
Beneficial Owner in the Company
- ---------------- --------------
LMW, Inc.(1)...................................................... 32.26%
Slavik Suites, Inc.(2)............................................ 67.74%
- ----------
(1) LMW, Inc. is owned 50% by Mr. Len Wolman and 50% by Mr. Mark Wolman. The
address for LMW, Inc. is c/o the Company, 914 Hartford Turnpike, P.O. Box 715,
Waterford, Connecticut.
(2) Messrs. Len and Mark Wolman together own approximately 22.5% of the
outstanding shares of Slavik Suites, Inc. The address for Slavik Suites, Inc. is
32605 West 12 Mile Road, Suite 350, Farmington Hills, Michigan.
90
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued by the Issuers pursuant to the Indenture
between the Issuers and Fleet National Bank, as trustee (the "Trustee"). The
Exchange Notes will evidence the same indebtedness as the Private Notes (which
they replace) and will be entitled to the benefits of the Indenture. The form
and terms of the Exchange Notes are the same as the form and terms of the
Private Notes except that (i) the Exchange Notes will have been registered under
the Securities Act, and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to certain rights of holders of the Private Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The terms of the Notes include those stated in the
Indenture and the Collateral Agreements (as defined below) 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
following summaries of certain provisions of the Indenture and the Collateral
Agreements are summaries only, do not purport to be complete and are qualified
in their entirety by reference to all of the provisions of the Indenture and the
Collateral Agreements. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Indenture. Wherever particular
provisions of the Indenture are referred to in this summary, such provisions are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference. A copy of the form of
Indenture and each of the Collateral Agreements is available from the Company
upon request. Set forth below is a summary of certain provisions of the Notes.
General
The Notes will be senior, secured, joint and several general obligations
of the Issuers, limited in aggregate principal amount to $65.0 million and
secured as set forth under "-- Security for the Notes" below. The Notes will be
issued only in fully registered form, without coupons, in denominations of
$l,000 and integral multiples thereof.
The Notes will mature on November 15, 2003. The Notes will bear interest
at the rate per annum stated on the cover page hereof from the Issue Date or
from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semi-annually on May 15 and November 15 of each year,
commencing May 15, 1997, to the persons in whose names such Notes are registered
at the close of business on the May 1 or November 1 immediately preceding such
Interest Payment Date (the "Record Date"). Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Principal of, premium, if any, and interest and Liquidated Damages, if
any, on the Notes will be payable, and the Notes may be presented for
registration of transfer or exchange, at the office or agency of the Issuers
maintained for such purpose, which office or agency shall be maintained in the
Borough of Manhattan, The State and City of New York. At the option of the
Issuers, payment of interest and Liquidated Damages may be made by check mailed
to the Holders of the Notes at the addresses set forth upon the registry books
of the Issuers; provided, that all payments with respect to Global Notes will be
required to be made by wire transfer of immediately available funds to the
account specified by the Holder thereof. No service charge will be made for any
registration of transfer or exchange of Notes, but the Issuers may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Until otherwise designated by the Issuers, the
Issuers' office or agency will be the corporate trust office of the Trustee
presently located at the office of the Trustee in the Borough of Manhattan, The
State and City of New York.
Security for the Notes
The obligations of the Issuers with respect to the Notes will be secured
on an exclusive basis by a pledge of the Subordinated Notes and a pledge of all
cash and Cash Equivalents held by the Company
91
<PAGE>
(collectively, the "Collateral"). Finance does not have, and pursuant to the
requirements of the Indenture will not have, any significant assets. The Company
will enter into one or more pledge and assignment agreements (collectively, the
"Collateral Agreements") that will provide for the pledge of the Collateral to
the Trustee for the benefit of the Holders of the Notes. Such pledges will
secure the payment and performance when due of all of the obligations of the
Issuers under the Indenture and the Notes. The Manager will not be a party to
the Indenture or the Collateral Agreements and accordingly in an Event of
Default the Trustee will be unable to foreclose on any rights of the Manager
under the Management Agreement. The Issuers will not have a pledge of the
Company's partnership interest in the Manager. Accordingly, in the event of an
acceleration under the Indenture, the Trustee under the indenture will not be
able to foreclose upon the equity in the Manager without bringing suit against
the Company.
Following an Event of Default, the Trustee, on behalf of the Holders of
the Notes, in addition to any rights or remedies available to it under the
Indenture, may take such action as it deems advisable to protect and enforce its
rights in the Collateral, including the institution of foreclosure proceedings.
See "Risk Factors--Ability to Foreclose on Collateral."
Certain Bankruptcy Considerations
The Company's only assets are the Collateral and its partnership interest
in the Manager, and it conducts no operations other than serving as a partner in
the Manager, which in turn has no operations other than managing the Mohegan Sun
for the Authority. In the event of a bankruptcy of the Manager or bankruptcy or
similar proceeding with respect to the Authority, the Issuers will have no
rights with respect to the assets of either the Manager or the Authority. In the
event of a bankruptcy of the Manager, the Company will only have the rights of
an equity holder in the Manager. The Company will not be an assignee of the
Management Agreement and accordingly will not have the right to perform under
the Management Agreement in the event that the Manager is unable to perform its
obligations thereunder, and the Management Agreement may be terminated for cause
by the Authority in the event of a failure to perform thereunder. In the event
of a bankruptcy or similar proceeding with respect to the Authority, the Company
will be a general unsecured creditor with respect to the Subordinated Notes, and
the Management Agreement may be subject to being rejected by the Authority.
Mandatory Redemption with Excess Cash Flow or Upon Exercise of Buy/Sell Option
The Issuers will be required to make a mandatory redemption on each May 15
and November 15, commencing November 15, 1997, of Notes in the largest principal
amount that is an integral multiple of $1,000, that may be redeemed using 100%
of Company Excess Cash as of the preceding September 30 and March 31,
respectively, at the following redemption prices (expressed as percentage of
principal amount) if redeemed during the 12-month period commencing May 15 of
the years indicated below, in each case (subject to the right of Holders of
record on a Record Date to receive interest and Liquidated Damages, if any, due
on an Interest Payment Date that is on or prior to such Redemption Date)
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date:
Year Percentage
---- ----------
1997 ......................................................... 112.750%
1998 ......................................................... 110.625
1999 ......................................................... 108.500
2000 ......................................................... 106.375
2001 ......................................................... 104.250
2002 ......................................................... 102.125
2003 ......................................................... 100.000
92
<PAGE>
In the event that either the Company or Sun International shall deliver an
election to either buy or sell the other party's interest in the Manager
pursuant to a Buy-Out Notice (as defined in the Partnership Agreement) or be
deemed to have delivered an election to sell such interest and such election to
buy or sell is consummated, the Issuers will be required to make a mandatory
redemption of all the Notes then outstanding, at the redemption prices described
above. Such redemption shall be made on a date no more than 35 days after the
date of the Closing (as such term is defined in the Partnership Agreement) under
the option.
Optional Redemption
Except as provided above, the Issuers will not have the right to redeem
any Notes prior to November 15, 1999. The Notes will be redeemable for cash at
the option of the Issuers, in whole or in part, at any time on or after November
15, 1999, with Company Excess Cash as of the date notice is given at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing May 15 of the years indicated
below, in each case (subject to the right of Holders of record on a Record Date
to receive interest and Liquidated Damages, if any, due on an Interest Payment
Date that is on or prior to such Redemption Date) together with accrued and
unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date:
Year Percentage
---- ----------
1999.......................................................... 108.500%
2000.......................................................... 106.375
2001.......................................................... 104.250
2002.......................................................... 102.125
2003.......................................................... 100.000
Regulatory Redemption
Notwithstanding any other provisions of the Indenture, if any Gaming
Regulatory Authority requires that a Holder or beneficial owner of the Notes
must be licensed, qualified or found suitable under any applicable gaming laws
in order to maintain any gaming license or franchise related to the Mohegan Sun
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 Company shall have the right, at its option:
(1) to require such Holder or beneficial owners to dispose of such
Holder's or beneficial owner's 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 Notes of such Holder or beneficial
owner at a redemption price equal to (a) the lesser of the principal amount
thereof or the price at which such Holder or beneficial owner acquired the
Notes, together with, in either case, accrued and unpaid 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 or (b) such other amount as may
be determined by such Gaming Regulatory Authority.
In connection with any such redemption, and except as may be required by a
Gaming Regulatory Authority, the Company shall comply with the procedures
contained in the Indenture for redemptions of the Notes. Under the Indenture,
the Company is not required to pay or reimburse any Holder of the Notes or
beneficial owner of Notes who is required to apply for any such license,
qualification or finding
93
<PAGE>
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."
Procedures for Redemptions
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair; provided, however, that mandatory or
optional redemptions from Company Excess Cash will be done as nearly as
practicable on a pro rata basis. The Notes may be redeemed in part in multiples
of $1,000 only.
Notice of any redemption will be sent, by first class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. Any notice which relates to a Note to
be redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after the
date of redemption, interest and Liquidated Damages, if any, will cease to
accrue on the Notes or portions thereof called for redemption, unless the
Issuers default in the payment thereof.
Certain Covenants
Repurchase of Notes at the Option of the Holder Upon a Change of Control
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such Holder's option,
pursuant to an irrevocable and unconditional offer by the Company or Finance
(the "Change of Control Offer"), to require the Issuers to repurchase all or any
part of such Holder's Notes (provided, however, that the principal amount of
such Notes must be $1,000 or an integral multiple thereof) on a date (the
"Change of Control Purchase Date") that is no later than 35 Business Days after
the occurrence of such Change of Control, at a cash price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof, together
with accrued interest and Liquidated Damages, if any, to the Change of Control
Purchase Date. The Change of Control Offer shall be made within 10 Business Days
following a Change of Control and shall remain open for 20 Business Days
following its commencement (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Issuers promptly shall
purchase all Notes properly tendered in response to the Change of Control Offer.
As used herein, a "Change of Control" means any event, the result of which
is that Len Wolman and Mark Wolman and their Permitted Assignees cease in the
aggregate to "beneficially own," directly or indirectly, at least 40% of the
total voting power in the aggregate of the Company.
On or before the Change of Control Purchase Date, the Issuers will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted together with an Officers' Certificate
listing the Notes or portions thereof being purchased. The Paying Agent promptly
will pay the Holders of Notes so accepted an amount equal to the Change of
Control Purchase Price (together with accrued and unpaid interest and Liquidated
Damages, if any), and the Trustee promptly will authenticate and deliver to such
Holders a new Note equal in principal amount to any unpurchased portion of the
Note surrendered. Any Notes not so accepted will be delivered promptly by the
Issuers to the Holder thereof. The Issuers will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Purchase Date.
94
<PAGE>
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws.
Limitation on Activities of the Issuers
The Issuers will not conduct any business (including having any
Subsidiary, other than Finance in the case of the Company) whatsoever, other
than to (i) own and act upon the Collateral, in the case of the Company, and the
Notes and (ii) comply with their respective rights and obligations under the
Partnership Agreement, the Indenture, the Registration Rights Agreement, the
Notes, the Management Agreement, the Omnibus Agreement, the Purchase Agreement
described under "Plan of Distribution" and the Collateral Agreements and take
action arising under such agreements or related or incidental thereto.
Limitation on Indebtedness and Disqualified Capital Stock
The Indenture provides that the Issuers will not, directly or indirectly,
create, issue, assume, guaranty, incur, suffer to exist, become directly or
indirectly liable with respect to (including as a result of an Acquisition), or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness
or any Disqualified Capital Stock, other than the Notes.
Limitation on Restricted Payments
The Indenture provides that the Issuers will not, directly or indirectly,
make any Restricted Payment.
The preceding paragraph, however, will not prohibit (i) the payment of
Permitted Quarterly Tax Distributions to the members of the Company as described
below and (ii) Investments in connection with the development and/or improvement
of the Mohegan Sun or a hotel adjacent to the Mohegan Sun or the purchase of the
5% interest of the minority partner in the Manager, provided, however, that,
after giving pro forma effect to the proposed Investment, (i) no Default or
Event of Default shall have occurred or be continuing and (ii) the aggregate
amount of all such Investments made on or after the Issue Date that are
outstanding (after giving effect to any such Investments that are returned to
the Company without restriction, in cash, on or prior to the date of any such
calculation) at any time does not exceed $5.0 million.
Notwithstanding the foregoing provisions of this covenant, the Issuers
will not, directly or indirectly, make any Investment in the Manager other than
a capital contribution or loan made (i) substantially concurrently with
proportionate capital contributions or loans made in cash by all other partners
of the Manager and (ii) at a time when the Manager is in compliance (without
regard to any cure periods) with the terms of the covenant described below under
"Covenants with Respect to the Manager."
For so long as the Company is a partnership or substantially similar
pass-through entity for Federal income tax purposes, the Company may make cash
distributions to its members, during each Quarterly Payment Period, in an
aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, the Permitted Quarterly Tax Distribution payable during the immediately
following Quarterly Payment Period shall be increased by such undistributed
portion.
Within 10 days following the Company's filing of Internal Revenue Service
Form 1065 for the immediately preceding taxable year, the Tax Amounts CPA shall
file with the Trustee a written statement indicating in reasonable detail the
calculation of the True-up Amount. In the case of a True-up Amount
95
<PAGE>
due to the members, the Permitted Quarterly Tax Distribution payable during the
immediately following Quarterly Payment Period shall be increased by such
True-up Amount. In the case of a True-up Amount due to the Company, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be reduced by such True-up Amount and the excess,
if any, of the True-up Amount over such Permitted Quarterly Tax Distribution
shall be applied to reduce the immediately following Permitted Quarterly Tax
Distributions until such True-up Amount is entirely offset.
Limitations on Liens
The Indenture provides that the Issuers will not, directly or indirectly,
create, incur or suffer to exist any Lien upon any of their property or assets,
whether now owned or hereafter acquired, or upon any income or profits
therefrom, other than (i) Liens on assets and property of the Company pursuant
to the Collateral Agreements or (ii) Permitted Liens.
Limitation on Sale of Assets
The Indenture provides that the Issuers will not, in one or a series of
related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of their property, business or assets having a value
in excess of $1,000 (an "Asset Sale"), except pursuant to a sale of its
partnership interest in the Manager pursuant to a Buy-Out Notice as described
above under the caption "--Mandatory Redemption with Excess Cash Flow or Upon
Exercise of Buy/Sell Option."
Limitation on Merger, Sale or Consolidation
The Indenture provides that neither of the Issuers will, directly or
indirectly, consolidate with or merge with or into another person or sell,
lease, convey or transfer all or substantially all of their respective assets
(computed on a consolidated basis), whether in a single transaction or a series
of related transactions, to another Person or group of affiliated Persons, or
adopt a plan of liquidation.
Covenants with Respect to the Manager
The Indenture provides that the Company will not permit the Manager to:
(i) incur any Indebtedness, except for any guarantees required by the
Hotel/Resort Management Agreement with respect to the construction of the hotel
or any Investment permitted by the covenant entitled "--Limitations on
Restricted Payments" and any pro rata investment by the other partner; (ii)
directly or indirectly create, incur or suffer to exist any Liens on any of its
properties or assets; (iii) directly or indirectly, create, assume or suffer to
exist any consensual restriction on the ability of the Manager or any Subsidiary
of the Manager to pay dividends or make other distributions to or on behalf of,
or to pay any obligation to or on behalf of, or otherwise to transfer assets or
property to or on behalf of, or make or pay loans or advances to or on behalf
of, the Company, except, in each case, for Permitted Liens and restrictions
imposed by the Operative Documents, provided, however, that customary provisions
restricting subletting or assignment of any lease entered into in the ordinary
course of business, consistent with industry practice shall not in and of
themselves be considered a restriction on the ability of the Manager or the
applicable Subsidiary to transfer such agreement or assets, as the case may be;
(iv) directly or indirectly make any Asset Sale; (v) enter into any subcontract
to delegate the duties of the Manager under the Management Agreement other than
those described in Article IV of the Partnership Agreement; (vi) issue any
equity security in a manner that dilutes distributions to the Company; (vii)
make payments for the management services, except for payments made in
accordance with the Operative Documents; or (viii) engage in any business other
than as described in the Partnership Agreement. In addition, the Company will
not agree, and will not permit the Manager to agree, to terminate, amend or
waive any provision of an Operative Document in a manner adverse to the economic
interest of the Holders without the consent of holders of a majority of the
principal amount of the Notes outstanding, provided, however,
96
<PAGE>
that this sentence will not apply to the terms of the Hotel/Resort Management
Agreement or the Hotel/Resort Development and Construction Agreement.
Acceptance of Remaining Excess Cash Purchase Offers and Change of Control
Offers
The Indenture requires the Company to accept Remaining Excess Cash
Purchase Offers (as defined in the Note Purchase Agreement) or any other offer
to purchase Subordinated Notes made by the Authority other than a Change of
Control Offer (as defined in the Note Purchase Agreement) as made as follows.
The Company shall accept any such offer, if accepted by Sun International. If
less than all the Subordinated Notes owned by Sun International are to be
tendered, the Company shall tender that principal amount of the Subordinated
Notes, rounded to the nearest multiple of $1,000, owned by the Company (with the
First Tranche Completion Guarantee Subordinated Notes (as defined below under
"Material Agreements -- Omnibus Agreement") to be tendered first) that bears the
same proportion to the total principal amount of Subordinated Notes owned by the
Company that the principal amount of Subordinated Notes to be tendered by Sun
International and its Affiliates bears to the total principal amount of
Subordinated Notes owned by Sun International and its Affiliates. In the event
that the total amount available for a Remaining Excess Cash Purchase Offer or
other offer is less than the total amount needed to purchase the Subordinated
Notes to be tendered by the Company and Sun International and its Affiliates
pursuant to the above formula, the Company shall reduce the amount of
Subordinated Notes to be tendered pro rata, assuming Sun International and its
Affiliates likewise reduce their amount of Subordinated Notes to be so tendered,
in each case rounded to the nearest multiple of $1,000, such that the total
amount of Subordinated Notes to be tendered can be purchased in such offer.
Notwithstanding the foregoing, in the event that either (i) Sun
International fails to notify the Company of its intention to tender into such
offer prior to the time at which tenders are due and has not as of such time
tendered into such offer or (ii) the total amount of cash or Cash Equivalents
held by the Company as of the date tenders are due is less than $5.0 million,
the Company shall tender into such offer all Subordinated Notes then held by it.
The Indenture requires the Company to accept Change of Control Offers (as
defined in the Note Purchase Agreement) in full.
Limitation on Transactions with Affiliates
The Indenture provides that the Company will not permit the Manager on or
after the Issue Date to enter into or suffer to exist any contract, agreement,
arrangement or transaction with any Affiliate of the Company (an "Affiliate
Transaction"), or any series of related Affiliate Transactions, other than those
existing on the Issue Date (i) unless it is determined that the terms of such
Affiliate Transaction are fair and reasonable to the Manager, and no less
favorable to the Manager, than could have been obtained in an arm's length
transaction with a non-Affiliate of the Company and, (ii) if involving
consideration to either party in excess of $500,000, unless such Affiliate
Transaction (or Transactions) is evidenced by an Officers' Certificate addressed
and delivered to the Trustee certifying that such Affiliate Transaction (or
Transactions) has been approved by a majority of the members of the Board of
Directors that are disinterested in such transaction and (iii) if involving
consideration to either party in excess of $1 million, unless in addition the
Company, prior to the consummation thereof, obtains a written favorable opinion
as to the fairness of such transaction to the Manager from a financial point of
view from an independent investment banking firm or accounting firm, in each
case having a national reputation.
Reports
The Indenture provides that whether or not the Issuers are subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, each of the
Issuers shall deliver to the Trustee, to each Holder and to prospective
purchasers of Notes identified to the Issuers by an Initial Purchaser, within 15
97
<PAGE>
days after it is or would have been (if it were subject to such reporting
obligations) required to file such with the Commission, annual and quarterly
financial statements substantially equivalent to financial statements that would
have been included in reports filed with the Commission, if the Issuers were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Issuers' certified independent public accountants as such would be required in
such reports to the Commission, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, to the extent permitted by the Commission (if it were
subject to such reporting obligations), file with the Commission the annual,
quarterly and other reports which it is or would have been required to file with
the Commission.
Events of Default and Remedies
The Indenture defines an Event of Default as (i) the failure by the
Issuers to pay any installment of interest or Liquidated Damages, if any, on the
Notes as and when the same becomes due and payable and the continuance of any
such failure for 30 days, (ii) the failure by the Issuers to pay all or any part
of the principal, or premium, if any, on the Notes when and as the same becomes
due and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, payment of the Change of Control Purchase Price
or on a mandatory redemption, or otherwise, (iii) the failure by the Issuers to
observe or perform the terms of the covenant described above under "Limitation
on Merger, Sale or Consolidation," (iv) the failure by the Issuers to observe or
perform any other covenant or agreement contained in the Notes or the Indenture
and, subject to certain exceptions, the continuance of such failure for a period
of 30 days after written notice is given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes outstanding, (v) certain events of bankruptcy, insolvency or
reorganization in respect of the Issuers, (vi) final unsatisfied judgments not
covered by insurance aggregating in excess of $2.0 million, at any one time
rendered against either or both of the Issuers and not stayed, bonded or
discharged within 60 days, or (vii) any default in the performance or breach of
the terms of an Operative Document by the Manager or by the Company with respect
to the Partnership Agreement, extending past any applicable cure period, that
would result in material damages to either the Company or the Manager, (viii)
the failure by the Company to observe or perform any material covenant set forth
in a Collateral Agreement, subject to applicable cure periods or (ix) an Event
of Default under the Senior Secured Notes resulting in an acceleration of the
maturity thereof. The Indenture provides that if a Default occurs and is
continuing, the Trustee must, within 90 days after the occurrence of such
default, give to the Holders notice of such default; provided, however, that if
the Manager is notified in writing of any default by the Manager under the
Management Agreement (regardless of whether or not any cure period has expired)
the Company shall promptly notify the Holders of such event.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (v), above, relating to either or both of the
Issuers), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
25% in aggregate principal amount of the Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal, determined as set forth
below, and accrued interest and Liquidated Damages, if any, thereon to be due
and payable immediately. If an Event of Default specified in clause (v), above,
relating to either or both of the Issuers occurs, all principal and accrued
interest and Liquidated Damages, if any, thereon will be immediately due and
payable on all outstanding Notes without any declaration or other act on the
part of Trustee or the Holders. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Holders of a
majority in aggregate principal amount of Notes generally are authorized to
rescind such acceleration if all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes which have become due solely by such acceleration,
have been cured or waived, except a default with respect
98
<PAGE>
to any provision requiring a supermajority approval to amend, which default may
only be waived by such a supermajority.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except on
default with respect to any provision requiring a supermajority approval to
amend, which default may only be waived by such a supermajority, and except a
default in the payment of principal of or interest and Liquidated Damages, if
any, on any Note not yet cured or a default with respect to any covenant or
provision which cannot be modified or amended without the consent of the Holder
of each outstanding Note affected. Subject to the provisions of the Indenture
relating to the duties of the Trustee, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the Holders, unless such Holders have offered to
the Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Notes at the time outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee.
Legal Defeasance and Covenant Defeasance
The Indenture provides that the Issuers may, at their option and at any
time, elect to have their obligations discharged with respect to the outstanding
Notes ("Legal Defeasance"). Such Legal Defeasance means that the Issuers shall
be deemed to have paid and discharged the entire indebtedness represented, the
Collateral shall be released from the Liens in favor of the Notes and the
Indenture shall cease to be of further effect as to all outstanding Notes,
except as to (i) rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
such Notes when such payments are due from the trust funds described below; (ii)
the Issuers' obligations with respect to such Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and
the maintenance of an office or agency for payment and money for security
payments held in trust; (iii) the rights, powers, trust, duties, and immunities
of the Trustee, and the Issuers' obligations in connection therewith; and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Issuers may,
at their option and at any time, elect to have the obligations of the Issuers
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, the Collateral shall be
released from the Liens in favor of the Notes and 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 Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. legal tender, U.S. government obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
such Notes on the stated date for payment thereof or on an optional redemption
date of such principal or installment of principal of, premium, if any, or
interest and Liquidated Damages, if any, on such Notes, and the Holders of Notes
must have a valid, perfected, exclusive security interest in such trust; (ii) in
the case of the Legal Defeasance, the Issuers shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
Trustee confirming that (A) the Issuers have received from, or there has been
published by the Internal Revenue Service, a ruling or (B) since the date of the
Indenture, there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of such Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such Legal Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been
99
<PAGE>
the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Issuers shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to such Trustee confirming
that the Holders of such Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit or such
earlier time as, in the opinion of counsel, such deposit is not voidable as a
preference under applicable bankruptcy law; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or constitute
a default any material agreement (other than the Indenture) or instrument to
which either Issuer is a party or by which either is bound; (vi) the Company
shall have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Issuers with the intent of preferring the Holders of
such Notes over any other creditors of the Issuers or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the Issuers
or others; and (vii) the Issuers shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that the
conditions precedent provided for in, in the case of the officers' certificate,
(i) through (vi) and, in the case of the opinion of counsel, clauses (i) (with
respect to the validity and perfection of the security interest), (ii), (iii)
and (v) of this paragraph have been complied with.
Amendments, Supplements and Waivers
The Indenture contains provisions permitting the Issuers and the Trustee
to enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Issuers and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; provided,
however, that no such modification may without the consent of Holders of at
least 66-2/3% in aggregate principal amount of Notes at the time outstanding,
modify the provisions (including the defined terms used therein) of the covenant
"Repurchase of Notes at the Option of the Holder upon a Change of Control" in a
manner adverse to the Holders, and provided further, that no such modification
may, without the consent of each Holder affected thereby: (i) change the Stated
Maturity on any Note, or reduce the principal amount thereof or the rate (or
extend the time for payment other than a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount of such
Notes and a waiver of the payment default resulting from such acceleration) of
interest and Liquidated Damages, if any, thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or the interest and Liquidated
Damages, if any, thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof (or,
in the case of redemption, on or after the Redemption Date), or reduce the
Change of Control Purchase Price or alter the provisions (including the defined
terms used therein) regarding the redemption of the Notes in a manner adverse to
the Holders, or (ii) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding Note
affected thereby, or (iv) cause the Notes to become subordinate in right of
payment to any other Indebtedness, or (v) modify any of the provisions relating
to the Collateral (including without limitation the Collateral Agreements) in a
manner adverse to the Holders.
The Issuers shall not, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
Notes for or as an inducement to any consent,
100
<PAGE>
waiver or amendment of any terms or provisions of the Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders of the
Notes which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
No Personal Liability of Officers, Directors, Employees and Members
The Indenture provides that no direct or indirect officer, director,
manager, employee or member, as such, past, present or future of the Issuers, or
any successor entity shall have any personal liability in respect of the
obligations of the Issuers under the Indenture, the Notes or the Collateral
Agreements by reason of his or its status as such officer, director, employee or
member, except to the extent such person is an Issuer.
Certain Definitions
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, stock purchase, merger, consolidation, or other transfer, and whether
or not for consideration.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with such person. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided, however, that with respect to ownership interest in the
Company a Beneficial Owner of 10% or more of the total voting power normally
entitled to vote in the election of directors, managers or trustees, as
applicable, shall for such purposes be deemed to constitute control.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control has the meaning attributed to it in Rules l3d-3 and l3d-5
under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"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 $300.0 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.
101
<PAGE>
"Company Excess Cash" means at any date of determination all cash and Cash
Equivalents held by the Company in excess of $10 million, provided, however, if
the principal amount of Notes then outstanding, together with accrued and unpaid
interest and Liquidated Damages, if any, thereon, is less than $10 million, then
the Company shall treat all cash and Cash Equivalents held by the Company as
Company Excess Cash.
"Disqualified Capital Stock" means with respect to any person, Equity
Interests of such person that, by its terms or by the terms of any security into
which it is then convertible, exercisable or exchangeable, is, or upon the
happening of an event or the passage of time would be, required to be redeemed
or repurchased (including at the option of the holder thereof) by such person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Notes.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership interests in, such Person.
"Estimation Period" means the period for which a partner who is an
individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year partnership in connection with
determining his estimated federal income tax liability for such period.
"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 Mohegan Tribe or the
Authority.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such any person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v)
relating to any capitalized lease obligation, or (vi) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all net obligations of such person under Interest Swap and
Hedging Obligations; (c) all liabilities and obligations of others of the kind
described in the preceding clause (a) or (b) that such person has guaranteed or
that is otherwise its legal liability or which are secured by any assets or
property of such person and all obligations to purchase, redeem or acquire any
Equity Interests; (d) any and all deferrals, renewals, extensions, refinancing
and refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b) or (c), or this clause (d), whether or not between or among the
same parties; and (e) all Disqualified Capital Stock of such Person.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
102
<PAGE>
"Investment" by any person in any other person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
person or any agreement to make any such acquisition; (b) the making by such
person of any deposit with, or advance, loan or other extension of credit to,
such other person (including the purchase of property from another person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other person) or any commitment to make any such advance,
loan or extension (but excluding accounts receivable or deposits arising in the
ordinary course of business); (c) the entering into by such person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other person; and (d) the making of any
capital contribution by such person to such other person.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Operative Documents" means collectively the Partnership Agreement, the
Omnibus Agreement, the Note Purchase Agreement, the Subordinated Notes, the
Management Agreement, the Hotel/Resort Management Agreement, the Hotel/Resort
Development and Construction Agreement and the Gaming Facility Development and
Construction Agreement.
"Permitted Assignee" means (i) any immediate family member of Len and Mark
Wolman, the estate of Len or Mark Wolman and any heirs upon distribution of such
estate, and any partnership, trust or similar entity controlled by Len or Mark
Wolman exclusively for their benefit and/or the benefit of immediate family
members and (ii) any charitable organization upon whose board of directors or
similar governing entity either Len or Mark Wolman serves.
"Permitted Investment" means Investments in Cash Equivalents, First
Tranche Completion Guarantee Subordinated Notes not in excess of $7.5 million
original principal amount (plus accrued and unpaid interest and amounts due from
the Manager under the Omnibus Agreement), Original Subordinated Notes not in
excess of $19.2 million original principal amount (plus accrued and unpaid
interest and amounts due from the Manager under the Omnibus Agreement) and the
purchase of RJH Development Corp.'s interest in the Manager for $10.6 million.
"Permitted Lien" means (a) Liens imposed by governmental authorities for
taxes, assessments or other charges not yet subject to penalty or which are
being contested in good faith and by appropriate proceedings, if adequate
reserves with respect thereto are maintained on the books of the Manager or the
Issuers, as the case may be, in accordance with GAAP; (b) statutory liens of
carriers, warehousemen, mechanics, materialmen, landlords, repairmen or other
like Liens arising by operation of law in the ordinary course of business
provided that (i) the underlying obligations are not overdue for a period of
more than 30 days, or (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Manager or the Issuers, as the case may be, in
accordance with GAAP; (c) Liens securing the performance of bids, trade
contracts (other than borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business; (d) easements, rights-of-way, zoning,
similar restrictions and other similar encumbrances or title defects which,
singly or in the aggregate, do not in any case materially detract from the value
of the property, subject thereto (as such property is used by the Manager or the
Issuers, as the case may be) or interfere with the ordinary conduct of the
business of the Manager or the Issuers, as the case may be; (e) Liens arising by
operation of law in connection with judgments, only to the extent, for an amount
and for a period not resulting in an Event
103
<PAGE>
of Default with respect thereto; (f) pledges or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security legislation; (g) leases or
subleases granted to other persons in the ordinary course of business not
materially interfering with the conduct of the business of the Manager or the
Issuers, as the case may be, or materially detracting from the value of the
relative assets of the Manager or the Issuers, as the case may be; and (h) Liens
arising from precautionary Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Manager or the Issuers, as the
case may be, in the ordinary course of business.
"Permitted Quarterly Tax Distributions" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company, for the related Estimation Period, as determined by the Tax Amounts CPA
in a statement filed with the Trustee; provided, however, that (A) prior to any
distributions of Tax Amounts the Company shall deliver an officers' certificate
stating to the effect that the Company qualifies as a partnership or
substantially similar pass-through entity for Federal income tax purposes and
(B) at the time of such distributions, the most recent audited financial
statements of the Company reflect that the Company was treated as a partnership
or substantially similar pass-through entity for Federal income tax purposes for
the period covered by such financial statements.
"Qualified Capital Stock" means any Equity Interests of any person that is
not Disqualified Capital Stock.
"Quarterly Payment Period" means the period commencing on the tenth day
and ending on and including the twentieth day of each month in which Federal
individual estimated tax payments are due (provided that payments in respect of
estimated state income taxes due in January may instead, at the option of the
Company, be paid during the last five days of the immediately preceding
December).
"Restricted Payment" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such person or any parent of such person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for value
of Equity Interests of such person or any Affiliate or parent of such person,
(c) any purchase, redemption, or other acquisition or retirement for value of,
any payment in respect of any amendment of the terms of or any defeasance of,
any Indebtedness, directly or indirectly, by such person or a parent prior to
the scheduled maturity, any scheduled repayment of principal, or scheduled
sinking fund payment, as the case may be, of such Indebtedness, other than
mandatory or optional redemption of the Notes or pursuant to a Change of Control
Offer or defeasance thereof as provided herein and (d) any Investment by such
person; provided, however, that the term "Restricted Payment" does not include
any dividend, distribution or other payment on or with respect to Equity
Interests of an issuer to the extent payable solely in shares of Qualified
Capital Stock of such issuer.
"Stated Maturity," when used with respect to any Note, means November 15,
2003.
"Subsidiary," with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person, (ii) any other person (other than a corporation or
a partnership) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such person or a Subsidiary of such person is,
at the time, a general partner and in which such person, directly or indirectly,
at the date of determination thereof has at least a majority ownership interest.
104
<PAGE>
"Tax Amounts" with respect to any taxable period shall not exceed an
amount equal to (A) the product of (x) the taxable income of the Company for
such period as determined by the Tax Amounts CPA and (y) the Tax Percentage
reduced by (B) to the extent not previously taken into account, any income tax
benefit attributable to the Company which could be realized (without regard to
the actual realization) by its members in the current or any prior taxable year,
or portion thereof, commencing on or after the Issue Date (including any tax
losses or tax credits), computed at the applicable Tax Percentage for the year
that such benefit is taken into account for purposes of this computation.
"Tax Amounts CPA" means a nationally recognized certified public
accounting firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of Federal and state income tax, imposed on an
individual taxpayer, as certified by the Tax Amounts CPA in a certificate filed
with the Trustee. The rate of "state income tax" to be taken into account for
purposes of determining the Tax Percentage for a particular taxable year shall
be deemed to be the higher of (A) the highest Connecticut income tax rate
imposed on individuals for such year or (B) the sum of (x) the highest Michigan
income tax rate imposed on individuals for such year and (y) the Michigan
intangibles tax rate.
"True-up Amount" means, in respect of a particular taxable year, an amount
determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year and (ii) the aggregate amount permitted to be distributed
in respect of such year as determined by reference to the Company's Internal
Revenue Service Form 1065 filed for such year. For purposes of this Agreement,
the amount equal to the excess, if any, of the amount described in clause (i)
above over the amount described in clause (ii) above shall be referred to as the
"True-up Amount due to the Company" and the excess, if any, of the amount
described in clause (ii) over the amount described in clause (i) shall be
referred to as the "True-up Amount due to the members".
"True-up Determination Date" means the date on which the Tax Amounts CPA
delivers a statement to the Trustee indicating the True-up Amount.
"True-up Payment Period" means, in respect of any immediately preceding
taxable year of the Company, the later of (i) the period commencing on the tenth
day and ending on and including the twentieth day of April or (ii) the period
commencing on the tenth day following the True-up Determination Date and ending
on and including the twentieth day following the True-up Determination Date.
Book-Entry, Delivery and Form
The Notes will be initially represented by one or more global notes (the
"Global Notes") issued in the form of fully registered Global Notes, which will
be deposited with or on behalf of the Depository and registered in the name of a
nominee of the Depository. Interests in Global Notes will be available for
purchase only by "qualified institutional buyers," as defined in Rule 144A under
the Securities Act ("QIBs").
The Depository has advised the Company and the Initial Purchasers that the
Depository intends to follow the procedures described below:
The Depository will act as securities depository for the Global Notes.
The Global Notes will be issued as a fully registered security registered
in the name of Cede & Co. (the Depository's nominee).
105
<PAGE>
The Depository is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depository holds securities that its participants
("Participants") deposit with the Depository. The Depository also
facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts thereby
eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations ("Direct
Participants"). The Depository is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the Depository's system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The Rules
applicable to the Depository and its Participants are on file with the
Commission.
Purchase of Notes must be made by or through Direct Participants,
which will receive a credit for the Notes on the Depository's records. The
ownership interest of each actual purchaser of each Note ("Beneficial
Owner") is in turn recorded on the Direct and Indirect Participant's
records. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Notes, except in the event
that use of the book-entry system for the Notes is discontinued.
Conveyance of Notes and other communications by the Depository to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, the Depository's practice is to determine by lot
the amount of the interest of each Direct Participant in such issue to be
redeemed.
Neither the Depository nor Cede & Co. will consent or vote with
respect to the Notes. Under its usual procedures, the Depository mails an
Omnibus Proxy to the issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Notes are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Principal of, premium and Liquidated Damages, if any, and interest
payments on the Notes will be made to the Depository. The Depository's
practice is to credit Direct Participants' accounts on the payable date in
accordance with their respective holdings shown on the Depository's records
unless the Depository has reason to believe that it will not receive
payment on the payable date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
Participant and not of the Depository, the Paying Agent or the Company,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment to the Depository of principal of, premium and
Liquidated Damages, if any, and interest on the Notes are the
responsibility of the Company or the Paying Agent, disbursement of such
payments to Direct
106
<PAGE>
Participants shall be the responsibility of the Depository, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
If the Depository is at any time unwilling, unable or ineligible to
continue as Depository and a successor Depository is not appointed by the
Company within 90 days, the Company will issue certificated securities in
exchange for the Global Notes. In addition, the Company may at any time and in
its sole discretion determine not to have any Notes in registered form
represented by the Global Notes and, in such event, will issue certificated
securities in exchange for the Global Notes. In any such instance, an owner of a
beneficial interest in a Global Note will be entitled to physical delivery of
certificated securities registered in its name. Upon the exchange of the Global
Notes for certificated securities, the Global Notes will be canceled by the
Trustee.
107
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes the material federal income tax
consequences expected to result to holders whose Private Notes are exchanged for
Exchange Notes in the Exchange Offer. Such opinion is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no ruling from the Service has
been or will be sought with respect to the Exchange Offer. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, 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. The tax treatment of a
holder of Notes may vary depending upon such holder's particular situation.
Certain holders (including, but not limited to, certain financial institutions,
insurance companies, broker-dealers, tax-exempt organizations, persons who are
not citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts as to the United States, and
persons holding the Notes as part of a "straddle," "hedge" or "conversion
transaction") may be subject to special rules not discussed below. This
discussion is limited to holders who will hold the Notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code. EACH HOLDER OF PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The Exchange Notes
The exchange of Private Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Private Notes. As
a result, no material federal income tax consequences will result to holders
exchanging Private Notes for Exchange Notes.
The Private Notes
Recognition of Interest Income
Because the Company will be required to use the Company Excess Cash
generated during certain specified semi-annual periods to redeem at a premium a
portion of the Notes on a pro rata basis and such redemption payments will be
contingent in nature, Treasury Regulations regarding contingent payment debt
instruments will apply to the Notes, requiring the Company to construct a
projected payment schedule for the Notes. Holders generally will recognize all
interest income with respect to a Note on a constant yield basis based on this
projected payment schedule (but would not recognize ordinary income upon receipt
of cash payments denominated as interest), subject to certain adjustments if
actual contingent payments differ from those projected. Such interest is treated
as "original issue discount" (or "OID").
The projected payment schedule will include each noncontingent payment and
a projection of the amount and timing of each contingent payment on the Notes as
of the issue date. The projected payment schedule must produce the "comparable
yield," which is the yield at which the Company would
108
<PAGE>
issue a fixed rate debt instrument with terms and conditions similar to those of
the Notes. The amount of interest that accrues each accrual period is the
product of the "comparable yield" (adjusted for the length of the accrual
period) and the Note's "adjusted issue price" at the beginning of each accrual
period. The "adjusted issue price" of a Note is equal to its issue price (i.e.,
the initial offering price paid by the holders for a Note), increased by
interest previously accrued on the Note (determined without adjustments), and
decreased by the amount of any noncontingent payments and the projected amount
of any contingent payments previously made on the Note. Except for adjustments
made for differences between actual and projected payments, the amount of
interest included in income by a holder of a Note is the sum of the "daily
portions" of interest income with respect to the Note for each day during the
taxable year (or portion thereof) on which such holder held such Note. The
"daily portions" of interest income are determined by allocating to each day in
the accrual period the ratable portion of the interest that accrues in the
accrual period. If the total actual payments exceed the total projected payments
in a tax year (a "net positive adjustment"), holders will generally be required
to treat such excess as additional interest includible in gross income for such
tax year. If the total actual payments are less than the total projected
payments in a tax year (a "net negative adjustment"), holders will be required
to reduce the amount of interest income that they would otherwise account for by
the amount of such difference. If the net negative adjustment exceeds the amount
of interest income that the holder would otherwise account for, such excess will
be treated as ordinary loss to the extent that the holder's total interest
inclusions with respect to the Note exceed the total net negative adjustments
treated as ordinary loss on the Note in prior taxable years. Any remaining
excess will be a "negative adjustment carryforward" and treated as a negative
adjustment in the succeeding tax year. If a Note is sold, exchanged or retired,
any negative adjustment carryforward from the prior year will reduce the
holder's amount realized on the sale, exchange or retirement. Thus, because the
yield to maturity of the Notes, for federal income tax purposes, will be
determined by assuming that the projected payments will be made on specific
dates, holders of Notes may be required to include amounts in income prior to
the receipt of cash payments attributable to such income.
The Company will provide to holders the projected payment schedule for the
Notes. The payment amounts, timing thereof, and yield set forth on the projected
payment schedule are for federal income tax purposes only and are not assurances
by the Company with respect to any aspect of the Notes. Holders will generally
be bound by the projected payment schedule. The Service, however, will not
respect the projected payment schedule if it determines such schedule to be
unreasonable. HOLDERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE CONTINGENT PAYMENT RULES DESCRIBED ABOVE TO
THE NOTES.
Sale or Other Taxable Disposition
A holder of a Note will generally recognize gain or loss upon the sale or
other taxable disposition of such Note in an amount equal to the difference
between (i) the amount of cash and the fair market value of any property
received in exchange therefor (except to the extent attributable to the payment
of accrued but unrecognized original issue discount, which generally will be
taxable to a holder as ordinary income), reduced by any negative adjustment
carryforward (as described above), and (ii) the holder's adjusted tax basis in
such Note. A holder's tax basis in a Note generally will be equal to the price
paid for such Note, increased by the amount of interest previously accrued on
the Note (determined without adjustments), and decreased by the amount of any
noncontingent payments and the projected amount of contingent payments
previously made on the Note.
If a Note is sold or otherwise disposed of when there are remaining
contingent payments due under the projected payment schedule, then any gain
recognized upon such sale or other disposition will be ordinary interest income,
while any loss recognized will be ordinary loss to the extent the holder's total
interest inclusions on a Note exceed the total net negative adjustments on the
Note the holder took into account as ordinary loss under the rules described
above, and any additional loss will generally be
109
<PAGE>
a capital loss. If, however, a Note is sold or otherwise disposed of after there
are no remaining contingent payments due on the Notes under the projected
payment schedule, the resulting gain or loss will generally be capital gain or
loss and will be long-term capital gain or loss if the Note had been held for
more than one year.
Liquidated Damages
The Company intends to take the position that the Liquidated
Damages described above will, if paid, be taxable to the holder as ordinary
income in accordance with the holder's method of accounting for federal income
tax purposes. The Service may take a different position, however, which could
affect the timing of both the holder's income and the Company's deduction with
respect to the Liquidated Damages.
Backup Withholding
A holder of Notes may be subject to backup withholding at the
rate of 31% with respect to certain payments of principal of, and interest on
(and the amount of original issue discount accrued on), a Note and proceeds of
certain sales of Notes unless (i) such holder is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a correct taxpayer identification number, certifies as to no loss
of exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A holder of Notes who does not
provide the Company with his or her correct taxpayer identification number may
be subject to penalties imposed by the Service. Any amount withheld under these
rules will be creditable against the federal tax liability of a holder, and will
be refundable to the extent that it results in an overpayment of tax.
The Company will report to the holders of the Notes and the
Service the amount of any "reportable payments" (including any original issue
discount accrued on the Notes) and any amount withheld with respect to the Notes
during the calendar year.
110
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resales of Exchange Notes received in
exchange for Private Notes where such Private Notes were acquired as a result of
market-making activities or other trading activities. The Issuers have agreed
that for a period of up to 120 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made 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
Exchange Notes. Any broker-dealer that resells Exchange 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 Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions 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 acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Issuers have agreed to pay all expenses incident to the Issuers's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Latham &
Watkins, New York, New York.
EXPERTS
The balance sheet of the Company and Finance included in the Prospectus
has been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as indicated in their report with respect thereto.
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the Exchange Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Issuers and
the Exchange Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof. As a result of the Exchange Offer, the
Issuers will become subject to the informational requirements of the Exchange
Act. The Registration Statement (and the exhibits and schedules thereto), as
well as the periodic reports and
111
<PAGE>
other information filed by the Issuers with the Commission, may be inspected and
copied 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 Room 1400, 75 Park Place, New York, New
York 10007 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 6061-2511. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and its public reference facilities
in New York, New York and Chicago, Illinois at the prescribed rates. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
Pursuant to the Indenture, the Issuers have agreed to furnish to the
Trustee and to registered holders of the Notes, without cost to the Trustee or
such registered holders, copies of all reports and other information that would
be required to be filed by the Issuers with the Commission under the Exchange
Act, whether or not the Issuers are then required to file reports with the
Commission. As a result of this Exchange Offer, the Issuers will become subject
to the periodic reporting and other informational requirements of the Exchange
Act. In the event that the Issuers ceases to be subject to the informational
requirements of the Exchange Act, the Issuers have agreed that, so long as any
Notes remain outstanding, it will file with the Commission (but only if the
Commission at such time is accepting such voluntary filings) and distribute to
holders of the Private Notes or the Exchange Notes, as applicable, copies of the
financial information that would have been contained in such annual reports and
quarterly reports, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," that would have been required to
be filed with the Commission pursuant to the Exchange Act. The Issuers will also
furnish such other reports as it may determine or as may be required by law.
The principal address of the Issuers is 914 Hartford Turnpike, P.O. Box
715, Waterford, CT 06385 and the Issuer's telephone number is (860) 442-4559.
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
WATERFORD GAMING, L.L.C.
Page
----
Report of Independent Accountants...................................... F-2
Balance Sheet.......................................................... F-3
Notes to Balance Sheet................................................. F-4
WATERFORD GAMING FINANCE CORP.
Page
----
Report of Independent Accountants...................................... F-5
Balance Sheet.......................................................... F-6
Notes to Balance Sheet................................................. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
Waterford Gaming, L.L.C.:
We have audited the accompanying balance sheet of Waterford Gaming, L.L.C. as of
October 17, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on the balance
sheet 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 the balance sheet. 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
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 Waterford Gaming, L.L.C. as of
October 17, 1996 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
October 18, 1996
F-2
<PAGE>
WATERFORD GAMING, L.L.C.
BALANCE SHEET
October 17, 1996
------
ASSETS
Cash $1,000
======
MEMBERS' EQUITY
Members' Equity $1,000
======
The accompanying notes are an integral part of the balance sheet.
F-3
<PAGE>
WATERFORD GAMING, L.L.C.
NOTES TO BALANCE SHEET
----------------------
1. Organization and Members' Agreement:
Waterford Gaming, L.L.C. (the "Company"), a Delaware limited liability
company, was formed on September 30, 1996. The Company will initially
acquire and own an interest in Trading Cove Associates, a Connecticut
General Partnership, and invest in certain financial instruments issued by
the Mohegan Tribal Gaming Authority.
The members of the Company are Slavik Suites, Inc. owning a 66.67% interest
and LMW Investments, Inc. owning a 33.33% interest. The Company has been
initially capitalized with $1,000 of equity. The members have agreed to
contribute their respective interests in Trading Cove Associates to the
Company. Allocations of profit and loss and distributions of excess of cash
are generally made in the respective ownership percentages, in accordance
with the members' agreement. The Company is governed by a board of managers
pursuant to the members' agreement.
2. Summary of Significant Accounting Policies:
The balance sheet has been prepared utilizing the accrual method of
accounting.
F-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
Waterford Gaming Finance Corp.:
We have audited the accompanying balance sheet of Waterford Gaming Finance Corp.
(the "Company") as of October 17, 1996. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the balance sheet 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 the balance sheet. 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
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 Waterford Gaming Finance Corp. as
of November 6, 1996 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
December 12, 1996
F-5
<PAGE>
WATERFORD GAMING FINANCE CORP.
BALANCE SHEET
November 6, 1996
------
ASSETS
Cash $100
====
STOCKHOLDERS' EQUITY
Stockholder's equity:
Common stock, $.01 par value:
1,000 shares authorized, issued and outstanding $ 10
Additional paid-in capital 90
----
Total stockholder's equity $100
====
The accompanying notes are an integral
part of the balance sheet.
F-6
<PAGE>
WATERFORD GAMING FINANCE CORP.
NOTES TO BALANCE SHEET
----------------------
1. Organization:
Waterford Gaming Finance Corp. (the "Company"), a Delaware corporation, was
formed on October 22, 1996 as a wholly-owned subsidiary of Waterford Gaming
L.L.C. The Company will initially act as a co-issuer of financing
transactions with its parent company Waterford Gaming L.L.C.
2. Summary of Significant Accounting Policies:
The balance sheet has been prepared utilizing the accrual method of
accounting.
F-7
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus,
and, if given or made, such information and representations must not be relied
upon as having been authorized by the Company or the Initial Purchasers. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy to any other person or by anyone in any jurisdiction in which such offer or
solicitation would be unlawful or to any person to whom it is unlawful. 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 Company 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
Use of Proceeds........................................................... 38
Capitalization............................................................ 39
The Mohegan Sun........................................................... 40
The Company............................................................... 46
Pro Forma Financial Information........................................... 47
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 48
Management................................................................ 52
Mohegan Tribe of Indians of Connecticut................................... 58
Certain Transactions...................................................... 60
Material Agreements....................................................... 62
Government Regulation..................................................... 85
Principal Security Holders................................................ 90
Description of Exchange Notes............................................. 91
Certain Federal Income Tax Consequences................................... 108
Plan of Distribution...................................................... 111
Legal Matters............................................................. 111
Experts................................................................... 111
Available Information..................................................... 111
Index to Financial Statements............................................. F-1
================================================================================
================================================================================
$65,000,000
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
-----------------------------
Prospectus
-----------------------------
___________, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Certificate of Incorporation and the Bylaws of Finance, and the
Certificate of Formation of the Company and the Company's Limited Liability
Company Agreement provide for the indemnification by the Issuers of each
director, officer, employee and agent of the Issuers to the fullest extent
permitted by the Delaware General Corporation Law, as the same exists or may
hereafter be amended. Section 145 of the Delaware General Corporation Law
provides in relevant part that a corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee,or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. Delaware law further provides that nothing in the above-described
provisions shall be deemed exclusive of any other rights to indemnification or
advancement of expenses to which any person may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
The Certificate of Incorporation of the Finance further provides that a
Director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
Director. Section 102(b)(7) of the Delaware General Corporation Law provides
that a provision so limiting the personal liability of a director shall not
eliminate or limit the liability of a director for, among other things: breach
of the duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; unlawful payment of
dividends; and transactions from which the director derived an improper personal
benefit.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
No. Description
- ------- -----------
3.1 Certificate of Formation, as amended, of Waterford Gaming L.L.C.
3.2 Certificate of Incorporation of Waterford Gaming Finance Corp.
3.3 Bylaws of Waterford Gaming Finance Corp.
4.1 Indenture, dated as of November 8, 1996, between Waterford Gaming , L.L.C.
and Waterford Gaming Finance Corp., the issuers, and Fleet National Bank,
as trustee, relating to $65,000,000 12 3/4% Senior Notes due 2003.
4.2 Registration Rights Agreement, dated as of November 8, 1996, among,
Waterford Gaming L.L.C., Waterford Gaming Finance Corp., Bear, Stearns &
Co., Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.3 Note Pledge Agreement, dated as of November 8, 1996, between Waterford
Gaming L.L.C. and Fleet National Bank, as trustee.
4.4 Cash Collateral and Disbursement Agreement, dated as of November 8, 1996,
among Fleet National Bank, as trustee, Fleet National Bank, as
disbursement agent, and Waterford Gaming L.L.C.
4.5 Specimen Form of 12 3/4% Senior Notes due 2003 (the "Private Notes")
(included in Exhibit 4.1 hereto). 4.6 Specimen Form of 12 3/4% Senior
Notes due 2003 (the "Exchange Notes") (included in Exhibit 4.1 hereto).
5.1* Opinion of Latham & Watkins regarding the validity of the Exchange Notes.
10.1 Omnibus Financing Agreement, dated as of September 21, 1995, between
Trading Cove Associates and Sun International Hotels Limited.
10.2 First Amendment to the Omnibus Financing Agreement, dated as of October
19, 1996, among Trading Cove Associates, Sun International Hotels Limited,
and Waterford Gaming L.L.C.
10.3 Amended and Restated Partnership Agreement of Trading Cove Associates,
dated as of September 21, 1994, among Sun Cove Ltd., RJH Development
Corp., Leisure Resort Technology, Inc., Slavik Suites, Inc., and LMW
Investments Corp.
10.4 First Amendment to Amended and Restated Partnership Agreement of Trading
Cove Associates, dated as of October 22, 1996, among Sun Cove Ltd., Slavik
Suites, Inc., RJH Development Corp., LMW Investments Corp. and Waterford
Gaming L.L.C.
10.5 Purchase Agreement, dated as of November 5, 1996, among Waterford Gaming
L.L.C., Waterford Gaming Finance Corp., Bear, Stearns & Co., Inc., and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
10.6 Limited Liability Company Agreement of Waterford Gaming L.L.C., dated as
of September 30, 1996, among Slavik Suites, Inc., LMW Investments and
Waterford Gaming L.L.C.
21.1 Subsidiaries of Waterford Gaming L.L.C.
21.2 Subsidiaries of Waterford Gaming Finance Corp.
23.1* Consent of Latham & Watkins (included in their opinion filed as Exhibit
5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney of Waterford Gaming L.L.C. and Waterford Gaming Finance
Corp. (included on signature page to Registration Statement on Form S-4).
25.1** Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of 1939 of Fleet National Bank.
27 Financial Data Schedule (included in Edgar filing only).
99.1* Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
*To be filed by amendment.
**To be filed under separate cover.
II-2
<PAGE>
Schedules Omitted
(b) Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
Item 22. Undertakings.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act"), may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or the registrant in the successful defense of
any action, suit paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted 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.
(b) The undersigned registrants hereby undertake to respond to requests
for information that is incorporated by reference into this prospectus pursuant
to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) (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 of 1933; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the 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; (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for purposes of determining any liability under the
Securities Act of 1933, 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 unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, each Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on December 13, 1996.
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
By:/s/ Len Wolman
--------------
Len Wolman
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers,
directors, and members of Waterford Gaming, L.L.C. (the "Company") a Delaware
limited liability company, and Waterford Gaming Finance Corp., a Delaware
corporation ("Finance" and, together with the Company, the "Issuers") for
himself and not for one another, does hereby constitute and appoint Len Wolman
for each of them, a true and lawful attorney in his name, place and stead, in
any and all capacities, to sign his name to any and all amendments, including
post-effective amendments, to this registration statement with respect to the
proposed issuance, sale and delivery by the Issuers of 12 3/4% Senior Notes due
2003, and to cause the same to be filed with the Securities and Exchange
Commission, granting unto said attorney full power and authority to do and
perform any act and thing necessary and proper to be done in the premises, as
fully to all intents and purposes as the undersigned could do if personally
present, and each of them shall lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
Signature Title Date
/s/ Len Wolman Director and Chief Executive Officer, December 13, 1996
- ------------------- Waterford Gaming, L.L.C. and Director,
Len Wolman President and Chief Executive Officer,
Waterford Gaming Finance Corp.
/s/ Del J. Lauria Director, Chief Financial Officer and December 13, 1996
- ------------------- principal accounting officer and
Del J. Lauria Secretary of Waterford Gaming, L.L.C.
and Director, Secretary and Treasurer
Waterford Gaming Finance Corp.
/s/ Mark Wolman Director, Waterford Gaming, L.L.C. and December 13, 1996
- ------------------- Director, Waterford Gaming Finance
Mark Wolman Corp.
/s/ Stephen Slavik, Sr. Director, Waterford Gaming, L.L.C. and December 13, 1996
- ------------------- Director, Waterford Gaming Finance
Stephen Slavik, Sr. Corp.
II-4
<PAGE>
INDEX TO EXHIBITS
Sequential
Page
Exhibit Number
- ------- -----------
3.1 Certificate of Formation, as amended, of
Waterford Gaming L.L.C.
3.2 Certificate of Incorporation of Waterford Gaming
Finance Corp.
3.3 Bylaws of Waterford Gaming Finance Corp.
4.1 Indenture, dated as of November 8, 1996, between
Waterford Gaming , L.L.C. and Waterford Gaming
Finance Corp., the issuers, and Fleet National
Bank, as trustee, relating to $65,000,000
12 3/4% Senior Notes due 2003.
4.2 Registration Rights Agreement, dated as of
November 8, 1996, among, Waterford Gaming
L.L.C., Waterford Gaming Finance Corp., Bear,
Stearns & Co., Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
4.3 Note Pledge Agreement, dated as of November 8,
1996, between Waterford Gaming L.L.C. and Fleet
National Bank, as trustee.
4.4 Cash Collateral and Disbursement Agreement,
dated as of November 8, 1996, among Fleet
National Bank, as trustee, Fleet National Bank,
as disbursement agent, and Waterford Gaming
L.L.C.
4.5 Specimen Form of 12 3/4% Senior Notes due 2003
(the "Private Notes") (included in Exhibit 4.1
hereto).
4.6 Specimen Form of 12 3/4% Senior Notes due 2003
(the "Exchange Notes") (included in Exhibit 4.1
hereto).
5.1* Opinion of Latham & Watkins regarding the
validity of the Exchange Notes.
10.1 Omnibus Financing Agreement, dated as of
September 21, 1995, between Trading Cove
Associates and Sun International Hotels Limited.
10.2 First Amendment to the Omnibus Financing
Agreement, dated as of October 19, 1996, among
Trading Cove Associates, Sun International
Hotels Limited, and Waterford Gaming L.L.C.
10.3 Amended and Restated Partnership Agreement of
Trading Cove Associates, dated as of September
21, 1994, among Sun Cove Ltd., RJH Development
Corp., Leisure Resort Technology, Inc., Slavik
Suites, Inc., and LMW Investments Corp.
10.4 First Amendment to Amended and Restated
Partnership Agreement of Trading Cove
Associates, dated as of October 22, 1996, among
Sun Cove Ltd., Slavik Suites, Inc., RJH
Development Corp., LMW Investments Corp. and
Waterford Gaming L.L.C.
10.5 Purchase Agreement, dated as of November 5,
1996, among Waterford Gaming L.L.C., Waterford
Gaming Finance Corp., Bear, Stearns & Co., Inc.,
and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
10.6 Limited Liability Company Agreement of Waterford
Gaming L.L.C., dated as of September 30, 1996,
among Slavik Suites, Inc., LMW Investments and
Waterford Gaming L.L.C.
21.1 Subsidiaries of Waterford Gaming L.L.C.
21.2 Subsidiaries of Waterford Gaming Finance Corp.
23.1* Consent of Latham & Watkins (included in their
opinion filed as Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney of Waterford Gaming L.L.C. and
Waterford Gaming Finance Corp. (included on
signature page to Registration Statement on Form
S-4).
25.1** Statement of Eligibility and Qualification (Form
T-1) under the Trust Indenture Act of 1939 of
Fleet National Bank.
27 Financial Data Schedule (included in Edgar filing only).
99.1* Form of Letter of Transmittal and related
documents to be used in conjunction with the
Exchange Offer.
*To be filed by amendment.
**To be filed under separate cover.
State of Delaware PAGE 1
Office of the Secretary of State
--------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "WATERFORD GAMING, L.L.C.", FILED IN THIS OFFICE ON THE
THIRTIETH DAY OF SEPTEMBER, A.D. 1996, AT 1:45 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
2668421 8100 AUTHENTICATION: 8166804
960313439 DATE: 10-29-96
<PAGE>
CERTIFICATE OF FORMATION
OF
WATERFORD GAMING, L.L.C.
1. The name of the limited liability company is: WATERFORD GAMING, L.L.C.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The duration of the company is perpetual.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation of WATERFORD GAMING, L.L.C. this 30th day of September, 1996.
SLAVIK SUITES, INC.
a Michigan corporation
By: /s/ Janis K. Kujan
---------------------------------
Janis K. Kujan
Its attorney-in-fact
Authorized Person
<PAGE>
State of Delaware PAGE 1
Office of the Secretary of State
--------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "WATERFORD GAMING, L.L.C.", FILED IN THIS OFFICE ON THE FOURTH DAY OF
NOVEMBER, A.D. 1996, AT 10 O'CLOCK A.M.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
2668421 8100 AUTHENTICATION: 8176792
960320224 DATE: 11-04-96
<PAGE>
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF FORMATION
OF
WATERFORD GAMING, L.L.C.
1. The name of the limited liability company is: WATERFORD GAMING, L.L.C.
2. Paragraph 3 of the Certificate of Formation of WATERFORD GAMING, L.L.C.,
is hereby amended to read as follows:
The latest date on which the limited liability company is to dissolve
is September 30, 2020.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment to Certificate of Formation of WATERFORD GAMING, L.L.C. this 4th day
of November, 1996.
SLAVIK SUITES, INC.
a Michigan corporation
(MEMBER)
By: /s/ Janis K. Kujan
---------------------------------
Janis K. Kujan
Its attorney-in-fact
Authorized Person
CERTIFICATE OF INCORPORATION
OF
WATERFORD GAMING FINANCE CORP.
1. The name of the corporation is:
Waterford Gaming Finance Corp.
2. The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, Delaware 19801 in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
3. The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
4. The total number of shares of all classes of stock that the corporation
shall issue is 1,000 shares, all of which are Common Stock with a par value of
$0.01 per share.
5. The name and mailing address of the sole incorporator is
Tani A. Raiche
Latham & Watkins
885 Third Avenue
New York, New York 10022
6. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or
repeal the by-laws of the corporation.
7. The election of directors of the corporation need not be by written
ballot unless the by-laws of the corporation shall so provide.
<PAGE>
8. No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, herein declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 22nd day of October, 1996.
/s/ Tania A. Raiche
---------------------------
Tania A. Raiche
Sole Incorporator
2
BY-LAWS
OF
WATERFORD GAMING FINANCE CORP.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - OFFICES........................................................ 1
Section 1. Registered Office........................................... 1
Section 2. Other Offices............................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS...................................... 1
Section 1. Place of Meetings........................................... 1
Section 2. Annual Meeting of Stockholders.............................. 1
Section 3. Quorum; Adjourned Meetings and Notice Thereof............... 1
Section 4. Voting...................................................... 2
Section 5. Proxies..................................................... 2
Section 6. Special Meetings............................................ 3
Section 7. Notice of Stockholder's Meetings............................ 3
Section 8. Maintenance and Inspection of Stockholder List.............. 3
Section 9. Stockholder Action by Written Consent Without a Meeting..... 4
ARTICLE III - DIRECTORS.................................................... 4
Section 1. The Number of Directors..................................... 4
Section 2. Vacancies.................................................. 5
Section 3. Powers...................................................... 5
Section 4. Place of Directors' Meetings................................ 6
Section 5. Regular Meetings............................................ 6
Section 6. Special Meetings............................................ 6
Section 7. Quorum...................................................... 6
Section 8. Action Without Meeting...................................... 7
Section 9. Telephonic Meetings......................................... 7
Section 10. Committees of Directors.................................... 7
Section 11. Minutes of Committee Meetings.............................. 8
Section 12. Compensation of Directors.................................. 8
Section 13. Indemnification............................................ 9
ARTICLE IV - OFFICERS...................................................... 9
Section 1. Officers.................................................... 9
Section 2. Election of Officers........................................ 10
Section 3. Subordinate Officers........................................ 10
Section 4. Compensation of Officers.................................... 10
Section 5. Term of Office; Removal and Vacancies....................... 10
i
<PAGE>
Page
Section 6. Chairman of the Board....................................... 10
Section 7. Chief Executive Officer..................................... 10
Section 8. Vice Presidents............................................. 11
Section 9. Secretary................................................... 11
Section 10. Assistant Secretaries....................................... 12
Section 11. Treasurer................................................... 12
Section 12. Assistant Treasurer......................................... 13
ARTICLE V - CERTIFICATES OF STOCK.......................................... 13
Section 1. Certificates................................................ 13
Section 2. Signatures on Certificates.................................. 14
Section 3. Statement of Stock Rights, Preferences, Privileges.......... 14
Section 4. Lost Certificates........................................... 14
Section 5. Transfers of Stock.......................................... 15
Section 6. Fixing Record Date.......................................... 15
Section 7. Registered Stockholders..................................... 15
ARTICLE VI - GENERAL PROVISIONS............................................ 16
Section 1. Dividends................................................... 16
Section 2. Payment of Dividends' Directors' Duties..................... 16
Section 3. Checks...................................................... 16
Section 4. Fiscal Year................................................. 16
Section 5. Corporate Seal.............................................. 16
Section 6. Manner of Giving Notice..................................... 16
Section 7. Waiver of Notice............................................ 17
Section 8. Annual Statement............................................ 17
ARTICLE VII - AMENDMENTS................................................... 17
Section 1. Amendment by Directors or Stockholders...................... 17
ii
<PAGE>
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders shall be held at any place
within or outside the State of Delaware designated by the Board of Directors. In
the absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the Corporation.
Section 2. The annual meeting of stockholders shall be held each
year on a date and a time designated by the Board of Directors. At each annual
meeting directors shall be elected and any other proper business may be
transacted.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any
1
<PAGE>
meeting of the stockholders, a majority of the voting stock represented in
person or by proxy may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the Corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the Corporation on the record date set by
2
<PAGE>
the Board of Directors as provided in Article V, Section 6 hereof. All elections
shall be had and all questions decided by a plurality vote.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation, issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
Section 8. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the
3
<PAGE>
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be not less than one (1) and not more than five (5). The exact
number of directors shall be determined by resolution of the Board, and the
initial number of directors shall be two (2). The directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and
4
<PAGE>
each director elected shall hold office until his successor is elected and
qualified; provided, however, that unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from the Board of
Directors at any meeting of stockholders by a majority of the stock represented
and entitled to vote thereat.
Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner replaced by a
vote of the shareholders. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all
5
<PAGE>
such powers of the Corporation and do all such lawful acts and things as are not
by statute or by the Certificate of Incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders.
Section 4. The directors may hold their meetings and have one or
more offices, and keep the books of the Corporation outside of the State of
Delaware.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 6. Special meetings of the Board of Directors may be called
by the President on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
President or the Secretary in like manner and on like notice on the written
request of two directors.
Section 7. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum. At any
meeting, a director shall have the right to be accompanied by counsel provided
that such
6
<PAGE>
counsel shall agree to any confidentiality restrictions reasonably imposed by
the Corporation.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such
7
<PAGE>
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-Laws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
8
<PAGE>
Section 13. The Corporation shall indemnify every person who is or
was a party or is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director or officer of the Corporation or, while
a director or officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, employee, agent or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including counsel fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the full extent permitted by
applicable law.
ARTICLE IV
OFFICERS
Section 1. The officers of this corporation shall be chosen by the
Board of Directors and shall include a Chief Executive Officer, a Secretary, and
a Chief Financial Officer. The Corporation may also have, at the discretion of
the Board of Directors, such other officers as are desired, including a Chairman
of the Board, one or more Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person unless the
Certificate of Incorporation or these By-Laws otherwise provide.
9
<PAGE>
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the Corporation.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 4. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board, if such
an officer be elected, shall, if present, preside at all meetings of the Board
of Directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by
these By-Laws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Section 7 of this Article IV.
Section 7. Chief Executive Officer. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the Chief Executive Officer shall be the
chief executive officer of the Corporation and shall,
10
<PAGE>
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the Corporation. He shall
preside at all meetings of the stockholders and, in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board of Directors. He
shall be an ex-officio member of all committees and shall have the general
powers and duties of management usually vested in the office of Chief Executive
Officer of corporations, and shall have such other powers and duties as may be
prescribed by the Board of Directors or these By-Laws.
Section 8. Vice Presidents. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 9. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws.
11
<PAGE>
He shall keep in safe custody the seal of the Corporation, and when
authorized by the Board, affix the same to any instrument requiring it, and when
so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.
Section 10. Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 11. Chief Financial Officer. The Chief Financial Officer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys, and other valuable effects in the name
and to the credit of the Corporation, in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation. If
required by the Board of Directors, he shall give the Corporation a bond, in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors, for the faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death,
12
<PAGE>
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
Section 12. Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Chief Financial Officer, perform the duties and exercise the
powers of the Chief Financial Officer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the Corporation shall be
entitled to have a certificate signed by, or in the name of the Corporation by,
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the Corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
13
<PAGE>
Section 3. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may
14
<PAGE>
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 5. Upon surrender to the Corporation, or the transfer agent
of the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its book.
Section 6. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
15
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may abolish any such reserve.
Section 3. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. The fiscal year of the Corporation shall be the calendar
year.
Section 5. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any
16
<PAGE>
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
ARTICLE VII
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such special meeting. If the power to adopt, amend or repeal
By-Laws is conferred upon the Board of Directors by the Certificate of
Incorporation it shall not divest or limit the power of the stockholders to
adopt, amend or repeal By-Laws.
17
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of Waterford
Gaming Finance Corp., a Delaware corporation; and
(2) That the foregoing By-Laws, comprising seventeen pages,
constitute the ByLaws of said corporation as duly adopted by the written consent
of the Incorporator, and approved by the Board of Directors, of said corporation
as of October __, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this ___ day
of October, 1996.
18
==============================
WATERFORD GAMING, L.L.C.
and
WATERFORD GAMING FINANCE CORP.
Issuers,
and
FLEET NATIONAL BANK
Trustee
------------------------
INDENTURE
Dated as of November 8, 1996
------------------------------
$65,000,000
12 3/4% Senior Notes due 2003
==============================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE............... 1
SECTION 1.1. Definitions.................................................. 1
SECTION 1.2. Incorporation by Reference of TIA............................ 16
SECTION 1.3. Rules of Construction........................................ 16
ARTICLE II
THE SECURITIES.............................. 17
SECTION 2.1. Form and Dating.............................................. 17
SECTION 2.2. Execution and Authentication................................. 17
SECTION 2.3. Registrar and Paying Agent................................... 18
SECTION 2.4. Paying Agent to Hold Assets in Trust......................... 19
SECTION 2.5. Securityholder Lists......................................... 20
SECTION 2.6. Transfer and Exchange........................................ 20
SECTION 2.7. Replacement Securities....................................... 27
SECTION 2.8. Outstanding Securities....................................... 28
SECTION 2.9. Treasury Securities.......................................... 28
SECTION 2.10. Temporary Securities......................................... 28
SECTION 2.11. Cancellation................................................. 29
SECTION 2.12. Defaulted Interest........................................... 29
ARTICLE III
REDEMPTION.............................. 30
SECTION 3.1. Right of Redemption.......................................... 30
SECTION 3.2. Notices to Trustee........................................... 32
SECTION 3.3. Selection of Securities to Be Redeemed....................... 32
SECTION 3.4. Notice of Redemption......................................... 33
SECTION 3.5. Effect of Notice of Redemption............................... 34
SECTION 3.6. Deposit of Redemption Price.................................. 34
SECTION 3.7. Securities Redeemed in Part.................................. 35
i
<PAGE>
Page
----
ARTICLE IV
COVENANTS............................... 35
SECTION 4.1. Payment of Securities........................................ 35
SECTION 4.2. Maintenance of Office or Agency.............................. 36
SECTION 4.3. Limitation on Restricted Payments............................ 36
SECTION 4.4. Corporate and Limited Liability Company Existence............ 37
SECTION 4.5. Payment of Taxes and Other Claims............................ 38
SECTION 4.6. Compliance Certificate; Notice of Default.................... 38
SECTION 4.7. Reports...................................................... 38
SECTION 4.8. Limitation on Status as Investment Company................... 39
SECTION 4.9. Limitation on Transactions with Affiliates................... 39
SECTION 4.10. Limitation on Indebtedness and Disqualified Capital Stock.... 39
SECTION 4.11. Limitation on Liens.......................................... 40
SECTION 4.12. Limitation on Sale of Assets................................. 40
SECTION 4.13. Covenants with Respect to the Manager........................ 40
SECTION 4.14. Limitation on Activities of the Issuers...................... 41
SECTION 4.15. Acceptance of Remaining Excess Cash Purchase Offers
and Change of Control Offers............................... 41
SECTION 4.16. Waiver of Stay, Extension or Usury Laws...................... 42
SECTION 4.17. Limitation on Merger, Sale or Consolidation.................. 43
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES..................... 43
SECTION 5.1. Events of Default............................................ 43
SECTION 5.2. Acceleration of Maturity Date; Rescission and Annulment...... 45
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.................................................... 46
SECTION 5.4. Trustee May File Proofs of Claim............................. 47
SECTION 5.5. Trustee May Enforce Claims Without Possession of
Securities................................................. 48
SECTION 5.6. Priorities................................................... 48
SECTION 5.7. Limitation on Suits.......................................... 49
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest...................................... 50
SECTION 5.9. Rights and Remedies Cumulative............................... 50
SECTION 5.10. Delay or Omission Not Waiver................................. 50
ii
<PAGE>
Page
----
SECTION 5.11. Control by Holders........................................... 50
SECTION 5.12. Waiver of Past Default....................................... 51
SECTION 5.13. Undertaking for Costs........................................ 52
SECTION 5.14. Restoration of Rights and Remedies........................... 52
ARTICLE VI
TRUSTEE................................ 52
SECTION 6.1. Duties of Trustee............................................ 52
SECTION 6.2. Rights of Trustee............................................ 54
SECTION 6.3. Individual Rights of Trustee................................. 55
SECTION 6.4. Trustee's Disclaimer......................................... 55
SECTION 6.5. Notice of Default............................................ 56
SECTION 6.6. Reports by Trustee to Holders................................ 56
SECTION 6.7. Compensation and Indemnity................................... 56
SECTION 6.8. Replacement of Trustee....................................... 57
SECTION 6.9. Successor Trustee by Merger, Etc............................. 58
SECTION 6.10. Eligibility; Disqualification................................ 59
SECTION 6.11. Preferential Collection of Claims Against Issuers............ 59
ARTICLE VII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE................ 59
SECTION 7.1. Option to Effect Legal Defeasance or Covenant Defeasance..... 59
SECTION 7.2. Legal Defeasance and Discharge............................... 59
SECTION 7.3. Covenant Defeasance.......................................... 60
SECTION 7.4. Conditions to Legal or Covenant Defeasance................... 60
SECTION 7.5. Deposited Cash and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions.............. 62
SECTION 7.6. Repayment to the Issuers..................................... 62
SECTION 7.7. Reinstatement................................................ 63
ARTICLE VIII
AMENDMENTS, SUPPLEMENTS AND WAIVERS.................. 64
SECTION 8.1. Supplemental Indentures Without Consent of Holders........... 64
SECTION 8.2. Amendments, Supplemental Indentures and Waivers with
Consent of Holders......................................... 64
iii
<PAGE>
Page
----
SECTION 8.3. Compliance with TIA.......................................... 66
SECTION 8.4. Revocation and Effect of Consents............................ 66
SECTION 8.5. Notation on or Exchange of Securities........................ 67
SECTION 8.6. Trustee to Sign Amendments, Etc.............................. 67
ARTICLE IX
RIGHT TO REQUIRE REPURCHASE...................... 68
SECTION 9.1. Repurchase of Securities at Option of the Holder Upon a
Change of Control.......................................... 68
ARTICLE X
SECURITY................................ 71
SECTION 10.1. Security Interest............................................ 71
SECTION 10.2. Recording; Opinions of Counsel............................... 71
SECTION 10.3. Cash Collateral Account...................................... 72
SECTION 10.4. Certain Releases of Collateral............................... 73
SECTION 10.5. Payment of Expenses.......................................... 73
SECTION 10.6. Suits to Protect the Collateral.............................. 73
SECTION 10.7. Trustee's Duties............................................. 73
ARTICLE XI
MISCELLANEOUS............................. 74
SECTION 11.1. TIA Controls................................................. 74
SECTION 11.2. Notices...................................................... 74
SECTION 11.3. Communications by Holders with Other Holders................. 75
SECTION 11.4. Certificate and Opinion as to Conditions Precedent........... 76
SECTION 11.5. Statements Required in Certificate or Opinion................ 76
SECTION 11.6. Rules by Trustee, Paying Agent, Registrar.................... 77
SECTION 11.7. Non-Business Days............................................ 77
SECTION 11.8. Governing Law................................................ 77
SECTION 11.9. No Adverse Interpretation of Other Agreements................ 78
SECTION 11.10. No Recourse against Others................................... 78
SECTION 11.11. Successors................................................... 78
SECTION 11.12. Duplicate Originals.......................................... 78
SECTION 11.13. Severability................................................. 78
iv
<PAGE>
Page
----
SECTION 11.14. Table of Contents, Headings, Etc............................. 79
SIGNATURES.................................................................. 80
Exhibit A................................................................... A-1
v
<PAGE>
INDENTURE, dated as of November 8, 1996, by and among Waterford
Gaming, L.L.C., a Delaware limited liability company ("the Company"), and
Waterford Gaming Finance Corp., a Delaware corporation ("Finance" and, together
with Gaming, the "Issuers") and Fleet National Bank, as Trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Issuers' 12
3/4% Senior Notes due 2003:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acceleration Notice" shall have the meaning specified in Section
5.2.
"Account" means the Account as defined in the Cash Collateral and
Disbursement Account.
"Acquisition" means the purchase or other acquisition of any person
or substantially all the assets of any person by any other person, whether by
purchase, stock purchase, merger, consolidation, or other transfer, and whether
or not for consideration.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with such person. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided, however, that with respect to ownership interests in the
Company a Beneficial Owner of 10% or more of the total voting power normally
entitled to vote in the election of directors, managers or trustees, as
applicable, shall for such purposes be deemed to constitute control.
"Affiliate Transaction" shall have the meaning specified in Section
4.9.
"Agent" means any authenticating agent, Registrar, Paying Agent or
transfer agent.
"Asset Sale" shall have the meaning specified in Section 4.12.
<PAGE>
"Authority" means the Mohegan Tribal Gaming Authority.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"Beneficial Owner" or "beneficial owner" has the meaning attributed
to it in Rules l3d-3 and l3d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
"Board of Directors", "Board of Managers" or "Board" means, with
respect to any Person, the Board of Directors or Board of Managers of such
Person or any committee of the Board of Directors or Board of Managers of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors or Board of Managers of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors or the Board of Managers of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York or
Hartford, Connecticut are authorized or obligated by law or executive order to
close.
"Buy Out Notice" has the meaning set forth in Section 4.03 of the
Partnership Agreement.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Capitalized Lease Obligation" means rental obligations under a
lease that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"Cash" or "cash" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
2
<PAGE>
"Cash Collateral and Disbursement Agreement" means the cash
collateral and disbursement agreement, dated the date hereof, among the
Disbursement Agent, the Trustee and the Company.
"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.
"Change of Control" means any event, the result of which is that Len
Wolman and Mark Wolman and their Permitted Assignees cease in the aggregate to
be the Beneficial Owners of at least 40% of the total voting power in the
aggregate of the Company.
"Change of Control Offer" shall have the meaning specified in
Section 9.1.
"Change of Control Offer Period" shall have the meaning specified in
Section 9.1.
"Change of Control Purchase Date" shall have the meaning specified
in Section 9.1.
"Change of Control Purchase Price" shall have the meaning specified
in Section 9.1.
"Closing" has the meaning set forth in Section 4.03 of the
Partnership Agreement.
3
<PAGE>
"Collateral" means the Subordinated Notes and Cash and Cash
Equivalents pledged by the Issuers pursuant to the Collateral Agreements to
secure their obligations hereunder.
"Collateral Agreements" means the Pledge Agreement and the Cash
Collateral and Disbursement Agreement.
"Commission" means the SEC.
"Company" means Waterford Gaming L.L.C.
"Company Excess Cash" means at any date of determination all cash
and Cash Equivalents held by the Company in excess of $10 million, provided,
however, if the principal amount of Securities then outstanding, together with
accrued and unpaid interest and Liquidated Damages, if any, thereon, is less
than $10 million, then the Company shall treat all cash and Cash Equivalents
held by the Company as Company Excess Cash.
"Covenant Defeasance" shall have the meaning specified in Section
7.3.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section
2.12.
"Definitive Securities" means Securities that are in the form of the
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.3
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disbursement Agent" means Fleet National Bank, the disbursement
agent under the Cash Collateral and Disbursement Agreement.
4
<PAGE>
"Disqualified Capital Stock" means with respect to any person,
Equity Interests of such person that, by its terms or by the terms of any
security into which it is then convertible, exercisable or exchangeable, is, or
upon the happening of an event or the passage of time would be, required to be
redeemed or repurchased (including at the option of the holder thereof) by such
person or any of its Subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the Securities.
"DTC" shall have the meaning specified in Section 2.3.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership interests in, such Person.
"Estimation Period" means the period for which a partner who is an
individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year partnership in connection with
determining his estimated federal income tax liability for such period.
"Event of Default" shall have the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 12 3/4% Senior Notes due 2003 to be
issued pursuant to this Indenture in connection with the offer to exchange
Securities for the Initial Securities that may be made by the Issuers pursuant
to the Registration Rights Agreement.
"Finance" means Waterford Gaming Finance Corp.
"First Tranche Completion Guarantee Subordinated Notes" means the
first $15 million aggregate principal amount of Floating Rate Subordinated Notes
issued by the Authority to Sun International in connection with Sun
International's completion guarantee under the Management Agreement.
"GAAP" means United States 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
5
<PAGE>
entity as approved by a significant segment of the accounting profession, as in
effect on the Issue Date.
"Gaming Facility Development and Construction Agreement" means the
Amended and Restated Gaming Facility Development and Construction Agreement,
dated as of September 1, 1995, by and between the Mohegan Tribe and the Manager.
"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
Mohegan Tribe or the Authority.
"Global Security" means a Security that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of Security attached hereto as Exhibit A.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Hotel/Resort Facility Development and Construction Agreement" means
the Hotel/Resort Facility Development and Construction Agreement, dated as of
July 28, 1994, by and between the Mohegan Tribe and the Manager.
"Hotel/Resort Management Agreement" means the Hotel/Resort
Management Agreement, dated July 28, 1994, by and between the Mohegan Tribe and
the Manager.
"Incur" or "Incurrence" shall have the meaning specified in Section
4.10.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v)
relating to any
6
<PAGE>
Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Swap and Hedging
Obligations; (c) all liabilities and obligations of others of the kind described
in the preceding clause (a) or (b) that such person has guaranteed or that is
otherwise its legal liability or which are secured by any assets or property of
such person and all obligations to purchase, redeem or acquire any Equity
Interests; (d) any and all deferrals, renewals, extensions, refinancing and
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b) or (c), or this clause (d), whether or not between or among the
same parties; and (e) all Disqualified Capital Stock of such Person.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Initial Purchasers" means Bear, Stearns & Co. Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
"Initial Securities" means the 12 3/4% Senior Notes due 2003, as
supplemented from time to time in accordance with the terms hereof, issued under
this Indenture on the Issue Date.
"Interest Payment Date" means the stated due date of an installment
of interest on the Securities.
"Interest Swap and Hedging Obligation" means any obligation of any
person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such person (whether for cash, property, services, securities or
otherwise) of Capital Stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other person or any agreement to
7
<PAGE>
make any such acquisition; (b) the making by such person of any deposit with, or
advance, loan or other extension of credit to, such other person (including the
purchase of property from another person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
person) or any commitment to make any such advance, loan or extension (but
excluding accounts receivable or deposits arising in the ordinary course of
business); (c) the entering into by such person of any guarantee of, or other
credit support or contingent obligation with respect to, Indebtedness or other
liability of such other person; and (d) the making of any capital contribution
by such person to such other person.
"Issue Date" means the date of first issuance of the Securities
under the Indenture.
"Issuers" means each of the parties named as such in this Indenture.
"Legal Defeasance" shall have the meaning specified in Section 7.2.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"Liquidated Damages" shall mean liquidated damages payable by the
Issuers to the Holders in connection with a Registration Default.
"Management Agreement" means Amended and Restated Gaming Facility
Management Agreement, dated August 30, 1995, between the Mohegan Tribe and the
Manager.
"Manager" means Trading Cove Associates, a Connecticut general
partnership.
"Maturity Date" means, when used with respect to any Security, the
date specified on such Security as the fixed date on which the final installment
of principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to the provisions of this Indenture regarding
acceleration of Indebtedness or any Change of Control Offer).
"Mohegan Sun" means the Mohegan Sun Casino.
8
<PAGE>
"Mohegan Tribe" means the Mohegan Tribe of Indians of Connecticut.
"Note Purchase Agreement" means the Note Purchase Agreement, dated
as of September 29, 1995, between the Authority and Sun International.
"Notice of Default" shall have the meaning specified in Section
5.1(d).
"Obligation" means any principal, premium or interest payment, or
monetary penalty, or damages, or purchase price due by any of the Issuers under
the terms of the Securities or the Indenture, including any Liquidated Damages
due pursuant to the terms of the Registration Rights Agreement.
"Offering Memorandum" means the offering memorandum, dated November
5, 1996, relating to the Securities.
"Officer" means, with respect to the Issuers, the Chief Executive
Officer, the President, any Executive or Senior Vice President, the Chief
Financial Officer, the Treasurer, the Controller or the Secretary.
"Officers' Certificate" means, with respect to the Issuers, a
certificate signed by two Officers or by an Officer and an Assistant Secretary
of both of the Issuers, and otherwise complying with the requirements of
Sections 11.4 and 11.5, and delivered to the Trustee or an Agent, as applicable.
"Omnibus Agreement" means the Omnibus Financing Agreement, dated as
of September 21, 1995, between the Manager and Sun International, as amended
through the Issue Date.
"Operative Documents" means, collectively, the Partnership
Agreement, the Omnibus Agreement, the Note Purchase Agreement, the Subordinated
Notes, the Management Agreement, the Hotel/Resort Management Agreement, the
Hotel/Resort Facility Development and Construction Agreement and the Gaming
Facility Development and Construction Agreement.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee (which may include counsel to the
Trustee or the Issuers including an employee of either of the Issuers) or an
Agent, as applicable, complying with the requirements of Sections 11.4 and 11.5,
and delivered to the Trustee or an Agent, as applicable.
9
<PAGE>
"Partnership Agreement" means the Amended and Restated Partnership
Agreement of the Manager, dated as of September 21, 1994, by and among Sun Cove
Ltd., RJH Development Corp., Slavik Suites, Inc., and LMW Investments, Inc, as
amended through the Issue Date.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Permitted Assignee" means (i) any immediate family member of Len
and Mark Wolman, the estate of Len or Mark Wolman and any heirs upon
distribution of such estate, and any partnership, trust or similar entity
controlled by Len or Mark Wolman exclusively for their benefit and/or the
benefit of immediate family members and (ii) any charitable organization upon
whose board of directors or similar governing entity either Len or Mark Wolman
serves.
"Permitted Investment" means Investments in Cash Equivalents, First
Tranche Completion Guarantee Subordinated Notes not in excess of $7.5 million
original principal amount (plus accrued and unpaid interest and amounts due from
the Manager under the Omnibus Agreement), Original Subordinated Notes not in
excess of $19.2 million original principal amount (plus accrued and unpaid
interest and amounts due from the Manager under the Omnibus Agreement), and the
purchase of RJH Development Corp.'s interest in the Manager for $10.6 million.
"Permitted Lien" means any of the following:
(a) Liens imposed by governmental authorities for taxes,
assessments or other charges not yet subject to penalty or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of the Manager or the Issuers,
as the case may be, in accordance with GAAP;
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen, landlords, repairmen or other like Liens arising by operation of
law in the ordinary course of business provided that (i) the underlying
obligations are not overdue for a period of more than 30 days, or (ii) such
Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Manager or the Issuers, as the case may be, in accordance with GAAP;
(c) Liens securing the performance of bids, trade contracts
(other than borrowed money), leases, statutory obligations, surety and appeal
bonds, per-
10
<PAGE>
formance bonds and other obligations of a like nature incurred in the ordinary
course of business;
(d) easements, rights-of-way, zoning, similar restrictions and
other similar encumbrances or title defects which, singly or in the aggregate,
do not in any case materially detract from the value of the property, subject
thereto (as such property is used by the Manager or the Issuers, as the case may
be,) or interfere with the ordinary conduct of the business of the Manager or
the Issuers, as the case may be;
(e) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto;
(f) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security legislation;
(g) leases or subleases granted to other persons in the
ordinary course of business not materially interfering with the conduct of the
business of the Manager or the Issuers, as the case may be, or materially
detracting from the value of the relative assets of the Manager or the Issuers,
as the case may be, and
(h) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Manager or the Issuers, as the case may be, in the ordinary course of business.
"Permitted Quarterly Tax Distributions" means quarterly
distributions of Tax Amounts determined on the basis of the estimated taxable
income of the Company, for the related Estimation Period, as determined by the
Tax Amounts CPA in a statement filed with the Trustee; provided, however, that
(A) prior to any distributions of Tax Amounts the Company shall deliver an
Officers' Certificate stating to the effect that the Company qualifies as a
partnership or substantially similar pass-through entity for Federal income tax
purposes and (B) at the time of such distributions, the most recent audited
financial statements of the Company reflect that the Company was treated as a
partnership or substantially similar pass-through entity for Federal income tax
purposes for the period covered by such financial statements.
"Person" or "person" means any corporation, individual, partnership,
trust, unincorporated association, or a government or any agency or political
subdivision thereof.
11
<PAGE>
"Pledge Agreement" means the note pledge agreement, dated the date
hereof, by and between the Company and the Trustee.
"Principal Corporate Trust Office of the Trustee" means the office
of the Trustee as set forth in Section 11.2 and such other offices as the
Trustee may designate from time to time.
"Property" or "property" means any right or interest in or to
property or assets of any kind whatsoever, whether real, personal or mixed and
whether tangible or intangible.
"Purchase Agreement" means the Purchase Agreement, dated November 5,
1996, by and among the Issuers and the Initial Purchasers.
"Qualified Capital Stock" means any Equity Interests of any Person
that is not Disqualified Capital Stock.
"Quarterly Payment Period" means the period commencing on the tenth
day and ending on and including the twentieth day of each month in which Federal
individual estimated tax payments are due (provided that payments in respect of
estimated state income taxes due in January may instead, at the option of the
Company, be paid during the last five days of the immediately preceding
December).
"Record Date" means a Record Date specified in the Securities
whether or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraphs 5, 6 and 7 in the form of Security attached hereto
as Exhibit A.
"Redemption Price," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Paragraphs
5, 6 or 7 in the form of Security attached hereto as Exhibit A, which shall
include, without duplication, in each case, accrued and unpaid interest and
Liquidated Damages to the Redemption Date (subject to the provisions of Section
3.5).
"Registrar" shall have the meaning specified in Section 2.3.
12
<PAGE>
"Registration Default" has the meaning set forth in Section 4 of the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date, by and among the Issuers on the one hand,
and the Initial Purchasers, on the other hand, providing for certain
registration rights for the Securities.
"Remaining Excess Cash Purchase Offers" has the meaning set forth in
Section 5.21 of the Note Purchase Agreement.
"Restricted Payment" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such person or any parent of such person (other than a
dividend by the Company on the Issue Date not to exceed $10 million), (b) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such person or any Affiliate or
parent of such person, (c) any purchase, redemption, or other acquisition or
retirement for value of, any payment in respect of any amendment of the terms of
or any defeasance of, any Indebtedness, directly or indirectly, by such person
or a parent prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case may be, of such
Indebtedness, other than mandatory or optional redemption of the Securities or
pursuant to a Change of Control Offer or defeasance thereof as provided herein
and (d) any Investment, other than a Permitted Investment, by such person;
provided, however, that the term "Restricted Payment" does not include any
dividend, distribution or other payment on or with respect to Equity Interests
of an issuer to the extent payable solely in shares of Qualified Capital Stock
of such issuer.
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities and, when
and if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Registrar, as custodian with
respect to the Securities in global form, or any successor entity thereto.
"Securityholder" or "Holder" means the Person in whose name a
Security is registered on the Registrar's books.
13
<PAGE>
"Special Record Date" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security, means
November 15, 2003.
"Subordinated Notes" means the Subordinated Notes due 2003 issued by
the Authority pursuant to the Note Purchase Agreement and the completion
guarantees under the Management Agreement.
"Subsidiary," with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person, (ii) any other person (other than a corporation or
partnership) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such person or a Subsidiary of such person is,
at the time, a general partner and in which such person, directly or indirectly,
at the date of determination thereof has at least a majority ownership interest.
"Sun International" means Sun International Hotels Limited, a
corporation incorporated under the laws of the Commonwealth of The Bahamas,
together with its Affiliates.
"Tax Amounts" with respect to any taxable period shall not exceed an
amount equal to (A) the product of (x) the taxable income of the Company for
such period as determined by the Tax Amounts CPA and (y) the Tax Percentage
reduced by (B) to the extent not previously taken into account, any income tax
benefit attributable to the Company which could be realized (without regard to
the actual realization) by its members in the current or any prior taxable year,
or portion thereof, commencing on or after the Issue Date (including any tax
losses or tax credits), computed at the applicable Tax Percentage for the year
that such benefit is taken into account for purposes of this computation.
"Tax Amounts CPA" means a nationally recognized certified public
accounting firm.
14
<PAGE>
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of Federal and state income tax, imposed on an
individual taxpayer, as certified by the Tax Amounts CPA in a certificate filed
with the Trustee. The rate of "state income tax" to be taken into account for
purposes of determining the Tax Percentage for a particular taxable year shall
be deemed to be the higher of (A) the highest Connecticut income tax rate
imposed on individuals for such year or (B) the sum of (x) the highest Michigan
income tax rate imposed on individuals for such year and (y) the Michigan
intangibles tax rate.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.
Code ss.ss. 77aaa-77bbbb), as in effect on the date of the execution of this
Indenture; except as otherwise provided in Section 8.3.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.6 hereof.
"True-up Amount" means, in respect of a particular taxable year, an
amount determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year and (ii) the aggregate amount permitted to be distributed
in respect of such year as determined by reference to the Company's Internal
Revenue Service Form 1065 filed for such year. For purposes of this Agreement,
the amount equal to the excess, if any, of the amount described in clause (i)
above over the amount described in clause (ii) above shall be referred to as the
"True-up Amount due to the Company" and the excess, if any, of the amount
described in clause (ii) over the amount described in clause (i) shall be
referred to as the "True-up Amount due to the members."
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture, and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
administration division (or any successor group) of the Trustee or any other
officer of the Trustee customarily performing functions similar to those
performed by the Persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer of
the Trustee to whom such trust matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"U.S. Government Obligations" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment
15
<PAGE>
of which obligation or guarantee the full faith and credit of the United States
of America is pledged.
SECTION 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture Trustee" or "institutional Trustee" means the Trustee.
"obligor" on the indenture securities means the Issuers and any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
16
<PAGE>
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage or the terms hereof.
The Issuers shall approve the form of the Securities and any notation, legend or
endorsement on them. Any such notations, legends or endorsements not contained
in the form of Security attached as Exhibit A hereto shall be delivered in
writing to the Trustee. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the form of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Issuers and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Security for the Issuers by manual or facsimile signature.
The Issuers' seals shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the
17
<PAGE>
Security, the Security shall be valid nevertheless and the Issuers shall
nevertheless be bound by the terms of the Securities and this Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate or cause to be authenticated the
Initial Securities for original issue in the aggregate principal amount of up to
$65,000,000 and shall authenticate Exchange Securities for original issue in the
aggregate principal amount of up to $65,000,000, in each case upon a written
order of the Issuers in the form of an Officers' Certificate provided that such
Exchange Securities shall be issuable only upon the valid surrender for
cancellation of Initial Securities of a like aggregate principal amount. The
Officers' Certificate shall specify the amount of Securities to be authenticated
and the date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
$65,000,000, except as provided in Section 2.7. Upon the written order of the
Issuers in the form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of either of the Issuers.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Issuers, any Affiliate of the Issuers,
or any Subsidiaries of the Issuers.
Securities shall be issuable only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Securities may
be presented for registration of transfer or exchange ("Registrar") and an
office or agency of the Issuers where Securities may be presented for payment
("Paying Agent") and where notices and demands to or upon the Issuers in respect
of the Securities may be served. The Issuers may act as Registrar or Paying
Agent, except that for the purposes of Articles III, VII and IX and as otherwise
specified in this Indenture, none of the Issuers or any Affiliate of either the
Company or Finance shall act as Paying Agent. The
18
<PAGE>
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Issuers may have one or more co-Registrars and one or more
additional Paying Agents. The term "Registrar" includes any co-registrar and the
term "Paying Agent" includes any additional Paying Agent. The Issuers hereby
initially appoint the Trustee as Registrar and Paying Agent, and by its
signature hereto, the Trustee hereby agrees so to act. The Issuers may at any
time change any Paying Agent or Registrar without notice to any Holder.
The Issuers shall enter into an appropriate written agency agreement
with any Agent (including the Paying Agent) not a party to this Indenture, which
agreement shall implement the provisions of this Indenture that relate to such
Agent, and shall furnish a copy of each such agreement to the Trustee. The
Issuers shall promptly notify the Trustee in writing of the name and address of
any such Agent. If the Issuers fail to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
The Issuers initially appoint The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Securities.
The Issuers initially appoint the Registrar to act as Securities
Custodian with respect to the Global Securities.
Upon the occurrence of an Event of Default described in Section
5.1(e) or (f), the Trustee shall, or upon the occurrence of any other Event of
Default by notice to the Issuers, the Registrar and the Paying Agent, the
Trustee may, assume the duties and obligations of the Registrar and the Paying
Agent hereunder.
The Trustee is authorized to enter into a letter of representation
with DTC in the form provided to the Trustee by the Issuers and to act in
accordance with such letter.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
The Issuers shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium or Liquidated Damages, if any, or interest on, the
Securities (whether such assets have been distributed to it by the Issuers or
any other obligor on the Securities), and shall notify the Trustee in writing of
any Default in making any such payment. If either of the Issuers acts as Paying
Agent, it shall segregate such assets and hold them as a separate trust fund for
the benefit of the Holders or the Trustee. The Issuers at any time may
19
<PAGE>
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default or any Event of Default, upon written request
to a Paying Agent, require such Paying Agent to distribute all assets held by it
to the Trustee and to account for any assets distributed. Upon distribution to
the Trustee of all assets that shall have been delivered by the Issuers to the
Paying Agent, the Paying Agent (if other than either of the Issuers) shall have
no further liability for such assets.
SECTION 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not
the Registrar, the Issuers shall furnish to the Trustee on or before the third
Business Day preceding each Interest Payment Date and at such other times as the
Trustee or any such Paying Agent may request in writing a list in such form and
as of such date as the Trustee reasonably may require of the names and addresses
of Holders and the Issuers shall otherwise comply with TIA ss. 312(a).
SECTION 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for registration of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Issuers and
the Registrar duly executed by the Holder thereof or his attorney duly
authorized in writing; and
20
<PAGE>
(ii) in the case of Definitive Securities that are
Transfer Restricted Securities, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are
being delivered to the Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Security is
being transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the form
set forth on the reverse of the Security); or
(C) if such Transfer Restricted Security is
being transferred (i) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act, or (ii)
pursuant to an effective registration statement under the Securities Act,
or (iii) in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security) and if
the Issuers or the Registrar so request, a customary opinion of counsel
reasonably acceptable to the Issuers and to the Registrar to the effect
that such transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the
21
<PAGE>
reverse of the Security, that such Definitive Security is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under the
Securities Act; and
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions of the Holder directing
the Registrar to make, or to direct the Securities Custodian to make, an
endorsement on the Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Security,
then the Registrar shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Issuers shall issue and the Trustee shall authenticate a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.
(d) Transfer of a Beneficial Interest in a Global Security for
a Definitive Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Registrar of written instructions
or such other form of instructions as is customary for the Depositary from
the Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Security and upon receipt by the Registrar of a
written order or such other form of instructions as is customary for the
Depositary or the Person designated by the Depositary as having such a
beneficial interest in a Transfer Restricted Security only, the following
additional information and documents (all of which may be submitted by
facsimile):
22
<PAGE>
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as being the
beneficial owner, a certification from such person to that effect (in
substantially the form set forth on the reverse of the Security); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under the
Securities Act a certification to that effect from the transferor (in
substantially the form set forth on the reverse of the Security); or
(C) if such beneficial interest is being
transferred (i) pursuant to an exemption from registration in accordance
with Rule 144 or Regulation S under the Securities Act, or (ii) pursuant
to an effective registration statement under the Securities Act, or (iii)
in reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferee or
transferor (in substantially the form set forth on the reverse of the
Security) and if the Issuers or the Registrar so requests, a customary
opinion of counsel from the transferee or transferor reasonably acceptable
to the Issuers and to the Registrar to the effect that such transfer is in
compliance with the Securities Act;
then the Registrar or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced and, following such reduction, the
Issuers will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate, the Trustee or the Trustee's authenticating agent will
authenticate and deliver to the transferee, a Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6(d)
shall be registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Registrar. The Registrar
shall deliver such
23
<PAGE>
Definitive Securities to the persons in whose names such Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.6), a Global
Security may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Securities in Absence of
Depositary. If at any time:
(i) the Depositary for the Securities notifies the
Issuers that the Depositary is unwilling, unable or ineligible to continue
as Depositary for the Global Securities and a successor Depositary for the
Global Securities is not appointed by the Issuers within 90 days after
delivery of such notice; or
(ii) the Issuers, in their sole discretion, notify the
Trustee and the Registrar in writing that they elect to cause the issuance
of Definitive Securities under this Indenture,
then the Issuers will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will, or its authenticating agent will, authenticate and deliver Definitive
Securities, in an aggregate principal amount equal to the principal amount of
the Global Securities, in exchange for such Global Securities.
(g) Cancellation and/or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or cancelled, such Global
Security shall be returned to or retained and cancelled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a Global Security
is exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced and an endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
24
<PAGE>
(h) Legends.
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE ISSUERS SO REQUEST), (2) TO THE ISSUERS
OR (3)
25
<PAGE>
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Security)
pursuant to Rule 144 under the Securities Act or an effective registration
statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such transfer Restricted Security for a Definitive Security that
does not bear the legend set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security, in the case of a sale
or transfer pursuant to Rule 144 under the Securities Act after delivery
of a customary opinion of counsel; and
(B) any such Transfer Restricted Security represented by a Global
Security shall not be subject to the provisions set forth in (i) above
(such sales or transfers being subject only to the provisions of Section
2.6(c) hereof); provided, however, that with respect to any request for an
exchange of a Transfer Restricted Security that is represented by a Global
Security for a Definitive Security that does not bear a legend, which
request is made in reliance upon Rule 144 under the Securities Act, the
Holder thereof shall certify in writing (to be accompanied by a customary
opinion of counsel) to the Registrar that such request is being made
pursuant to Rule 144 under the Securities Act (such certification to be
substantially in the form set forth on the reverse of the Security).
(i) Obligations with respect to Transfers and Exchanges of
Definitive Securities.
(i) To permit registrations of transfers and exchanges,
the Issuers shall execute and the Trustee or any authenticating agent of
the Trustee shall authenticate Definitive Securities and Global Securities
at the Registrar's request.
26
<PAGE>
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any transfer tax, assessment, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments, or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.2 (fourth paragraph), 2.10,
3.7, 8.5, or 9.1 (final paragraph)).
(iii) The Registrar shall not be required to register
the transfer of or exchange (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Security being redeemed in part, or
(b) any Security for a period beginning 15 Business Days before the
mailing of a notice of an offer to repurchase pursuant to Article IX
hereof or a notice of redemption of Securities pursuant to Article III
hereof and ending at the close of business on the day of such mailing.
(iv) Prior to due presentment for registration or
transfer of any Security, the Trustee, any Agent and the Issuers may deem
and treat the Person in whose name the Security is registered as the
absolute owner of such Security, and none of the Trustee, Agent or the
Issuers shall be affected by notice to the contrary.
SECTION 2.7. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims and submits an affidavit or other evidence,
satisfactory to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Issuers shall issue and the Trustee or any
authenticating agent of the Trustee shall authenticate a replacement Security if
the Trustee's requirements are met. If required by the Trustee or the Issuers,
such Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of the Issuers and the Trustee, to protect the Issuers, the Trustee or
any Agent from any loss which any of them may suffer if a Security is replaced.
The Issuers may require the payment of a sum sufficient to cover any transfer
tax, assessment or similar governmental charge that may be imposed in relation
to the issuance of any new Security and charge such Holder for its reasonable,
out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Issuers.
27
<PAGE>
SECTION 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Issuers or
an Affiliate of either of the Issuers holds the Security, except as provided in
Section 2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Issuers or an Affiliate of either of the Issuers) holds Cash or U.S.
Government Obligations sufficient to pay all of the principal and interest and
premium, if any, due on the Securities payable on that date and payment of the
Securities called for redemption is not otherwise prohibited, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. Treasury Securities.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Issuers or Affiliates of either of the Issuers
shall be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Securities that a Trust Officer of the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
Until permanent Securities are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of permanent Securities but may
have variations that the Issuers reasonably and in good faith consider
appropriate for temporary Securities. Without unreasonable delay, the Issuers
shall prepare and the Trustee shall authenticate permanent Securities in
exchange for temporary Securities. Until so exchanged, the temporary
28
<PAGE>
Securities shall in all respects be entitled to the same benefits under this
Indenture as permanent Securities authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
The Issuers at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to it or them (as applicable) for registration of
transfer, exchange or payment. The Trustee or, at the direction of the Trustee,
the Registrar or the Paying Agent (other than the Issuers or an Affiliate of
either of the Issuers), and no one else shall cancel and, at the written
direction of the Issuers, shall dispose of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.7, the Issuers
may not issue new Securities to replace Securities that have been paid or
delivered to the Trustee for cancellation. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in this
Section 2.11, except as expressly permitted in the form of Securities and as
permitted by this Indenture.
SECTION 2.12. Defaulted Interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Issuers, at
their election in each case, as provided in clause (1) or (2) below:
(1) The Issuers may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Issuers shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Issuers shall deposit with the Trustee an amount of Cash equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such Cash when
deposited to be held in trust for the benefit of the persons entitled to
such Defaulted Interest as provided in this clause (1). Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not
29
<PAGE>
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Issuers of such
Special Record Date and, in the name and at the expense of the Issuers,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Security
register not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the persons in whose names the Securities (or their
respective predecessor Securities) are registered on such Special Record
Date and shall no longer be payable pursuant to the following clause (2).
(2) The Issuers may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Issuers to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption.
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with such provision and this Article III.
The Issuers shall be required to make a mandatory redemption on each May and
November 15, commencing November 15, 1997, of Securities in the largest
principal amount that is an integral multiple of $1,000, that may be redeemed
using 100% of Company Excess Cash as of the preceding September 30 and March 31,
respectively, at the Redemption Prices specified in the form of Security
attached as Exhibit A set forth therein in Paragraph 5 thereof, including
accrued and unpaid interest and Liquidated Damages, if any, to the Redemption
Date (subject to the right of Holders of record on a Record Date to receive
30
<PAGE>
interest due on an Interest Payment Date that is on or prior to such Redemption
Date, and subject to the provisions set forth in Section 3.5).
In the event that either the Company or Sun International shall
deliver an election to either buy or sell the other party's interest in the
Manager pursuant to a Buy-Out Notice or be deemed to have delivered an election
to sell such interest and such election to buy or sell is consummated, the
Issuers shall be required to make a mandatory redemption of all the Securities
then outstanding, at the Redemption Prices specified in the form of Security
attached as Exhibit A set forth in paragraph 5 thereof. Such redemption shall be
made on a date no more than 35 days after the date of the Closing.
Except as provided in the two preceding paragraphs of this Section
3.1, the Issuers will not have the right to redeem any Securities prior to
November 15, 1999. The Securities will be redeemable for cash at the option of
the Issuers, in whole or in part, at any time on or after November 15, 1999,
with Company Excess Cash as of the date notice is given at the Redemption Prices
specified in the form of Security attached as Exhibit A set forth in Paragraph 6
thereof (subject to the right of Holders of record on a Record Date to receive
interest and Liquidated Damages, if any, due on an Interest Payment Date that is
on or prior to such Redemption Date) together with accrued and unpaid interest
and Liquidated Damages, if any, thereon to the Redemption Date and subject to
the provisions set forth in Section 3.5.
Notwithstanding any other provisions of this Indenture, if any
Gaming Regulatory Authority requires that a Holder or beneficial owner of the
Securities must be licensed, qualified or found suitable under any applicable
gaming laws in order to maintain any gaming license or franchise related to the
Mohegan Sun 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 Company shall have the right, at its option:
(1) to require such Holder or beneficial owners to dispose of
such Holder's or beneficial owner's Securities 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 Securities of such Holder or
beneficial owner at a redemption price equal to (a) the lesser of the
principal amount thereof or the price at which such Holder or beneficial
owner acquired
31
<PAGE>
the Securities, together with, in either case, accrued and unpaid 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 or (b) such
other amount as may be determined by such Gaming Regulatory Authority.
SECTION 3.2. Notices to Trustee.
If the Issuers are required, or elect, to redeem Securities pursuant
to Paragraphs 5, 6 or 7 of the Securities, they shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed and whether they want the Trustee to give notice of redemption to the
Holders. Such notice to the Trustee shall describe in reasonable detail the
circumstances requiring such redemption, and the Trustee shall not otherwise be
deemed to have knowledge of such circumstances.
If the Issuers elect to reduce the principal amount of Securities to
be redeemed pursuant to Paragraphs 5, 6 or 7 of the Securities by crediting
against any such redemption Securities they have not previously delivered to the
Trustee for cancellation, they shall so notify the Trustee of the amount of the
reduction and deliver such Securities with such notice.
The Issuers shall give each notice to the Trustee provided for in
this Section 3.2 at least 30 days before the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee). Any such notice may be cancelled
at any time prior to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.3. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
Paragraphs 5, 6 or 7 thereof, the Trustee shall select the Securities or
portions thereof for redemption on a pro rata basis, by lot or by such other
method as the Trustee shall determine to be fair and appropriate, provided that
mandatory and optional redemptions from Company Excess Cash will be done as
nearly as possible on a pro rata basis.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Issuers
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations
32
<PAGE>
of $1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.4. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Issuers shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed to
such Holder's last address as then shown on the registry books of the Registrar.
At the Issuers' request, the Trustee shall give the notice of redemption in the
Issuers' names and at the Issuers' expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued and
unpaid interest and Liquidated Damage to be paid upon such redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent at the address specified in such notice to collect the
Redemption Price;
(5) that, unless the Issuers default in their obligation to
deposit Cash or U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide Cash in an amount to fund the Redemption Price
with the Paying Agent in accordance with Section 3.6 hereof or such
redemption payment is otherwise prohibited, interest on Securities called
for redemption ceases to accrue on and after the Redemption Date and the
only remaining right of the Holders of such Securities is to receive
payment of the Redemption Price, including accrued and unpaid interest to
the Redemption Date, upon surrender to the Paying Agent of the Securities
called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion of
the principal amount equal to $1,000 or any integral multiple thereof, of
such Secu-
33
<PAGE>
rity to be redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.4
and pursuant to the mandatory or optional redemption provisions of
Paragraphs 5, 6 or 7, as applicable, of the Securities.
SECTION 3.5. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or, if the Trustee is no longer
the paying agent, to the Paying Agent, such Securities called for redemption
shall be paid at the Redemption Price, including interest and Liquidated
Damages, if any, accrued and unpaid to the Redemption Date; provided that if the
Redemption Date is on or after a regular Record Date and on or prior to the
Interest Payment Date to which such Record Date relates, the accrued interest
and Liquidated Damages, if any, shall be payable to the Holder of the redeemed
Securities registered on the relevant Record Date and no additional interest
will be payable to Holders of the redeemed Securities on the Redemption Date;
and provided, further, that if a Redemption Date is a non-Business Day, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
On or prior to the Redemption Date, the Issuers shall deposit with
the Paying Agent (other than the Issuers or an Affiliate of either of the
Issuers) Cash or U.S. Government Obligations sufficient to pay the Redemption
Price of, and accrued and unpaid interest and Liquidated Damages, if any, on,
all Securities to be redeemed on such Redemption Date (other than Securities or
portions thereof called for redemption
34
<PAGE>
on that date that have been delivered by the Issuers to the Trustee for
cancellation). The Paying Agent shall promptly return to the Issuers any Cash or
U.S. Government Obligations so deposited which is not required for that purpose
upon the written request of the Issuers.
If the Issuers comply with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not otherwise prohibited, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Issuers to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.1 hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Issuers shall execute, and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
The Issuers shall pay the principal of and interest and premium and
Liquidated Damages, if applicable, on the Securities on the dates and in the
manner provided herein and in the Securities. An installment of principal of or
interest and premium, if applicable, on the Securities shall be considered paid
on the date it is due if the Trustee or Paying Agent (other than the Issuers or
an Affiliate of either of the Issuers) holds for the benefit of the Holders, on
or before 10:00 a.m. New York City time on that date, Cash deposited and
designated for and sufficient to pay the installment.
35
<PAGE>
The Issuers shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuers in respect of the
Securities and this Indenture may be served. The Issuers shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Issuers shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 11.2.
The Issuers may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Issuers of their obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Issuers shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. The
Issuers hereby initially designate the Trustee's agency at Fleet Bank, c/o First
Chicago Trust Company, 14 Wall Street, Window 2, New York, New York 10005,
Attention: Corporate Trust Operations as such office.
SECTION 4.3. Limitation on Restricted Payments.
The Issuers shall not, directly or indirectly, make any Restricted
Payment.
The preceding paragraph, however, will not prohibit (i) the payment
of Permitted Quarterly Tax Distributions to the members of the Company as
described below and (ii) Investments in connection with the development and/or
improvement of the Mohegan Sun or a hotel adjacent to the Mohegan Sun or the
purchase of the 5% interest of the minority partner in the Manager, provided,
however, that, after giving pro forma effect to the proposed Investment, (i) no
Default or Event of Default shall have occurred or be continuing and (ii) the
aggregate amount of all such Investments made on or after the Issue Date that
are outstanding (after giving effect to any such Investments
36
<PAGE>
that are returned to the Company without restriction, in cash, on or prior to
the date of any such calculation) at any time does not exceed $5.0 million.
Notwithstanding the foregoing provisions of this covenant, the
Issuers will not, directly or indirectly, make any Investment in the Manager
other than a capital contribution or loan made (i) substantially concurrently
with proportionate capital contributions or loans made in cash by all other
partners of the Manager and (ii) at a time when the Manager is in compliance
(without regard to any cure periods) with the terms of Section 4.13.
For so long as the Company is a partnership or substantially similar
pass-through entity for Federal income tax purposes, the Company may make cash
distributions to its members, during each Quarterly Payment Period, in an
aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, the Permitted Quarterly Tax Distribution payable during the immediately
following Quarterly Payment Period shall be increased by such undistributed
portion.
Within 10 days following the Company's filing of Internal Revenue
Service Form 1065 for the immediately preceding taxable year, the Tax Amounts
CPA shall file with the Trustee a written statement indicating in reasonable
detail the calculation of the True-up Amount. In the case of a True-up Amount
due to the members, the Permitted Quarterly Tax Distribution payable during the
immediately following Quarterly Payment Period shall be increased by such
True-up Amount. In the case of a True-up Amount due to the Company, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be reduced by such True-up Amount and the excess,
if any, of the True-up Amount over such Permitted Quarterly Tax Distribution
shall be applied to reduce the immediately following Permitted Quarterly Tax
Distributions until such True-up Amount is entirely offset.
SECTION 4.4. Corporate and Limited Liability Company Existence.
Except as otherwise provided or permitted in this Indenture, Finance
and the Company shall do or cause to be done all things necessary to preserve
and keep in full force and effect their respective corporate and limited
liability company existence in accordance with the respective organizational
documents of each of them (as the same may be amended from time to time) and the
rights (charter and statutory) and corporate and limited liability company
franchises of the Issuers.
37
<PAGE>
SECTION 4.5. Payment of Taxes and Other Claims.
The Issuers shall pay, prior to delinquency, all material taxes,
assessments, and governmental levies except (i) as contested in good faith by
appropriate proceedings and with respect to which appropriate reserves have been
taken to the extent required by GAAP or (ii) where the failure to effect such
payment is not adverse in any material respect to the Holders.
SECTION 4.6. Compliance Certificate; Notice of Default.
(a) The Issuers shall deliver to the Trustee within 120 days
after the end of their fiscal year an Officers' Certificate complying with
Section 314(a)(4) of the TIA and stating that a review of their activities
during the preceding fiscal year has been made under the supervision of the
signing Officers and stating, as to each such Officer signing such certificate,
to the best of his or her knowledge, based on such review, whether or not the
signer knows of any Event of Default or event which with notice or the passage
of time would become an Event of Default which has occurred and is continuing.
The Officers' Certificate shall also notify the Trustee should the relevant
fiscal year end on any date other than the current fiscal year end date.
(b) The Issuers shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto; provided, however, that if the Manager is notified in writing
of any default under the Management Agreement (regardless of whether or not any
due period has expired) the Company shall promptly notify the Holders directly
of such event. The Trustee shall not be deemed to have knowledge of any Default
or any Event of Default unless one of its Trust Officers receives written notice
thereof from the Issuers or any of the Holders.
SECTION 4.7. Reports.
Whether or not the Issuers are subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, each of the Issuers shall deliver to
the Trustee, to each Holder and to prospective purchasers of Securities
identified to the Issuers by an Initial Purchaser, within 15 days after it is or
would have been (if it were subject to such reporting obligations) required to
file such with the Commission, commencing with the fiscal quarter ending
December 31, 1996, annual and quarterly financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the Commission, if the Issuers were subject to the requirements of
Section 13 or
38
<PAGE>
15(d) of the Exchange Act, including, with respect to annual information only, a
report thereon by the Issuers' certified independent public accountants as such
would be (if it were subject to such reporting obligations) required in such
reports to the Commission, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, to the extent permitted by the Commission (if it were
subject to such reporting obligations), file with the Commission the annual,
quarterly and other reports which it is or would have been required to file with
the Commission.
SECTION 4.8. Limitation on Status as Investment Company.
Neither the Company nor Finance shall conduct its business in a
fashion that would cause it to be required to register as an "investment
company" (as that term is defined in the Investment Company Act of 1940, as
amended).
SECTION 4.9. Limitation on Transactions with Affiliates.
The Company shall not permit the Manager on or after the Issue Date
to enter into or suffer to exist any contract, agreement, arrangement or
transaction with any Affiliate of the Company (an "Affiliate Transaction"), or
any series of related Affiliate Transactions, other than those existing on the
Issue Date (i) unless it is determined that the terms of such Affiliate
Transaction are fair and reasonable to the Manager, and no less favorable to the
Manager, than could have been obtained in an arm's length transaction with a
non-Affiliate of the Company and, (ii) if involving consideration to either
party in excess of $500,000, unless such Affiliate Transaction (or Transactions)
is evidenced by an Officers' Certificate addressed and delivered to the Trustee
certifying that such Affiliate Transaction (or Transactions) has been approved
by a majority of the members of the Board of Directors that are disinterested in
such transaction and (iii) if involving consideration to either party in excess
of $1 million, unless in addition the Company, prior to the consummation
thereof, obtains a written favorable opinion as to the fairness of such
transaction to the Manager from a financial point of view from an independent
investment banking firm or accounting firm, in each case having a national
reputation.
SECTION 4.10. Limitation on Indebtedness and Disqualified Capital
Stock.
The Issuers shall not, directly or indirectly, create, issue,
assume, guaranty, incur, suffer to exist, become directly or indirectly liable
with respect to (including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (individually and collectively, to
"Incur" or, as appropriate, an "Incurrence"), any Indebtedness or any
Disqualified Capital Stock, other than the Securities.
39
<PAGE>
SECTION 4.11. Limitation on Liens.
The Issuers shall not, directly or indirectly, create, incur or
suffer to exist any Lien upon any of their property or assets, whether now owned
or acquired, or upon any income or profits therefrom other than (i) Liens on
assets and property of the Company pursuant to the Collateral Agreements and
(ii) Permitted Liens.
SECTION 4.12. Limitation on Sale of Assets.
The Issuers shall not, in one or a series of related transactions,
convey, sell, transfer, assign or otherwise dispose of, directly or indirectly,
any of their property, business or assets having a value in excess of $1,000 (an
"Asset Sale"), except pursuant to a sale of its partnership interest in the
Manager pursuant to a Buy-Out Notice.
SECTION 4.13. Covenants with Respect to the Manager.
The Company shall not permit the Manager to:
(i) incur any Indebtedness, except for any guarantees
required by the Hotel/Resort Management Agreement with respect to
the construction of the hotel or any Investment permitted by Section
4.3 and any pro rata investment by the other partner;
(ii) directly or indirectly create, incur or suffer to
exist any Liens on any of its properties or assets;
(iii) directly or indirectly, create, assume or suffer
to exist any consensual restriction on the ability of the Manager or
any Subsidiary of the Manager to pay dividends or make other
distributions to or on behalf of, or to pay any obligation to or on
behalf of, or otherwise to transfer assets or property to or on
behalf of, or make or pay loans or advances to or on behalf of, the
Company, except, in each case, for Permitted Liens and restrictions
imposed by the Operative Documents, provided, however, that
customary provisions restricting subletting or assignment of any
lease entered into in the ordinary course of business, consistent
with industry practice shall not in and of themselves be considered
a restriction on the ability of the Manager or the applicable
Subsidiary to transfer such agreement or assets, as the case may be;
40
<PAGE>
(iv) directly or indirectly make any Asset Sale;
(v) enter into any subcontract to delegate the duties of
the Manager under the Management Agreement other than those
described in Article IV of the Partnership Agreement;
(vi) issue any equity security in a manner that dilutes
distributions to the Company;
(vii) make payments for management services, except for
payments made in accordance with the Operative Documents; or
(viii) engage in any business other than as described in
the Partnership Agreement.
In addition, the Company shall not agree, and shall not permit the
Manager to agree, to terminate, amend or waive any provision of an Operative
Document in a manner adverse to the economic interest of the Holders without the
consent of holders of a majority of the principal amount of the Securities
outstanding, provided, however, that this sentence will not apply to the terms
of the Hotel/Resort Management Agreement or the Hotel/Resort Facility
Development and Construction Agreement.
SECTION 4.14. Limitation on Activities of the Issuers.
The Issuers will not conduct any business (including having any
Subsidiary, other than Finance in the case of the Company) whatsoever, other
than to (i) own and act upon the Collateral, in the case of the Company, and the
Securities and (ii) comply with their respective rights and obligations under
the Partnership Agreement, this Indenture, the Registration Rights Agreement,
the Securities, the Management Agreement, the Omnibus Agreement, the Purchase
Agreement and the Collateral Agreements and take action arising under such
agreements or related or incidental thereto.
SECTION 4.15. Acceptance of Remaining Excess Cash Purchase Offers
and Change of Control Offers.
The Company shall accept Remaining Excess Cash Purchase Offers or
any other offer to purchase Subordinated Notes made by the Authority other than
a Change of Control Offer (as defined in the Note Purchase Agreement) as made as
follows. The Company shall accept any such offer, if accepted by Sun
International. If less than all the Subordinated Notes owned by Sun
International are to be tendered, the Company shall tender
41
<PAGE>
that principal amount of the Subordinated Notes, rounded to the nearest multiple
of $1,000, owned by the Company (with the First Tranche Completion Guarantee
Subordinated Notes to be tendered first) that bears the same proportion to the
total principal amount of Subordinated Notes owned by the Company that the
principal amount of Subordinated Notes to be tendered by Sun International and
its Affiliates bears to the total principal amount of Subordinated Notes owned
by Sun International and its Affiliates. In the event that the total amount
available for a Remaining Excess Cash Purchase Offer or other offer is less than
the total amount needed to purchase the Subordinated Notes to be tendered by the
Company and Sun International and its Affiliates pursuant to the above formula,
the Company shall reduce the amount of Subordinated Notes to be tendered pro
rata, assuming Sun International and its Affiliates likewise reduce their amount
of Subordinated Notes to be so tendered, in each case rounded to the nearest
multiple of $1,000, such that the total amount of Subordinated Notes to be
tendered can be purchased in such offer.
Notwithstanding the foregoing, in the event that either (i) Sun
International fails to notify the Company of its intention to tender into such
offer prior to the time at which tenders are due and has not as of such time
tendered into such offer or (ii) the total amount of cash or Cash Equivalents
held by the Company as of the date tenders are due is less than $5 million, the
Company shall tender into such offer all Subordinated Notes then held by it.
SECTION 4.16. Waiver of Stay, Extension or Usury Laws.
Each of the Issuers covenants (to the extent that it may lawfully do
so) that it will not at any time voluntarily insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Issuers from paying all or any portion of the principal of, premium of, or
interest on the Securities as contemplated herein, wherever enacted, now or at
any time hereafter in force; and (to the extent that it may lawfully do so) each
of the Issuers hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee relating to any such law, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
42
<PAGE>
SECTION 4.17. Limitation on Merger, Sale or Consolidation.
Neither of the Issuers shall, directly or indirectly, consolidate
with or merge with or into another person or sell, lease, convey or transfer all
or substantially all of their respective assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons or adopt a plan of liquidation.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.1. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) the failure by the Issuers to pay any installment of
interest or Liquidated Damages, if any, on the Securities as and when the same
becomes due and payable and the continuance of any such failure for 30 days;
(b) the failure by the Issuers to pay all or any part of the
principal, or premium, if any, on the Securities when and as the same becomes
due and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, payment of the Change of Control Purchase Price
or on a mandatory redemption, or otherwise;
(c) the failure by the Issuers to observe or perform the terms
of the covenant set forth in Section 4.17 of this Indenture;
(d) the failure by either of the Issuers to observe or perform
any other covenant or agreement contained in the Securities or this Indenture
(other than a default in the performance of any covenant or agreement which is
specifically dealt with elsewhere in this Section 5.1) and the continuance of
such failure for a period of 30 days after written notice (a "Notice of
Default") is given to the Issuers by the Trustee or to the Issuers and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding, specifying such Default and requiring that it be
remedied;
43
<PAGE>
(e) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating either or both of the Issuers
as bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization of either or both of the Issuers under any bankruptcy or similar
law, and such decree or order shall have continued undischarged and unstayed for
a period of 60 consecutive days; or a decree or order of a court of competent
jurisdiction, judgment appointing a receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency for either or both of the Issuers or any substantial
part of the property of any such Person, or for the winding up or liquidation of
the affairs of any such Person, shall have been entered, and such decree,
judgment, or order shall have remained in force undischarged and unstayed for a
period of 60 days;
(f) either or both of the Issuers shall institute proceedings
to be adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization under any bankruptcy or similar law or similar statute,
or shall consent to the filing of any such petition, or shall consent to the
appointment of a Custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any substantial part of its assets or
property, or shall make a general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
take any corporate action in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing;
(g) final unsatisfied judgments not covered by insurance
aggregating in excess of $2.0 million, at any one time rendered against either
or both of the Issuers and not stayed, bonded or discharged within 60 days;
(h) any default in the performance or breach of the terms of
an Operative Document by the Manager or by the Company with respect to the
Partnership Agreement, extending past any applicable cure period, that would
result in material damages to either the Company or the Manager;
(i) the failure by the Company to observe or perform any
material covenant set forth in a Collateral Agreement, subject to applicable
cure periods; or
(j) an Event of Default under the 13 1/2% Senior Secured Notes
Due 2002 of the Authority resulting in an acceleration of the maturity thereof.
Notwithstanding the 30-day period and notice requirement contained
in Section 5.1(d) above, (i) with respect to a default under Article IX, the
30-day period referred to in Section 5.1(d) shall be deemed to have begun as of
the date notice of a Change of Control Offer is required to be sent to the
Holders in the event that the Issuers have not complied
44
<PAGE>
with the provisions of Section 9.1, and the Trustee or Holders of at least 25%
in principal amount of the outstanding Securities thereafter give the Notice of
Default referred to in Section 5.1(d) in respect of such compliance to the
Issuers and, if applicable, the Trustee; provided, however, that if the breach
or default is a result of a default in the payment when due of the Change of
Control Purchase Price on the Change of Control Payment Date, such default shall
be deemed, for purposes of this Section 5.1, to arise on the Change of Control
Payment Date.
SECTION 5.2. Acceleration of Maturity Date; Rescission and
Annulment.
If an Event of Default occurs and is continuing (other than an Event
of Default specified in clauses (e) and (f) of Section 5.1, relating to either
or both of the Issuers) then in every such case, unless the principal of all of
the Securities shall have already become due and payable, either the Trustee or
the Holders of 25% in aggregate principal amount of the Securities then
outstanding, by notice in writing to the Company (and to the Trustee if given by
Holders) (an "Acceleration Notice"), may declare all principal and accrued
interest and Liquidated Damages, if any, thereon to be due and payable
immediately. If an Event of Default specified in clauses (e) and (f), of Section
5.1, relating to either or both of the Issuers occurs, all principal and accrued
interest and Liquidated Damages, if any, thereon will be immediately due and
payable on all outstanding Securities without any declaration or other act on
the part of Trustee or the Holders.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided in this Article V, the Holders of not
less than a majority in aggregate principal amount of then outstanding
Securities, by written notice to the Issuers and the Trustee, may rescind, on
behalf of all Holders, any such declaration of acceleration if:
(1) the Issuers have paid or deposited with the Trustee Cash
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium and Liquidated
Damages, if any, applicable to) any Securities which would become
due other than by reason of such declaration of acceleration, and
interest thereon at the rate borne by the Securities,
45
<PAGE>
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the
Securities,
(D) all sums paid or advanced by the Trustee
hereunder and the compensation, expenses, disbursements and advances
of the Trustee and its agents and counsel, and any other amounts due
the Trustee under Section 6.7, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 5.12, including, if applicable, any Event of
Default relating to the covenants contained in Section 9.1.
Notwithstanding the previous sentence of this Section 5.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to (i) any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event and (ii) any provision requiring supermajority approval to amend, unless
such default has been waived by such a supermajority. No such waiver shall cure
or waive any subsequent default or impair any right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Issuers covenant that if an Event of Default in payment of
principal, premium, or interest or Liquidated Damages, if any, specified in
clauses (a) or (b) of Section 5.1 occurs and is continuing, the Issuers shall,
upon demand of the Trustee, pay to it, for the benefit of the Holders of such
Securities, the whole amount then due and payable on such Securities for
principal, premium and Liquidated Damages (if any) and interest, and, to the
extent that payment of such interest shall be legally enforceable, interest on
any overdue principal (and premium and Liquidated Damages, if any) and on any
overdue interest, at the rate borne by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee and its agents and counsel and all other amounts due the Trustee
under Section 6.7.
46
<PAGE>
If the Issuers fail to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Issuers or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Issuers or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Issuers or any other obligor upon the
Securities or the property of the Issuers or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Issuers for the payment of overdue principal and premium and Liquidated
Damages, if any, or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise to take any and all actions under the TIA,
including
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest and Liquidated Damages owing
and unpaid in respect of the Securities and to file such other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agent and
counsel and all other amounts due the Trustee under Section 6.7) and of
the Holders allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such
47
<PAGE>
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel, and any other amounts due
the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.5. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel
and all other amounts due the Trustee under Section 6.7, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
SECTION 5.6. Priorities.
Any money collected by the Trustee pursuant to this Article V shall,
subject to Article XII, be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal, premium and Liquidated Damages (if any) or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 6.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium and Liquidated Damages (if any) and interest on, the
Securities in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium and Liquidated
Damages (if any) and interest, respectively; and
48
<PAGE>
THIRD: To the Issuers or such other Person as may be lawfully
entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record date
and payment date for any payment to the Holders under this Section 5.6.
SECTION 5.7. Limitation on Suits.
No Holder of any Security shall have any right to order or direct
the Trustee to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(A) such Holder has previously given written
notice to the Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in aggregate
principal amount of then outstanding Securities shall have made
written request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities to be incurred or reasonably probable to be incurred
in compliance with such request;
(D) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
any such proceeding; and
(E) no direction inconsistent with such written
request has been given to the Trustee during such 60-day period by
the Holders of a majority in aggregate principal amount of the
outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority
49
<PAGE>
or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and interest on, such
Security on the respective dates such payments are due as expressed in such
Security (in the case of redemption, the Redemption Price on the applicable
Redemption Date) and to institute suit for the enforcement of any such payment
after such respective dates, and such rights shall not be impaired without the
consent of such Holder.
SECTION 5.9. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right and remedy given by this Article V or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 5.11. Control by Holders.
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, provided, that
50
<PAGE>
(1) such direction shall not be in conflict with any rule of
law or with this Indenture or involve the Trustee in personal liability,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not taking part in
such direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.12. Waiver of Past Default.
Subject to Section 5.8, prior to the declaration of acceleration of
the maturity of the Securities, the Holder or Holders of not less than a
majority in aggregate principal amount of the Securities then outstanding may,
on behalf of all Holders, waive any past default hereunder and its consequences,
except a default
(A) in the payment of the principal of, premium,
if any, or interest and Liquidated Damages, if any, on, any Security
as specified in clauses (a) and (b) of Section 5.1 and not yet
cured;
(B) in respect of a covenant or provision hereof
which, under Article VIII, cannot be modified or amended without the
consent of the Holder of each outstanding Security affected; or
(C) in respect of any provision hereof which,
under Article VIII, cannot be modified, amended or waived without
the consent of the Holders of 662/3% of the aggregate principal
amount of the Securities at the time outstanding; provided, that any
such waiver may be effected with the consent of the Holders of
662/3% of the aggregate principal amount of the Securities then
outstanding.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
51
<PAGE>
SECTION 5.13. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted to be taken by it
as Trustee, any court may in its discretion require the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.13 shall not apply to any suit instituted
by the Issuers, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the respective
maturity dates expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
SECTION 5.14. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Issuers, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VI
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed,
subject to the terms hereof.
SECTION 6.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same
52
<PAGE>
degree of care and skill in their exercise as a prudent Person would exercise or
use under the circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants
or obligations shall be implied in or read into this Indenture or the
Collateral Agreements which are adverse to the Trustee, and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 6.1,
(2) The Trustee shall not be liable for any error of judgment
made in good faith by it, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts, and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.11.
(d) No provision of this Indenture or any Collateral Agreement
shall require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or to take
or omit to take any action under this Indenture or any Collateral Agreement or
at the request, order or direction of the Holders or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
53
<PAGE>
(e) Every provision of this Indenture or any Collateral
Agreement that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c), (d) and (f) of this Section 6.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Issuers.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 6.2. Rights of Trustee.
Subject to Section 6.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.4 and 11.5. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture or any Collateral
Agreement, nor for any action permitted to be taken or omitted hereunder by any
Agent.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or any Collateral
Agreement at the request, order or direction of any of the Holders, pursuant to
the provisions of this Indenture or any Collateral Agreement, unless such
Holders shall have offered to the Trustee reasonable
54
<PAGE>
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Issuers shall be
sufficient if signed by an Officer of each of the Issuers.
(h) The Trustee shall have no duty to inquire as to the
performance of the Issuers' covenants in Article IV hereof or any Collateral
Agreement or as to the performance by any Agent of its duties hereunder or
thereunder. In addition, the Trustee shall not be deemed to have knowledge of
any Default or Event of Default except any Default or Event of Default of which
the Trustee shall have received written notification or with respect to which a
Trust Officer shall have actual knowledge.
(i) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate.
SECTION 6.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Issuers, any of
their Subsidiaries, or their respective Affiliates with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 6.10 and 6.11.
SECTION 6.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or any Collateral Agreement or the Securities or as to the
validity or perfection of any security interest or lien created thereby and it
shall not be accountable for the Issuers' use of the proceeds from the
Securities, and it shall not be responsible for any statement in the Securities,
other than the Trustee's certificate of authentication (if executed by the
Trustee), or the use or application of any funds received by a Paying Agent
other than the Trustee.
55
<PAGE>
SECTION 6.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Securityholder notice
of the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal (or premium, if any) of, or interest or Liquidated
Damages on any Security (including the payment of the Change of Control Purchase
Price on the Change of Control Purchase Date or the payment of the Redemption
Price on the Redemption Date), the Trustee may withhold the notice if and so
long as a Trust Officer in good faith determines that withholding the notice is
in the interest of the Securityholders.
SECTION 6.6. Reports by Trustee to Holders.
Within 60 days after each January 31, beginning with January 31,
1997, the Trustee shall, if required by law, mail to each Securityholder a brief
report dated as of such January 31 that complies with TIA ss. 313(a). The
Trustee also shall comply with TIA ss.ss. 313(b) and 313(c).
The Issuers shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Issuers and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
SECTION 6.7. Compensation and Indemnity.
The Issuers jointly and severally agree to pay to the Trustee from
time to time reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuers shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances incurred or made by it in
accordance with this Indenture. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
The Issuers jointly and severally agree to indemnify the Trustee (in
its capacity as Trustee) and each of its officers, directors, attorneys-in-fact
and agents for, and hold it and each of them harmless against, any claim,
demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and
56
<PAGE>
counsel), loss or liability incurred by it without negligence or bad faith on
the part of the Trustee, arising out of or in connection with the administration
of this trust and its rights or duties hereunder including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
Trustee shall notify the Issuers promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Issuers shall defend the claim and
the Trustee shall provide reasonable cooperation at the Issuers' expense in the
defense. The Trustee may have separate counsel and the Issuers shall pay the
reasonable fees and expenses of such counsel. The Issuers need not pay for any
settlement made without their written consent, which consent shall not be
unreasonably withheld. The Issuers need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the Issuers' payment obligations in this Section 6.7, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal and premium, if any, of or interest or Liquidated Damages
on particular Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.1(e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Issuers' obligations under this Section 6.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Issuers' obligations pursuant to Article VII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION 6.8. Replacement of Trustee.
The Trustee may resign by so notifying the Issuers in writing, to
become effective upon the appointment of a successor trustee. The Holder or
Holders of a majority in aggregate principal amount of the outstanding
Securities may remove the Trustee by so notifying the Issuers and the Trustee in
writing and may appoint a successor trustee with the Issuers' consent. The
Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 6.10;
(b) the Trustee is adjudged bankrupt or insolvent;
57
<PAGE>
(c) a receiver, Custodian, or other public officer takes
charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in aggregate principal amount of the Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
6.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the lien provided in Section
6.7, the resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holder or Holders of at least 10% in aggregate principal amount of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
6.8, the Issuers' obligations under Section 6.7 shall continue for the benefit
of the retiring Trustee.
SECTION 6.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
58
<PAGE>
SECTION 6.10. Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA ss.
310(a)(1), (2) and (5). The Trustee (together with its corporate parent) shall
have a combined capital and surplus of at least $25,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA ss. 310(b).
SECTION 6.11. Preferential Collection of Claims Against Issuers.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 7.1. Option to Effect Legal Defeasance or Covenant
Defeasance.
The Issuers may, at their option and at any time, elect to have
Section 7.2 or Section 7.3 applied to all outstanding Securities upon compliance
with the conditions set forth below in this Article VII.
SECTION 7.2. Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 7.1 of the option
applicable to this Section 7.2, the Issuers shall be deemed to have been
discharged from their respective obligations with respect to all outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Issuers shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 7.5 and the other
Sections of this Indenture referred to in (a) and (b) below, the Collateral
shall have been released from the Liens in favor of the Securities and the
Issuers shall be deemed to have satisfied all their other obligations under such
Securities and this Indenture (and the Trustee, on demand of and at the expense
of the Issuers, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (a) rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest and Liquidated Damages, if any, on such
Securities when such payments are due from the
59
<PAGE>
trust funds described below; (b) the Issuers' obligations with respect to such
Securities concerning issuing temporary Securities, registration of Securities,
mutilated, destroyed, lost or stolen Securities, and the maintenance of an
office or agency for payment and money for security payments held in trust; (c)
the rights, powers, trust, duties, and immunities of the Trustee, and the
Issuers' obligations in connection therewith; and (d) this Article VII. Upon
Legal Defeasance as provided herein, the Trustee shall promptly execute and
deliver to the Issuers any documents reasonably requested by the Issuers to
evidence or effect the foregoing. Subject to compliance with this Article VII,
the Issuers may exercise their option under this Section 7.2 notwithstanding the
prior exercise of their option under Section 7.3 with respect to the Securities.
SECTION 7.3. Covenant Defeasance.
Upon the Issuers' exercise under Section 7.1 of the option
applicable to this Section 7.3, the Issuers shall be released from their
respective obligations under the covenants contained in Sections 4.3, 4.5, 4.6,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and Article IX
with respect to the outstanding Securities on and after the date the conditions
set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the
Securities shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Issuers need not comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document (and Section 5.1(d) shall not
apply to any such covenant), but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby. In addition,
upon the Issuers' exercise under Section 7.1 of the option applicable to this
Section 7.3, the Collateral shall be released from the Liens in favor of the
Securities and Sections 5.1(c), (e), (f), (g), (h), (i) and (j) shall not
constitute Events of Default.
SECTION 7.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 7.2 or Section 7.3 to the outstanding Securities:
(a) The Issuers shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfactory to the Trustee
satisfying the requirements of Section 6.10 who shall agree to comply with the
provisions of this Article VII
60
<PAGE>
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, (a) Cash in an amount, or (b)
U.S. Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, Cash in an amount, or (c)
a combination thereof, in such amounts, as in each case will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge and which shall be applied by the Paying Agent (or other
qualifying trustee) to pay and discharge the principal of, premium and
Liquidated Damages, if any, and interest on the outstanding Securities on the
stated maturity or on the applicable optional redemption date, as the case may
be, of such principal or installment of principal, premium and Liquidated
Damages, if any, or interest on the Securities; provided that the Paying Agent
shall have been irrevocably instructed to apply such Cash and the proceeds of
such U.S. Government Obligations to said payments with respect to the
Securities. The Paying Agent shall promptly advise the Trustee in writing of any
Cash or Securities deposited pursuant to this Section 7.4;
(b) In the case of an election under Section 7.2, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Issuers have
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) In the case of an election under Section 7.3, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to Federal income tax in the same amount, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit) or,
insofar as Section 5.1(e) or Section 5.1(f) is concerned, at any time in the
period ending on the 91st day after the date of deposit
61
<PAGE>
or such earlier time as, in the Opinion of Counsel, such deposit is not voidable
as a preference under applicable bankruptcy law;
(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under any other
material agreement (other than this Indenture) or instrument to which either
Issuer is a party or by which either are bound;
(f) In the case of an election under either Section 7.2 or
7.3, the Issuers shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Issuers pursuant to its election under
Section 7.2 or 7.3 was not made by the Issuers with the intent of preferring the
Holders of such Securities over any other creditors of the Issuers or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuers or others; and
(g) The Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that the
conditions precedent provided for in, in the case of the Officer's Certificate,
clauses (a) through (f), and, in the case of the Opinion of Counsel, clauses (a)
(with respect to the validity and perfection of the security interest), (b), (c)
and (e) of this Section 7.4 have been complied with.
SECTION 7.5. Deposited Cash and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions.
Subject to Section 7.6, all Cash and U.S. Government Obligations
(including the proceeds thereof) deposited with the Paying Agent (or other
qualifying trustee, collectively for purposes of this Section 7.5, the "Paying
Agent") pursuant to Section 7.4 in respect of the outstanding Securities shall
be held in trust and applied by the Paying Agent, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any other Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium and Liquidated Damages, if any, and interest, but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 7.6. Repayment to the Issuers.
Anything in this Article VII to the contrary notwithstanding, the
Trustee or the Paying Agent, as applicable, shall deliver or pay to the Company
from time to time upon the request of the Issuers any Cash or U.S. Government
Obligations held by it as provided in Section 7.4 hereof which in the opinion of
a nationally recognized firm of independent
62
<PAGE>
public accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 7.4(a) hereof), are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
Any Cash and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium, if any, or
interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall,
subject to the requirements of applicable law, be paid to the Company on its
request; and the Holder of such Security shall thereafter look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 7.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any Cash or U.S.
Government Obligations in accordance with Section 7.2 or 7.3, as the case may
be, by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Issuers' obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 7.2 or 7.3
until such time as the Trustee or Paying Agent is permitted to apply such money
in accordance with Section 7.2 and 7.3, as the case may be; provided, however,
that, if the Issuers make any payment of principal of, premium and Liquidated
Damages, if any, or interest on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the Cash and U.S. Government
Obligations held by the Trustee or Paying Agent.
63
<PAGE>
ARTICLE VIII
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Issuers, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto or amendments to the Collateral
Agreements, in form satisfactory to the Trustee, for any of the following
purposes:
(1) to cure any ambiguity, defect, or inconsistency, or make
any other provisions with respect to matters or questions arising under
this Indenture or the Collateral Agreements which shall not be
inconsistent with the provisions of either this Indenture or the
Collateral Agreements, provided such action pursuant to this clause shall
not adversely affect the interests of the Holders;
(2) to add to the covenants of the Issuers for the benefit of
the Holders, to provide additional collateral or to surrender any right or
power herein conferred upon the Issuers ;
(3) to comply with the TIA; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities.
SECTION 8.2. Amendments, Supplemental Indentures and Waivers with
Consent of Holders.
Subject to Section 5.8, with the consent of the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities, by
written act of said Holders delivered to the Issuers and the Trustee, the
Issuers, when authorized by Board Resolutions, and the Trustee may amend or
supplement this Indenture or the Securities or enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
the Securities or of modifying in any manner the rights of the Holders under
this Indenture or the Securities. Subject to Section 5.8, the Holder or Holders
of not less than a majority in aggregate principal amount of then outstanding
Securities may waive compliance by the Issuers with any provision of this
Indenture or the Securities. Notwithstanding any of the above, however, no such
amendment, supplemental indenture or waiver shall
64
<PAGE>
without the consent of the Holders of not less than 66-2/3% of the aggregate
principal amount of Securities at the time outstanding alter the terms or
provisions of Section 9.1 in a manner adverse to the Holders; and no such
amendment, supplemental indenture or waiver shall, without the consent of the
Holder of each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest
and Liquidated Damages on (other than a rescission of acceleration of the
Notes by the Holders of at least a majority in aggregate principal amount
of such Notes and a waiver of the payment default arising from such
acceleration) any Security;
(3) reduce the principal or premium amount of any Security, or
reduce the Change of Control Purchase Price or the Redemption Price;
(4) change the Stated Maturity;
(5) alter the redemption provisions of Article III in a manner
adverse to any Holder;
(6) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or the rights
of Holders to recover the principal or premium of, interest on, or
redemption payments with respect to, any Security, including without
limitation any changes in Section 5.8, 5.12 or this third sentence of this
Section 8.2, except to increase any required percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security affected
thereby;
(7) make the principal of, or the interest or premium or
Liquidated Damages, if any, on any Security payable with anything or in
any manner other than as provided for in this Indenture (including
changing the place of payment where, or the coin or currency in which, any
Security or any premium or the interest thereon is payable) and the
Securities as in effect on the date hereof;
(8) cause the Securities to become subordinate in right of
payment of other Indebtedness; or
65
<PAGE>
(9) modify any of the provisions of Article X or the
Collateral Agreements in a manner adverse to the holders.
It shall not be necessary for the consent of the Holders under this
Section 8.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Issuers to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
After an amendment, supplement or waiver under this Section 8.2 or
Section 8.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article VIII, the Issuers may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 8.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 8.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by written notice to
the Issuers or the Person designated by the Issuers as the Person to whom
consents should be sent if such revocation is received by the Issuers or such
Person before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
66
<PAGE>
The Issuers may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (9) of Section 8.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided, that any such
waiver shall not impair or affect the right of any other Holder to receive
payment of principal and premium of and interest on a Security, on or after the
respective dates set for such amounts to become due and payable expressed in
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates.
SECTION 8.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee or require the Holder to put an appropriate notation on the
Security. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Issuers or
the Trustee so determine, the Issuers in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Security
shall not affect the validity of such amendment, supplement or waiver.
SECTION 8.6. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article VIII; provided, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article VIII is
authorized or permitted by this Indenture.
67
<PAGE>
ARTICLE IX
RIGHT TO REQUIRE REPURCHASE
SECTION 9.1. Repurchase of Securities at Option of the Holder Upon a
Change of Control.
(a) In the event that a Change of Control occurs, each Holder
shall have the right, at such Holder's option, pursuant to an irrevocable and
unconditional offer by the Company or Finance (the "Change of Control Offer")
subject to the terms and conditions of this Indenture, to require the Issuers to
repurchase all or any part of such Holder's Securities (provided, that the
principal amount of such Securities at maturity must be $1,000 or an integral
multiple thereof) on a date selected by the Issuers that is no later than 35
Business Days after the occurrence of such Change of Control (the "Change of
Control Purchase Date"), at a cash price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof, plus (subject to the
right of Holders of record on a Record Date to receive interest due on an
Interest Payment Date that is on or prior to such repurchase date and subject to
clause (b)(4) below) accrued and unpaid interest and Liquidated Damages, if any,
to the Change of Control Purchase Date.
(b) In the event of a Change of Control, the Company or
Finance shall be required to commence an offer to purchase Securities (a "Change
of Control Offer") as follows:
(1) the Change of Control Offer shall commence within 10
Business Days following the occurrence of the Change of Control;
(2) the Change of Control Offer shall remain open for not less
than 20 Business Days following its commencement (the "Change of Control
Offer Period");
(3) upon the expiration of the Change of Control Offer Period,
the Issuers shall purchase all of the properly tendered Securities at the
Change of Control Purchase Price, plus accrued and unpaid interest
thereon;
(4) if the Change of Control Purchase Date is on or after a
Record Date and on or before the related interest payment date, any
accrued interest will be paid to the Person in whose name a Security is
registered at the close of business on
68
<PAGE>
such Record Date, and no additional interest will be payable to
Securityholders who tender Securities pursuant to the Change of Control
Offer;
(5) the Issuers shall provide the Trustee and the Paying Agent
with written notice of the Change of Control Offer at least three Business
Days before the commencement of any Change of Control Offer; and
(6) on or before the commencement of any Change of Control
Offer, the Company, Finance or the Registrar (upon the request and at the
expense of the Issuers) shall send, by first-class mail, a notice to each
of the Securityholders, which (to the extent consistent with this
Indenture) shall govern the terms of the Change of Control Offer and shall
state:
(i) that the Change of Control Offer is being made
pursuant to such notice and this Section 9.1 and that all
Securities, or portions thereof, tendered will be accepted for
payment;
(ii) the Change of Control Purchase Price (including the
amount of accrued and unpaid interest, subject to clause (b)(4)
above) and the Change of Control Purchase Date;
(iii) that any Security, or portion thereof, not
tendered or accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing
Cash with the Paying Agent in accordance with the last paragraph of
this Article IX or such payment is prevented, any Security, or
portion thereof, accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Purchase Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent (which may not for purposes of this
Section 9.1, notwithstanding anything in this Indenture to the
contrary, be either of the Issuers or any Affiliate of the Issuers)
at the address specified in the notice prior to the expiration of
the Change of Control Offer;
69
<PAGE>
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not
for purposes of this Section 9.1, notwithstanding anything in this
Indenture to the contrary, be either of the Issuers or any Affiliate
of the Issuers) receives, up to the close of business on the Change
of Control Purchase Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount
of the Securities the Holder is withdrawing and a statement that
such Holder is withdrawing his election to have such principal
amount of Securities purchased; and
(vii) a brief description of the events resulting in
such Change of Control.
The Issuers agree that any such Change of Control Offer shall be
made in compliance with all applicable Federal and state laws, rules and
regulations, including, if applicable, Regulation 14E under the Exchange Act and
the rules thereunder and all other applicable Federal and state securities laws,
and any provisions of this Indenture which conflict with such laws shall be
deemed to be superseded by the provisions of such laws.
On or before the Change of Control Purchase Date, the Issuers shall
(i) accept for payment Securities or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent Cash
sufficient to pay the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any) of all Securities or
portions thereof so tendered and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate listing the Securities or
portions thereof being purchased. The Paying Agent promptly shall mail to
Holders of Securities so accepted payment in an amount equal to the Change of
Control Purchase Price (together with accrued and unpaid interest and Liquidated
Damages, if any) for such Securities, and the Trustee or its authenticating
agent shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered; provided, however, that each such new Security will be in a
principal amount of $1,000 or an integral multiple thereof. Any Securities not
so accepted shall be promptly mailed or delivered by the Issuers to the Holder
thereof. The Issuers shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date.
70
<PAGE>
ARTICLE X
SECURITY
SECTION 10.1. Security Interest.
(a) In order to secure the prompt and complete payment and
performance in full of the Issuers' obligations hereunder, the Company, the
Trustee and the Disbursement Agent, as applicable, have entered into this
Indenture and the Collateral Agreements required to be entered into on the Issue
Date. Each Holder, by accepting a Security, agrees to all of the terms and
provisions of this Indenture and the Collateral Agreements, and the Trustee
agrees to all of the terms and provisions of this Indenture and the Collateral
Agreements, as this Indenture and the Collateral Agreements may be amended from
time to time pursuant to the provisions thereof and hereof.
(b) The Collateral as now or hereafter constituted shall be
held for the equal and ratable benefit of the Holders without preference,
priority or distinction of any thereof over any other by reason of difference in
time of issuance, sale or otherwise, as the only security for the Issuers'
obligations hereunder.
(c) The provisions of TIA ss. 314(d), and provisions of TIA
ss. 314(c)(3) to the extent applicable by specific reference in this Article X,
are hereby incorporated by reference herein as if set forth in their entirety.
SECTION 10.2. Recording; Opinions of Counsel.
(a) Each of the Issuers represents that it has caused to be
executed and delivered, filed and recorded and covenants that it will promptly
cause to be executed and delivered, file and recorded, all instruments and
documents, and has done and will do or will cause to be done all such acts and
other things, at the Issuers' expense, as are necessary to effect and maintain
valid and perfected security interests in the Collateral. Each of the Issuers
shall, as promptly as practicable, cause to be executed and delivered, filed and
recorded all instruments and do all acts and other things as may be required by
law to perfect, maintain and protect the security interests under the Collateral
Agreements and herein.
(b) The Issuers shall furnish to the Trustee, concurrently
with the execution and delivery of this Indenture and the Collateral Agreements
and promptly after the execution and delivery of any amendment thereto or any
other instrument of further assurance, an Opinion(s) of Counsel stating that, in
the opinion of such counsel, subject to
71
<PAGE>
customary exclusions and exceptions reasonably acceptable to the Trustee, either
(i) this Indenture, the Collateral Agreements, any such amendment and all other
instruments of further assurance have been properly recorded, registered and
filed and all such other action has been taken to the extent necessary to make
effective valid security interests and to perfect the securities interests
intended to be created by this Indenture and the Collateral Agreements, and
reciting the details of such action, or (ii) no such action is necessary to make
effective and maintain in full force and effect the validity and perfection of
the security interests under the Collateral Agreements and hereunder.
(c) The Issuers shall furnish to the Trustee, on or prior to
November 1 of each year commencing in 1997, an Opinion(s) of Counsel, dated as
of such date, stating that, in the opinion of such counsel, subject to customary
exclusions and exceptions reasonably acceptable to the Trustee, either (A) all
such action has been taken with respect to the recording, registering, filing,
rerecording and refiling of this Indenture, all supplemental indentures, the
Collateral Agreements, financing statements, continuation statements and all
other instruments of further assurance as is necessary to maintain the validity
and perfection of security interests under the Collateral Agreements and
hereunder in full force and effect and reciting the details of such action, and
stating that all financing statements and continuation statements have been
executed and filed and such other actions taken that are necessary fully to
preserve and protect the rights of the Holders and the Trustee hereunder and
under the Collateral Agreements, or (B) no such action is necessary to maintain
in full force and effect the validity and perfection of the security interests
under the Collateral Agreements and hereunder.
SECTION 10.3. Cash Collateral Account.
The Company shall establish and maintain with Disbursement Agent
pursuant to the terms of the Cash Collateral and Disbursement Agreement a cash
collateral account (the "Account") which shall hold, among other assets, a
portion of the proceeds of the sale of the Securities (net of underwriting
discounts and commissions) as provided for therein. The Company shall grant a
valid, perfected and exclusive security interest in favor of the Trustee for the
equal and ratable benefit of the Holders in the Account without preference,
priority, or distinction of any thereof over any other thereof by reason of
difference in time of issuance, sale or otherwise, as security for the prompt
and complete performance and payment in full of the Issuers' obligations
hereunder. The funds from time to time on deposit in the Account may be
disbursed from such account only for the purposes and in the manner provided for
in the Cash Collateral and Disbursement Agreement. All cash and other property
received by the Company or Finance after the Issue Date shall be turned over to
the Disbursement Agent for deposit in the Account.
72
<PAGE>
SECTION 10.4. Certain Releases of Collateral.
Subject to applicable law, the release of any Collateral from Liens
created by the Collateral Agreements or the release of, in whole or in part, the
Liens created by the Collateral Agreements, will not be deemed to impair the
Collateral Agreements in contravention of the provisions of this Indenture if
and to the extent the Collateral or Liens are released pursuant to, and in
accordance with, the applicable Collateral Documents or pursuant to, and in
accordance with, the terms hereof. To the extent applicable, without limitation,
the Issuers and each other obligor, if any, on the Securities shall cause TIA
ss. 314(d), relating to the release of property or securities from the Liens of
the Collateral Agreements, to be complied with. Any certificate or opinion
required by TIA ss. 314(d) may be made by two Officers, except in cases in which
TIA ss. 314(d) requires that such certificate or opinion be made by an
independent person.
SECTION 10.5. Payment of Expenses.
On demand of the Trustee, the Issuers forthwith shall pay or
satisfactorily provide for all reasonable expenditures incurred by the Trustee
under this Article X, including the reasonable fees and expenses of counsel and
all such sums shall be a Lien upon the Collateral and shall be secured thereby
and permitted hereby.
SECTION 10.6. Suits to Protect the Collateral.
Subject to Section 10.1 of this Indenture and to the provisions of
the Collateral Agreements, the Trustee shall have power to institute and to
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of the Collateral Agreements or this Indenture, including the power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid or if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interests in
contravention of this Indenture or be prejudicial to the interests of the
Holders or of the Trustee. The Trustee shall give notice to the Issuers promptly
following the institution of any such suit or proceeding.
SECTION 10.7. Trustee's Duties.
The powers and duties conferred upon the Trustee by this Article X
are solely to protect the security interests and shall not impose any duty upon
the Trustee to exercise any such powers and duties, except as expressly provided
in this Indenture or the TIA. The
73
<PAGE>
Trustee shall be under no duty to the Issuers or any Holder whatsoever to make
or give any presentment, demand for performance, notice of nonperformance,
protest, notice of protest, notice of dishonor, or other notice or demand in
connection with any Collateral, or to take any steps necessary to preserve any
rights against prior parties except as expressly provided in this Indenture. The
Trustee shall not be liable to the Issuers or any Holder for failure to collect
or realize upon any or all of the Collateral, or for any delay in so doing, nor
shall the Trustee be under any duty to the Issuers or any Holder to take action
whatsoever with regard thereto. The Trustee shall have no duty to the Issuers or
any Holder to comply with any recording, filing, or other legal requirements
necessary to establish or maintain the validity, priority or enforceability of
the security interests in, or the Trustee's rights in or to, any of the
Collateral.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 11.2. Notices.
Any notices or other communications to the Issuers, Paying Agent,
Registrar, Securities Custodian, transfer agent or the Trustee required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
if to the Issuers:
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
914 Hartford Turnpike
P.O. Box 715
Waterford, CT 06385
Attention: Len Wolman
74
<PAGE>
Telephone: (860) 442-4559
Telecopy: (860) 437-7752
if to the Trustee:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Telephone: (860) 986-2067
Telecopy: (860) 986-7920
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him or her by first-class mail or other equivalent means at his or her
address as it appears on the registration books of the Registrar and shall be
sufficiently given to him or her if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.3. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Issuers, the Trustee, the Registrar and any other Person shall
have the protection of TIA ss. 312(c).
75
<PAGE>
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by either or both of the Issuers to
the Trustee to take any action under this Indenture, such Person shall furnish
to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been met; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel,
all such conditions precedent have been met;
provided, however, that in the case of any such request or application as to
which the furnishing of particular documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished under this Section 11.4.
SECTION 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been met; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been met; provided, however,
76
<PAGE>
that with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 11.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting
of Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.7. Non-Business Days.
If a payment date is not a Business Day at such place, payment may
be made at such place on the next succeeding day that is a Business Day, and no
interest shall accrue for the intervening period.
SECTION 11.8. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE ISSUERS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUERS IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY
AND ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE TRUSTEE OR ANY SECURITY-HOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY
77
<PAGE>
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ISSUERS IN
ANY OTHER JURISDICTION.
SECTION 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Issuers. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 11.10. No Recourse against Others.
No direct or indirect stockholder, member, employee, officer,
manager or director, as such, past, present or future of the Issuers or any
successor entity, shall have any personal liability in respect of the
obligations of the Issuers under the Securities, this Indenture or the
Collateral Agreements by reason of his, her or its status as such stockholder,
member, employee, officer, manager or director. Each Securityholder by accepting
a Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
SECTION 11.11. Successors.
All agreements of the Issuers in this Indenture and the Securities
shall bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in
the Securities shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
78
<PAGE>
SECTION 11.14. Table of Contents, Headings, Etc.
The Table of Contents and headings of the Articles and the Sections
of this Indenture have been inserted for convenience of reference only, are not
to be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
79
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
WATERFORD GAMING, L..L.C.
By: /s/ Len Wolman
---------------------------------
Name: Len Wolman
Title: Chief Executive Officer
WATERFORD GAMING FINANCE CORP.
By: /s/ Len Wolman
---------------------------------
Name: Len Wolman
Title: Chief Executive Officer
FLEET NATIONAL BANK, as Trustee,
Registrar, Paying Agent and Securities
Custodian
By: /s/ Philip G. Kane, Jr.
---------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
80
<PAGE>
Exhibit A
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
12 3/4% SENIOR NOTE DUE 2003
CUSIP: ___________________
No. $____________
Waterford Gaming, L.L.C., a Delaware limited liability company (the
"Company"), and Waterford Gaming Finance Corp., a Delaware corporation
("Finance" and together with the Company, the "Issuers"), for value received,
hereby promise to pay to , or registered assigns, the principal sum of Dollars,
on __________, 2003.
Interest Payment Dates: May 15 and November 15 commencing May 15,
1997.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
A-1
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Instrument to be
duly executed under their corporate seal.
Dated: November __, 1996
WATERFORD GAMING, L.L.C.
[Seal]
By: _________________________________________
Name:
Title:
Attest: _________________
Secretary
WATERFORD GAMING FINANCE CORP.
[Seal]
By: _________________________________________
Name:
Title:
Attest: _________________
Secretary
A-2
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
FLEET NATIONAL BANK
as Trustee and
Authenticating Agent
By: ______________________________
Authorized Signatory
A-3
<PAGE>
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
12 3/4% Senior Note due 2003
Unless and until it is exchanged in whole or in part for Securities
in definitive form, this Security may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the Issuers or their agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.(1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c)
- ----------
(1) This paragraph should only be added if the Security is issued in global
form.
A-4
<PAGE>
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO
REQUEST), (2) TO THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.(2)
1. Interest.
Waterford Gaming, L.L.C., a Delaware limited liability company (the
"Company"), and Waterford Gaming Finance Corp., a Delaware corporation
("Finance" and together with the Company, the "Issuers"), promise to pay
interest on the principal amount of this Security at the rate of 12 3/4% per
annum from November 8, 1996 until maturity. To the extent it is lawful, the
Issuers promise to pay interest on any interest payment due but unpaid on such
principal amount at a rate of 12 3/4% per annum compounded semi-annually.
The Issuers will pay interest semi-annually on May 15 and November
15 of each year or, if any such day is not a Business Day, on the next
succeeding Business Day (each, an "Interest Payment Date"), commencing May 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid on the Securities, from
the date of issuance. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
2. Method of Payment.
The Issuers shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the May 1 or November 1 immediately preceding the Interest Payment Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Except as provided below, the Issuers shall pay principal and interest
in such coin or currency of the United States of
- ----------
(2) This paragraph should be included only for the Transfer Restricted
Securities.
A-5
<PAGE>
America as at the time of payment shall be legal tender for payment of public
and private debts ("Cash"). The Securities will be payable as to principal,
premium and Liquidated Damages, if any, and interest, and the Securities may be
presented for registration of transfer or exchange, at the office or agency of
the Issuers maintained for such purpose within or without the Borough of
Manhattan, the City and State of New York or, at the option of the Issuers,
payment of interest may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal, premium and Liquidated Damages, if any, and interest on all Global
Securities and all other Securities the Holders of which shall have provided
wire transfer instructions to an account within the United States to the Issuers
or the Paying Agent. Until otherwise designated by the Issuers, the Issuers'
office or agency will be the corporate trust office of the Trustee presently
located at the Trustee's agency at CTOPTO6D, 777 Main Street, Hartford,
Connecticut 06115, Attention: Corporate Trust Operations, and the Issuer's
office or agency in The Borough of Manhattan and City and State of New York will
be Fleet Bank, c/o First Chicago Trust Company, 14 Wall Street, Window 2, New
York, New York 10005, Attention: Corporate Trust Operations.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee," which term includes
any successor Trustee under the Indenture) will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. The Issuers may, subject to certain exceptions,
act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Issuers issued the Securities under an Indenture, dated as of
November 8, 1996 (the "Indenture"), among the Issuers and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are senior
secured, joint and several general obligations of the Issuers limited in
aggregate principal amount to $65,000,000.
A-6
<PAGE>
5. Mandatory Redemption with Excess Cash Flow or Upon Exercise of Buy/Sell
Option.
The Issuers will be required to make a mandatory redemption on each
November 15 and May 15, commencing November 15, 1997, of Securities in the
largest principal amount that is an integral multiple of $1,000, that may be
redeemed using 100% of Company Excess Cash as of the preceding September 30 and
March 31, respectively, at the following redemption prices (expressed as
percentage of principal amount) if redeemed during the 12-month period
commencing May 15 of the years indicated below, in each case (subject to the
right of Holders of record on a Record Date to receive interest and Liquidated
Damages, if any, due on an Interest Payment Date that is on or prior to such
Redemption Date) together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Redemption Date:
Year Percentage
---- ----------
1997................................................... 112.750%
1998................................................... 110.625%
1999................................................... 108.500%
2000................................................... 106.375%
2001................................................... 104.250%
2002................................................... 102.125%
2003................................................... 100.000%
In the event that either the Company or Sun International shall deliver an
election to either buy or sell the other party's interest in the Manager
pursuant to a Buy-Out Notice or be deemed to have delivered an election to sell
such interest and such election to buy or sell is consummated, the Issuers will
be required to make a mandatory redemption of all the Securities then
outstanding, at the redemption prices described above. Such redemption shall be
made on a date no more than 35 days after the date of the Closing under the
option.
6. Optional Redemption.
Except as provided above, the Issuers will not have the right to
redeem any Securities prior to November 15, 1999. The Securities will be
redeemable for cash at the option of the Issuers, in whole or in part, at any
time on or after November 15, 1999, with Company Excess Cash as of the date
notice is given at the following redemption prices (expressed as percentages of
the principal amount) if redeemed during the 12-month period commencing May 15
of the years indicated below, in each case (subject to the right
A-7
<PAGE>
of Holders of record on a Record Date to receive interest and Liquidated
Damages, if any, due on an Interest Payment Date that is on or prior to such
Optional Redemption Date) together with accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Optional Redemption Date:
Year Percentage
---- ----------
1999................................................... 108.500%
2000................................................... 106.375%
2001................................................... 104.250%
2002................................................... 102.125%
2003................................................... 100.000%
7. Regulatory Redemption.
Notwithstanding any other provisions of the Indenture and this
Security, if any Gaming Regulatory Authority requires that a Holder or
beneficial owner of the Securities must be licensed, qualified or found suitable
under any applicable gaming laws in order to maintain any gaming license or
franchise related to the Mohegan Sun 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 Company shall have the right, at its
option:
(1) to require such Holder or beneficial owners to dispose of such
Holder's or beneficial owner's Securities 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 Securities of such Holder or
beneficial owner at a redemption price equal to (a) the lesser of the
principal amount thereof or the price at which such Holder or beneficial
owner acquired the Securities, together with, in either case, accrued and
unpaid 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 or (b)
such other amount as may be determined by such Gaming Regulatory
Authority.
A-8
<PAGE>
In connection with any such redemption, and except as may be
required by a Gaming Regulatory Authority, the Company shall comply with the
procedures contained in the Indenture for redemptions of the Securities. Under
the Indenture, the Company is not required to pay or reimburse any Holder of the
Securities or beneficial owner of Securities 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.
8. Procedures for Redemption.
In the case of a partial redemption, the Trustee shall select the
Securities or portions thereof for redemption on a pro rata basis, by lot or in
such other manner it deems appropriate and fair; provided, however, that
mandatory and optional redemptions from Excess Cash Flow will be done as nearly
as practicable on a pro rata basis. The Securities may be redeemed in part in
multiples of $1,000 only.
Notice of any redemption will be sent by first class mail, at least
30 days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Security to be redeemed at such Holder's last address as then
shown upon the registry books of the Registrar.
Any notice which relates to a Security to be redeemed in part only
must state the portion of the principal amount equal to the unredeemed portion
thereof and must state that on and after the date of redemption, upon surrender
of such Security, a new Security or Securities in a principal amount equal to
the unredeemed portion thereof will be issued. On and after the date of
redemption, interest and Liquidated Damages, if any, will cease to accrue on the
Securities or portions thereof called for redemption, unless the Issuers default
in the payment thereof.
9. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of Securities in accordance with the Indenture. No service charge
will be made for any registration of transfer or exchange of the Securities, but
the Issuers may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes or other governmental
charge payable in connection therewith. The Registrar need not register the
transfer of or exchange any Securities selected for redemption.
A-9
<PAGE>
10. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Issuers at their written request. After that, all liability of the Trustee
and any such Paying Agent(s) with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
Except as set forth in the Indenture, if the Issuers irrevocably
deposit with the Trustee, in trust, for the benefit of the Holders, Cash, U.S.
Government Obligations or a combination thereof, in such amounts as will be
sufficient in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, and Liquidated Damages, if any,
and interest on the Securities to redemption or maturity and comply with the
other provisions of the Indenture relating thereto, the Issuers will be
discharged from certain provisions of the Indenture and the Securities
(including the restrictive covenants described in paragraph 14 below, but
excluding their obligation to pay the principal of and interest on the
Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may under certain circumstances amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, or make any other change that does not adversely affect
the rights of any Holder of a Security.
14. Restrictive Covenants and Excess Cash Purchase Offers.
The Indenture imposes certain limitations on the ability of the
Issuers to, among other things, incur additional Indebtedness and Disqualified
Capital Stock, pay
A-10
<PAGE>
dividends or make certain other restricted payments, enter into certain
transactions with Affiliates, incur Liens, sell assets, merge or consolidate
with any other Person or transfer (by lease, assignment or otherwise)
substantially all of the properties and assets of the Issuers. The limitations
are subject to a number of important qualifications and exceptions. The Issuers
must periodically report to the Trustee on compliance with such limitations.
In addition, the Indenture requires the Company to accept Remaining
Excess Cash Purchase Offers or any other offer to purchase Subordinated Notes,
subject to certain qualifications, exceptions and requirements.
15. Repurchase at Option of Holder.
If there is a Change of Control, the Issuers shall be required to
offer to purchase on the Change of Control Purchase Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the Change of Control Purchase
Date. Holders of Securities will receive a Change of Control Offer from the
Issuers prior to any related Change of Control Purchase Date and may elect to
have such Securities purchased by completing the form entitled "Option of Holder
to Elect Purchase" appearing below.
16. Security for the Securities.
The obligations of the Issuers with respect to the Securities are
secured on an exclusive basis by a pledge of the Collateral. The Company has
entered into the Collateral Agreements that provide for the pledge of the
Collateral to the Trustee for the benefit of the Holders of the Securities. Such
pledge secures the payment and performance when due of all of the obligations of
the Issuers under the Indenture and the Securities.
Following an Event of Default, the Trustee, on behalf of the Holders
of the Securities, in addition to any rights or remedies available to it under
the Indenture, may take such action as it deems advisable to protect and enforce
its rights in the Collateral, including the institution of foreclosure
proceedings.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
Securities shall have already become due
A-11
<PAGE>
and payable, either the Trustee or the Holders of 25% in aggregate principal
amount of Securities then outstanding may declare all the Securities to be due
and payable in the manner and with the effect provided in the Indenture. Holders
of Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture, the Collateral Agreements or the Securities. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of principal
or interest), if it determines that withholding notice is in their interest.
18. Trustee or Agent Dealings with Issuers.
The Trustee and each Agent under the Indenture, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates as if it were not the Trustee and such Agent.
19. No Recourse Against Others.
No direct or indirect stockholder, member, employee, officer,
manager or director, as such, past, present or future, of the Issuers or any
successor entity shall have any personal liability in respect of the obligations
of the Issuers under the Securities or the Indenture by reason of his or its
status as such stockholder, member, employee, officer, manager or director. Each
Holder of a Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
20. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
A-12
<PAGE>
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
23. Additional Rights of Holders of Securities.
The Issuers will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Waterford Gaming, L.L.C.
914 Hartford Turnpike
P.O. Box 715
Waterford, CT 06385
Attn: Len Wolman
Telephone: (860) 442-4559
Telecopy: (860) 437-7752
A-13
<PAGE>
ASSIGNMENT
I or we assign this Security to
___________________________________________________________
__________________________________
___________________________
__________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of
assignee
__________________________
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ______________________________
__________________________________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee**
- ----------
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i)
The Securities Transfer Agent Medallion Program (Stamp); (ii) The New York
Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion
Program (SEMP); or (iv) in such other guarantee program acceptable to the
Trustee.
A-14
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuers
pursuant to Article IX of the Indenture, check the box: |_|
If you want to elect to have only part of this Security purchased by
the Issuers pursuant to Article IX of the Indenture, as the case may be, state
the amount you want to be purchased: $________
Date: ________________ Signature: ________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee**
- ----------
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i)
The Securities Transfer Agent Medallion Program (Stamp); (ii) The New York
Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion
Program (SEMP); or (iv) in such other guarantee program acceptable to the
Trustee.
A-15
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES(3)
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer of
Date of Principal Amount Principal Amount Security following Trustee or
Exchange of this Global of this Global such decrease (or Securities
Security Security increase) Custodian
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(3) This schedule should only be added if the Security is issued in global
form.
A-16
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
SECURITIES
Re: 12 3/4% SENIOR NOTES DUE 2003 OF WATERFORD GAMING, L.L.C. AND WATERFORD
GAMING FINANCE CORP.
This Certificate relates to $______ principal amount of Securities held in
(check applicable box) _____ book-entry or ______ definitive form by _____ (the
"Transferor").
The Transferor (check applicable box):
|_| has requested the Registrar by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
|_| has requested the Registrar by written order to exchange or register
the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Securities and as provided in
Section 2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because (check
applicable box):
|_| Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
|_| Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the Indenture) or pursuant to an
effective registration statement under the Securities Act (in satisfaction of
Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
A-17
<PAGE>
|_| Such Security is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an exemption from registration in accordance
with Regulation S under the Securities Act (in satisfaction of Section
2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
___________________________________________
[INSERT NAME OF TRANSFEROR]
By: _______________________________________
Date: ______________________
A-18
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of November 8, 1996
by and among
WATERFORD GAMING, L.L.C.
and
WATERFORD GAMING FINANCE CORP.
as Issuers
and
BEAR, STEARNS & CO. INC.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
as Initial Purchasers
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made and entered
into as of November 8, 1996, among WATERFORD GAMING, L.L.C., a Delaware limited
liability company (the "Company"), WATERFORD GAMING FINANCE CORP., a Delaware
corporation ("Finance" and, together with the Company, the "Issuers"), and BEAR
STEARNS & CO. INC. and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
(together, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated November
5, 1996, among the Issuers and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Issuers to the Initial
Purchasers of $65,000,000 aggregate principal amount of 12 3/4% Senior Notes due
2003 (the "Notes"). In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Issuers have agreed to provide to the Initial Purchasers
and their respective direct and indirect transferees, among other things, the
registration rights for the Notes set forth in this Agreement. The execution of
this Agreement is a condition to the closing of the transactions contemplated by
the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings (and, unless otherwise indicated, capitalized terms used herein without
definition shall have the respective meanings ascribed to them by the Purchase
Agreement):
Applicable Period: See Section 2(b) hereof.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Closing Date: The Closing Date as defined in the Purchase Agreement.
Effectiveness Period: See Section 3(a) hereof.
1
<PAGE>
Effectiveness Target Date: The 180th day following the Closing Date.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a) hereof.
Filing Date: The 45th day after the Closing Date.
Holder: Any holder of Transfer Restricted Notes.
Indemnified Party: See Section 7 hereof.
Indemnified Person: See Section 7 hereof.
Indemnifying Person: See Section 7 hereof.
Indenture: The Indenture, dated as of November 8, 1996, by and among the
Issuers and Fleet National Bank, as Trustee, pursuant to which the Notes are
being issued, as amended or supplemented from time to time in accordance with
the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
Inspectors: See Section 3(m) hereof.
Issuers: See the introductory paragraph of this Agreement.
Liquidated Damages: See Section 4(a) hereof.
Notes: See the introductory paragraphs to this Agreement.
Participating Broker-Dealer: See Section 2(b) hereof.
2
<PAGE>
Person or person: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business association,
limited liability company, limited liability partnership, firm or other legal
entity.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Exchange Notes and/or the Transfer Restricted Notes (as applicable),
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Records: See Section 4(m) hereof.
Registration Default: See Section 4(a) hereof.
Registration Statement: Any registration statement of the Issuers,
including, but not limited to, the Exchange Offer Registration Statement, Shelf
Registration or a registration statement of the Issuers that otherwise covers
any of the Transfer Restricted Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated pursuant to the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
3
<PAGE>
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Transfer Restricted Notes: The Notes upon original issuance thereof and at
all times subsequent thereto, until (i) a Registration Statement covering such
Notes has been declared effective by the SEC and such Notes have been disposed
of in accordance with such effective Registration Statement, (ii) such Notes are
sold in compliance with Rule 144 or (iii) such Notes cease to be outstanding.
Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes.
Underwritten registration or underwritten offering: A registration in
which securities of the Issuers are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) The Issuers agree to file with the SEC as soon as practicable after
the Closing Date, but in no event later than the Filing Date, an offer to
exchange (the "Exchange Offer"), any and all of the Transfer Restricted Notes
for a like aggregate principal amount of debt securities of the Issuers (the
"Exchange Notes"), which Exchange Notes will be (i) substantially identical in
all material respects to the Notes, except that such Exchange Notes will not
contain terms with respect to transfer restrictions, (ii) entitled to the
benefits of the Indenture or a trust indenture which is identical to the
Indenture (other than such changes to the Indenture or any such identical trust
indenture as are necessary to comply with any requirements of the SEC to effect
or maintain the qualification thereof under the TIA), and which, in either case,
has been qualified under the TIA, and (iii) registered pursuant to an effective
Registration Statement in compliance with the Securities Act. The Exchange Offer
will be registered pursuant to the Securities Act on an appropriate form of
Registration Statement (the "Exchange Offer Registration Statement"), and will
comply with all applicable tender offer rules and regulations promulgated
pursuant to the Exchange Act and shall be duly registered or qualified pursuant
to all applica-
4
<PAGE>
ble state securities or Blue Sky laws. The Exchange Offer shall not be subject
to any condition, other than that the Exchange Offer does not violate any
applicable law, policy or interpretation of the staff of the SEC. No securities
shall be included in the Exchange Offer Registration Statement other than the
Exchange Notes. The Issuers agree to use their best efforts to (x) cause the
Exchange Offer Registration Statement to become effective pursuant to the
Securities Act on or before the Effectiveness Target Date; and (y) keep the
Exchange Offer open for not less than 20 Business Days (or such longer period
required by applicable law), after the date that the notice of the Exchange
Offer referred to below is mailed to Holders. Each Holder who participates in
the Exchange Offer will be required to represent that any Exchange Notes
received by it will be acquired in the ordinary course of its business, that at
the time of the consummation of the Exchange Offer such Holder will have no
arrangement or understanding with any person to participate in the distribution
of the Exchange Notes, and that such Holder is not an "affiliate" of the Issuers
within the meaning of Rule 405 of the Securities Act (or that if it is such an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable). Each Holder that
is not a Participating Broker-Dealer will be required to represent that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. Each Holder that (i) is a Participating Broker-Dealer and (ii)
will receive Exchange Notes for its own account in exchange for the Transfer
Restricted Notes that it acquired as the result of market-making or other
trading activities will be required to acknowledge that it will deliver a
Prospectus as required by law in connection with any resale of such Exchange
Notes. Upon consummation of the Exchange Offer in accordance with this
Agreement, the Issuers shall have no further obligation to register Transfer
Restricted Notes pursuant to Section 3 of this Agreement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
acceptable to the Initial Purchasers, which shall contain a summary statement of
the positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), of Exchange Notes received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"). Such
"Plan of Distribution" section shall also allow the use of the Prospectus by all
persons subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may resell the Exchange Notes.
5
<PAGE>
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided that such period shall not
exceed 180 days after consummation of the Exchange Offer (or such longer period
if extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable
Period").
In connection with the Exchange Offer, the Issuers shall:
(i) mail as promptly as practicable to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last Business Day on which
the Exchange Offer shall remain open by sending to the institution and at
the address (located in the Borough of Manhattan, The City of New York)
specified in the notice, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Transfer Restricted Securities delivered for exchange and a statement that
such Holder is withdrawing his or her election to have such Transfer
Restricted Securities exchanged.
As soon as practicable after the close of the Exchange Offer, the Issuers
shall:
(i) accept for exchange all Notes tendered and not validly with-
drawn pursuant to the Exchange Offer;
(ii) deliver, or cause to be delivered, to the Trustee for cancella-
tion all Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes equal in principal amount to the Notes of
such Holder so accepted for exchange.
6
<PAGE>
(c) If (1) prior to the consummation of the Exchange Offer, applicable
interpretations of the staff of the SEC do not permit the Issuers to effect the
Exchange Offer, or (2) if for any other reason the Exchange Offer is not
consummated within 225 days of the Closing Date, then the Issuers shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice"), and the Issuers shall file a Registration Statement pursuant to
Section 3 hereof. Following the delivery of a Shelf Notice to the Holders of
Transfer Restricted Notes, the Issuers shall not have any further obligation to
conduct the Exchange Offer pursuant to this Section 2, provided, that the
Issuers shall have the right, nonetheless, to proceed to consummate the Exchange
Offer notwithstanding their obligations pursuant to this Section 2(c) (and, upon
such consummation, their obligations to consummate a Shelf Registration shall
terminate).
3. Shelf Registration
If the Issuers are required to deliver a Shelf Notice as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuers shall prepare and file with the SEC,
as promptly as practicable following the Shelf Notice, a Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415 covering
all of the Transfer Restricted Notes (the "Shelf Registration"). The Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of the Transfer Restricted Notes for resale by the Holders in the
manner or manners reasonably designated by them (including, without limitation,
one or more underwritten offerings). The Issuers shall not permit any securities
other than the Transfer Restricted Notes to be included in the Shelf
Registration. The Issuers shall use their best efforts, as described in Section
5(b) hereof, to cause the Shelf Registration to be declared effective pursuant
to the Securities Act as promptly as practicable after the filing of such Shelf
Registration and to keep the Shelf Registration continuously effective under the
Securities Act until the earlier of (i) the date which is 36 months after the
Closing Date, (ii) the date that all Transfer Restricted Notes covered by the
Shelf Registration have been sold in the manner set forth and as contemplated in
the Shelf Registration or (iii) the date that there ceases to be outstanding any
Transfer Restricted Notes (the "Effectiveness Period").
(b) Supplements and Amendments. The Issuers shall use their best efforts
to keep the Shelf Registration continuously effective by supplementing and
amending the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities
7
<PAGE>
Act, or if reasonably requested by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Notes covered by such Registration
Statement or by any underwriter of such Transfer Restricted Notes.
4. Liquidated Damages
(a) The Issuers and the Initial Purchasers agree that the Holders of
Transfer Restricted Notes will suffer damages if the Issuers fail to fulfill
their obligations pursuant to Section 2 or Section 3 hereof and that it would
not be possible to ascertain the extent of such damages. Accordingly, in the
event of such failure by the Issuers to fulfill such obligations, the Issuers
hereby agree to pay liquidated damages ("Liquidated Damages") to each Holder of
Transfer Restricted Notes under the circumstances and to the extent set forth
below:
(i) if neither the Exchange Offer Registration Statement nor the
Shelf Registration has been filed with the SEC on or prior to the Filing
Date; or
(ii) if neither the Exchange Offer Registration Statement nor the
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Target Date; or
(iii) if an Exchange Offer Registration Statement is declared
effective by the SEC, and on or prior to 45 days following the earlier of
(A) the effectiveness thereof or (B) the Effectiveness Target Date, the
Issuers have not exchanged Exchange Notes for all Notes validly tendered
in accordance with the terms of the Exchange Offer; or
(iv) the Shelf Registration has been declared effective by the SEC
and such Shelf Registration ceases to be effective or usable at any time
during the Effectiveness Period, without being succeeded on the same day
immediately by a post-effective amendment to such Shelf Registration that
cures such failure and that is itself immediately declared effective on
the same day;
(any of the foregoing, a "Registration Default"), then, with respect
to the first 90-day period following such Registration Default, the Issuers
shall pay to each Holder of Transfer Restricted Notes Liquidated Damages in an
amount equal to $0.05 per week per $1,000 principal amount of Transfer
Restricted Notes held by such Holder for each week or portion thereof that the
Registration Default continues.
8
<PAGE>
The amount of such Liquidated Damages will increase by an additional $0.05 per
week per $1,000 principal amount of Transfer Restricted Notes with respect to
each subsequent 90-day period until all Registration Defaults have been cured;
provided, however, that Liquidated Damages shall not at any time exceed $0.50
per week per $1,000 principal amount of Transfer Restricted Notes (regardless of
whether one or more than one Registration Defaults has occurred and is
continuing). Following the cure of all Registration Defaults relating to any
Transfer Restricted Notes, the accrual of Liquidated Damages with respect to
such Transfer Restricted Notes will cease. A Registration Default under clause
(i) above shall be cured on the date that either the Exchange Offer Registration
Statement or the Shelf Registration is filed with the SEC; a Registration
Default under clause (ii) above shall be cured on the date that either the
Exchange Offer Registration Statement or the Shelf Registration is declared
effective by the SEC; a Registration Default under clause (iii) above shall be
cured on the earlier of the date (A) the Exchange Offer is consummated or (B) a
Shelf Registration is declared effective; and a Registration Default under
clause (iv) above shall be cured on the earlier of (A) the date that the
post-effective amendment curing the deficiency in the Shelf Registration is
declared effective or (B) the Effectiveness Period expires.
(b) The Issuers shall notify the Trustee within one Business Day after
each and every date on which a Registration Default first occurs. Liquidated
Damages shall be paid by the Issuers to the Holders by wire transfer of
immediately available funds to the accounts specified by them or by mailing
checks to their respective addresses as such addresses appear in the Security
Register if no such accounts have been specified on or before the semi-annual
interest payment date provided in the Indenture and on each payment date
provided in the Indenture including, without limitation, whether upon
redemption, maturity (by acceleration or otherwise) or purchase upon a Change of
Control. Each obligation to pay Liquidated Damages shall be deemed to commence
accruing on the date of the applicable Registration Default and to cease
accruing when all Registration Defaults have been cured. In no event shall the
Issuers pay Liquidated Damages in excess of the applicable maximum weekly amount
set forth above, regardless of whether one or multiple Registration Defaults
exist.
(c) The parties hereto agree that the Liquidated Damages provided for in
this Section 4 constitute a reasonable estimate of the damages that will be
suffered by Holders by reason of the failure to file the Exchange Offer
Registration Statement or the Shelf Registration Statement, the failure of the
Exchange Offer Registration Statement or the Shelf Registration Statement to be
declared effective, the failure to
9
<PAGE>
consummate the Exchange Offer or the failure of the Shelf Registration Statement
to remain effective, as the case may be, in accordance with this Agreement.
5. Registration Procedures
In connection with the registration of any Exchange Notes or Transfer
Restricted Notes pursuant to Sections 2 or 3 hereof, the Issuers shall effect
such registration to permit the sale of such Exchange Notes or Transfer
Restricted Notes (as applicable), in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Issuers shall:
(a) prepare and file with the SEC a Registration Statement or Registration
Statements as prescribed by Section 2 or Section 3 hereof, and use their best
efforts to cause such Registration Statement to become effective and remain
effective as provided herein; provided that, if (1) such filing is pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuers shall furnish to and afford the Holders of the Transfer Restricted
Notes and each such Participating Broker-Dealer, as the case may be, covered by
such Registration Statement, their counsel and the managing underwriters, if
any, a reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all exhibits
thereto), proposed to be filed (at least 3 Business Days prior to such filing,
or such later date as is reasonable under the circumstances). The Issuers shall
not file any Registration Statement or Prospectus or any amendments or
supplements thereto in respect of which the Holders, pursuant to this Agreement,
must be afforded an opportunity to review prior to the filing of such document,
if the Holders of a majority in aggregate principal amount of the Transfer
Restricted Notes covered by such Registration Statement, or such Participating
Broker-Dealer, as the case may be, their counsel, or the managing underwriters,
if any, shall reasonably object on a timely basis (except that documents filed
as exhibits that are incorporated by reference or deemed to be incorporated by
reference shall not be subject to such objections);
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Offer Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period, as
the
10
<PAGE>
case may be, or such shorter period as will terminate when all Transfer
Restricted Notes covered by such Registration Statement have been sold; cause
the related Prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force), under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
of the SEC promulgated thereunder with respect to the disposition of all
securities covered by such Registration Statement, as so amended, or in such
Prospectus, as so supplemented, and with respect to the subsequent resale of any
Notes being sold by a Participating Broker-Dealer covered by any such
Prospectus; the Issuers shall be deemed not to have used their best efforts to
keep a Registration Statement effective during the Applicable Period if they
voluntarily take any action that would result in selling Holders of the Transfer
Restricted Notes covered thereby or Participating Broker-Dealers seeking to sell
Exchange Notes not being able to sell such Transfer Restricted Notes or such
Exchange Notes during that period, unless (i) such action is required by
applicable law, or (ii) such action is taken by either of them in good faith and
for valid business reasons (not including avoidance of their obligations
hereunder), including the acquisition or divestiture of assets;
(c) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, notify the selling Holders of Transfer Restricted Notes,
or each known Participating Broker-Dealer, as the case may be, their counsel and
the managing underwriters, if any, promptly and confirm such notice in writing,
(i) when a Prospectus, any prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
Prospectus is required by the Securities Act to be delivered in connection with
sales of the Transfer Restricted Notes the representations and warranties of the
Issuers contained in any agreement (including any underwriting agreement),
contemplated by Section 5(l) hereof cease to be true and correct, (iv) of the
receipt by the Issuers of any notification with respect to the sus-
11
<PAGE>
pension of the qualification or exemption from qualification of a Registration
Statement or any of the Transfer Restricted Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation of any proceeding for such purpose, (v) of the happening of
any event or any information becoming known that makes any statement made in
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(vi) of the Issuers' reasonable determination that a post-effective amendment to
a Registration Statement would be appropriate;
(d) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use their best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification), of any of the Transfer Restricted Notes or
the Exchange Notes (as applicable), to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued,
to use their best efforts to obtain the withdrawal of any such order at the
earliest possible moment;
(e) if a Shelf Registration is filed pursuant to Section 3 hereof and if
requested by the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Transfer Restricted Notes being sold in
connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information relating to
underwriters, if any, any Holder of Transfer Restricted Notes or the plan of
distribution of the Transfer Restricted Notes as the managing underwriter, if
any, or such Holders may reasonably request to be included therein, (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Issuers have received notification of
the matters to be incorporated in such prospectus supplement or post-effective
amendment pursuant to clause (i), and (iii) supplement
12
<PAGE>
or make amendments to such Registration Statement with such information as is
required in connection with any request made pursuant to clause (i);
(f) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Transfer Restricted
Notes and to each such Participating Broker-Dealer who so requests and to
counsel and each managing underwriter, if any, without charge, one conformed
copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits;
(g) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Transfer Restricted
Notes, or each such Participating Broker-Dealer, as the case may be, its
counsel, and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of preliminary Prospectus), and
each amendment or supplement thereto and any documents incorporated by reference
therein, as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5 hereof, the Issuers hereby consent to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Notes or each such Participating Broker-Dealer,
as the case may be, and their underwriters or agents, if any, and dealers, if
any, in connection with the offering and sale of the Transfer Restricted Notes
covered by or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to such Prospectus and any amendment or supplement thereto;
(h) prior to any public offering of Transfer Restricted Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use their best efforts to register or qualify, and to
cooperate with the selling Holders of Transfer Restricted Notes or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification), of such Transfer
Restricted Notes for offer and sale
13
<PAGE>
under the securities or Blue Sky laws of such jurisdictions as any selling
Holder, Participating Broker-Dealer, or the managing underwriters reasonably
request in writing; keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Exchange Notes held by Participating Broker-Dealers or the Transfer Restricted
Notes covered by the applicable Registration Statement; provided that the
Issuers shall not be required to (A) qualify generally to do business in any
jurisdiction where they are not then so qualified, (B) take any action that
would subject them to general service of process in any such jurisdiction where
they are not then so subject or (C) subject them to taxation in any such
jurisdiction where they are not so subject;
(i) if a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Transfer Restricted Notes and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company ("DTC"), and enable such
Transfer Restricted Notes to be in such denominations and registered in such
names as the managing underwriters, if any, or Holders may reasonably request at
least two Business Days prior to any sale of the Transfer Restricted Notes;
(j) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the expense of the
Issuers, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Transfer Restricted Notes
being sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
14
<PAGE>
(k) prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Notes, (i) provide the Trustee with
certificates for the Transfer Restricted Notes in a form eligible for deposit
with DTC and (ii) use their best efforts to provide a CUSIP number for the
Transfer Restricted Notes;
(l) in connection with an underwritten offering of Transfer Restricted
Notes pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings and take all such other actions as are
reasonably requested by the managing underwriters in order to expedite or
facilitate the registration or the disposition of such Transfer Restricted
Notes, and in such connection, (i) make such representations and warranties to
the underwriters, with respect to the business of the Issuers, the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Issuers and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public accountants
with respect to any business for which financial statements and financial data
are, or are required to be, included in the Registration Statement), addressed
to each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as are reasonably requested
by underwriters as permitted by Statement on Auditing Standards No. 72; and (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set forth
in Section 7 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of outstanding Transfer
Restricted Notes covered by such Registration Statement and the managing
underwriters or agents), with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder;
(m) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable
15
<PAGE>
Period, make available for inspection by any selling Holder of such Transfer
Restricted Notes being sold, or each such Participating Broker-Dealer, as the
case may be, any underwriter participating in any such disposition of Transfer
Restricted Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the case
may be, or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Issuers
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise any applicable due diligence responsibilities, and cause the
officers, directors and employees of the Issuers and the Company's subsidiaries
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement;
(n) provide an indenture trustee for the Transfer Restricted Notes or the
Exchange Notes, as the case may be, and cause the Indenture to be qualified
under the TIA not later than the effective date of the Exchange Offer or the
first Registration Statement relating to the Transfer Restricted Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Transfer Restricted Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use their best efforts to cause such
trustee to execute, all customary documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner;
(o) comply with all applicable rules and regulations of the SEC and, as
soon as reasonably practicable, make generally available to the holders of
Exchange Notes and the Holders, if any, consolidated earning statements of the
Issuers that satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
(p) If an Exchange Offer is to be consummated, upon delivery of the
Transfer Restricted Notes by Holders to the Issuers (or to such other Person as
directed by the Issuers), in exchange for the Exchange Notes, the Issuers shall
mark, or cause to be marked, on such Transfer Restricted Notes that such
Transfer Restricted Notes are being cancelled in exchange for the Exchange
Notes; in no event shall such Transfer Restricted Notes be marked as paid or
otherwise satisfied.
(q) cooperate with each seller of Transfer Restricted Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Transfer Restricted Notes and their respective counsel in
connection with any
16
<PAGE>
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD");
(r) use their best efforts to take all other steps necessary to effect the
registration of the Transfer Restricted Notes or the Exchange Notes covered by a
Registration Statement contemplated hereby; and
(s) use their best efforts to cause the Transfer Restricted Notes or the
Exchange Notes, as applicable, covered by an effective registration statement
required by Section 2 or Section 3 hereof to be rated with the appropriate
rating agencies, if so requested by the managing underwriters in connection
therewith, if any.
The Issuers may require each seller of Transfer Restricted Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Transfer Restricted Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, as the
Issuers may, from time to time, reasonably request. The Issuers may exclude from
such registration the Transfer Restricted Notes or Exchange Notes of any seller
or Participating Broker-Dealer, as the case may be, who fails to furnish such
information within a reasonable time after receiving such request.
Each Holder of Transfer Restricted Notes and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Notes or
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, that, upon receipt of any notice from the Issuers of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi)
hereof, such Holder shall forthwith discontinue disposition of such Transfer
Restricted Notes covered by such Registration Statement or Prospectus or such
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof, or until it is advised in
writing by the Issuers that the use of the applicable Prospectus may be resumed,
and has received copies of any amendments or supplements thereto.
17
<PAGE>
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers, whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Transfer Restricted Notes or Exchange Notes and
determination of the eligibility of the Transfer Restricted Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the Holders
of Transfer Restricted Notes are located, in the case of the Exchange Notes, or
(y) as provided in Section 5(h) hereof, in the case of Transfer Restricted Notes
or Exchange Notes to be sold by a Participating Broker-Dealer during the
Applicable Period)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Transfer Restricted Notes or Exchange
Notes in a form eligible for deposit with DTC and of printing Prospectuses if
the printing of Prospectuses is requested by the managing underwriters, if any,
or, in respect of Transfer Restricted Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Notes included
in any Registration Statement or of such Exchange Notes, as the case may be),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuers, (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(l)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) rating agency fees, (vii)
Securities Act liability insurance, if the Issuers desire such insurance, (viii)
fees and expenses of all other Persons retained by either of the Issuers, (ix)
internal expenses of the Issuers (including, without limitation, all salaries
and expenses of officers and employees of the Issuers performing legal or
accounting duties), (x) the expense of any annual audit and (xi) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange. Nothing contained in this Section 6 shall
create an obligation on the part of the Issuers to pay or reimburse any Holder
for any underwriting commission or discount attributable to any such Holder's
Transfer Restricted Notes included in an underwritten offering pursuant to a
Registration Statement filed in accordance with the terms of this Agreement, or
to guarantee such Holder any profit or proceeds from the sale of such Notes.
18
<PAGE>
(b) In connection with any Shelf Registration hereunder, the Issuers shall
reimburse the Holders of the Transfer Restricted Notes being registered in such
registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel), chosen by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Notes to be
included in such Registration Statement.
7. Indemnification
The Issuers, jointly and severally, agree to indemnify and hold harmless
(i) each Initial Purchaser or each Holder of Transfer Restricted Notes, each
initial Holder of Exchange Notes and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act), any such Person (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees,
representatives and agents of any of such Person or any controlling person (any
person referred to in clause (i), (ii) or (iii) may hereinafter be referred to
as an "Indemnified Person"), to the fullest extent lawful, from and against any
and all losses, claims, damages, judgments, actions, out-of-pocket expenses, and
other liabilities (the "Liabilities"), including without limitation and as
incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person, joint or
several, directly or indirectly related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or Prospectus (as amended or
supplemented if the Issuers shall have furnished to such Indemnified Person any
amendments or supplements thereto), or any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
Liabilities arise out of or are based upon (i) any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Indemnified Person furnished to the Issuers or
any underwriter in writing by such Indemnified Person expressly for use therein,
or (ii) any untrue statement contained in or omission from a preliminary
prospectus if a copy of the Prospectus (as then amended or supplemented, if the
Issuers shall have furnished to or on behalf of the Holder participating in the
distribution relating to the relevant Registration Statement any amendments or
supplements thereto) was not sent or given by or on behalf of such Holder to the
19
<PAGE>
person asserting any such Liabilities who purchased Notes, if such Prospectus
(or Prospectus as amended or supplemented) is required by law to be sent or
given at or prior to the written confirmation of the sale of such Notes to such
person and the untrue statement contained in or omission from such preliminary
prospectus was completely corrected in the Prospectus (or the Prospectus as
amended or supplemented). The Issuers shall notify the Holders promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation), or litigation of which it shall have become aware
in connection with the matters addressed by this Agreement which involves the
Issuers or an Indemnified Person.
In connection with any Registration Statement in which a Holder of
Transfer Restricted Notes or a Participating Broker-Dealer is participating,
such Holder of Transfer Restricted Notes or Participating Broker-Dealer agrees,
severally and not jointly, to indemnify and hold harmless each of the Issuers,
each person who controls either or both of the Issuers within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and the
respective partners, directors, officers, members, representatives, employees
and agents of such person or controlling person to the same extent as the
foregoing indemnity from the Issuers to each Indemnified Person, but only with
reference to information relating to such Indemnified Person furnished to the
Issuers in writing by such Indemnified Person expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary Prospectus. The liability of any Indemnified Person pursuant to
this paragraph shall in no event exceed the net proceeds received by such
Indemnified Person from sales of Transfer Restricted Notes giving rise to such
obligations.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Party"), shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person"), in writing of the commencement thereof (but the failure to so notify
an Indemnifying Person shall not relieve it from any liability which it may have
under this Section 7), and the Indemnifying Person, upon request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding. Notwithstanding the foregoing, in any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party,
unless
20
<PAGE>
(i) the Indemnifying Person and the Indemnified Party shall have mutually agreed
in writing to the contrary, (ii) the Indemnifying Person failed within a
reasonable time after notice of commencement of the action to assume the defense
and employ counsel reasonably satisfactory to the Indemnified Party or (iii) the
named parties to any such action (including any impleaded parties), include both
such Indemnified Party and the Indemnifying Person, or any affiliate of the
Indemnifying Person, and such Indemnified Party shall have been reasonably
advised by counsel that, either (x) there may be one or more legal defenses
available to it which are different from or additional to those available to the
Indemnifying Person or such affiliate of the Indemnifying Person or (y) a
conflict may exist between such Indemnified Party and the Indemnifying Person or
such affiliate of the Indemnifying Person (in which case the Indemnifying Person
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Person
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel), for
all such indemnified parties, which firm shall be designated in writing by those
indemnified parties who sold a majority in outstanding aggregate principal
amount of Transfer Restricted Notes sold by all such indemnified parties and any
such separate firm for the Issuers, their directors, their officers and such
control persons of the Issuers as shall be designated in writing by the Issuers.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Party
from and against any loss or liability by reason of such settlement or judgment.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is for any reason held to be unavailable to an Indemnified Party
in respect of any Liabilities referred to therein (other than by reason of the
exceptions provided therein) or is insufficient to hold harmless a party
indemnified thereunder, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Party thereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Liabilities
(i) in such proportion as is
21
<PAGE>
appropriate to reflect the relative benefits of the Indemnified Party on the one
hand and the Indemnifying Person(s) on the other in connection with the
statements or omissions that resulted in such Liabilities, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Indemnifying
Person(s) and the Indemnified Party, as well as any other relevant equitable
considerations. The relative fault of the Issuers on the one hand and any
Indemnified Persons on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuers or by such Indemnified Persons and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if such
indemnified parties were treated as one entity for such purpose), or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of any Liabilities referred
to in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 7, in
no event shall an Indemnified Person be required to contribute any amount in
excess of the amount by which proceeds received by such Indemnified Person from
sales of Transfer Restricted Notes or Exchange Notes exceeds the amount of any
damages that such Indemnified Person has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 7, each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act) an Initial Purchaser, a Holder of Transfer Restricted Notes, an initial
Holder of Exchange Notes or a Participating Broker-Dealer shall have the same
rights to contribution as such Initial Purchaser, such Holder of Transfer
Restricted Notes, such initial Holder of Exchange Notes or such Participating
Broker-Dealer, as the case may be, and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) the
Issuers, and each officer, director, partner, employee, representative, agent or
manager of the Issuers shall have the same rights to contribution as the
Issuers. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for
22
<PAGE>
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 7 or
otherwise. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7 will
be in addition to any liability which the indemnifying parties may otherwise
have to the indemnified parties referred to above. The Indemnified Persons'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective principal amount of Notes sold by each of the Indemnified
Persons hereunder and not joint.
8. Rules 144 and 144A
The Issuers covenant that they will file the reports required to be filed
by them pursuant to the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Issuers are not required to file such reports, they will, upon the request
of any Holder of Transfer Restricted Notes, make available information required
by Rule 144 and Rule 144A under the Securities Act in order to permit sales
pursuant to Rule 144 and Rule 144A. The Issuers further covenant that they will
take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
and Rule 144A or (b) any similar rule or regulation hereafter adopted by the
SEC.
9. Underwritten Registrations
(a) If any of the Transfer Restricted Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Notes included in such offering and shall be reasonably
acceptable to the Issuers.
23
<PAGE>
No Holder of Transfer Restricted Notes may participate in any underwritten
registration hereunder, unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
(b) Each Holder of Transfer Restricted Notes agrees, if requested
(pursuant to a timely written notice), by the managing underwriters in an
underwritten offering or by a placement agent in a private offering of the
Issuers' debt securities, not to effect any private sale or distribution
(including a sale pursuant to Rule 144(k) or Rule 144A under the Securities Act,
but excluding non-public sales to any of its affiliates, officers, directors,
employees and controlling persons), of any of the Notes except pursuant to an
Exchange Offer, during the period beginning 10 days prior to, and ending 90 days
after, the closing date of the underwritten offering.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Notes if such Holder is prevented by applicable statute or regulation
from entering into any such agreement.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Issuers of any of their
obligations under this Agreement, each Holder of Transfer Restricted Notes and
each Participating Broker-Dealer holding Exchange Notes, in addition to being
entitled to exercise all rights provided herein, in the Indenture or, in the
case of the Initial Purchasers, in the Purchase Agreement, or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. Subject to Section 4, the Issuers agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by them of any of the provisions of this Agreement and hereby
further agree that, in the event of any action for specific performance in
respect of such breach, they shall waive the defense that a remedy at law would
be adequate.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to or departures from the provisions hereof may not be
given, unless the Issuers have obtained the written consent of holders of at
least a majority of the then outstanding aggregate principal amount of Transfer
24
<PAGE>
Restricted Notes and Exchange Notes held by Participating Broker-Dealers taken
as one class. Notwithstanding the foregoing, a waiver or consent to or departure
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders and Participating Broker-Dealers holding Exchange Notes
whose securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect, impair, limit or compromise the rights
of other Holders and Participating Broker-Dealers holding Exchange Notes may be
given by holders of at least a majority in aggregate principal amount of the
Transfer Restricted Notes and Exchange Notes held by Participating
Broker-Dealers being sold by such Holders and Participating Broker-Dealers
pursuant to such Registration Statement; provided that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee), provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted Notes, at the most current
address given by the Trustee to the Issuers; and
(ii) if to the Issuers, c/o Waterford Gaming, L.L.C., 914 Hartford
Turnpike, P.O. Box 715, Waterford, CT 06385 Attention: Len Wolman, with a
copy to Latham & Watkins, 885 Third Avenue, New York, New York 10022,
Attn: Raymond Lin.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; one Business Day after
being timely delivered to a nationally recognized next-day air courier, if made
by next-day air courier; and when receipt is acknowledged by the addressee, if
telecopied on a Business Day on such Business Day, if not on a Business Day, on
the first Business Day thereafter.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
25
<PAGE>
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto,
including, without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Notes. The Issuers agree that the
Holders of Transfer Restricted Notes and Participating Broker-Dealers holding
Exchange Notes shall be third party beneficiaries to the agreements made
hereunder by the Initial Purchasers and the Issuers, and each Holder and
Participating Broker-Dealer shall have the right to enforce such agreements
directly to the extent it deems such enforcement necessary or advisable to
protect its rights hereunder.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
26
<PAGE>
(h) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties hereto that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties hereto as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(j) Notes Held by the Issuers or its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Transfer Restricted Notes is
required hereunder, Transfer Restricted Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act), shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Survival. This Agreement is intended to survive the consummation of
the transactions contemplated by the Purchase Agreement. The indemnification and
contribution obligations under Section 7 of this Agreement shall survive the
termination of the Issuers' obligations under Sections 2 and 3 of this
Agreement.
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WATERFORD GAMING, L.L.C.
By:/s/ Len Wolman
------------------------------------
Name: Len Wolman
Title: Cheif Executive Officer
WATERFORD GAMING FINANCE CORP.
By: /s/ Len Wolman
------------------------------------
Name: Len Wolman
Title: President
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: Bear, Stearns & Co. Inc.
By:/s/ Philip Berney
Name: Philip Berney
Title: Managing Director
- --------------------------------------------------------------------------------
NOTE PLEDGE AGREEMENT
between
Waterford Gaming, L.L.C.
(a Delaware Limited Liability Company)
and
Fleet National Bank
as Trustee for
the holders of the
12 3/4% Senior Notes due 2003
of
Waterford Gaming, L.L.C.
and
Waterford Gaming Finance Corp.
________________________
Dated as of November 8, 1996
________________________
- --------------------------------------------------------------------------------
<PAGE>
NOTE PLEDGE AGREEMENT
NOTE PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of November 8,
1996, by and between Waterford Gaming, L.L.C., a Delaware limited liability
company (the "Company"), and Fleet National Bank, in its capacity as trustee
(the "Trustee") under the Indenture, dated as of November 8, 1996 (the
"Indenture"), relating to the 12 3/4% Senior Notes due 2003 (the "Securities")
issued by the Company and Waterford Gaming Finance Corp. ("Finance"). As used
herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Indenture.
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture and the Purchase Agreement, dated
November 5, 1996, among the Company, Finance and the initial purchasers named
therein, the Company and Finance issued and sold $65 million aggregate principal
amount of the Securities;
WHEREAS, the Company is using proceeds of the sale of the Securities to
purchase $19.15 million in principal amount of, and is receiving a dividend of
$850,000 principal amount of, 15% Subordinated Notes due 2003 (all of such
Subordinated Notes, the "Original Subordinated Notes") of the Mohegan Tribal
Gaming Authority (the "Authority");
WHEREAS, the Company intends to purchase up to an additional $7.5 million
in principal amount of the Authority's Floating Rate Subordinated Notes due 2003
(any and all of such Floating Rate Subordinated Notes, the "Additional
Subordinated Notes" and, together with the Original Subordinated Notes, the
"Subordinated Notes");
WHEREAS, in order to secure the payment and performance of the obligations
of the Company and Finance under the Indenture (the "Obligations"), the Company
desires to pledge by this Pledge Agreement all of its right, title and interest
in the Subordinated Notes to the Trustee; and
WHEREAS, the parties hereto desire to set forth their mutual understanding
and certain agreements regarding the terms and conditions of the pledge of the
Subordinated Notes made by the Company to the Trustee for the
1
<PAGE>
benefit of the Holders and certain agreements between the Company and the
Trustee relative to such pledge.
NOW, THEREFORE, in consideration of the premises and other benefits to the
Company, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Pledge. As collateral security for payment and performance in full of
the Obligations, in accordance with their respective terms, the Company hereby
pledges, hypothecates, assigns, transfers, sets over and delivers unto the
Trustee, and hereby grants unto the Trustee for the benefit of the Holders, and
unto its successors and assigns, a continuing security interest in all of the
right, title and interest of the Company in, to and under any and all of the
following described property, rights and interests and any and all documents
evidencing such property, rights and interests (collectively, the "Pledged
Collateral"), to be held and administered by the Trustee in accordance with the
provisions hereof and of Article X of the Indenture:
(a) the Subordinated Notes, including all renewals, extensions,
modifications and replacements of the same and all distributions thereon and
proceeds (as defined in Section 9-306 of the Uniform Commercial Code) thereof,
and without limiting the generality of the foregoing, the present, continuing
and future right to make claim for, collect or cause to be collected, receive or
cause to be received directly from the Authority all payments of principal,
premiums, if any, interest and other sums of money payable thereunder; and
(b) any substituted or additional property required to be supplied
under the terms of this Pledge Agreement.
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights,
titles, interests, powers, privileges and preferences pertaining or incidental
thereto, unto the Trustee for the benefit of the Holders, and unto their
respective successors and assigns; subject, however, to the terms, covenants and
conditions hereinafter set forth.
2. Representations, Warranties and Covenants of the Finance Company. The
Company hereby represents and warrants, covenants and agrees that:
2
<PAGE>
(a) Except for the security interest granted hereunder to the
Trustee for the benefit of the Holders, the Company is the legal and equitable
owner of the Pledged Collateral, holds the same free and clear of all liens,
claims, charges, encumbrances and security interests of every kind and nature
and has not made and will not make any other pledge, assignment, mortgage,
hypothecation or transfer of the Pledged Collateral.
(b) The Company has valid right and legal authority to pledge the
Pledged Collateral in the manner hereby done or contemplated and will defend its
title thereto against the claims of all persons whomsoever and shall maintain
and preserve the security interest granted hereunder with respect to the Pledged
Collateral as long as this Pledge Agreement shall remain in full force and
effect.
(c) Neither the execution and delivery of this Pledge Agreement by
the Company nor the consummation of the transactions herein contemplated nor the
fulfillment of the terms hereof violate or will violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease, instrument or
other document to which the Company is a party, or conflict or will conflict
with any law, order, rule or regulation applicable to the Company of any court
or any government, regulatory body or administrative agency or any other
governmental body having jurisdiction over the Company or its properties or
assets, which violation or conflict would have a material adverse effect on the
business or condition of the Company taken as a whole or on the value of the
Pledged Collateral.
(d) No consent or approval which has not been obtained prior to the
date hereof of any governmental body or regulatory authority was or is necessary
as a condition to the pledge hereunder of the Pledged Collateral, and such
pledge is effective to vest in the Trustee the rights of the Trustee in the
Pledged Collateral as set forth herein.
(e) The Company shall deliver the Original Subordinated Notes to the
Trustee concurrently with the execution of this Pledge Agreement and each other
item of Pledged Collateral, including without limitation, the Additional
Subordinated Notes, immediately upon the Company's acquisition thereof. Upon
delivery to the Trustee, any and all Pledged Collateral shall be accompanied by
such endorsements, instruments or documents necessary to perfect the pledge
hereunder of such Pledged Collateral or as reasonably requested by the Trustee.
The Trustee shall have the right (but not the obligation) to hold the
Subordinated
3
<PAGE>
Notes and any other documents representing the Pledged Collateral in its own
name or in the name of its nominee, all in form and substance sufficient to make
effective the pledge hereunder and otherwise satisfactory to the Trustee.
(f) The Company shall pay and discharge all taxes, assessments and
governmental charges or levies against any Pledged Collateral prior to
delinquency thereof and shall keep all Pledged Collateral free of all unpaid
charges whatsoever, unless contested in good faith and appropriate reserves have
been set aside in accordance with generally accepted accounting principles.
(g) Subject to Sections 4 and 14 of this Pledge Agreement, for so
long as any of the Securities shall remain outstanding, the Company shall take
no action discharging, cancelling, extinguishing or otherwise impairing its
right, title and interest in and to any of the Pledged Collateral in
contravention of the terms of the Indenture.
3. Administration of the Pledged Collateral. The Trustee shall administer
the Pledged Collateral in accordance with and subject to the provisions hereof
and of the Indenture and the other Collateral Agreements.
4. Release and Substitution of Collateral. The Pledged Collateral shall
not be released from the security interest created hereunder and no property
shall be substituted for any of the Pledged Collateral except in accordance with
the provisions of this Section 4 and Section 14 of this Pledge Agreement.
Upon either (a) a redemption of Subordinated Notes in accordance with
their terms or (b) the acceptance by the Company of a Remaining Excess Cash
Purchase Offer in accordance with Section 4.15 of the Indenture, the Trustee
shall deliver to the Authority, in the case of clause (a), that principal amount
of Subordinated Notes identified in the notice of redemption and, in the case of
clause (b), that principal amount of Subordinated Notes certified by the Company
to the Trustee as those Subordinated Notes required to be tendered under the
Indenture. At the time of such delivery, this Pledge Agreement shall no longer
constitute a lien on or grant any security interest in the Subordinated Notes
tendered, provided that the proceeds are deposited in the Account (as defined in
the Cash Collateral and Disbursement Agreement of even date herewith between the
Company, the Trustee and the disbursement agent identified therein (the "Cash
Collateral Account")). In the event that the Subordinated Notes held by the
Trustee are in denominations larger that the principal amount of Subordinated
4
<PAGE>
Notes to be redeemed or purchased, the Trustee may tender such Subordinated
Notes provided that the new Subordinated Notes issued with respect to the
principal amount of Subordinated Notes not redeemed or purchased are returned to
the Trustee to be held as Pledged Collateral.
5. Default; Remedies.
(a) Defined. For purposes of this Pledge Agreement, the terms
"Default" and "Event of Default" shall have the respective meanings provided in
the Indenture.
(b) Remedies Generally. The Trustee shall be entitled to sue for,
enforce payment of and receive any and all amounts due from the Authority for
principal and interest on the Subordinated Notes, or any other sums due under
the Pledged Collateral, with interest on overdue payments of such principal, and
interest on overdue installments of interest, to the extent lawful, at the rate
or rates set forth in the Subordinated Notes. If an Event of Default shall have
occurred and be continuing, the Trustee may retain the Pledged Collateral or
sell, assign, transfer, endorse and deliver the whole or, from time to time, any
part of the Pledged Collateral at public or private sale, for cash, upon credit
or for other property, for immediate or future delivery, and for such price or
prices and on such other terms as are reasonably satisfactory to the Trustee.
Upon consummation of any such sale, the Trustee shall have the right to assign,
transfer, endorse and deliver to the purchaser thereof the Pledged Collateral so
sold. Any such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Company, and the
Company hereby waives (to the extent permitted by law) all rights of redemption,
stay or appraisal which the Company now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted. The
Trustee shall give the Company five (5) days' written notice (which the Company
agrees shall be deemed to be reasonable notification within the meaning of
Section 9-504(3) of the relevant Uniform Commercial Code) of the Trustee's
intention to make any such public or private sale. Any such sale shall be held
at such time or times and at such place or places as the Trustee may fix. The
Trustee shall not be obligated to make any sale of the Pledged Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of the
Pledged Collateral may have been given. The Trustee may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case sale of the Pledged
5
<PAGE>
Collateral is made on credit or for future delivery, the Pledged Collateral so
sold may be retained by the Trustee until the sale price is paid by the
purchaser or purchasers thereof, but the Trustee shall not incur any liability
in case any such purchaser or purchasers shall fail to take up and pay for the
Pledged Collateral so sold and, in case of any such failure, such Pledged
Collateral may be sold again upon like notice. As an alternative to exercising
the power of sale herein conferred upon it, the Trustee may proceed by suit or
suits at law or in equity to foreclose this Pledge Agreement and sell the
Pledged Collateral pursuant to judgment or decree of a court or courts having
competent jurisdiction.
(c) Preventing Impairment of the Pledged Collateral. Regardless of
whether or not there shall have occurred any Default or Event of Default, the
Trustee may institute and maintain or cause in the name of the Company or the
Trustee, or both, to be instituted and maintained, such suits and proceedings as
the Trustee may be advised by its counsel shall be necessary or expedient to
prevent any impairment of the Pledged Collateral in contravention of the terms
of the Indenture.
6. Trustee Appointed Attorney-in-Fact. The Company hereby constitutes and
appoints the Trustee its attorney-in-fact for the purpose of carrying out the
provisions, but subject to the terms and conditions, of this Pledge Agreement
and taking any action and executing any instrument that the Trustee may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, but subject to the terms and conditions of this Pledge Agreement, the
Trustee shall have the right (but not the obligation), with full power of
substitution, either in the Trustee's name or in the name of the Company, to ask
for, demand, sue for, collect, receive, and give acquittance for any and all
monies due or to become due under or by virtue of any Pledged Collateral, to
endorse checks, drafts, orders and other instruments for the payment of money
payable to the Trustee for the benefit of the Holders, representing any
distribution payable in respect of the Pledged Collateral or any part thereof or
on account thereof and to give full discharge for the same, to settle,
compromise, prosecute or defend any action, claim or proceeding with respect
thereto, and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Trustee to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by it, or to present or file any claim or notice, or to
take any action with respect to the Pledged Collateral or any part thereof or
the monies due or to become due in respect
6
<PAGE>
thereof or any property covered thereby, and no action taken or omitted to be
taken by the Trustee with respect to the Pledged Collateral shall give rise to
any defense, counterclaim or right of offset in favor of the Company or to any
claim or right of action against the Trustee, unless the Trustee's actions are
taken or omitted to be taken with gross negligence or bad faith or constitute
willful misconduct.
7. Purchase of Pledged Collateral by the Trustee or the Secured Creditors.
At any sale of the Pledged Collateral, whether pursuant to power of sale or
otherwise hereunder, the Trustee or any Holder may, to the extent permitted by
applicable law, bid for and purchase, free from any right of redemption, stay or
appraisal (all such rights being hereby waived and released by the Company to
the extent permitted by law), the Pledged Collateral or any part thereof or any
interest therein and upon compliance with the terms of such sale may hold,
retain, exploit, resell or otherwise dispose of such property without further
accountability to the Company for the proceeds of such sale. The Company will
execute and deliver, or cause to be executed and delivered, such instruments,
endorsements, assignments, waivers, certificates and other documents and take
such further action as the Trustee shall request in connection with any such
sale.
8. Application of Proceeds of Sale and Cash. The proceeds of any sale of
the Pledged Collateral, together with any other monies held by the Trustee under
the provisions of this Pledge Agreement, shall be applied by the Trustee in
accordance with the provisions of the Indenture and the other Collateral
Agreements. All Revenues (as defined below) due and to become due under or
pursuant to the Pledged Collateral shall be deposited by the Company in
accordance with the provisions of the Cash Collateral and Disbursement
Agreement, except during the continuation of a Default or Event of Default, in
which case it shall be paid by the Company directly to the Trustee. As used
herein, the term "Revenues" shall mean (x) all amounts paid or payable to the
Company by the Authority under or upon redemption or repurchase of the
Subordinated Notes and (y) the net proceeds realized upon or as a result of the
enforcement of the security interest granted under this Pledge Agreement or upon
or as a result of the exercise of any right or remedy under the Pledged
Collateral or this Pledge Agreement.
9. Waiver of Claims. Except as otherwise provided in this Pledge
Agreement, THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE OF JUDICIAL HEARING IN CONNECTION WITH THE TRUSTEE'S TAKING POSSESSION OR
THE TRUSTEE'S DISPOSITION OF ANY OF THE PLEDGED COLLATERAL,
7
<PAGE>
INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICES AND HEARINGS FOR ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT IT WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and, to the full extent permitted by applicable law, the hereby
further waives:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the Trustee's gross negligence, bad faith
or willful misconduct;
(b) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Trustee's rights
and powers hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
marshalling of assets, extension or moratorium, existing at law or in equity, by
statute or otherwise, now or hereafter in force, in order to prevent or delay
the enforcement of this Pledge Agreement or the sale or other disposition of the
Pledged Collateral or any portion thereof, and the Company, for itself and all
who may claim under it, insofar as it now or hereafter lawfully may, hereby
waives all such rights.
Any sale of, or exercise of any options to purchase, or any other
realization upon, any Pledged Collateral shall operate to divest all right,
title, interest, claim and demand, at law or in equity, of the Company therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Company and against any and all persons claiming or attempting to claim the
Pledged Collateral so sold, optioned or realized upon, or any part thereof,
through and under the Company.
10. Remedies Cumulative; No Waiver. Each right, power and remedy of the
Trustee provided for herein or in any other Collateral Agreement or the
Indenture, or now or hereafter existing at law or in equity, by statute or
otherwise, shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy of the Trustee, or the Holders in any other
Collateral Agreement or the Indenture, or now or hereafter existing at law or in
equity, by statute or otherwise. No failure on the part of the Trustee or the
Holders to exercise, and no delay in exercising, any right, power or remedy
hereunder or under any other Collateral Agreement or the Indenture, or now or
hereafter
8
<PAGE>
existing at law or in equity, by statute or otherwise, shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. No notice to or demand on the Company hereunder
shall, of itself, entitle the Company to any other or further notice or demand
in the same, similar or other circumstances.
11. Additional Collateral. Without notice or consent of the Company and
without impairment of the security interest and rights created by this Pledge
Agreement, the Trustee may accept from any person or persons additional
collateral or other security for the Obligations. Neither the creation of the
security interest created hereunder nor the acceptance of any such additional
collateral or security shall prevent the Trustee from resorting to such
additional collateral or security or to the Pledged Collateral, in any order
without affecting the Trustee's rights hereunder.
12. Further Assurances. The Company agrees (i) that it shall, at its own
expense, file or record such notices, financing statements, continuation
statements, or other documents as may be necessary to perfect the security
interest of the Trustee hereunder, and (ii) that it shall, at its own expense,
do such further acts and things and execute and deliver to the Trustee such
additional conveyances, assignments, agreements and instruments as the Trustee
may at any time reasonably request in connection with the administration and
enforcement of this Pledge Agreement or relative to the Pledged Collateral or
any part thereof or in order to assure and confirm unto the Trustee its rights,
powers and remedies hereunder.
13. Indemnification. The Trustee shall be entitled to indemnification as
set forth in Section 6.7 the Indenture.
14. Termination. At such time as the Indebtedness under the Securities
shall be fully paid or there has been redemption of all the outstanding
Securities or defeasance of the Securities in accordance with the provisions of
the Indenture, including Section 3.1 and Article VII thereof, this Pledge
Agreement shall terminate and the Trustee shall reassign and redeliver to the
Company all of the Pledged Collateral which has not been sold, disposed of,
retained or applied by the Trustee in accordance with the terms hereof and the
Indenture. Such reassignment and redelivery shall be without warranty by or
recourse to the Trustee, and shall be at the expense of the Company. At such
time, this Pledge Agreement shall no longer constitute a lien upon or grant any
security interest in
9
<PAGE>
any of the Pledged Collateral and the Trustee shall, at the Company's expense,
deliver to the Company written acknowledgement thereof and cancellation of this
Pledge Agreement in a form reasonably requested by the Company.
15. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
To the Company: Waterford Gaming, L.L.C.
914 Hartford Turnpike
P.O. Box 715
Waterford, CT 06385
Attn: Len Wolman
To the Trustee: Fleet National Bank
777 Main Street
Hartford, CT 06115
Telephone: (860) 986-2067
Telecopy: (860) 986-7920
Attn: Corporate Trust Department
Any party hereto may, by notice to each other party, designate such additional
or different addresses as shall be furnished in writing by such party. Any
notice or communication to any party shall be deemed to have been given or made
as of the date so delivered, if delivered personally or by courier; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
(5) calendar days after mailing, if sent by registered or certified mail (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee). A copy of any notice given under this
Pledge Agreement to any party shall also be given to each other party hereto.
Any party hereto may give notice to the Holders at the addresses set forth for
them in the register kept by the Registrar under the Indenture or may request
that the Trustee notify them at such addresses.
10
<PAGE>
16. Security Interest Absolute. All rights of the Trustee and security
interests hereunder, and all obligations of the Company hereunder, shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any provision of the
Indenture, the Securities or any Collateral Agreement or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, or any increase in the amount of, all or any of the
Obligations, or any other amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Indenture, the
Securities or any Collateral Agreement;
(iii) any exchange, release or non-perfection of any Lien on any
other collateral, or any release or amendment or waiver of any term of any
guaranty of, or consent to departure from any requirement of any guaranty
of, all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, a borrower or a pledgor.
17. Binding Agreement; Assignment. This Pledge Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Pledge Agreement nor any interest
herein or in the Pledged Collateral, or any part thereof, may be assigned by the
Company. This Pledge Agreement shall be deemed to be automatically assigned by
the Trustee to any person who succeeds to the Trustee as Trustee in accordance
with Section 6.8 of the Indenture, and its assignee shall have all rights and
powers of, and act as, the Trustee hereunder.
18. Governing Law; Jurisdiction. THE PARTIES HERETO EXPRESSLY ACKNOWLEDGE
AND AGREE THAT, IN ACCORDANCE WITH THE PROVISIONS OF NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1401 GOVERNING AGREEMENTS RELATING TO ANY OBLIGATION
ARISING OUT OF A TRANSACTION COVERING IN THE AGGRE-
11
<PAGE>
GATE NOT LESS THAN $250,000, THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR THE PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS PLEDGE AGREEMENT MAY BE BROUGHT IN COURTS OF THE STATE OF
NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS PLEDGE AGREEMENT, EACH PARTY HERETO
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
19. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY WHICH EITHER OF THEM
MIGHT OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE IN ANY LEGAL ACTION OR PROCEEDING BROUGHT WITH RESPECT TO, OR
ARISING OUT OF, THIS PLEDGE AGREEMENT.
20. Amendments. This Pledge Agreement may not be amended or modified,
except in conformity with Sections 8.1 and 8.2(9) of the Indenture.
21. Severability. In the event that any provision contained in this Pledge
Agreement shall for any reason be held to be illegal or invalid under the laws
of any jurisdiction, such illegality or invalidity shall in no way impair the
effectiveness of any other provision hereof, or of such provision under the laws
of any other jurisdiction; provided, that in the construction and enforcement of
such provision under the laws of the jurisdiction in which such holding of
illegality or invalidity exists, and to the extent only of such illegality or
invalidity, this Pledge Agreement shall be construed and enforced as though such
illegal or invalid provision had not been contained herein.
22. Headings. Section headings used herein are inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Pledge Agreement.
12
<PAGE>
23. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
and all of which shall together constitute one and the same instrument. A
complete set of counterparts shall be lodged with the Trustee.
13
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Pledge Agreement to be executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
WATERFORD GAMING, L.L.C.
(a Delaware Limited Liability Compa-
ny), as the Company
By:/s/ Len Wolman
--------------------------------
Name: Len Wolman
Title: Chief Executive Officer
WITNESS: /s/ John Waldron
------------------------
Name: John waldron
/s/ Del J. Lauria
------------------------
Name Del J. Lauria
Fleet National Bank,
as Trustee
By:/s/ Philip G. Kane, Jr.
--------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
WITNESS: /s/ Meera J. Cattafesta
----------------------------
Name: Meera J. Cattafesta
/s/ Tania A. Raiche
----------------------------
Name Tania A. Raiche
14
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
Dated November 8, 1996
Among
Fleet National Bank,
as Trustee,
Fleet National Bank,
as Disbursement Agent,
and
WATERFORD GAMING, L.L.C.
<PAGE>
T A B L E O F C O N T E N T S
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms....................................... 2
ARTICLE II
ESTABLISHMENT OF ACCOUNT;
INITIAL DEPOSITS; PRIORITY RELEASES
SECTION 2.1 Establishment of Account.................................... 3
SECTION 2.2 Deposits to Account......................................... 3
SECTION 2.3 Priority Releases........................................... 3
SECTION 2.4 Security Interest........................................... 3
SECTION 2.5 Appointment of Disbursement Agent........................... 4
SECTION 2.6 Disbursement Agent Is Agent of Trustee...................... 4
SECTION 2.7 Instructions and Entitlement Orders
of Trustee................................................. 5
ARTICLE III
REQUESTING AND MAKING CASH
DISBURSEMENTS FROM THE ACCOUNT
SECTION 3.1 Requesting the Cash Disbursement............................ 5
SECTION 3.2 Making the Cash Disbursement................................. 5
ARTICLE IV
CONDITIONS OF CASH DISBURSEMENTS
FROM THE ACCOUNT
SECTION 4.1 Conditions Precedent to Cash
Disbursements............................................... 6
ARTICLE V
COVENANTS
SECTION 5.1 Covenants of the Company..................................... 7
SECTION 5.2 Covenants of the Disbursement Agent.......................... 9
i
<PAGE>
Page
----
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT
SECTION 6.1 Event of Default............................................ 10
SECTION 6.2 Rights and Remedies Generally............................... 11
SECTION 6.3 Assembly of Collateral...................................... 11
SECTION 6.4 Disposition of Collateral................................... 11
SECTION 6.5 Recourse.................................................... 11
SECTION 6.6 Expenses; Attorneys' Fees................................... 11
SECTION 6.7 Limitation on Duties Regarding
Preservation of Cash Collateral............................ 12
ARTICLE VII
DISBURSEMENT AGENT
SECTION 7.1 Rights, Duties, etc......................................... 13
SECTION 7.2 Resignation or Removal...................................... 14
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc............................................. 15
SECTION 8.2 Notices, Etc................................................ 15
SECTION 8.3 No Waiver; Remedies......................................... 17
SECTION 8.4 Expenses; Indemnity......................................... 17
SECTION 8.5 Execution in Counterparts................................... 18
SECTION 8.6 Relationship of Trustee..................................... 18
SECTION 8.7 Governing Law............................................... 18
SECTION 8.8 Waiver of Jury Trial........................................ 18
SECTION 8.9 Termination................................................. 18
EXHIBIT A REQUEST FOR A CASH DISBURSEMENT.............................A-1
EXHIBIT B FORM OF TRUSTEE'S CERTIFICATE...............................B-1
ii
<PAGE>
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
CASH COLLATERAL AND DISBURSEMENT AGREEMENT, dated November 8, 1996, among
Fleet National Bank, as trustee for the Holders (in such capacity, together with
its successor in trust, if any, appointed pursuant to the Indenture referred to
below, the "Trustee"), under an Indenture dated the date hereof (such Indenture
as amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof, the "Indenture"), Waterford Gaming, L.L.C. (the
"Company"), and Fleet National Bank, as Disbursement Agent for the Trustee (the
"Disbursement Agent").
PRELIMINARY STATEMENTS:
(1) The Company has entered into the Indenture pursuant to which it will
issue $65,000,000 of its 12 3/4% Senior Notes due 2003 (the "Notes").
(2) As security for the prompt and complete payment and performance in
full of the Obligations under the Indenture, the Company intends to grant to the
Trustee a security interest in, among other things, the Cash Collateral.
(3) The Disbursement Agent has agreed to take such action with respect to
the Account as specified herein.
(4) This Cash Collateral and Disbursement Agreement is a condition to the
issuance of the Notes under the terms of the Purchase Agreement, dated November
5, 1996, by and among the Company, Waterford Gaming Finance Corp. and the
initial purchasers named therein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. Capitalized terms used but not defined
herein and in any schedules and exhibits hereto shall have the meanings set
forth in the Indenture. In addition, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Account" has the meaning specified in Section 2.1.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banks in Connecticut are authorized or
obligated by law to close.
"Cash Collateral" has the meaning specified in Section 2.4.
"Cash Disbursement" means a disbursement to the Trustee or as
directed by the Company.
"Cash Disbursement Date" has the meaning specified in Section 3.1.
"Closing Date" means November 8, 1996.
"Company" means Waterford Gaming, L.L.C.
"Disbursement Agent" has the meaning specified in the recital of
parties.
"Indenture" has the meaning specified in the recital of parties.
"Notes" has the meaning specified in the Preliminary Statements
hereto.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political
subdivision or agency thereof.
2
<PAGE>
"Request for a Cash Disbursement" has the meaning specified in
Section 3.1.
"Trustee" shall have the meaning set forth in the recitals of the
parties.
ARTICLE II
ESTABLISHMENT OF ACCOUNT;
INITIAL DEPOSITS; PRIORITY RELEASES
SECTION 2.1 Establishment of Account. There is hereby established with
Fleet National Bank a custodial account under the sole dominion and control of
the Trustee (the "Account"). The Account shall clearly indicate on the title
thereof that it is the account of Fleet National Bank, as trustee for the
holders of 12 3/4% Senior Notes due 2003 of Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp.
SECTION 2.2 Deposits to Account. The initial deposit to the Account shall
be $62,725,000. The Company at any time shall make contributions to the Account
consistent with the terms of the Indenture.
SECTION 2.3 Priority Releases. Funds in the Account shall be released by
the Disbursement Agent to any account specified by the Trustee, upon receipt of
a Trustee's Certificate substantially in the form of Exhibit B hereto,
certifying that such amounts will promptly be used for the purpose of making any
required payment of principal or interest or Liquidated Damages to Noteholders,
provided that the applicable notice shall have been given and the applicable
cure periods shall have expired, in each case as provided for in the Indenture.
SECTION 2.4 Security Interest. As security for the prompt and complete
payment and performance in full of all the Obligations, the Company hereby
pledges and assigns to the Trustee for the equal and ratable benefit of the
Holders, and grants to the Trustee for the equal and ratable benefit of the
Holders an exclusive first priority security interest in all of its right, title
and interest in the following collateral (the "Cash Collateral"):
3
<PAGE>
(a) the Account, all funds, investments and securities held therein
or credited thereto, whether by book-entry or other form, and all certificates
and instruments, if any, from time to time representing or evidencing the
Account;
(b) all investments from time to time credited to the Account, and
all certificates and instruments, if any, held therein from time to time
representing or evidencing Cash Equivalents;
(c) all notes, certificates of deposits, deposit amounts, checks and
other instruments from time to time hereafter delivered to or otherwise
possessed by the Disbursement Agent for or on behalf of the Trustee for the
benefit of the Holders;
(d) all interest, dividends, cash and instruments from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing; and
(e) all proceeds of any and all of the foregoing.
SECTION 2.5 Appointment of Disbursement Agent. The Trustee hereby appoints
Fleet National Bank to act as the Disbursement Agent in connection with this
Agreement, and to take all actions necessary or appropriate on behalf of the
Trustee in order to comply with the terms of this Agreement.
SECTION 2.6 Disbursement Agent Is Agent of Trustee. Subject to the
limitations as to the duties and liabilities of the Disbursement Agent set forth
below, (a) the Trustee hereby appoints the Disbursement Agent as the Trustee's
agent and pledgee-in-possession for the Cash Collateral; and (b) the
Disbursement Agent by its execution and delivery of this Agreement hereby
accepts such appointment and agrees to be bound by the terms of this Agreement.
The Company hereby agrees to such appointment of the Disbursement Agent and
further agrees that the Disbursement Agent, on behalf of the Trustee, shall be
entitled to act upon the instructions of the Trustee pursuant to Sections 2.3
and 2.7 herein. The Disbursement Agent agrees to take such action as shall from
time to time be specified in writing from the Trust-
4
<PAGE>
ee to enable the Trustee to exercise its rights and remedies with respect to the
lien and security interest described in Section 2.4 above.
SECTION 2.7 Instructions and Entitlement Orders of Trustee. The
Disbursement Agent hereby agrees, and the Company hereby acknowledges, that the
Disbursement Agent shall comply with instructions and entitlement orders
(including without limitation, instructions as to the investment, transfer,
redemption or other disposition of the Cash Collateral) originated by the
Trustee without further consent of the Company. Notwithstanding the foregoing,
the Trustee agrees with the Company that any such instruction or entitlement
order shall be consistent with any and all rights that the Trustee may have
under the Indenture and all other agreements and instruments executed pursuant
thereto, or under applicable law, with respect to the Cash Collateral.
ARTICLE III
REQUESTING AND MAKING CASH
DISBURSEMENTS FROM THE ACCOUNT
SECTION 3.1 Requesting the Cash Disbursement. The Company may request that
a Cash Disbursement be made from the Account by delivering notice to the
Disbursement Agent, not later than 11:00 A.M. (New York time) on the second
Business Day prior to the date of the proposed Cash Disbursement, except with
respect to Cash Disbursements made on the Closing Date, which request may be
made on such date. Each such request shall be substantially in the form of
Exhibit A (a "Request for a Cash Disbursement") shall be executed by a duly
authorized officer of the Company and shall specify therein (i) the requested
date of such Cash Disbursement (the "Cash Disbursement Date") and (ii) the
aggregate amount of such Cash Disbursement.
SECTION 3.2 Making the Cash Disbursement. Upon fulfillment of the terms
and conditions set forth herein including, without limitation, the applicable
conditions set forth in Article IV hereof, the Disbursement Agent shall make
payment of each Cash Disbursement, no later than 3:00 P.M. (New York time) on
each Cash Disbursement Date, by deducting the amount of each Cash Dis-
5
<PAGE>
bursement from the Account and depositing such amount in the trust account
maintained with the Trustee for such purpose or as otherwise directed by the
Company with respect to Cash Disbursement not involving payments to the holders
of the Notes, provided that Cash Disbursements on the Closing Date may be made
by checks on the Account of up to $687,211. At least two Business Days prior to
any Cash Disbursement Date, the Company shall instruct the Disbursement Agent to
sell such portion of the Cash Equivalents, if any, held in the Account as shall
be necessary to fund the requested Cash Disbursement.
ARTICLE IV
CONDITIONS OF CASH DISBURSEMENTS
FROM THE ACCOUNT
SECTION 4.1 Conditions Precedent to Cash Disbursements. The Disbursement
Agent shall make Cash Disbursements from the Account upon satisfaction in
connection with each Cash Disbursement of the following conditions:
(a) Documents. The Disbursement Agent shall have received the
following, in form and substance reasonably satisfactory to the Disbursement
Agent:
(i) a Request for a Cash Disbursement in substantially the
form of Exhibit A (including the representations and warranties referred
to in Section 4.1(b) herein); and
(ii) such other instruments, documents, opinions, and
information pertaining to the Cash Disbursement or evidencing compliance
by the Company with the provisions of this Agreement and the Indenture as
the Disbursement Agent may reasonably request.
(b) Representations and Warranties. The giving of each Request for a
Cash Disbursement shall constitute a representation and warranty by the Company
to the Disbursement Agent, the Trustee and the Holders that:
6
<PAGE>
(i) no event has occurred and is continuing, or would result
from such Cash Disbursement or from the application of the proceeds
thereof, that constitutes an Event of Default under the Indenture or would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both; and
(ii) the Company has satisfied all of the conditions herein to
the release of such funds.
(c) Cessation of Disbursements. In the event of an Event of Default,
the Disbursement Agent shall not disburse any additional funds other than to the
Trustee until such event is waived or cured. The Company covenants to promptly
notify the Disbursement Agent of such event, and the Disbursement Agent may rely
on such notification without independent verification.
ARTICLE V
COVENANTS
SECTION 5.1 Covenants of the Company. For so long as this Agreement shall
remain in effect, the Company shall:
(a) Certain Rights. Not claim any rights with respect to the Cash
Collateral except as specifically set forth herein or in accordance with
applicable law.
(b) Further Assurances. From time to time at the expense of the
Company, promptly execute, deliver, file and record all further instruments,
indorsement and other documents, and take such further action as the Trustee may
deem reasonably desirable in obtaining the full benefits of this Agreement and
of the rights, remedies and powers herein granted, including, without
limitation, the following:
7
<PAGE>
(i) the filing of any financing statements, in form sufficient
under the Uniform Commercial Code in effect in any jurisdiction with
respect to the liens and security interests granted hereby. The Company
also hereby authorizes the Trustee to file any such financing statement
without the signature of the Company to the extent permitted by applicable
law. A photocopy or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed in lieu of the
original to the extent permitted by applicable law. The Company will pay
or reimburse the Trustee for all filing fees and related expenses; and
(ii) furnish to the Trustee from time to time statements and
schedules further identifying and describing the Cash Collateral and such
other reports in connection with the Cash Collateral as the Trustee may
reasonably request, all in reasonable detail and in form satisfactory to
the Trustee.
(c) Change of Name; Identity; Corporate Structure; or Chief
Executive Office. Not change its name, identity, corporate structure or the
location of its chief executive office without (i) giving the Trustee and the
Disbursement Agent at least thirty (30) days' prior written notice clearly
describing such new name, identity, corporate structure or new location and
providing such other information in connection therewith as the Trustee may
reasonably request, and (ii) taking all action satisfactory to the Trustee as
the Trustee may reasonably request to maintain the security interest of the
Trustee in the Cash Collateral intended to be granted hereby at all times fully
perfected with the same or better priority and in full force and effect.
(d) Prompt Notice. Upon discovering that it requires funding and is
unable to make the representations and warranties contained herein in connection
with a Request for a Cash Disbursement, promptly notify the Trustee and the
Holders of such event.
(e) Change in Law. In the event that the 1994 Official Text of
Article 8 of the Uniform Commercial
8
<PAGE>
Code or an amended version thereof ("Revised Article 8") becomes law in the
State of Connecticut, within 30 days after the effective date of the adoption of
Revised Article 8 in Connecticut, the Company shall deliver to the Trustee an
opinion of counsel that either (i) the enactment of Revised Article 8 does not
adversely effect the validity, perfection or priority of the security interest
of the Trustee for the benefit of the Holders in the Cash Collateral, and after
giving effect to Revised Article 8, the security interest of the Trustee for the
benefit of the Holders in the Cash Collateral will be entitled to the same
status as a valid and perfected security interest and entitled to the same
priority to which it would otherwise have been entitled immediately prior to
giving effect to Revised Article 8 or (ii) the provisions of the Cash Collateral
and Disbursement Agreement are effective to give the Trustee "control" (as
defined in Revised Article 8) over any "securities entitlements" (as defined in
Revised Article 8). If the opinion contained in clause (ii) is given, the
opinion shall further state that pursuant to Revised Article 8, the provisions
of the Cash Collateral and Disbursement Agreement together with such control are
sufficient to create a valid and perfected security interest in favor of the
Trustee in any such "securities entitlements" and that no other security
interest of any other creditor of the Company will be equal or prior to the
security interest of the Trustee in such securities entitlements.
SECTION 5.2 Covenants of the Disbursement Agent. For so long as this
Agreement shall remain in effect, in addition to its other undertakings, the
Disbursement Agent:
(a) The Account. Shall maintain the Account as follows:
(i) Notwithstanding anything to the contrary in this or any
other agreement relating to the Account, the Account is and will be held
in trust on behalf of the Trustee for the benefit of the Holders and not
commingled with any ordinary deposit or commercial bank account, will be
maintained with the trust department of the Disbursement Agent solely for
the Trustee for the benefit of the Holders and
9
<PAGE>
will be subject to the written instructions of the Trustee.
(ii) Unless otherwise instructed in writing by the Trustee
for the benefit of the Holders, the Disbursement Agent shall invest
amounts on deposit in the Account in Cash Equivalents in accordance with
the written instructions of the Company.
(iii) All disbursements and releases pursuant to this
Agreement shall be made by the Disbursement Agent irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off
and shall be final.
(iv) All service charges and fees with respect to this
Agreement or the Account shall be paid by the Company.
(v) The Disbursement Agent irrevocably waives and renounces
any pledge, security interest (whether consensual, statutory or otherwise)
or right of offset or compensation that it has or may ever have for its
own benefit with respect to the Account.
(b) Books and Records. Shall maintain appropriate books and records
with respect to the Account in which shall be recorded all transactions related
thereto including, without limitation, all disbursements hereunder and any Cash
Equivalents acquired by the Disbursement Agent and shall permit the Trustee or
any of its agents or representatives to inspect and to make copies of such books
and records at the Company's sole cost and expense.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT
SECTION 6.1 Event of Default. For purposes of this Agreement, the term
"Event of Default" shall have the meaning provided in the Indenture and shall
also include any default in the performance, or breach, of any
10
<PAGE>
covenant of the Company set forth in Section 5.1 hereof that continues for 30
days after written notice has been given from the Trustee or from holders of at
least 25% of the aggregate principal amount of the Notes then outstanding,
specifying such default and requiring that it be remedied.
SECTION 6.2 Rights and Remedies Generally. If an Event of Default shall
occur and be continuing, then and in every such case, the Trustee shall have all
the rights of a secured party under the Uniform Commercial Code, shall have all
rights now or hereafter existing under all other applicable laws, and, subject
to any mandatory requirements of applicable law then in effect, shall have all
the rights set forth in this Agreement and all the rights set forth with respect
to the Cash Collateral or this Agreement in any other security agreement
between the parties.
SECTION 6.3 Assembly of Collateral. If an Event of Default shall occur and
be continuing, upon five (5) days' notice to the Company, the Company shall, at
its own expense, assemble the Cash Collateral (or from time to time any portion
thereof) and make it available to the Trustee at any place or places designated
by the Trustee which is reasonably convenient to both parties.
SECTION 6.4 Disposition of Collateral. The Trustee will give the Company
reasonable notice as required by the Uniform Commercial Code, if any of the time
and place of any public sale of the Cash Collateral or any part thereof or of
the time after which any private sale or any other intended disposition thereof
is to be made. The Company agrees that the requirements of reasonable notice to
it shall be met if such notice is mailed, registered or certified mail, to its
address specified in Section 7.2 of this Agreement at least ten (10) days before
the time of any public sale (notwithstanding the time periods contained in
Section 7.2) or after which any private sale may be made.
SECTION 6.5 Recourse. The Company shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Cash Collateral are
insufficient to satisfy the Obligations in accordance with the terms of the
Indenture. The Company shall also be liable for all expenses of the Trustee
incurred in
11
<PAGE>
connection with collecting such deficiency, including, without limitation, the
fees and disbursements of any attorneys employed by the Trustee to collect such
deficiency.
SECTION 6.6 Expenses; Attorneys' Fees. The Company shall reimburse the
Trustee for all its expenses in connection with the exercise of its rights
hereunder, including, without limitation, all reasonable attorneys' fees and
legal expenses incurred by the Trustee. Expenses of retaking, holding, preparing
for sale, selling or the like shall include the reasonable attorneys' fees and
legal expenses of the Trustee. All such expenses shall be secured hereby.
SECTION 6.7 Limitation on Duties Regarding Preservation of Cash
Collateral. (a) The Trustee's sole duty with respect to the custody, safekeeping
and physical preservation of the Cash Collateral in its possession, under
Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with
it in the same manner as the Trustee deals with similar property for its own
account.
(b) The Trustee shall have no obligation to take any steps to
preserve rights against prior parties to any Cash Collateral.
(c) Neither the Trustee nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Cash Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Cash
Collateral upon the request of the Company or otherwise.
(d) Neither the Trustee nor the Disbursement Agent nor any of their
directors, officers, employees or agents shall be liable for disbursements made
in good faith reliance on any certificate provided to either of them pursuant to
the terms of this Agreement; provided, however, that the Trustee, the
Disbursement Agent and their respective directors, officers, employees and
agents shall remain liable for damages caused by disbursements made through
their gross negligence, bad faith or willful misconduct.
12
<PAGE>
ARTICLE VII
DISBURSEMENT AGENT
SECTION 7.1 Rights, Duties, etc. The acceptance by the Disbursement Agent
of its duties hereunder is subject to the following terms and conditions which
the parties to this Agreement hereby agree shall govern and control with respect
to its rights, duties, liabilities and immunities:
(a) it shall act hereunder as a disbursement agent only and shall
not be responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of any funds or securities deposited with
or held by it, except as provided in this Agreement;
(b) it shall be protected in acting upon any written notice,
certificate, instruction, request or other paper or document, as to the due
execution thereof and the validity and effectiveness of the provisions thereof
and as to the truth of any information therein contained, which Disbursement
Agent in good faith believes to be genuine;
(c) it shall not be liable for any error of judgment or for any act
done or step taken or omitted except in the case of its negligence, wilful
misconduct or bad faith;
(d) it may consult with and obtain advice from counsel in the event
of any dispute or question as to the construction of any provision hereof;
(e) it shall have no duties as Disbursement Agent except those which
are expressly set forth herein and in any modification or amendment hereof;
provided, however, that no such modification or amendment hereof shall affect
its duties unless it shall have given its prior written consent thereto;
(f) it may execute or perform any duties hereunder either directly
or through agents or attorneys;
13
<PAGE>
(g) it may engage or be interested in any financial or other
transactions with any party hereto and may act on, or as depository, trustee or
agent for, any committee or body of holders of obligations of such person as
freely as if it were not the Disbursement Agent hereunder; and
(h) it shall not be obligated to take any action which in its
reasonable judgment would involve it in expense or liability unless it has been
furnished with reasonable indemnity.
Notwithstanding anything contained herein to the contrary, the standard of good
faith imposed on the Disbursement Agent under this Agreement shall not impose a
duty upon the Disbursement Agent to undertake any investigation with respect to
any Trustee's Certificate or Request for a Cash Disbursement delivered to the
Disbursement Agent hereunder other than to determine that it is completed in
accordance with the requirements hereof and contains the required attachments
thereto. Any allegation that the Disbursement Agent did not act in good faith,
or that the Disbursement Agent acted in bad faith, shall not result in any
liability to the Disbursement Agent until such allegation is upheld by a court
of competent jurisdiction.
SECTION 7.2 Resignation or Removal. (a) The Disbursement Agent may at any
time resign by giving notice to each other party to this Agreement, such
resignation to be effective upon the appointment of a successor Disbursement
Agent and the delivery of a written instrument accepting such appointment as
hereinafter provided.
(b) The Trustee may remove the Disbursement Agent at any time by
giving notice to each other party to this Agreement, such removal to be
effective upon the appointment of a successor Disbursement Agent and the
delivery of a written instrument accepting such appointment as hereinafter
provided.
(c) In the event of any resignation or removal of the Disbursement
Agent, a successor Disbursement Agent, which shall be a bank or trust company
organized under the laws of the United States of America or any state thereof
and having a capital and surplus of not
14
<PAGE>
less than $100,000,000, shall be appointed by the Company. Any such successor
Disbursement Agent shall deliver to each party to this Agreement, a written
instrument accepting such appointment hereunder, and thereupon such successor
Disbursement Agent shall succeed to all the rights and duties of the
Disbursement Agent hereunder and shall be entitled to receive the Account from
the predecessor Disbursement Agent.
(d) If a successor Disbursement Agent shall not have been appointed
within 30 days after the giving of written notice of such resignation or the
delivery of the written instrument with respect to such removal, the
Disbursement Agent or Trustee may apply to any court of competent jurisdiction
to appoint a successor Disbursement Agent to act until such time, if any, as a
successor shall have been appointed as above provided. Any successor
Disbursement Agent so appointed by such court shall immediately and without
further act be superseded by any successor Disbursement Agent appointed as above
provided within one year from the date of the appointment by such court.
(e) Any person into which the Disbursement Agent may be merged or
converted or within which it may be consolidated, or any person resulting from
any merger, conversion or consolidation to which the Disbursement Agent shall be
a party, or any person to which substantially all the corporate trust business
of the Disbursement Agent may be transferred, shall, subject to the terms of
paragraph (c) above, be the Disbursement Agent under this Agreement without
further act.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No amendment, modification or waiver of any
provision of this Agreement may be made except in accordance with Section 8.1
and 8.2(9) of the Indenture; provided, that any such amendment, modification or
waiver which adversely affects the Disbursement Agent shall require the prior
written consent of the Disbursement Agent.
SECTION 8.2 Notices, Etc. All notices and other communications required or
permitted hereunder
15
<PAGE>
shall be in writing and shall be sufficiently given if made by hand delivery, by
telex, by facsimile or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
To Disbursement Agent:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Telephone: (860) 986-2067
Telecopy: (860) 986-7920
To Trustee:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Telephone: (860) 986-2064
Telecopy: (860) 986-7920
To the Company:
Waterford Gaming, L.L.C.
914 Hartford Turnpike
P.O. Box 715
Waterford, CT 06385
Attention: Len Wolman
with a copy to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Attention: Raymond Lin
Any party hereto may by notice to each other party designate such
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party shall be deemed to have been
given or made as of the date so delivered, if personally delivered or by
courier; when answered back, if telexed; when receipt is acknowledged, if faxed;
and five calendar days after mailing, if sent by registered or certified mail
(except that a notice of change of address
16
<PAGE>
shall not be deemed to have been given until actually received by the
addressee). A copy of any notice given under this agreement to any party shall
also be given to each other party hereto. Any party hereto may give notice to
the Holders at the addresses set forth for them in the register kept by the
Registrar under the Indenture or may request that the Trustee notify them at
such address.
SECTION 8.3 No Waiver; Remedies. No failure on the part of the
Disbursement Agent, the Trustee, or any Holder to exercise, and no delay in
exercising, any right under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
SECTION 8.4 Expenses; Indemnity. The Company will upon demand pay to the
Disbursement Agent or the Trustee the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, that the Disbursement Agent or the Trustee may incur in connection with
(i) the administration of this Agreement, (ii) the exercise or enforcement of
any of the rights of the Disbursement Agent, the Trustee, or the Holders
hereunder or (iii) the failure by the Company to perform or observe any of the
provisions hereof. In addition, the Company hereby assumes liability for and
agrees to indemnify, protect, save and keep harmless the Disbursement Agent and
its respective successors, assigns, agents and servants, from and against any
claim, demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Disbursement Agent's agents and counsel), loss
or liability that may be imposed on, incurred by, or asserted against, at any
time, the Disbursement Agent (whether or not also indemnified against by any
other person under any contract or instrument) and in any way relating to or
arising out of the execution, delivery and performance of this Agreement, the
establishment of the Account, the acceptance of deposits, the purchase or sale
of investments, the retention of cash and investments or the proceeds thereof
and any payment, transfer or other application of cash or investments by the
Disbursement Agent in accordance with the provisions of this Agreement, or as
may arise by reason of any act, omission or error of the Disbursement Agent made
in good faith in the
17
<PAGE>
conduct of its duties; except that the Company shall not be required to
indemnify, protect, save and keep harmless the Disbursement Agent against the
Disbursement Agent's own negligence, active or passive, or wilful misconduct.
The indemnities contained in this Section 8.4 shall survive the termination of
this Agreement.
SECTION 8.5 Execution in Counterparts. This Agreement may be executed in
any number of separate counterparts and by different parties hereto in separate
counterparts, each of which, when so executed, shall be deemed to be an original
and all of which, taken together, shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.6 Relationship of Trustee. The Trustee shall not be under any
responsibility in respect of the validity or sufficiency of this Agreement or
the execution and delivery hereof or in respect of the validity or sufficiency
of any document or agreement delivered in connection herewith, including, but
not limited to, the Request for a Cash Disbursement as provided by Exhibit A.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.
SECTION 8.8 Waiver of Jury Trial. Each of the Company, the Trustee and the
Disbursement Agent hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement, or the actions of any
party hereto in the negotiation, administration, performance or enforcement
thereof.
SECTION 8.9 Termination. The rights, duties and obligations of each of the
parties hereto as provided for hereunder shall cease and this Agreement shall
terminate upon the discharge in full of all of the Obligations.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
WATERFORD GAMING, L.L.C.
By:/s/ Len Wolman
-----------------------------------
Name: Len Wolman
Title: Chief Executive Officer
Fleet National Bank,
as Trustee
By: /s/ Philip G. Kane, Jr.
-----------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
Fleet National Bank,
as Disbursement Agent
By: /s/ Philip G. Kane, Jr.
-----------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
19
<PAGE>
EXHIBIT A
REQUEST FOR A CASH DISBURSEMENT
[Letterhead of the Company]
November 8, 1996
Fleet National Bank,
as Disbursement Agent
777 Main Street
Hartford, Connecticut
Attention: ______________________________
Gentlemen:
The undersigned refers to the Cash Collateral and Disbursement
Agreement, dated November 8, 1996 (the "Cash Collateral and Disbursement
Agreement"; the defined terms used herein are as therein defined or as defined
in the Indenture referred to therein), among the Trustee, the undersigned and
you and requests, pursuant to Section 3.1 of the Cash Collateral and
Disbursement Agreement, that a Cash Disbursement from the Account in the amount
of $__________ (the "Cash Disbursement") be made available to
____________________ on ____________, 199__, which is a Business Day.
The undersigned hereby certifies that the representations and
warranties contained in the Cash Collateral and Disbursement Agreement are true
on the date hereof and will be true on the date of the Cash Disbursement.
A-1
<PAGE>
The undersigned hereby certifies that the Cash Disbursement will be
applied to the uses indicated below in the amounts indicated below:
o for the payment of interest on the Notes on the regular Interest
Payment Date falling on _____- _______, ____, in the amount of
$_________
o for the payment of Liquidated Damages on the Notes on the regular
Interest Payment Date falling on ____________, ____ in the amount of
$______________
o for the payment of Defaulted Interest on the Notes on __________,
____ in the amount of $-----------
o for the mandatory redemption of Notes out of Excess Cash in the
amount of $__________ on __________, ____ (the date fixed for
redemption) as provided in the first paragraph of Section 3.1 of
the Indenture, including accrued and unpaid interest and Liquidated
Damages and scheduled premium thereon. A copy of the notice of
redemption as mailed is attached.
o for the mandatory redemption of Notes out of Excess Cash in the
amount of $__________ on __________, ____ (the date fixed for
redemption) as provided in the second paragraph of Section 3.1 of
the Indenture, including accrued and unpaid interest and Liquidated
Damages and scheduled premium thereon. A copy of the notice of
redemption as mailed is attached.
o for the optional redemption of Notes out of Excess Cash in the
amount of $__________ on __________, ____ (the date fixed for
redemption) as provided in the third paragraph of Section 3.1 of
the Indenture, including accrued and unpaid interest and Liquidated
Damages and scheduled premium thereon. A copy of the notice of
redemption as mailed is attached.
o for the repurchase of Notes pursuant to a Change of Control Offer in
the amount of $___________ as provided in Article IX of the
A-2
<PAGE>
Indenture, including accrued and unpaid interest and Liquidated
Damages and scheduled premium thereon. A copy of the offer to
purchase is attached.
o for the payment of the purchase price of First Tranche Completion
Guarantee Subordinated Notes or Original Subordinated Notes in the
amount of $___________ as permitted by Section 4.3 of the Indenture.
o for the making of a capital contribution or loan in the amount of
$_________ to Trading Cove Associates, a Connecticut general
partnership ("TCA"), for the development and/or improvement of the
Mohegan Sun as permitted by Section 4.3 of the Indenture. A copy of
the notice from TCA is attached.
o for the making of an Investment in the amount of $_________ in
connection with development and/or improvement of a hotel adjacent
to the Mohegan Sun.
o for the payment of a dividend of $_______ (not to exceed $10
million) on the Issue Date for purchase or redemption of certain
equity interests in the members of the Company.
o for the payment of $10.6 million for the acquisition of RJH
Development Corp.'s interest in TCA.
o for the payment of Permitted Quarterly Tax Distributions in the
amount of $_________. The statement of the Tax Amounts CPA is
attached.
o for the payment of expenses of $______ consistent with Section
4.14 of the Indenture for o trustee fees o printing expenses o legal
expenses o audit expenses o filing fees o initial purchaser offering
expenses
A-3
<PAGE>
o other _____ (not to include overhead, salaries, rent, lease payments
or any other operating expenses of the Manager)
Wire instructions (for payments other than to the Trustee) are
attached.
Very truly yours,
WATERFORD GAMING, L.L.C.
By:_________________________________
Name:
Title:
A-4
<PAGE>
EXHIBIT B
FORM OF TRUSTEE'S CERTIFICATE
[Date]
Fleet National Bank,
as Disbursement Agent
777 Main Street
Hartford, Connecticut
Attention: _____________________
Re: Request of $_______
Gentlemen:
Fleet National Bank (the "Trustee") requests that a disbursement of
$________ be made from the Account to Account No. ______________. Capitalized
terms used herein shall have the meaning afforded them under that certain Cash
Collateral and Disbursement Agreement dated November 8, 1996, to which you are a
party. In connection with the requested release of funds, the Trustee hereby
represents, warrants and certifies that the Trustee is entitled to the
possession of such funds.
The foregoing representations, warranties and certifications are
true and correct and Disbursement Agent is entitled to rely on the foregoing and
is authorized in making the release of funds.
FLEET NATIONAL BANK
By:_____________________________________
Name:
Title:
B-1
Execution Copy
OMNIBUS FINANCING AGREEMENT dated as of September 21, 1995, between
Trading Cove Associates ("TCA") and Sun International Hotels Limited
("SIHL").
WHEREAS, TCA has entered into a Management Agreement with the Mohegan
Tribe of Indians of Connecticut, pursuant to which TCA will construct and manage
a casino complex in Montville, Connecticut (the "Project");
WHEREAS, SIHL indirectly owns a 50% partnership interest in TCA;
WHEREAS, in connection with the Project, the Mohegan Gaming Authority (the
"Authority") proposes to issue $175 million of senior notes (the "Senior
Notes");
WHEREAS, in order to enable the Authority to sell the Senior Notes, SIHL
has been requested to (i) acquire $38.3 million of subordinated notes of the
Authority (the "Original Subordinated Notes") pursuant to a note purchase
agreement to be dated the same date as the closing of the sale of the Senior
Notes (the "Note Purchase Agreement"), (ii) provide a completion guarantee,
pursuant to which SIHL will guarantee that the Project will be completed (the
"Completion Guarantee"), (iii) arrange for a pledge 750,000 shares of SIHL stock
with a market value of approximately $43 million as collateral for its
obligation under the Completion Guarantee and (iv) post a letter of credit in an
amount up to $15 million to support its obligation under the Completion
Guarantee (the "Letter of Credit");
WHEREAS, if SIHL becomes obligated to pay funds under the Completion
Guarantee, the Authority is obligated to issue to SIHL certain subordinated
notes (the "Guarantee Subordinated Notes") having the same terms as the Original
Subordinated Notes except that the annual interest rate thereon shall be prime
plus one percent (the "Base Interest Rate"); the first $15 million of Guarantee
Subordinated Notes shall be "First Tranche Guarantee Sub Notes" and any
additional Guarantee Subordinated Notes shall be "Second Tranche Guarantee Sub
Notes"; and
WHEREAS, SIHL and TCA are party to a letter agreement dated May 12, 1995
(the "Letter Agreement").
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein, TCA and SIHL agree as follows:
1. Termination of Letter Agreement. The Letter Agreement is hereby
terminated.
2. Payments Relating to the Original Subordinated Notes. Interest on the
Original Subordinated Notes shall be payable by the Authority on the outstanding
principal balance thereof at an annual rate of fifteen percent (15%). Such
interest shall be paid in accordance with the Note Purchase Agreement.
Additional amounts
1
<PAGE>
with respect to the Original Subordinated Notes (the "Original Additional
Payments") shall be payable to the holders thereof by TCA on the outstanding
principal balance of such Original Subordinated Notes at an annual rate of
eleven and one-half percent (11 1/2%). The Original Additional Payments shall be
payable on the interest payment dates provided in the Original Subordinated
Notes directly from funds TCA would have received as its Management Fee. Subject
to the priorities set forth in Section 10 of this Agreement, to the extent that
TCA does not receive sufficient Management Fees to pay the full amount of any
Original Additional Payment when due, TCA shall pay the entire Management Fee it
receives as partial payment of the Original Additional Payment and such portion
of the Original Additional Payment not paid shall be deferred until TCA receives
sufficient Management Fees.
3. Acquisition of Original Subordinated Notes. The Original Partners of
TCA shall have the right at any time to purchase without premium from SIHL a
participating interest (the "Participating Interest") in the Original
Subordinated Notes. The total percentage Participating Interest in the Original
Subordinated Notes which may be acquired shall not exceed the Original Partners'
Percentage Interest in TCA.
4. Reimbursement of Financing Costs. If the Original Subordinated Notes
are purchased by SIHL, TCA shall reimburse SIHL for the out-of-pocket expenses
(without premium) incurred solely for the purpose of arranging the purchase of
the Original Subordinated Notes. Such reimbursement shall not in any case exceed
two and one-half percent (2 1/2%) of the principal issue amount of the Original
Subordinated Notes.
5. Completion Guarantee Fee. If SIHL executes and delivers the Completion
Guarantee, TCA shall pay to SIHL a completion guarantee fee ("Completion
Guarantee Fee") equal to two percent (2%) of the total development costs of the
Project (all so-called hard and soft costs with respect to construction of the
Project, except land acquisition costs). The Completion Guarantee Fee shall be
payable from funds TCA would have received as its Management Fee with priority
as set forth in Section 10.
6. Letter of Credit Fee. Upon the posting of the Letter of Credit, and on
each anniversary such Letter of Credit is outstanding, TCA shall pay to SIHL a
fee equal to the costs incurred by SIHL or its affiliates in posting such Letter
of Credit plus 1% of the principal amount thereof; provided, however, the fee
payable to SIHL by TCA shall not exceed for any one year 2% of the undrawn and
outstanding principal amount of such Letter of Credit.
7. Payments Related to First Tranche Guarantee Sub Notes. Interest on the
First Tranche Guarantee Sub Notes shall be payable by the Authority on the
outstanding principal balance thereof at the Base Interest Rate. Such interest
shall be paid in accordance with the Note Purchase Agreement. Additional amounts
with respect to the First Tranche Guarantee Sub Notes (the "First Tranche
Additional Payments") shall be payable to the holders thereof by TCA on the
outstanding principal balance of such First Tranche Guarantee Sub Notes at an
annual rate equal to the difference between 26 1/2% and the Base Interest Rate.
The First Tranche Additional Payments shall be payable on the interest payment
dates provided in the First Tranche Guarantee Sub Notes. If on such interest
payment date the Authority is not permitted to pay accrued interest on the First
Tranche Guarantee Sub Notes
2
<PAGE>
due to restrictions in the indenture for the Authority's Senior Notes, TCA shall
pay to the holder of the First Tranche Guarantee Sub Notes such accrued interest
(the "Deferred Interest Amount"); provided, however, if and when the Authority
does pay to the holder of First Tranche Guarantee Sub Notes any Deferred
Interest Amounts, TCA's obligation to pay any First Tranche Additional Payments
shall be reduced by the Deferred Interest Amounts previously paid by TCA; it
being the agreed upon principal that the holder of any First Tranche Guarantee
Sub Notes shall be entitled to an annual return of 26 1/2% on the principal
amount of such First Tranche Guarantee Sub Notes and that to the extent TCA paid
amounts otherwise payable to the Authority, once the Authority pays such amounts
an accounting shall be made, and repayments made to TCA as necessary, to that
the holders of the First Tranche Guarantee Sub Notes do not receive excess
payments. The First Tranche Additional Payments and Deferred Interest Amounts
shall be payable on the interest payment dates provided in the First Tranche
Guarantee Sub Notes directly from funds TCA would have received as its
Management Fee. Subject to the priorities set forth in Section 10 of this
Agreement, to the extent that TCA does not receive sufficient Management Fees to
pay the full amount of any First Tranche Additional Payment or Deferred Interest
Amount when due, TCA shall pay the entire Management Fee it receives as partial
payment of the First Tranche Additional Payment or Deferred Interest Amount and
such portion of the First Tranche Additional Payment or Deferred Interest Amount
not paid shall be deferred until TCA receives sufficient Management Fees.
8. Payments Related to Second Tranche Guarantee Sub Notes. Interest on the
Second Tranche Guarantee Sub Notes shall be payable by the Authority on the
outstanding principal balance thereof at the Base Interest Rate. Such interest
shall be paid in accordance with the Note Purchase Agreement. Additional
payments with respect to the Second Tranche Guarantee Sub Notes (the "Second
Tranche Additional Payments") shall be payable to the holders thereof by TCA on
the outstanding principal balance of such Second Tranche Guarantee Sub Notes at
an annual rate equal to the difference between 26 1/2% and the Base Interest
Rate. The Second Tranche Additional Payments shall be payable on the interest
payment dates provided in the Second Tranche Guarantee Sub Notes directly from
funds TCA would have received as its Management Fee. Subject to the priorities
set forth in Section 10 of this Agreement, to the extent that TCA does not
receive sufficient Management Fees to pay the full amount of any Second Tranche
Additional Payment when due, TCA shall pay the entire Management Fee it receives
as partial payment of the Second Tranche Additional Payment and such portion of
the Second Tranche Additional Payment not paid shall be deferred until TCA
receives sufficient Management Fees.
9. TCA Acquisition of First Tranche Guarantee Sub Notes. Subject to the
priorities set forth in Section 10 of this Agreement, on each of the first,
second and third anniversary of the issuance of the First Tranche Guarantee Sub
Notes, TCA shall acquire from the holders of the First Tranche Guarantee Sub
Notes one third of the outstanding principal amount of such First Tranche
Guarantee Sub Notes at a purchase price equal to the outstanding principal
amount thereof plus all accrued and unpaid interest thereon.
10. Priorities. The parties agree that payments required to be made by TCA
out of Management Fees shall be prioritized as follows:
3
<PAGE>
(a) First, to return capital contributions made by the Partners of
TCA after the closing of the sale of the Original Subordinated Notes;
(b) Second, to pay Original Additional Payments;
(c) Third, to pay Deferred Interest Amounts and First Tranche
Additional Payments on a pari passu basis;
(d) Fourth, to pay Second Tranche Additional Payments;
(e) Fifth, to return capital contributions made by the Partners of
TCA before the closing of the sale of the Original Subordinated Notes; provided,
however, such Partners shall use such funds to acquire outstanding First Tranche
Guarantee Sub Notes from the holders thereof;
(f) Sixth, to pay the Development Fee;
(g) Seventh, to pay the Management Services Fee;
(h) Eighth, to pay the Completion Guarantee Fee;
(i) Ninth, to pay the Partners, pro rata based on their respective
Percentage Interest, an amount equal to state and federal income tax obligations
calculated in accordance with Section 3.03a.(1) of the Partnership Agreement;
(j) Tenth, to acquire the First Tranche Guarantee Sub Notes in
accordance with Section 9;
(k) Eleventh, to pay the Organizational and Administrative Fee and
the Marketing and Casino Operations Fee on a pari passu basis; and
(l) Twelfth, to the distribution of Excess Cash to the Partners, pro
rata based on their respective Percentage interest, as specified in Section 3.03
of the Partnership Agreement.
The obligation of TCA and its Partners under this Section 10 shall
be limited to applying or directing its receipts from the Authority or Project
to the payments in the priority herein set forth. The Partners of TCA shall have
no personal recourse liability to make any of the payments provided for in this
Section 10 of the Agreement.
11. Capitalized Terms. Capitalized words and terms used hereinbefore not
defined in this Agreement shall take on the definitions set forth in the Amended
and Restated Partnership Agreement of TCA (the "Partnership Agreement").
4
<PAGE>
12. Conflicts. If provisions of this Agreement should conflict with those
of the Partnership Agreement, then the provisions of this Agreement shall
prevail.
SUN INTERNATIONAL HOTELS LIMITED
By: /s/ Charles D. Adamo
--------------------------------
Name: Charles D. Adamo
Title: Executive Vice President
TRADING COVE ASSOCIATES
RJH Development Corp.,
a New York Corporation
By: ________________________________
Name:
Title:
Slavik Suites, Inc.
a Michigan corporation
By: /s/ Del J. Lauria
--------------------------------
Name: DEL J. LAURIA
Title: EXECUTIVE VICE PRESIDENT
LMW Investments, Inc.
a Connecticut corporation
By: /s/ Len Wolman
--------------------------------
Name: LEN WOLMAN
Title: PRESIDENT
5
FIRST AMENDMENT TO
OMNIBUS FINANCING AGREEMENT
This First Amendment to Omnibus Financing Agreement (this "Agreement") is
made this 19th day of October, 1996 between Trading Cove Associates, a
Connecticut general partnership ("TCA"), Sun International Hotels Limited, a
Bahamian corporation ("SIHL") and Waterford Gaming, L.L.C., a Delaware limited
liability company ("Waterford").
PRELIMINARY STATEMENT
The following is a recital of certain facts upon which this Agreement is
based:
On September 21, 1995, TCA and SIHL entered into that certain Omnibus
Financing Agreement (the "Omnibus Agreement") which deals with certain aspects
of the construction, financing and management of a casino complex in Montville,
Connecticut. Capitalized terms used herein shall be understood to have the
meanings ascribed to them in the Omnibus Agreement.
TCA wishes to transfer to Waterford certain of its rights and obligations
under the Omnibus Agreement and Waterford wishes to acquire from TCA such rights
and has agreed to perform such obligations.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein, TCA, SIHL and Waterford hereby agree as follows:
1. Acquisition of Original Subordinated Notes. TCA and SIHL hereby
acknowledge that Waterford is about to become the sole Original Partner of TCA
and has the right to purchase 50% of the outstanding Original Subordinated Notes
from SIHL, all as set forth in a Note Purchase Agreement being executed
concurrently herewith (the "Note Purchase Agreement").
2. First Tranche Guarantee Sub Notes. Section 9 of the Omnibus Agreement
is hereby deleted in its entirety and is hereby replaced with the following:
"On each of October 12, 1997, October 12, 1998 and October 12, 1999
(each, a "Closing Date"), Waterford shall purchase from SIHL or an
Affiliate of SIHL and SIHL shall sell, or cause an Affiliate to
sell, to Waterford that portion of the outstanding principal amount
of the First Tranche Guarantee Sub Notes equal, in each instance, to
one-sixth (1/6) of the principal amount of the First Tranche
Guarantee Sub Notes issued at any time which shall include all
accrued and unpaid interest thereon to and including each Closing
Date and any First Tranche Additional Payments that have accrued and
are unpaid thereon as of each Closing Date,
<PAGE>
reduced, pro rata, by any redemptions or payments which may have
occurred or been made prior to each applicable Closing Date. The
purchase price which will be paid by Waterford to SIHL on each
Closing Date will be equal to the outstanding principal balance of
the First Tranche Guarantee Sub Notes to be acquired on the Closing
Date plus all accrued and unpaid interest thereon as of each Closing
Date and any First Tranche Additional Payments that have accrued and
are unpaid thereon as of each Closing Date. The terms and conditions
of such purchase and sale transactions shall be substantially
similar to the terms and conditions upon which Waterford has or will
acquire a portion of the Original Subordinated Notes.
3. Additional Amounts. As the holder of a portion of the Original
Subordinated Notes and the First Tranche Guarantee Sub Notes, Waterford will be
entitled to all benefits provided for in the Omnibus Agreement, including, but
not being limited to a proportionate amount of each of the Original Additional
Payments and the First Tranche Additional Payments.
4. Redemption or Repurchase of Subordinated Notes. If the Authority shall
offer to purchase any of the Original Subordinated Notes, First Tranche
Subordinated Notes or Second Tranche Subordinated Notes (collectively, the
"Subordinated Notes"), other than a Change of Control Offer, then SIHL shall
notify Waterford, no later than 10 business days prior to the expiration of such
offer, of its irrevocable decision with respect to the principal amount that it
or any of its Affiliates has determined to tender in such offer to purchase of
each of the Original Subordinated Notes, if any. Waterford agrees to tender that
principal amount of the Subordinated Notes that it owns equal to the product of
the aggregate principal amount of the Subordinated Notes to be tendered by SIHL
and its Affiliates times a fraction, the numerator of which is the aggregate
principal amount of Subordinated Notes then owned by Waterford and the
denominator of which is the aggregate principal amount of Subordinated Notes
then owned by SIHL and its Affiliates, rounded to the nearest multiple of $1000.
SIHL agrees to tender, and to cause its Affiliates to tender, all such
Subordinated Notes as it indicated in its notice to Waterford. In the event that
the total amount available for an offer (other than a Change of Control Offer)
is less than the total amount needed to purchase the Subordinated Notes to be
tendered by Waterford and SIHL and its Affiliates pursuant to the above formula,
Waterford, on the one hand, and SIHL and its Affiliates, on the other hand,
shall reduce their amount of Subordinated Notes to be tendered pro rata, based
on the ratio of Subordinated Notes originally tendered by each of them, rounded
to the nearest multiple of $1,000, such that the total amount of Notes to be
tendered can be purchased in such offer. SIHL agrees that if it, or any of its
Affiliates, transfers any of the Subordinated Notes to anyone other than SIHL,
an Affiliate of SIHL or the Authority, that it will cause such transferee to be
bound by a similar agreement to notify Waterford of its irrevocable decision to
tender in any such offer to purchase, and Waterford will agree to be similarly
bound to tender a pro rata portion of its Subordinated Notes.
2
<PAGE>
As used in this Agreement, the term "Affiliate" shall have the meaning set
forth in the Note Purchase Agreement under which the Subordinated Notes were
originally issued.
SIHL hereby represents and warrants that it or its Affiliates own all of
the Subordinated Notes other than the Subordinated Notes owned by TCA; provided,
however, it is acknowledged that SIHL has pledged such Subordinated Notes to
certain banks pursuant to a credit facility.
5. Initial Original Subordinate Notes. The parties agree that in
satisfaction of the obligation to return capital contributions used by TCA to
purchase $1,700,000 principal amount of Original Subordinated Notes, TCA shall
return such capital contribution by distributing to each of SIHL and Waterford,
$850,000 in principal amount of Original Subordinated Notes, in accordance with
the terms of the Note Purchase Agreement.
6. Effective Date. The obligations hereunder are and shall be subject to
the conditions that:
(a) Waterford shall have successfully completed a debt offering to
finance the transactions referred to in Paragraph 1 hereof; and
(b) Waterford will own the entire Original Partners' percentage
interest in TCA and by itself will be the Original Partner within the
meaning of the TCA Partnership Agreement as then amended and in effect.
7. Continuation of Omnibus Agreement. The Omnibus Agreement, as amended by
this Agreement, shall continue in full force and effect and is hereby ratified,
confirmed and approved.
8. Counterpart. This Agreement may be executed in any number of
counterparts, each of which shall, for all purposes, constitute an original and
all of which, taken together, shall constitute one and the same agreement.
9. Successors and Assigns. This Agreement shall be binding upon, and
inured to the benefit of, the parties hereto and their respective successors and
assigns.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first set forth above.
SUN INTERNATIONAL LIMITED
By: /s/ Howard Kerzner
-----------------------------------------
Its: President
-----------------------------------
WATERFORD GAMING, L.L.C.
By: Slavik Suites, Inc.
Its: Member
By: /s/ Del J. Lauria
-------------------------------------
Its: Executive vice President
------------------------------
By: LMW Investments, Inc.
Its: Member
By: /s/ Len Wolman
-------------------------------------
Its: President
----------------------------------
TRADING COVE ASSOCIATES
By: Sun Cove, Ltd.
Its: Partner
By: /s/ Howard Kerzner
-------------------------------------
Its: President
-----------------------------------
By: LMW Investments, Inc.
Its: Partner
By: /s/ Len Wolman
-------------------------------------
Its: President
------------------------------
4
<PAGE>
By: RJH Development Corporation
Its: Partner
By: /s/ Richard J. Hertz
--------------------
Its: President
------------------------------
By: Slavik Suites, Inc
Its: Partner
By: /s/ Del J. Lauria
-------------------------------------
Its: EXECUTIVE VICE PRESIDENT
------------------------------
5
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
TRADING COVE ASSOCIATES
<PAGE>
TABLE OF CONTENTS
Page
RECITALS .................................................................. 1
ARTICLE I
CONTINUATION, NAME, PURPOSES,
OFFICE AND TERM OF THE PARTNERSHIP .................. 1
1.01 Admission of Sun and the Continuation of the Partnership ........ 1
1.02 Name of the Partnership ......................................... 1
1.03 Purposes of the Partnership ..................................... 2
1.04 Principal Office; Agent for Service of Process .................. 2
1.05 Term of the Partnership ......................................... 2
ARTICLE II
CAPITAL CONTRIBUTIONS AND RELATED MATTERS ............... 3
2.01 Capital Contributions by the Partners; Percentage
Interests ....................................................... 3
2.02 Additional Contributions ........................................ 3
2.03 Optional Loans .................................................. 3
2.04 Limitations on Use of Capital Contribution ...................... 4
2.05 Capital Contributions to Restore Capital Accounts at
Termination of the Partnership .................................. 4
2.06 Return of Capital Contributions; Interest on Capital
Contributions ................................................... 4
2.07 Remedies for Non-Payment of Additional Contributions ............ 4
2.08 Additional Capital Contributions by the Partners ................ 6
2.09 Remedies for Non-Payment of Additional Capital
Contributions ................................................... 6
ARTICLE III
ALLOCATION OF THE
PROFITS, LOSSES, AND
DISTRIBUTIONS OF THE PARTNERSHIP ................... 9
3.01 Allocation of the Profits and Losses of the Partnership ......... 9
3.02 Allocations Solely for Federal Income Tax Purposes .............. 11
3.03 Distribution of Excess Cash ..................................... 12
3.04 Withholding of Tax .............................................. 13
-i-
<PAGE>
ARTICLE IV
MANAGEMENT OF THE PARTNERSHIP
AND RELATED MATTERS .......................... 13
4.01 Management Powers of the Managing Partners ...................... 13
4.02 Major Business Decisions of the Original Partners ............... 15
4.03 Resolution of Disputes .......................................... 16
4.04 Designated Representative of the Managing Partner ............... 18
4.05 Duty to Devote Time; Other Activities ........................... 19
4.06 Indemnity ....................................................... 20
4.07 Dealing with the Partnership .................................... 20
4.08 Certain Services, Fees and Reimbursements to the Partners
and Affiliates of the Partners .................................. 21
4.09 Employment Agreement with an Affiliate .......................... 25
4.10 The Facility and the Development Agreement ...................... 25
4.11 Budget .......................................................... 25
ARTICLE V
ACCOUNTING MATTERS AND BANK ACCOUNTS ................. 26
5.01 Fiscal Year and Accounting Method ............................... 26
5.02 Books and Records ............................................... 26
5.03 Bank Accounts ................................................... 26
5.04 Tax Information and Financial Statements ........................ 26
5.05 Tax Matters Partner ............................................. 26
ARTICLE VI
ASSIGNMENTS OF PARTNERSHIP INTERESTS,
WITHDRAWAL OF A PARTNER AND RELATED MATTERS .............. 27
6.01 Assignment of Sun's Partnership Interest ........................ 27
6.02 Assignment of an Original Partner's Partnership Interest ........ 28
6.03 Admission of the Partners ....................................... 30
6.04 Transfers at Death or Incompetency of a Principal of the
Original Partners ............................................... 31
6.05 Withdrawal etc. of a Partner .................................... 32
6.06 Development Agreement Withdrawal ................................ 33
6.07 Financing Withdrawal ............................................ 35
6.08 Insolvency of a Partner ......................................... 36
6.09 Power of Attorney ............................................... 36
6.10 Dissolution of a Partner ........................................ 36
ARTICLE VII
WINDING UP AND TERMINATION OF THE PARTNERSHIP ............. 36
7.01 Liquidation of the Property and Assets of the Partnership
and Disposition of the Proceeds ................................. 36
- ii -
<PAGE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES BY THE PARTNERS ............ 38
8.01 Original Partner Representations ................................ 38
8.02 Sun Representations ............................................. 39
8.03 Mutual Representations .......................................... 39
ARTICLE IX
MISCELLANEOUS PROVISIONS ....................... 39
9.01 Notices ......................................................... 40
9.02 Article and Section Headings .................................... 41
9.03 Construction .................................................... 41
9.04 Severability .................................................... 41
9.05 Governing Law ................................................... 42
9.06 Counterparts .................................................... 42
9.07 Entire Agreement ................................................ 42
9.08 Amendments to this Agreement .................................... 42
9.09 Benefits Limited to Partners .................................... 42
9.10 Further Assurances .............................................. 42
9.11 Successors and Assigns .......................................... 42
ARTICLE X
GLOSSARY ............................... 42
10.01 Definitions ..................................................... 42
- iii -
<PAGE>
Exhibit List
Page
Exhibit A
Capital Contributions by the Partners ............................. 3
Exhibit B
Development Agreement ............................................. 33
Exhibit C
Withdrawal Agreement .............................................. 36
Exhibit D
Shareholders of Record of Sun ..................................... 39
Exhibit E
Initial Budget .................................................... 46
- iv -
<PAGE>
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
TRADING COVE ASSOCIATES
THIS AGREEMENT, made as of the 21st day of Sept, 1994 by and among (1) Sun
Cove, Ltd., a Connecticut corporation ("Sun"), (ii) RJH Development Corp., a New
York corporation ("RJH"), (iii) Leisure Resort Technology, Inc., a Connecticut
corporation ("Leisure"), (iv) Slavik Suites, Inc., a Michigan corporation
("Slavik") and (v) LMW Investments, Inc., a Connecticut corporation ("LMW").
RECITALS:
A. RJH, Leisure, Slavik and LMW, as partners (hereinafter collectively
referred to as the "Original Partners"), were parties to a partnership agreement
dated July 23, 1993, as amended by that certain First Amendment to Partnership
Agreement of Trading Cove Associates dated effective March 24, 1994 (as amended
from time to time, the "Original Partnership Agreement") pursuant to which the
parties formed Trading Cove Associates, a Connecticut general partnership (the
"Partnership").
B. The parties desire that (i) Sun be admitted to the Partnership as a
partner, (ii) the original Partnership Agreement be further amended, modified
and restated in its entirety by this Agreement, and (iii) the Partners continue
the Partnership, for the purposes and term set forth in, and in accordance with
the provisions of, this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
CONTINUATION, NAME, PURPOSES,
OFFICE AND TERM OF THE PARTNERSHIP
1.01 Admission of Sun and the
Continuation of the Partnership:
Sun shall be admitted to the Partnership as a partner and the Partners
shall continue the Partnership as a partnership under the Act, for the purposes
and term set forth in, and in accordance with, the provisions of this Agreement.
The admission of Sun shall be effected by, and shall occur at the time of, the
execution of this Agreement by all of the Partners.
1.02 Name of the Partnership:
The name of the Partnership shall continue to be "Trading Cove Associates",
or such other name as shall be selected from time to time by the Managing
Partners. The Partnership may transact its business under any assumed name or
names selected by the Managing Partners at any time and from time to time. The
Managing Partners shall expeditiously file any certificates or other filings
with governmental agencies as may be required in connection with the
Partnership's business pursuant to any statute, ordinance, rule or regulation.
<PAGE>
1.03 Purposes of the Partnership:
a. The purposes of the Partnership are, and the Partnership is being
continued to, (i) become, act as, execute all of the rights and powers of, and
perform all of the duties, responsibilities and obligations of, the exclusive
agent of The Mohegan Nation (the "Mohegan Tribe"), to manage and develop an
entertainment and gaming facility (the "Facility") on certain land located in
the City of Montville and the City of Norwich, Connecticut (or such other land
as may be required to develop the Facility) (the "Property"), which Property is
to be located within the Mohegan Tribe's Reservation, (ii) at the election of
the Partners, become, act as, exercise all of the rights and powers of, and
perform all of the duties, responsibilities and obligations of, the exclusive
agent for or otherwise participate in other gaming and/or resort activities
involving Native Americans or any other gaming activity (individually an
"Alternative Facility" and collectively the "Alternative Facilities"), (iii)
sell or otherwise dispose of all, or any portion of, or any interest in, the
Development Agreement or any other agreement relating to an Alternative Facility
or any other property or asset of the Partnership if and when the Partners, in
their sole discretion, so determine, and if and to the extent permitted under
the Development Agreement or any other agreement relating to an Alternative
Facility, and (iv) engage in any and all activities incidental or related to the
foregoing activities.
b. The Partnership and the Partners shall have all the powers necessary
or appropriate for the accomplishment of the Partnership's purposes, including,
but not limited to, the powers described or referred to in Section 4.01 a.
hereof.
1.04 Principal Office; Agent for Service of Process:
a. The principal office of the Partnership shall be located at 914
Hartford Turnpike, P.O. Box 715, Waterford, Connecticut 06385, or at such other
place as the Managing Partners shall select from time to time. In the event the
Managing Partners elect to designate another principal office for the
Partnership, the Managing Partners shall send each Partner a written notice of
the Partnership's new principal office address.
b. If the Partnership is required to maintain an agent for service of
process for any reason or is otherwise required to maintain a designated agent,
such agent shall be Len Wolman, whose address is 914 Hartford Turnpike, P.O. Box
715, Waterford, Connecticut 06385, or such other person as the Managing Partners
shall select from time to time. Len Wolman shall promptly (i) inform the other
Partners in writing of any information relating to the Partnership which comes
into his possession as a result of his acting as agent for the Partnership in
accordance with this Section 1.04 b. and (ii) send the Partners all papers,
documents and any other materials concerning the Partnership served upon him in
his capacity as agent for the Partnership pursuant to this Section 1.04 b.
Notwithstanding the foregoing, if any Partner is served or receives any of the
foregoing information or materials from a third party, it shall promptly send
such information or materials to all of the Partners.
1.05 Term of the Partnership:
a. The term of the Partnership began on July 27, 1993.
b. The term of the Partnership shall end on December 31, 2040 and the
Partnership shall dissolve on such date. However, if any of the following events
shall occur prior to December 31, 2040, the Partnership shall dissolve on the
first to occur of such events:
- 2 -
<PAGE>
(1) A final disposition by the Partnership of its entire interest in
the Facility and the termination of the Development Agreement; provided,
however, if the Partnership has acquired any interest in an Alternative
Facility, the term of the Partnership shall not end until a final
disposition by the Partnership of its entire interest in all such
Alternative Facilities and the termination of any agreements relating
thereto; and provided further, if such sale or other disposition results in
the acquisition of a receivable by the Partnership, the Partnership shall
not dissolve until such receivable has been collected, unless the Managing
Partners agree otherwise;
(2) The decision of the Managing Partners to terminate the
Partnership; or
(3) Any other event which, under this Agreement or the Act, results
in the dissolution of the Partnership.
ARTICLE II
CAPITAL CONTRIBUTIONS AND RELATED MATTERS
2.01 Capital Contributions by the Partners; Percentage Interests:
a. Each Partner has made a Capital Contribution in the amount set forth
opposite its name in column (2) on Exhibit A attached hereto and incorporated
herein (the "Original Capital Contribution").
b. Each Partner shall have the Percentage Interest set forth opposite his
name in column (3) on Exhibit A attached hereto.
2.02 Additional Contributions:
When and if additional monies are needed to fund the Partnership's
obligations under the Development Agreement, in excess of all monies contributed
to date by the Partners to the Partnership as set forth in Exhibit A, Sun on the
one hand and the Original Partners on the other hand shall each fund such
obligations pro rata in accordance with their Percentage Interests up to a
maximum aggregate amount of U.S. $160,000.00 (individually an "Additional
Contribution" and collectively "Additional Contributions"), so that in the
aggregate the Partners' contributions to the Partnership will not exceed the
maximum contribution amount, U.S. $1,100,000.00, one-half of which shall be
contributed by Sun and one-half of which shall be contributed by the Original
Partners. In the event any Additional Contribution is required, the Original
Partners Managing Partners shall give each of the Partners a capital call notice
("Capital Call Notice"), which Capital Call Notice shall specify the amount
required and the budgeted item(s) in the Initial Budget for which the Capital
Call Notice is given together with a copy of paid invoices or a statement
indicating such budgeted items are currently due and payable.
2.03 Optional Loans:
In the event the Partnership requires any additional funds to satisfy the
Partnership's obligations under the Development Agreement or to otherwise
satisfy any obligations it may have with respect to any Alternative Facility,
any Partner may, but shall not be obligated to, make loans to the Partnership
(together with any accrued interest thereon, the "Loans"). Each Partner shall be
entitled to make Loans to the Partnership on a pro rata basis, based on each of
its respective Partnership Interests; provided, however, if any Partner elects
not to make such Loans, the Partners making such Loans may increase their
respective pro rata shares of such Loans or may make such Loans on any basis
agreeable to the
- 3 -
<PAGE>
Partners making such Loan and the Managing Partners. The amounts so advanced on
a pro rata basis shall (i) bear interest at an annual rate of two (2%) percent
above the prime rate as publicly announced from time to time by the Bank of New
York as its "prime rate" and (ii) be a general unsecured obligation of the
Partnership, payable, together with accrued but unpaid interest, from the first
funds available to the Partnership prior to any distributions to the Partners
under Section 3.03 a. hereof. Any change in the prime rate shall immediately
effect a change in the interest rate. The Loans shall be non-recourse to the
Partners and shall be satisfied only from the assets of the Partnership.
2.04 Limitations on Use of Capital Contribution:
The Original Capital Contributions and the Additional Contributions shall
be used to fund the Partnership's next required expenditures in substantial
conformity with the amounts and items set forth in the Initial Budget as the
Initial Budget may change, from time to time, with the approval of the Partners.
2.05 Capital Contributions to Restore Capital
Accounts at Termination of the Partnership:
No Partner shall have an obligation to restore any deficit in its Capital
Account. This Section 2.05 shall not diminish a Partner's obligations under any
other provision of this Agreement.
2.06 Return of Capital Contributions;
Interest on Capital Contributions:
a. No Partner shall have the right to withdraw from the Partnership, or
to withdraw his Capital Contributions or to demand or receive the return of his
Capital Contributions or any part thereof, except as otherwise provided in this
Agreement.
b. Except as otherwise provided for in this Agreement, to the extent that
any Partner shall ever have the right to withdraw his Capital Contributions or
to demand or receive the return of his Capital Contributions or any part
thereof, no Partner shall be personally liable or responsible for the return of
such Capital Contributions and any such return shall be made solely from the
assets of the Partnership.
c. No interest shall be paid by the Partnership on any Capital
Contributions to the Partnership, except as otherwise provided for in this
Agreement.
2.07 Remedies for Non-Payment of Additional Contributions:
a. If the Original Partners Managing Partners determine that under the
terms of this Agreement an Additional Contribution is required to fund the
Partnership's obligations under the Development Agreement and the Original
Partners Managing Partners have given Sun a Capital Call Notice in accordance
with Section 2.02 hereof, and if Sun does not make such Capital Contribution
within 10 days after the delivery of such Capital Call Notice, Sun shall
automatically be deemed to have withdrawn from the Partnership if the amount
specified in such Capital Call Notice is not paid within 20 days after delivery
of written notice by the Original Partners Managing Partners to Sun of such
default and the failure of Sun to pay such amount within such 20 day period;
provided, however, in the event the Original Partners are in default under their
obligations under Section 2.02, so long as such default is continuing, Sun shall
not be deemed to have withdrawn from the Partnership and shall not have an
obligation to make such Additional Contribution until the Original Partners are
no longer in default. In
- 4 -
<PAGE>
the event of a withdrawal of Sun pursuant to this Section 2.07 a., Sun shall not
be entitled to receive a return of its Original Capital Contribution or any
Additional Contributions it may have funded to the Partnership pursuant to this
Agreement but shall be entitled to receive the repayment of any Loans made by it
to the Partnership upon the commencement of the construction of Phase One of the
Facility.
b. If the Original Partners Managing Partners determine that an
Additional Contribution is required to fund the Partnership's obligations under
the Development Agreement and the Original Partner's Managing Partners have
given the Original Partners a Capital Call Notice with respect to such
Additional Contribution, if the Original Partners do not collectively pay their
pro rata share of such Additional Contributions and if the amount specified in
such Capital Call Notice is not paid within twenty (20) days after delivery of
written notice by the Sun Managing Partners to the Original Partners of such
default, Sun shall have the right, but not the obligation, to pay such
shortfall. The amount so advanced by Sun, at the election of Sun:
(1) Shall be deemed to be a loan (the "Sun Loan") to the Defaulting
Original Partner(s) (as hereinafter defined) in the amount of such
Defaulting Original Partner's shortfall
- 5 -
<PAGE>
in such Additional Contribution and a Capital Contribution by such
Defaulting Original Partner to the Partnership; such loans to bear interest
at a rate of two percent (2%) above the prime rate of interest publicly
announced from time to time by Bank of New York as its "prime rate"; and
the portion of all Partnership distributions and Organizational and
Administrative Fee (as hereinafter defined) otherwise distributable or
payable to such Defaulting Original Partner shall be first paid to Sun pari
passu with any Original Partner Loans (as hereinafter defined) and the
Original Partner Shortfall Loans; or
(2) Shall be deemed to be a Capital Contribution by Sun to the
Partnership and, in such event, the Percentage Interest of Sun and such
Defaulting Original Partner shall be adjusted to reflect Sun's contribution
made in accordance with this paragraph, such Defaulting Original Partner's
Percentage Interest shall be reduced, but not below five percent (5%) with
respect to RJH and Leisure, to an amount equal to (a) multiplied by (b),
where:
(a) is the Defaulting Original Partner's Percentage Interest,
and
(b) is a fraction, of which the numerator is the Defaulting
Partner's total Capital Contributions and the denominator is its total
Capital Contributions plus the Additional Contribution required to be
made under Sections 2.01 and 2.02 hereof.
The amount of reduction in the Defaulting Partner's Percentage
Interest shall be allocated to Sun.
2.08 Additional Capital Contributions by the Partners:
If at any time, and from time to time during the term of the Partnership,
the Majority of the Original Partners, on the other hand, determine that
additional monies are needed to fund the Partnership's obligations under this
Agreement in excess of (i) the Initial Capital Contributions and (ii) the
Additional Contributions set forth in Section 2.02 hereof, the Partners (subject
to Section 2.09 d. with respect to Leisure) shall each fund such obligations pro
rata, in accordance with their respective Percentage Interests (individually an
"Additional Capital Contribution" and collectively the "Additional Capital
Contributions"). Any requirement for an Additional Capital Contribution
pursuant to this Section 2.08 shall require the concurrence of Sun, on the one
hand, and the Majority of the Original Partners, on the other hand. In the
event any Additional Capital Contribution is required to fund the Partnership's
obligations, as determined by Sun and the Majority of the Original Partners, the
Managing Partners shall give each Partner a Capital Call Notice, which Capital
Call Notice shall specify the amount required and the items for which the
Capital Call Notice is given.
2.09 Remedies for Non-Payment of Additional Capital Contributions:
a. If Sun and the Majority of the Original Partners determine that under
Section 2.08 of this Agreement an Additional Capital Contribution is required to
fund the Partnership's obligations, Managing Partners have given the Partners a
Capital Call Notice in accordance with Section 2.08 hereof, then, if Sun does
not make such Additional Capital Contribution within ten (10) days after the
delivery of such Capital Call Notice, Sun shall automatically be deemed to have
withdrawn from the Partnership if the amount specified in such Capital Call
Notice is not paid within twenty (20) days after delivery of written notice by
the Original Partners Managing Partners to Sun of such default and the failure
of Sun to pay such amount within such twenty (20) day period; provided, however,
in the event the Original Partners are in default under their obligations under
Section 2.08 hereof, so long as such default is continuing, Sun shall not be
deemed to have withdrawn from the Partnership and shall not have
- 6 -
<PAGE>
an obligation to make such Additional Contribution until the Original Partners
are no longer in default. In the event of a withdrawal of Sun pursuant to this
Section 2.09 a., Sun shall not be entitled to receive a return of its Initial
Capital Contribution, any Additional Contributions or any Additional Capital
Contributions it may have funded to the Partnership pursuant to this Agreement
but shall be entitled to receive the repayment of any Loans made by it to the
Partnership upon the commencement of the construction of Phase One of the
Facility, if the withdrawal occurs prior thereto, or within 120 days after the
withdrawal, if the withdrawal occurs after the commencement of construction of
Phase One of the Facility.
b. If at any time the Majority of the Original Partners and Sun determine
under Section 2.08 of this Agreement that an Additional Capital Contribution is
required to fund the Partnership's obligations under this Agreement and the
Managing Partners have given the Partners a Capital Call Notice in accordance
with Section 2.08 hereof, if any Original Partner does not make such Additional
Capital Contribution within ten (10) days after the delivery of Capital Call
Notice ("Defaulting Original Partner") then the other Original Partners, other
than the Defaulting Original Partner, shall have the right, but not the
obligation, to pay such shortfall. The amount so advanced by the non-defaulting
Original Partners, at the unanimous election of the other non-defaulting
Original Partners (on a pro rata basis or on any other basis agreed to by all of
the non-defaulting Original Partners):
(1) shall be deemed to be a loan to the Defaulting Original
Partner(s) in the amount of such Defaulting Original Partner's shortfall in
such Additional Capital Contribution ("Original Partners Shortfall Loan")
and a Capital Contribution by such Defaulting Original Partner to the
Partnership; the Original Partners Shortfall Loan bear interest at a rate
of two percent (2%) above the prime rate of interest publicly announced
from time to time by Bank of New York as its "prime rate"; and the portion
of all Partnership distributions and Organizational and Administrative Fee)
otherwise distributable or payable to such Defaulting Original Partner
shall be first paid to the non-defaulting Original Partners pari passu with
any Original Partner Loans and the Sun Loan; or
(2) shall be deemed to be a Capital Contribution by the contributing
non-defaulting Original Partners to the Partnership and, in such event, the
Percentage Interest of the Defaulting Original Partner(s) shall be adjusted
to reflect each of the other contributing Original Partner's contributions
made in accordance with this paragraph, and such Defaulting Original
Partner's Percentage Interest shall be reduced, but not below five percent
(5%), to an amount equal to (a) multiplied by (b), where:
(a) is the Defaulting Original Partner's Percentage Interest;
and
(b) is a fraction, of which the numerator is the total Capital
Contributions of the Defaulting Original Partner and the denominator
is the Defaulting Original Partner's total Capital Contributions plus
the Additional Capital Contribution required to be made under Section
2.08 hereof.
The amount of reduction in the Defaulting Original Partner's
Percentage Interest shall be allocated to each of the contributing Original
Partners, pro rata, based on the contribution of each contributing Original
Partner under this clause (2) in relation to the total contributions made
by all of the contributing Original Partners under this clause (2).
(3) Notwithstanding the foregoing, if at the time that an Additional
Capital Contribution is required in accordance with Section 2.08 hereof,
and either (i) Excess Cash is
- 7 -
<PAGE>
available for distribution to Leisure pursuant to the terms of Section 3.03
hereof and/or Leisure is due any portion of the Organizational and
Administrative Fee or (ii) Excess Cash has previously been distributed to
Leisure pursuant to Section 3.03 hereof and/or Leisure has been distributed
its pro rata share of the Organizational and Administrative Fee (the
aggregate of all such distributions or payments are hereinafter
collectively referred to as the "Leisure Distribution"), all of the
Original Partners, including Leisure (to the extent of the Leisure
Distribution less any amounts paid by Leisure for federal and state income
tax with respect to such Leisure Distribution and any amount previously
contributed by Leisure to the Partnership as an additional contribution
with respect to the Leisure Distribution set forth in Section 2.07 b.
hereof), shall make the Additional Capital Contribution based on each
Original Partner's Percentage Interest in relation to the Percentage
Interests of all Original Partners.
In the event that Leisure's pro rata share of capital required to be
contributed pursuant to the preceding paragraph exceeds the Leisure
Distribution less any amounts paid by Leisure for federal and state income
tax with respect to such Leisure Distribution and any amounts previously
contributed to the Partnership as an Additional Contribution by Leisure
with respect to the Leisure Distribution set forth in Section 2.07 b.
hereof, all of the Other Original Partners shall contribute their pro rata
share of such deficiency based on the Percentage Interest of each such
Other Original Partner in relation to the Percentage Interests of all of
the Other Original Partners.
In the event that Leisure is unable, despite its best efforts, to
contribute to the Partnership all or any portion of the funds required to
be contributed by it pursuant to clause (ii) above, the Other Original
Partners shall have the right to advance to the Partnership all or any
portion of such shortfall pro rata, based on their respective Percentage
Interests or on any other basis the Other Original Partners determine
appropriate. The amount so advanced by the Other Original Partners shall be
deemed to be (i) Original Partner Loans to Leisure by the Other Original
Partners making such advances, and (ii) an Additional Capital Contribution
by Leisure to the Partnership. Such Original Partner Loans shall (i) bear
interest at a rate of two percent (2%) above the prime rate publicly
announced from time to time by Bank of New York as its "prime rate", and
(ii) at the election of each of the Other Original Partners, be evidenced
by promissory note(s) containing such terms and conditions not inconsistent
with this paragraph. If any of the Other Original Partners make such
Original Partner Loans, the portion of all Partnership distributions and
Organizational and Administrative Services Fee otherwise distributable or
payable to Leisure shall, instead of being paid to Leisure, be first paid
pan passu with any Sun Loan and any Original Partner Shortfall Loan to such
Other Original Partners who have made such Original Partner Loans pro rata,
based on the Original Partner Loans made by each Other Original Partner in
relation to Original Partner Loans made by all of the Other Original
Partners and applied against all principal and accrued interest on such
loans until all such loans are paid in full.
(4) If Sun and the Majority of the Original Partners determine that
an Additional Capital Contribution is required to fund the Partnership's
obligations pursuant to Section 2.08 hereof and the Managing Partners have
given the Original Partners a Capital Call Notice with respect to such
Additional Capital Contribution, if the Original Partners do not
collectively pay their pro rata share of such Additional Capital
Contribution and if the amount specified in such Capital Call Notice is not
paid within twenty (20) days after delivery of written notice by the Sun
Managing Partner to the Original Partners of such default and the failure
of the Original Partners to pay such amount within such twenty (20) day
period, then Sun shall have the right,
- 8 -
<PAGE>
but not the obligation, to pay such shortfall. The amount so advanced by
Sun, at the election of Sun:
(a) shall be deemed to be a loan to the Defaulting Original
Partner(s) in the amount of such Defaulting Original Partner's
shortfall in such Additional Contribution ("Sun Loan") and a Capital
Contribution by such Defaulting Original Partner to the Partnership;
the Sun Loan shall bear interest at a rate of two percent (2%) above
the prime rate of interest publicly announced from time to time by
Bank of New York as its "prime rate", and that portion of all
Partnership distributions and the Organizational and Administrative
Services Fee otherwise distributable or payable to such Defaulting
Original Partner shall be first paid to Sun pari passu with any
Original Partner Loans and any Original Partner Shortfall Loan; or
(b) shall be deemed to be a Capital Contribution by Sun to the
Partnership and, in which event, the Percentage Interest of the
Defaulting Original Partner(s) shall be adjusted to reflect Sun's
contribution made in accordance with this paragraph; such Defaulting
Original Partner's Percentage Interest shall be reduced, but not below
five percent (5%) with respect to RJH and Leisure, to an amount equal
to i) multiplied by ii), where:
i) is the Defaulting Original Partner's Percentage
Interest (calculated after any dilution pursuant to Section 2.09
b. (2) hereof; and
ii) is a fraction, of which the numerator is the total
Capital Contributions of the Original Defaulting Partner and the
denominator is the Original Defaulting Partner's total Capital
Contributions plus the Additional Capital Contribution required
to be made under 2.08 hereof.
The amount of resulting reduction in the Original Defaulting Partner's
Percentage Interest shall be allocated to Sun.
ARTICLE III
ALLOCATION OF THE
PROFITS, LOSSES, AND
DISTRIBUTIONS OF THE PARTNERSHIP
3.01 Allocation of the Profits
and Losses of the Partnership:
a. Profits and Losses. After giving effect to the special allocations set
forth in Section 3.01 b. and the curative allocations set forth in Section 3.01
c. hereof, Profit or Loss for any fiscal year shall be allocated as Set forth in
Section 3.01 a.(1) below, subject to the limitations in Section 3.01 a.(2)
below.
(1) Profit for any fiscal year shall be allocated among the Partners,
pro rata, in accordance with their Percentage Interests.
(2) Loss for any fiscal year shall be allocated among the Partners
pro rata, in accordance with their Percentage Interests.
- 9 -
<PAGE>
(3) The Losses allocated pursuant to Section 3.01 a.(2) hereof shall
not exceed the maximum amount of Losses that can be so allocated without
causing any Partner to have a deficit in its Adjusted Capital Account at
the end of any fiscal year. All Losses in excess of the limitations set
forth in this Section 3.01 a.(3) shall be allocated to the other Partners
pro rata, in the ratio that their Percentage Interests bears to each other,
so long as such allocation will not create a deficit in the Adjusted
Capital Account of any other Partner.
b. Special Allocations. The following special allocations shall be made
in the following order:
(1) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in "partnership
minimum gain" during any fiscal year, each Partner shall be specially
allocated items of Partnership income and gain for such fiscal year (and,
if necessary, subsequent fiscal years) in an amount equal to such Partner's
share of the net decrease in "partnership minimum gain," determined in
accordance with Section 1.704-2(g) of the Regulations. Allocations pursuant
to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant thereto. The
items to be so allocated shall be determined in accordance with Sections
1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 3.01
b.(1) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(2) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-(2)(i)(4) of the Regulations, if there is a net decrease in
"partner nonrecourse debt minimum gain" attributable to a "partner
nonrecourse debt" during any fiscal year, each Partner who has a "share of
partner nonrecourse debt minimum gain" attributable to such "partner
nonrecourse debt," determined in accordance with Section 1.704-2(i)(5) of
the Regulations, shall be specially allocated items of Partnership income
and gain for such fiscal year (and, if necessary, subsequent fiscal years)
in an amount equal to such Partner's share of the net decrease in "partner
nonrecourse debt minimum gain" attributable to such "partner nonrecourse
debt," determined in accordance with Section 1.704-2(i)(4) of the
Regulations. Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined
in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.01 b.(2) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and
shall be interpreted consistently therewith.
(3) In the event that any Partner unexpectedly receives any
adjustments, allocations or distributions described in Section 1.704-
1(b)(2)(ii)(d)(4)-(6) of the Regulations, items of Partnership income and
gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the
deficit in such Partner's Adjusted Capital Account as quickly as possible,
provided that an allocation pursuant to this Section 3.01 b.(3) shall be
made only to the extent that such Partner would have a deficit in its
Adjusted Capital Account after all other allocations provided for in this
Section 3.01 have been tentatively made as if this Section 3.01 b.(3) were
not in the Agreement.
(4) Nonrecourse Deductions. "Nonrecourse deductions" for any fiscal
year shall be specially allocated among the Partners pro rata, in
accordance with their Percentage Interests.
- 10 -
<PAGE>
(5) Partner Nonrecourse Deductions. Any "partner nonrecourse
deductions" for any fiscal year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the "partner
nonrecourse debt" to which such "partner nonrecourse deductions" are
attributable in accordance with Section 1.704-2(i)(l) of the Regulations.
c. Curative Allocations. The allocations set forth in Sections 3.01 a.(2)
and 3.01 b. hereof (collectively, the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or, if necessary, with special
allocations of other items of Partnership income, gain, loss, or deduction
pursuant to this Section 3.01 c. Therefore, notwithstanding any other provision
of this Section 3.01 (other than the Regulatory Allocations), special
allocations of Partnership income, gain, loss, or deduction shall be made to
offset the Regulatory Allocations such that each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of this
Agreement and all Partnership items were allocated pursuant to Section 3.01 a.
In applying this Section 3.01 c., there shall be taken into account future
Regulatory Allocations under Sections 3.01 b.(1) and 3.01 b.(2) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 3.01 b.(3) and 3.01 b.(4).
d. Definitions. For purposes of this Section 3.01, (i) "Regulations"
shall mean regulations promulgated by the U.S. Department of Treasury, (ii) all
other terms set off in quotation marks shall have the meanings ascribed to them
in Section 1.704-2 of the Regulations, and (iii) Adjusted Capital Account shall
mean, with respect to any Partner such Partner's Capital Account, reduced by
those anticipated allocations, adjustments and distributions described in
Section 1.704-1(b)(2)(ii)(d)(4)-(6) of the Regulations and increased by such
Partner's "share of partnership minimum gain", such Partner's "share of partner
nonrecourse debt minimum gain" and the amount of any deficit in such Partner's
Capital Account that such Partner is deemed obligated to restore under Section
1.704-1(b)(2)(ii)(c) of the Regulations as of the end of such fiscal year.
3.02 Allocations Solely for Federal Income Tax Purposes:
a. In the event of the transfer of a Partner's Partnership Interest or a
portion thereof by sale or exchange, or upon the death of a Partner, the
Partnership shall, if the person acquiring such Partnership Interest or portion
thereof so requests and if the Partners agree to do so, elect, pursuant to
Section 754 of the Code, or any corresponding provision of succeeding law, to
adjust the basis of the Partnership property. Each Partner hereby agrees to
provide the Partnership with all information necessary to give effect to such
election.
(1) Any change in the amount of the depreciation or amortization
deducted by the Partnership, and any change in the gain or loss of the
Partnership, for federal income tax purposes, resulting from such election,
shall be allocated entirely to the transferee of the Partnership Interest
or portion thereof so transferred; provided, however, neither the Capital
Contribution obligations of, nor the amount of any cash distributions to,
the Partners shall be affected as a result of such election, and the making
of such election shall have no effect except for federal income tax
purposes.
(2) A subsidiary account shall be established on the books of the
Partnership for each asset, the basis of which is adjusted as a result of
such election, and each such subsidiary account shall be debited (in the
case of an increase in basis) or credited (in the case of a decrease in
basis) by the amount of such basis adjustment, and the offsetting credit or
debit shall
- 11 -
<PAGE>
be made to a subsidiary capital account established on the books of the
Partnership for the transferee Partner. Any change in the amount of the
depreciation deducted by the Partnership, and any change in the gain or
loss of the Partnership, for federal income tax purposes, attributable to
the basis adjustment made as a result of such election shall be debited or
credited, as the case may be, to the appropriate subsidiary asset account
and the offsetting credit or debit shall be made to the subsidiary capital
account of the appropriate Partner.
b. In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for federal
income tax purposes and the initial Book Value of such property (computed in
accordance with Section 10.01 m.(1) hereof). If the Book Value of any
Partnership property is adjusted pursuant to Section 10.01 m.(2) hereof,
subsequent allocations of income, gain, loss and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal Income tax purposes and the Book Value of such asset in the
same manner as under Section 704(c) of the Code and the Treasury Regulations
thereunder.
3.03 Distribution of Excess Cash:
a. The Managing Partners shall, from time to time but no less often than
quarterly), determine whether the Partnership has Excess Cash, as defined in
Section 3.03 b. hereof, and whenever the Partnership has Excess Cash, the
Managing Partners shall cause the Excess Cash to be paid:
(1) First, to the Partners pro rata, based on their respective
Percentage Interests, an amount determined by multiplying (i) times (ii),
where (i) equals the sum of (-A-) plus (-B-), where (-A-) equals the
maximum federal income tax rate on individuals and (-B-) equals the greater
of (a) Connecticut income tax rate on individuals or (b) combined Michigan
income tax rates on individuals plus the Michigan intangibles tax rate and
(ii) is the sum of (-A-) plus (-B-), where (-A-) equals the Partnership's
taxable income as shown on the Partnership's U.S. Federal Income Tax Form
1065, and (-B-) equals the amount of all other items of income and gain
allocated to such Partners by virtue of their Partnership Interest which
are not otherwise included in clause (ii) (-A-) above;
(2) Next, to Sun in payment of its Deferred Development Fee, to the
extent that its Deferred Development Fee has not been paid by prior
application of this Section 3.03 a.(2) (or otherwise paid from other
sources); and
(3) Then, the balance, if any, to the Partners pro rata, based on
their respective Percentage Interests.
Notwithstanding the foregoing, after the distributions of Excess Cash to
the Partners provided in Section 3.03 a.(l) and Section 3.03 a.(2) above, at the
option of the Managing Partners, the Managing Partners may annually fund an
additional Partnership reserve fund out of the next available Excess Cash of the
Partnership (the "Additional Reserve") of up to the lesser of (-A-) 10% of the
Excess Cash of the Partnership or (-B-) U.S. $2,000,000, or such greater amount
as shall be determined by the Partners.
b. As used in this Agreement, "Excess Cash" means, at any relevant time,
that portion of the cash and cash equivalent assets of the Partnership which, in
light of the Partnership's then current and foreseeable sources of, and needs
for, cash, exceeds the amount needed by the Partnership to (i) service
- 12 -
<PAGE>
its debts and obligations to third parties in a timely fashion, (ii) pay the
Organizational and Administrative Fee, the Marketing and Casinos Operation Fee,
the Management Services Fee and the portion of the Development Services Fee not
constituting the Deferred Development Fee, (iii) maintain adequate working
capital and reserves other than Additional Reserves, (iv) conduct its business
and carry out its purposes and (v) repay any Loans.
c. Anything contained in this Agreement to the contrary notwithstanding,
in the event of an inconsistency between the provisions of this Section 3.03 and
the provisions of Section 7.01 a. hereof, the provisions of Section 7.01 a.
hereof shall govern and control.
3.04 Withholding of Tax:
The Partnership shall withhold with respect to the share of Partnership
income or profits of any foreign partner and remit to the Internal Revenue
Service, any tax that is required to be so withheld and remitted under Section
1446, or any successor or other provision, of the Code. The withholding of any
tax with respect to a Partner's share of income or profits of the Partnership
shall be treated as a distribution of cash to such Partner and shall reduce the
amount otherwise distributable to such Partner under the terms of this
Agreement. Notwithstanding the foregoing, if in any calendar year there is
insufficient Excess Cash available for distribution to any foreign partner to
fund any tax required to be withheld with respect to such foreign partner, such
foreign partner shall immediately remit to the Partnership sufficient funds to
enable the Partnership to satisfy its withholding obligations under Section 1446
of the Code. The determination of such withholding obligations shall be made by
the Partnership's accountants.
ARTICLE IV
MANAGEMENT OF THE PARTNERSHIP
AND RELATED MATTERS
4.01 Management Powers of the Managing Partners:
a. Subject to Section 4.02 hereof, the Partnership shall be managed by
the Managing Partners, who shall have the full, exclusive and absolute right,
power and authority to manage and control the Partnership and the property,
assets and business thereof, and the Managing Partners shall make all decisions
affecting the Partnership and the property, assets and business thereof. The
Managing Partners shall have all of the rights, powers and authority conferred
upon the partners of a partnership by law and all of the rights, powers and
authority conferred upon them under other provisions of this Agreement. In
addition thereto, the Managing Partners shall have the right, power and
authority, for and on behalf of the Partnership, on terms and conditions
agreeable to them, to cause the Partnership to:
(1) Recommend to the Mohegan Tribe, and, if approved by the Mohegan
Tribe, implement (i) the nature, scope, elements, timing, and design of
each phase of the Facility, (ii) when and how each phase of the Facility
will be constructed and (iii) all other matters related to the development
of each phase of the Facility, including, but not limited to, the
preparation of a budget for each phase of the Facility;
(2) Pursuant to the Development Agreement, cause each phase of the
Facility to be constructed for and on behalf of the Mohegan Tribe, and
negotiate, enter into and perform any and al! agreements, execute any and
all instruments and documents (including, but not limited
- 13 -
<PAGE>
to, agreements with Affiliates as provided herein), and take any and all
actions with respect thereto;
(3) Operate, maintain and manage the Facility for and on behalf of
the Mohegan Tribe, and negotiate, enter into and perform agreements and
subcontract for the operation, maintenance and management of the Facility
(including, but not limited to the Consulting Agreement and other
agreements with Affiliates as provided herein), and enter into all
instruments, documents and agreements incidental, related or similar
thereto;
(4) Determine whether or not to acquire any interest in an
Alternative Facility and negotiate, enter into, conclude and perform
agreements for the development and operation of any Alternative Facility
(including agreements with Affiliates as provided herein);
(5) Acquire any other property or asset that the Managing Partners
deem necessary or appropriate to the business of the Partnership;
(6) Borrow money and incur other debts and obligations and issue
evidences of indebtedness, in furtherance of the Partnership business, and
secure such indebtedness by mortgage, pledge or other lien on, or security
interest in, any property or asset of the Partnership;
(7) Negotiate arrangements for financing with respect to any phase of
the Facility pursuant to the Development Agreement or other agreements
relating to an Alternative Facility (including, agreements with Affiliates
as provided herein);
(8) Negotiate, enter into, conclude and perform and take any action
with respect to, the Development Agreement and any amendments or
modifications thereof,
(9) Change the amount of, amend, modify or change the terms of,
extend the time for the payment of, or retire, discharge or refinance, any
indebtedness or obligation of the Partnership; and change the amount or
value of, modify or change the nature or type of, or make any other
modifications or changes with respect to, any security granted or
collateral given for any Partnership indebtedness or obligation; and amend,
modify or change the terms of any agreement, instrument or document with
respect to any such security or collateral;
(10) Subject to Section 3.03 a. hereof, establish and maintain
reserves in such amounts and for such purposes as the Managing Partners
shall determine, in the exercise of their sole and absolute judgment;
(11) Negotiate, enter into, conclude and perform agreements for, and
take actions with respect to, the sale, exchange, lease or other
disposition of all, or any part of or any interest in, the Development
Agreement, if and to the extent permitted under the Development Agreement
or any other property or asset of the Partnership;
(12) Sue on, defend or compromise any and all claims or liabilities in
favor of or against the Partnership; submit any or all such claims or
liabilities to arbitration; and confess a judgment against the Partnership
in connection with any litigation in which the Partnership may be involved;
(13) Make or revoke any election permitted the Partnership by any
taxing authority;
- 14 -
<PAGE>
(14) Retain or employ, and coordinate the services of employees,
administrators, supervisors, consultants, legal counsel, accountants,
architects, engineers and contractors, and other professionals in
connection with the Partnership business;
(15) Subject to the provisions of Section 4.07 and 4.08 hereof,
contract with any person to supply any goods and/or services of any type or
kind to the Partnership in connection with the Partnership business and pay
the purchase price, costs, fees, commissions, compensation and/or other
amounts and/or consideration therefor;
(16) Open, maintain and close bank accounts and make deposits to and
withdrawals from such bank accounts;
(17) Admit a person as a partner of the Partnership pursuant to the
applicable provisions of this Agreement; and
(18) Perform any and all other acts the Managing Partners deem
necessary or appropriate with respect to the Partnership or the property,
assets or business thereof.
b. The rights, powers and authority vested in, and conferred upon, the
Managing Partners pursuant to Section 4.01 a. hereof, shall be exercised by the
Managing Partners pursuant to, and in accordance with, the provisions of this
Agreement. All decisions of the Managing Partners require the concurrence of the
Sun Managing Partner, on the one hand, and the Original Partners Managing
Partners, on the other hand, and the Original Partners Managing Partners shall
be entitled to one vote and the Sun Managing Partner shall be entitled to one
vote.
c. No person dealing with the Partnership shall be required to
investigate or inquire as to the authority of the Managing Partners to execute
instruments and documents and to take actions on behalf of the Partnership; and
any person dealing with the Partnership shall be entitled to rely upon any
instrument or document executed and any action taken by the Managing Partners,
on behalf of the Partnership and the Partnership shall be bound thereby. Sun
shall be entitled to rely on any action taken by the Original Partners Managing
Partners and shall not be required to investigate or inquire as to the authority
of the Original Partners Managing Partners.
d. No Partner who is not a Managing Partner shall have any power to sign
on behalf or bind the Partnership to any agreement or undertaking, or to act on
behalf of the Partnership in any manner whatsoever.
4.02 Major Business Decisions of the Original Partners:
a. The Original Partners Managing Partners shall make and implement all
decisions on behalf of the Original Partners except the Major Business Decisions
of the Original Partners and any other decision which requires the concurrence
of the Original Partners as provided herein.
b. As used in this Agreement, the term "Major Business Decision of the
Original Partners" shall mean any decision specified in Section 4.02 c. or
Section 4.02 d.
c. The following Major Business Decisions of the Original Partners shall
require the concurrence of all Original Partners:
- 15 -
<PAGE>
(1) Incurring or paying expenses or costs which are not in the
ordinary course of business or changing the purpose of the Partnership,
except those expenses or costs which are included in the Budget; and
(2) Determining the compensation of the Original Partners Managing
Partners.
d. The following Major Business Decisions of the Original Partners shall
require the concurrence of a Majority of the Original Partners:
(1) Incurring or paying expenses or costs which exceed in any one
transaction or in a series of related transactions a monetary commitment on
behalf of the Original Partners of $10,000 or more, except those costs or
expenses included in the Budget;
(2) Borrowing money or incurring other debts or obligations on behalf
of the Partnership or issuing evidence of indebtedness in excess of
$10,000, except those costs or expenses included in the Budget;
(3) Retaining, employing or coordinating the services of legal
counsel, accountants or other professionals;
(4) Making other major business decisions within the stated purpose
of the Partnership;
(5) Resolving any dispute between the Original Partners Managing
Partners with respect to any decision required to be made by the Original
Partners Managing Partners on behalf of the Original Partners Group under
Sections 4.01 a. or 4.08 a.(4) hereof; and
(6) Approving the Budget.
e. Any act requiring the approval of the Majority of the Original
Partners or the concurrence of all Original Partners shall be made as follows:
(1) The Original Partners Managing Partners shall give notice to each
Original Partner in accordance with Section 8.01 hereof;
(2) In the event that any Original Partner does not respond within 30
days of receipt of such notice, it shall be conclusive that such Original
Partner has consented to the act for which the approval was sought. The
Original Partners acknowledge that in order to manage the Partnership and
the Original Partners' interest in the Partnership properly, the Original
Partners Managing Partners must receive prompt responses and this mechanism
is set up to assure that there will be prompt responses.
4.03 Resolution of Disputes:
The Managing Partners and the Partners agree that, as partners, they have a
mutual obligation of good faith and fair dealing and a mutual obligation to make
all reasonable efforts to resolve any disagreements that may arise between them
with respect to the Partnership or the business thereof. If any such
disagreements arise between the Managing Partners with respect to any matter
hereof, and the Managing Partners are unable to resolve such disagreement after
making all reasonable efforts to do so, then, in such event, either Group may
give the other Group written notice that such dispute is considered
- 16 -
<PAGE>
to be a material deadlock dispute (the "Deadlock Dispute"). Each Group shall
have ten (10) days from the receipt of such notice to resolve the Deadlock
Dispute between them. In the event such Deadlock Dispute is not resolved within
such ten (10) day period, then:
(1) Either Group shall have the right, exercisable by written notice
given to the other Group (the "Buy-Out Notice") to require the other Group
to elect to either (i) sell the other Group's Partnership Interests to the
Group giving notice at the price and under the terms set forth in the Buy-
Out Notice (the "Buy-Out Price") or (ii) to have the other Group or its
designee purchase the Partnership Interests of the Group giving notice at
the Buy-Out Price on the following terms and conditions:
Within forty-five (45) days after the receipt of the Buy-Out
Notice, the Group receiving the Buy-Out Notice shall elect, by giving
written notice to the other Group, to either:
(-A-) sell its entire Partnership Interests to the Group sending
the Buy-Out Notice for the Buy-Out Price of such Group's Partnership
Interests (in the event that such election is made, the Group
receiving the Buy-Out Notice is hereinafter referred to as the
"Selling Group" and the Group sending the Buy-Out Notice is
hereinafter referred to as the "Purchasing Group"), or
(-B-) purchase the entire Partnership Interests of the Group
sending the Buy-Out Notice for the Buy-Out Price of such Group's
Partnership Interests (in the event such election is made, the Group
sending the Buy-Out Notice or its designee is (are) hereinafter
referred to as the "Selling Group" and the Group receiving the Buy-Out
Notice is hereinafter referred to as the "Purchasing Group").
In the event the Group receiving the Buy-Out Notice shall fail to make
an election during the time and in the manner provided above, the Group
receiving the Buy-Out Notice shall be deemed to have made the election
described in Section 4.03 (1)(-A-) above.
(2) The closing of the purchase and sale of the Selling Group's
Partnership Interests pursuant to the provisions of this Section 4.03
(hereinafter referred to as the "Closing") shall take place at the
principal office of the Partnership (or such other place as designated by
both Groups) on a date, not to exceed seventy-five (75) days from the
expiration of the forty-five (45) day period provided in Section 4.03 a.(1)
above, by the Purchasing Group in written notice given to the Selling Group
at least fifteen (15) days prior thereto or on such other date as shall be
mutually agreeable to the Selling Group and Purchasing Group; provided,
however, that such Closing date shall be automatically extended by any
period of time required to obtain any consents or approvals of such sale as
referred to in Section 4.10 d. hereof. At the Closing, the Buy-Out Price
shall be paid in accordance with the terms of the Buy-Out Notice. At the
Closing of such purchase, the Selling Group shall execute and deliver such
assignments and other instruments as shall be necessary or desirable in the
reasonable opinion of the Purchasing Group to transfer and assign the
Selling Group's Partnership Interests.
(3) Notwithstanding anything herein to the contrary, either the
Selling Group or the Purchasing Group can elect at any time prior to
Closing to terminate this Buy-Sell option and, in such event, the Deadlock
Dispute shall be resolved and the decision of the non-rescinding Group
shall be deemed to be the decision of the Managing Partners.
- 17 -
<PAGE>
(4) On or after the Closing, the Purchasing Group, at its sole
election, may terminate any agreement with any Partner of the other Group
or its Affiliate(s) with respect to their employment arrangement or other
arrangements with the Partnership.
(5) The Purchasing Group shall release the Selling Group from any and
all liability owed to the Partnership or any members of the Purchasing
Group and shall indemnify the Selling Group for any obligations it may
incur subsequent to the Closing with respect to its participation in the
Partnership, except for acts which constitute fraud, gross negligence, bad
faith or breach of duty of loyalty. The liability for such indemnification
shall be non-recourse to the remaining Partners and may be satisfied only
from the assets of the Partnership.
4.04 Designated Representative of the Managing Partner:
a. Howard ("Butch") Kerzner ("Kerzner") shall be the Designated
Representative of Sun and the Sun Managing Partner. In his absence, John Allison
shall be the Designated Representative of Sun. Such Designated Representatives
shall have the right, power and authority to act for and on behalf of, and to
bind, Sun (and the Sun Managing Partner) with respect to all matters relating to
the Partnership and the business thereof. Kerzner may appoint by proxy another
person(s) to act in his stead upon written notification to the Original Partners
Managing Partners. Sun shall have the right to remove and the right to replace
Kerzner and/or any other substitute Designated Representative, and Kerzner,
and/or any other substitute Designated Representative shall have the right to
resign, as a Designated Representative without the consent of the Original
Partners.
b. Subject to the provisions of Section 4.04 c.; Richard J. Hertz
("Hertz") and Len Wolman ("L. Wolman") shall be the Designated Representatives
of the Original Partners and the Original Partners Managing Partners. Such
Designated Representatives shall have the right, power and authority to act for
and on behalf of, and to bind, the Original Partners and the Original Partners
Managing Partners with respect to all matters relating to the Partnership and
the business thereof. The Original Partners shall have the right to remove, and
the right to replace, Hertz or L. Wolman and/or any other substitute Designated
Representative as provided in Section 4.04 c. hereof, and Hertz or L. Wolman
and/or any other substitute Designated Representative, shall have the right to
resign, as a Designated Representative, without the consent of Sun.
c. Notwithstanding anything in Section 4.04 b. above, in the event that
(i) Hertz sells a controlling interest in RJH, (ii) RJH is no longer a Partner
or (iii) Hertz dies, becomes incompetent, becomes disabled or for any other
reason is unable to perform the duties required of the Designated Representative
in this Agreement, then Hertz shall immediately cease to be a Designated
Representative and L. Wolman shall be the sole Designated Representative and LMW
the Original Partner Managing Partner. In the event that L. Wolman (i) no longer
owns at least a 50% interest in LMW, (ii) LMW is no longer a Partner or (iii) L.
Wolman dies, becomes incompetent, becomes disabled or for any other reason is
unable to perform the duties required of a Designated Representative in this
Agreement, then L. Wolman shall immediately cease to be a Designated
Representative and Mark Wolman shall replace him as a Designated Representative;
provided, however, in the event that Mark Wolman (i) no longer owns at least a
50% interest in LMW, (ii) LMW is no longer a Partner or (iii) Mark Wolman dies,
becomes incompetent, becomes disabled or for any other reason is unable to
perform the duties required of a Designated Representative in this Agreement,
then Mark Wolman shall not become or shall not be a Designated Representative
and Hertz shall be the sole Designated Representative and RJH the sole Original
Partners Managing Partners. In the event that Wolman, Mark Wolman and Hertz
cease to be Designated Representatives in accordance with this Section 4.04 c.,
then Tyrol shall be the successor Designated Representative and Leisure the sole
Original Partners Managing Partners. Notwithstanding
- 18 -
<PAGE>
the foregoing, any Designated Representative and any Original Partners Managing
Partners may be changed at any time by a vote of the Majority of the Original
Partners.
d. The Partners and their respective Designated Representatives agree to
and accept the appointment of such Designated Representatives. They also agree
that no further or subsequent authorization, consent or ratification shall be
required with respect to the exercise of any of the rights, powers or authority,
or the doing of any act, that such Designated Representatives have the right,
power or authority to do under the provisions of this Agreement. Each Partner
hereby acknowledges and agrees that it shall be bound by any action taken on its
behalf by its Designated Representative.
4.05 Duty to Devote Time; Other Activities:
a. The Managing Partners shall devote such time and attention to the
business of the Partnership as shall be necessary for them to perform their
respective responsibilities under Section 4.01 a. hereof. The Partners hereby
acknowledge and agree that the Partnership may engage the services of persons
affiliated and related to any Partner, subject to the provisions of this
Agreement.
b. Subject to the provisions of, and except as otherwise provided in
Section 4.05 c. hereof, the Partners acknowledge that each of them may have
interests in other present or future ventures, including competitive ventures,
and that, notwithstanding their status as Partners in the Partnership, each
Partner shall be entitled to obtain and/or continue its individual participation
in such ventures without (i) accounting to the Partnership or the other Partners
for any profits with respect thereto, (ii) any obligation to advise the other
Partners of business opportunities for the Partnership which may come to its
attention as a result of its participation in such other ventures, or in the
Partnership, and (iii) being subject to any claims whatsoever on account of such
participation.
c. Until the later to occur of the termination of the term of the
Development Agreement, as such term may be extended, from time to time, or the
termination of any activities of the Partnership with respect to the Partners
agree to bring to the attention of the Partnership all opportunities to manage,
operate or otherwise deal with gaming activities on Native American reservations
involving Native Americans pursuant to the Indian Gaming Act wherever located
and any other gaming activity planned, contemplated or carried on within a
radius of 100 miles from the Facility, to the extent that such activity is not
prohibited by the Development Agreement. The Partners agree that they shall
discuss on a good faith basis mutually satisfactory arrangements to deal with
such opportunities in the Partnership. Among other things, the Partners agree
that if either of the Groups or any Partner brings to the attention of the other
Group or Partners, as the case may be, an opportunity for the Partnership to
manage, operate or otherwise deal with gaming or resort activities on behalf of
Native Americans on Native American reservations, the Partners will explore any
such opportunity on the same participation basis which exists under this
Agreement unless otherwise agreed to by the Partners. If the Partners or other
Group, as the case may be, are unable to reach a mutually satisfactory
arrangement within sixty (60) days from the presentation of such opportunity,
the Partners or Group being offered the opportunity will not be permitted to
pursue such an opportunity (and the Partner(s) presenting such proposal shall be
free to pursue such opportunity) without the prior consent of the Partners or
other Group presenting such opportunity. Notwithstanding the foregoing, the
Partners acknowledge and agree that this Section 4.05 c. shall not apply to
Slavik and its Affiliates with respect to certain property owned by Slavik or
its Affiliate on Atwater Street in Detroit, Michigan (the "Excluded Property"),
and it is hereby agreed that Slavik may develop the Excluded Property in any
manner it elects and shall not be required to offer such opportunity to the
Partners as required under this Section 4.05 c.
- l9 -
<PAGE>
d. The Partners acknowledge and agree that any other opportunities which
the Partners agree to undertake pursuant to Section 4.05 c. above, will include
consulting arrangements with the Management Services Company under terms and
conditions to be agreed upon among the Partners.
e. At the request of the Original Partners Managing Partners, Sun agrees
that it shall devote such time, attention, and expertise as required to assist
the Mohegan Tribe and/or the Original Partners in purchasing the Property or
such other land as required to effectuate the purposes of the Development
Agreement and to place in trust such land for the Mohegan Tribe, site planning
such land and improvements for the Facility, selecting and working with
architects, planners, engineers, accountants, attorneys, underwriters and others
in the planning of the Facility, and awarding of contracts.
f. Upon the approval of the Compact and the Development Agreement, Sun
agrees that it shall use its reasonable best efforts to obtain a financing
commitment for phase one of the Facility ("Phase One"). It is presently
anticipated that the construction and development of Phase One of the Facility,
will require a loan in the approximate amount of $150,000,000 (the "Phase One
Financing") Sun shall be primarily responsible for obtaining such Phase One
Financing, which may be obtained from third party sources or from parties
affiliated with Sun. Any commitment for the Phase One Financing shall be subject
to approval of (i) the Original Partners, which approval shall not be
unreasonably withheld, (ii) the Mohegan Tribe, and (iii) the Commission, to the
extent legally required. Notwithstanding the foregoing, the Partners acknowledge
that by executing this Agreement, Sun is not guaranteeing that it will be able
to obtain the Phase One Financing and neither any Original Partner nor the
Partnership shall have any claim against Sun for the failure to obtain Phase One
Financing so long as it has used its reasonable best efforts to do so. The
parties agree that the Phase One Financing, whether or not obtained from parties
or sources affiliated with Sun, shall contain such terms and conditions,
including interest rate(s), applicable to such financing based on the prevailing
market conditions (with the expectation that it will not require lender
participation in equity or profit sharing).
4.06 Indemnity:
No Managing Partner shall be liable to the Partnership or any of the other
Partners (and the Partnership Interests of the Managing Partners shall be free
of any claims by the Partnership or any of the other Partners) by reason of any
act performed for or on behalf of the Partnership, or in the furtherance of
Partnership business, or any omission to act, except for acts or omissions that
constitute a material breach of any provision of this Agreement, a breach of a
duty of loyalty as a Partner, gross negligence, fraud or bad faith. The
Partnership shall indemnify, defend and hold harmless the Managing Partners from
any claim, demand or liability, and from any loss, cost or expense, including,
but not limited to, attorneys' fees and court costs, which may be made or
imposed upon them by reason of any act performed for or on behalf of the
Partnership or in furtherance of the Partnership business, or any omission to
act, except for acts and omissions that constitute a breach of any provision of
this Agreement, a breach of a duty of loyalty as a Partner, gross negligence,
fraud or bad faith.
4.07 Dealing with the Partnership:
Each Partner and its Affiliates shall have the right to contract and
otherwise deal with the Partnership with respect to the sale or lease of
personal property, the rendition of services, the lending of money and for other
purposes, and to receive the purchase price, fees, interest and other amounts
and/or forms of consideration in connection therewith, without being subject to
claims for self dealing; provided that, except with respect to the transactions
referred to in Sections 4.08 and 4.09 hereof or in other Sections of this
Agreement, (i) the Managing Partner(s) of the other Group has given its written
consent thereto, and (ii) the terms and conditions of such transactions are not
less favorable to the
- 20 -
<PAGE>
Partnership than those which the Partnership could obtain from comparable
independent third parties. The approval by the Managing Partner(s) of the other
Group shall be prima facie evidence of the foregoing.
4.08 Certain Services. Fees and Reimbursements to the Partners and
Affiliates of the Partners:
Pursuant to the terms of a certain Management Agreement between the Mohegan
Tribe and the Partnership and the terms of a certain Hotel/Resort Management
Agreement between the Mohegan Tribe and the Partnership (collectively, the
"Management Agreements"), the Partnership is required to perform various
services on behalf of the Mohegan Tribe, including organizational, planning,
development, management, marketing, administrative and supervisory services
(hereinafter collectively referred to as the "Services"). Certain Affiliates of
Partners shall be subcontracted by the Partnership to perform or have performed
certain of these Services on behalf of the Mohegan Tribe and shall be
compensated for the Services from the revenues the Partnership is to receive
from the Mohegan Tribe pursuant to the Management Agreements as set forth below.
a. The Partners agree that an entity to be formed by an Affiliate of Sun,
as to a 50% interest, and the Waterford Hotel Group, Inc., an Affiliate of
Slavik and LMW, as to a 50% interest (the "Management Services Company') shall
be subcontracted by the Partnership to perform certain of the services the
Partnership is required to provide pursuant to the Management Agreements. The
Management Services Company shall perform certain supervisory duties with
respect to how management duties, responsibilities and functions will be carried
out with respect to the Facility in conformance with the Management Agreements
and to the extent directed by the Partnership. The Management Services Company
shall be entitled to compensation therefor as set forth below pursuant to a
Management Services Agreement between the Partnership and the Management
Services Company incorporating the terms set forth in this Section 4.08 a. with
the understanding that if the Management Services Company is unwilling or unable
to reach agreement on any matter relating to the day-to-day activities of the
Facility, decisions relating to such matter(s) shall be made by the Managing
Partners:
(1) The Management Services Company shall make available to the
Partnership adequate employees or other supervisory personnel who will
provide consultation services to the Partnership to assist the Partnership
in the day-to-day supervision of all aspects and functions required to
implement the management decisions and supervision of the day-to-day
operation of the Facility. It is contemplated by the Partners that Wolman
will become the chief operating officer of the Management Services Company.
(2) In consideration of the services rendered by the Management
Services Company, the Partnership shall pay the Management Services Company
an on-going fee of 1% of the gross revenues of the Facility, but not
greater than 25% of the Excess Cash, plus the organizational and
administrative fee, and the marketing and casino operation fee, annually
(the "Management Services Fee").
(3) The Management Services Company can be terminated by the Managing
Partners for "cause" as defined in the Management Services Agreement.
(4) The Management Services Company shall meet and consult with the
Managing Partners on a regular basis, but no less often than quarterly or
as otherwise requested by the Managing Partners. The Management Services
Company shall also meet and consult with any Original Partner(s) and/or the
Managing Partners as reasonably requested by such Original Partner(s) to
discuss any issues, concerns or disagreements which may arise from time to
time in connection with the relationship of the Mohegan Tribe and the
Partnership or the
- 21 -
<PAGE>
Partnership's obligations under the Development Agreement and Management
Agreements. The Management Services Company and/or the Managing Partners,
as the case may be, shall give serious consideration to all such concerns
or problems brought to the attention of the Management Services Company
and/or the Managing Partners, as the case may be, and, to the extent
possible in the best business judgment of the Management Services Company
and/or Managing Partners, as the case may be, shall address such concerns
or problems in such a mariner so as to minimize such problems or concerns.
The Managing Partners shall have the right to require changes in any
management or operation procedure suggested or implemented by the
Management Services Company.
b. The Partners agree that an Affiliate of Sun (hereinafter referred to
as the "Marketing Agent"), shall be subcontracted by the Partnership to perform
marketing and casino operations consulting services required to be performed
under the Management Agreements for the Mohegan Tribe, including the marketing
of promotional events to the extent directed by the Partnership and the Managing
Partners. The Marketing Agent shall be entitled to compensation therefor as set
forth below pursuant to a Marketing Agreement to be entered into among the
Partnership and the Marketing Agent incorporating the terms set forth in this
Section 4.08 b. with the understanding that ultimate decisions in the event the
Marketing Agent is unable to reach agreement on any matter relating to the
responsibilities of the Marketing Agent under the Marketing Agreement shall be
made by the Managing Partners.
(1) The Marketing Agent shall provide consulting advice regarding
casino operations and, among other marketing services, shall together with
its Affiliates provide certain expertise in marketing of promotional
events, the association with Sun and its Affiliates, use of sales offices
and coordination of various marketing activities to ensure consistency of
cultural heritage and symbols in the development and decor of the Facility
and shall create a premium customer development program.
(2) In consideration of the services rendered by the Marketing Agent,
the Partnership shall pay the Marketing Agent an on-going fee (the
"Marketing and Casino Operations Fee") as follows:
If in any fiscal year the Facility gross revenues ("Facility
Gross Revenues") equal or exceed the thresholds set forth below, the
Partnership shall pay the Marketing and Casino Operations Fee calculated as
follows:
Facility Gross Organizational and
Revenues Thresholds Administrative Fee
------------------- ------------------
$300 Million 1.5% of Facility Gross Revenues
$400 Million 2.0% of Facility Gross Revenues
The Marketing and Casino Operations Fee (i) shall be paid sixty (60) days
after the end of each fiscal year, (ii) is solely an obligation of the
Partnership without recourse to the Partners, (iii) shall terminate in the
event of an admission or withdrawal of a Partner and (iv) shall be paid
pari passu with the Organizational and Administrative Fee.
(3) The Marketing Agent shall consult with the Managing Partners to
discuss any issues, concerns or disagreements which may arise in the
marketing in the marketing area. The Managing Partners shall have the right
to require changes in the marketing procedure suggested or implemented by
the Marketing Agent.
- 22 -
<PAGE>
c. The Partners agree that the Original Partners or Affiliates of the
Original Partners (hereinafter collectively referred to as the "Administrative
Agents"), shall be subcontracted by the Partnership to perform or have performed
certain organizational and administrative services required to be performed
under the Management Agreements for the Mohegan Tribe, including the
coordination of certain administrative services, and certain consultation
services in connection with governmental approvals to the extent directed by the
Partnership and the Managing Partners. The Administrative Agents shall be
entitled to compensation therefor as set forth below pursuant to an
Organizational and Administrative Services Agreement to be entered into among
the Partnership and the Administrative Agents incorporating the terms set forth
in this Section 4.08 c. with the understanding that ultimate decisions in the
event the Administrative Agents are unable to reach agreement on any matter
relating to the responsibilities of the Administrative Agents under the
Organizational and Administrative Services Agreement shall be made by the
Managing Partners.
(1) The Administrative Agents shall provide or have provided certain
organizational and administrative services, including advising the Mohegan
Tribe in connection with its application for Federal government
recognition, negotiations with the State of Connecticut with respect to the
Compact, settlement of a land claim, negotiations with the City of
Monteville, aiding the Mohegan Tribe in obtaining Federal legislation to
secure its land claim, aiding the Mohegan Tribe in purchasing additional
land and placing the additional land in trust, providing the Mohegan Tribe
with organizational planning and business and financial advice on an on
going basis, planning and coordination of certain tribal activities,
serving as a liaison with the Mohegan Tribe and various professionals and
other parties, interviewing and recommending professionals to represent the
Mohegan Tribe, coordinating, planning and obtaining appropriate tribal
approvals for the development activities, and coordinating various
marketing activities to ensure consistency of cultural heritage and symbols
in the development and decor of the Facility.
(2) In consideration of the services rendered by the Administrative
Agents, the Partnership shall pay the Administrative Agents an on-going fee
(the "Organizational and Administrative Fee") as follows:
If in any fiscal year the Facility Gross Revenues equal or exceed
the thresholds set forth below, the Partnership shall pay the
Organizational and Administrative Fee calculated as follows:
Facility Gross Organizational and
Revenues Thresholds Administrative Fee
------------------- ------------------
$300 Million 1.5% of Facility Gross Revenues
$400 Million 2.0% of Facility Gross Revenues
The Organizational and Administrative Fee shall be paid to the Original
Partners or their Affiliates (allocated among the Original Partners as they
may agree among themselves). The Organizational and Administrative Fee (i)
shall be paid sixty (60) days after the end of each fiscal year, (ii) is
solely an obligation of the Partnership without recourse to the Partners,
(iii) shall terminate in the event of an admission or withdrawal of a
Partner and (iv) shall be paid pan passu with the Marketing and Casino
Operations Fee.
- 23 -
<PAGE>
(3) The Administrative Agents shall meet and consult with one another
on a regular basis, but no less often than monthly. The Administrative
Agents shall also consult with the Managing Partners to discuss any issues,
concerns or disagreements which may arise in the administrative services or
other relationships between the Partnership's obligations under the
Development Agreement and the Management Agreements to the Mohegan Tribe.
The Managing Partners shall have the right to require changes in the
administrative procedure suggested or implemented by the Administrative
Agents.
d. The Partners agree that Sun (or its Affiliate) (hereinafter in such
capacity referred to as the "Developer") shall be subcontracted by the
Partnership to act as the developer of the Facility and perform certain planning
and developmental functions required of the Partnership under the Development
Agreement for the Mohegan Tribe. The Developer shall be entitled to compensation
therefor as set forth below pursuant to a Development Services Agreement between
Sun and the Partnership ("Development Services Agreement") incorporating the
terms set forth in this Section 4.08(d).
(1) The Developer will make available to the Mohegan Tribe its
development expertise, plans and employees to provide the necessary
expertise to enable the Partnership to perform its obligations under the
Development Agreement for the benefit of the Mohegan Tribe.
(2) In consideration of the service rendered by the Developer, the
Partnership shall pay the Developer a fee in the amount equal to three
percent (3%) of the total development costs of Phase One of the Facility
(which development costs shall include all so-called bard and soft costs
with respect to the construction of the Facility, except land acquisition
costs), plus an additional $25,000 for any out-of-pocket costs and expenses
it might incur (the "Development Services Fee").
(3) The Development Services Fee shall be due and payable, to the
extent available or made available to the Partnership from the Phase One
Financing, as follows: (i) 30% of the amount of the Development Services
Fee shall be paid out of the proceeds of the first construction loan draw
made for Phase One; (ii) 40% of the Development Services Fee shall be
payable when 50% of the Phase One is completed, and (iii) the remaining 30%
of the Development Services Fee shall be paid upon completion of Phase One.
To the extent that there is insufficient Phase One financing proceeds
available to pay all or any portion of the Development Services Fee (the
"Deferred Development Fee") the payment of such Deferred Development Fee
shall be deferred until there are other proceeds available or there is
sufficient Excess Cash to pay such Deferred Development Fee in accordance
with Section 3.03 a.(2) hereof.
(4) In the event the Partnership pursues the development of
additional phases of the Facility, similar fees will be paid to the
Developer for its services to the Partnership in the development of the
additional phase(s).
(5) The Partners acknowledge that Sun will enter into a subcontract
with Wolman Construction Company ("Wolman Construction"), an Affiliate of
LMW, and RJH, under which Wolman Construction and RJH will, subject to
Sun's direction, assist in supervising and monitoring the planning and
construction of Phase One. For its services, Sun will pay Wolman
Construction and RJH collectively 20.83% of the Development Services Fee
plus $25,000 for expense reimbursement, as and when received, payable
ratably.
- 24 -
<PAGE>
4.09 Employment Agreement with an Affiliate:
The Partners acknowledge and agree that Tyrol has entered into an
employment agreement with the Partnership pursuant to which Tyrol is acting as
the full time executive director of the Partnership in the operation of the
Partnership, the coordination of the relationship between the Partnership and
the Mohegan Tribe and the development of new business opportunities for the
Partnership. The relationship between Tyrol and the Partnership is governed by
the terms of such employment agreement, subject to the provisions of this
Agreement.
4.10 The Facility and the Development Agreement:
a. The Facility is to be developed in phases and is expected to contain
Class III gaming (as those terms are defined in the Indian Gaming Regulatory
Act, 25 U.S.C. Section 2701 et seq.), restaurants, bars, retail shops, one or
more hotels and other entertainment facilities. The Partners acknowledge that
Phase One is expected to include gaming facilities, a hotel, restaurants, bars,
retail shops and other entertainment facilities, as well as such other
assistance to the Mohegan Tribe as is required under the Development Agreement.
b. Under the terms of the Development Agreement, the Partnership is
obligated to act as the Mohegan Tribe's exclusive agent to design, develop,
construct, manage and maintain the Facility on the Property, or such other site
as selected by the Mohegan Tribe and the Partnership, solely for the benefit of
the Mohegan Tribe.
c. The Partners hereby agree that all of their respective obligations and
duties under this Agreement (including obligations and duties of Affiliates)
shall be conducted in a manner consistent with the Development Agreement and in
cooperation with the Mohegan Tribe.
d. Notwithstanding anything in this Agreement to the contrary, the rights
of any Partner to transfer any Partnership Interest under any provision of this
Agreement, shall in all respects be subject to the consent of (i) the Mohegan
Tribe and (ii) any governmental agency to the extent legally required, and shall
be in conformance with all requirements of the Development Agreement. To the
extent that any transfer of Partnership Interests occur among Partners, the
consent of the Mohegan Tribe shall be required, other than set forth in Section
6.01 b. hereof unless legally required.
e. The Partners acknowledge and agree that the initial undertaking
contemplated by this Agreement includes Phase One only and that any subsequent
phases of the development of the Facility shall require the concurrence of the
Managing Partners.
4.11 Budget:
The Managing Partners shall annually, at least sixty (60) days prior to the
beginning of each fiscal year of the Partnership, prepare a budget for proposed
Partnership expenditures for the next year (the "Budget"). The Budget shall be
sent to each Partner.
- 25 -
<PAGE>
ARTICLE V
ACCOUNTING MATTERS AND BANK ACCOUNTS
5.0l Fiscal Year and Accounting Method:
The Partnership shall operate on a calendar fiscal year and shall use the
accrual method of accounting or such other fiscal year or method of accounting
as shall be determined by the Managing Partners.
5.02 Books and Records:
The books and records of the Partnership shall be maintained at the
Partnership's principal office, or at such other location as the Managing
Partners shall determine. Each Partner may inspect the Partnership's books and
records at any reasonable time.
5.03 Bank Accounts:
All funds of the Partnership shall be deposited in such bank account(s) as
shall be determined by the Managing Partners. All withdrawals therefrom shall be
made upon checks signed by any person(s) authorized to do so by the Managing
Partners.
5.04 Tax Information and Financial Statements:
At the end of each fiscal year of the Partnership, the Managing Partners,
at the expense of the Partnership, shall cause to be prepared and furnished to
the Partners (i) all information relating to the Partnership that is necessary
for the preparation of the Partners' federal, state or local income tax returns,
and (ii) such financial statements as the Managing Partners shall decide to have
prepared, which shall be unaudited unless either the Sun Managing General
Partner, on the one hand, or the Original Managing General Partners, on the
other hand, shall decide otherwise.
5.05 Tax Matters Partner:
LMW Investment, Inc. is hereby designated as Tax Matters Partner for the
Partnership. The Managing Partners may, in their discretion, designate any other
person as Tax Matters Partner. The Tax Matters Partner shall have full power and
authority to act as such for the Partnership and the Partners, with all the
rights and responsibilities of that position described in Section 6222 through
6232 of the Code. Notwithstanding the foregoing, unless the Tax Matters Partner
shall have obtained the advance written approval of the other Managing Partners,
the Tax Matters Partner shall not have the power or authority to (i) choose any
judicial, administrative or other forum in which to contest or litigate any
position or action taken by any taxing authority against or with respect to the
Partnership (or any Partner concerning the Partnership), or (ii) agree to any
extension of any period within which any taxing authority must take action
against or with respect to the Partnership (or any Partner concerning the
Partnership).
- 26 -
<PAGE>
ARTICLE VI
ASSIGNMENTS OF PARTNERSHIP INTERESTS,
WITHDRAWAL OF A PARTNER AND RELATED MATTERS
6.01 Assignment of Sun's Partnership Interest:
a. Except as otherwise provided in Section 6.01 b., 6.01 C. or 6.01 d.
and subject in all respects to Section 4.10 d. hereof, Sun shall not have the
right to assign all or any portion of its Partnership Interest without the
consent of the Original Partners; and, except as otherwise provided in Sections
6.01 b., 6.01 c. and 6.01 d. hereof no assignee of Sun's Partnership Interest or
portion thereof shall have the right to be admitted to the Partnership as a
partner in respect thereof.
b. Sun shall have the right to assign its Partnership Interest to an SEC
Affiliate of Sun and if Sun so elects to have such assignee admitted to the
Partnership as a Partner in respect thereof without the consent of the Original
Partners. Any person to whom Sun makes an assignment of its Partnership Interest
pursuant to the provisions of this Section 6.01 b. shall have the right to be
admitted to the Partnership as a partner in respect of the Partnership Interest
or portion thereof so assigned to such person upon the satisfaction of the
requirements set forth in Section 6.03 a. hereof.
c. If Sun receives a bona fide written offer to purchase all or any
portion of its Partnership Interest in the Partnership, Sun, if it desires to
sell such Partnership Interest, may transfer its Partnership Interest in
accordance with the provisions of Section 6.03 a. hereof without the consent of
the Original Partners under the following terms and conditions:
(1) Sun shall give written notice to the Original Partners Group of
its desire to make such sale, the name and address of the offeror and the
purchase price and other terms of sale together with a copy of the offer
(the "Offer Notice").
(2) The Original Partners Group shall thereupon have the option, but
not the obligation, to purchase all (but not less than all) of said
Partnership Interest subject to, and on the same terms and conditions as
set forth in, the Offer Notice. The option shall be exercised by the
Original Partners giving written notice ("Acceptance") to Sun within thirty
(30) days after the receipt of the Offer Notice by the Original Partners.
The Acceptance shall fix a date ("Closing Date") as the date on which the
purchase of such Partnership Interest shall be consummated, such date to be
not less than fifteen (15) nor more than sixty (60) days (or such longer
time as may be required to obtain any applicable consents from any
governmental agency so long as such consent(s) are diligently pursued)
after the expiration of such thirty (30) day period. Failure of the
Acceptance to fix a Closing Date shall be deemed an election to consummate
the purchase on the sixtieth (6Oth) day. The Original Partners Group shall
purchase such Partnership Interest in proportion to the Percentage Interest
each accepting Original Partner bears to the total Percentage Interest of
all accepting Original Partners or as otherwise agreed to by the Original
Partners.
(3) Failure by the Original Partners to give a notice of Acceptance
within the time specified in Section 6.01 c.(2) shall be deemed an election
by the Original Partners not to exercise such option. In the event all
Original Partners shall fail to exercise their rights to purchase such
Partnership Interest as offered, Sun shall be free to transfer such
Partnership Interest but only in accordance with the terms and conditions
referred to in the Offer Notice given pursuant to Section 6.01 c.(l) during
a period thirty (30) days following the expiration
- 27 -
<PAGE>
of the period of time in which the Original Partners Group had the right to
purchase the same (or such longer time as may be required to obtain any
applicable consents from any governmental agency so long as such consent(s)
are diligently pursued); but after said thirty (30) day period has expired,
the Original Partner Group's right of first refusal as provided shall
reapply to the Partnership Interest so offered.
d. The equity securities of Sun may be transferred to any SEC Affiliate
of its current corporate parent without the consent of the Original Partners. No
other transfers of the equity securities of Sun shall be permitted without the
consent of the Original Partners.
e. Any assignee of Sun's Partnership interest or portion thereof who is
not admitted to the Partnership as a Partner in respect thereof shall only be
entitled to receive, in accordance with any agreement that such assignee may
have with Sun, all or a portion of the Profits, Losses and/or distributions of
the Partnership otherwise allocable to Sun in respect of Sun's Partnership
Interest or portion thereof assigned to such assignee, and such assignee shall
not have any other rights of a Partner under this Agreement or otherwise.
f. As used in this Article VI., the term (i) "assignment" means any sale,
conveyance, transfer, assignment, mortgage, pledge, encumbrance, hypothecation
or any other alienation or disposition of any type or kind, (ii) "assign" means
any making of an assignment, (iii) "assignor" means any person who makes an
assignment, and (iv) "assignee" means any person to whom or for whose benefit an
assignment is made.
6.02 Assignment of an Original Partner's Partnership Interest:
a. Except as otherwise provided in Sections 6.02 b., 6.02 c. or 6.02 d.
hereof and subject in all respects to Section 4.10 d. hereof, no Original
Partner (and no assignee of an Original Partner's Partnership Interest or a
portion thereof) shall have the right to assign its Partnership Interest or any
portion thereof without the written consent of the Partners; and, except as
otherwise provided in Sections 6.02 b., 6.02 c. and 6.02 d. hereof, no assignee
of an Original Partner's Partnership Interest or a portion thereof shall have
the right to be admitted to the Partnership as a partner in respect thereof, and
such assignee shall only be entitled to receive, in accordance with any
agreement that he may have with the assignor, all or a portion of the Profits,
Losses and/or distributions of the Partnership otherwise allocable to the
assignor in respect of such Partnership Interest or portion thereof, and such
assignee shall not have any of the other rights of a partner of the Partnership.
b. Any Original Partner may assign its Partnership Interest to an
Affiliate of such Original Partner at any time with the consent of the Majority
of the Remaining Original Partners, which consent shall not be unreasonably
withheld. Any person to whom an Original Partner makes an assignment of its
Partnership Interest or a portion thereof which is permitted under the
provisions of this Section 6.02 b. shall have the right to be admitted to the
Partnership as a partner in respect of the Partnership Interest or portion
thereof so assigned to such person upon the satisfaction of the requirements set
forth in Section 6.03 a. hereof.
c. Except to the trustees of a trust for the benefit of a Principal
and/or his spouse and/or his issue and only if the trustee agrees to assume the
obligations of this Agreement and to abide by the terms hereof, no Original
Partner shall (i) permit any transfer of its stock, other than resulting from
the death of a shareholder, to be recorded on its books or records, or (ii)
issue any additional shares of its stock or warrants or other rights authorizing
the purchase of additional shares with the results that the Principals of such
Original Partner (including the interests of a trustee permitted above) have
together less than
- 28 -
<PAGE>
50.1 % interest in such controlling and beneficial interest in the Original
Partner. A violation of this Section 6.02 c. will result in such Original
Partner's interest in the Partnership being deemed converted to a beneficial
interest under the general terms and conditions set forth in Section 6.04 f.
hereof. The Managing Partners shall take whatever action is needed to effectuate
such conversion. The Original Partners shall pay for all expenses incurred to
carry Out such conversion except for the converted Original Partner's expenses,
such as accounting and legal, which shall be the sole obligation of such
converted Original Partner.
d. Anything contained in this Agreement to the contrary notwithstanding,
if any Partner who is a member of the Original Partners Group receives a bona
fide written offer to purchase all (but not a portion) of its Partnership
Interest, such Partner, if it desires to sell, may transfer such interest in
accordance with this Section 6.02 d. without the consent of the Partners, under
the following terms and conditions:
(1) If any Original Partner receives a bona fide written offer to
purchase all of its Partnership Interests, such Original Partner, if it
desires to sell, may transfer such interest in accordance with the terms of
this Section 6.02 d.
(2) The Original Partner who receives an offer under this Section
6.02 d. (the "Selling Partner") shall give the Offer Notice to the other
non-selling Partners of the Original Partners Group (the "Non-Selling
Partners").
(3) The Non-Selling Partners shall thereupon have the option, but not
the obligation, to purchase all (but not less than all) of said Partnership
Interest on the same terms and conditions as set forth in the Offer Notice.
The option shall be exercised by the Non-Selling Partner's giving of the
Acceptance to the Selling Partner within thirty (30) days after the receipt
of the Offer Notice by the Non-Selling Partners. The Acceptance shall fix
the Closing Date, such Closing Date shall be not less than fifteen (15) nor
more than sixty (60) days after the expiration of such thirty (30) day
period. Failure of the Acceptance to fix a Closing Date shall be deemed an
election to consummate the purchase on the sixtieth (6Oth) day. The Non-
Selling Partners shall purchase such Partnership Interest in the proportion
to the Percentage Interest of each accepting Original Partner bears to the
total Percentage Interest of all accepting Original Partners.
(4) Failure by a Non-Selling Partner to give a notice of Acceptance
within the time specified in Section 6.02 d.(3) shall be deemed an election
by the Non-Selling Partner not to exercise such option. In the event all
Non-Selling Partners shall fail to exercise their rights to purchase such
Partnership Interest as offered, the Selling Partner shall then give the
Offer Notice to Sun.
(5) Sun shall thereupon have the option, but not the obligation, to
purchase all (but not less than all) of said Partnership Interest on the
same terms and conditions as set forth in the Offer Notice. The option
shall be exercised by Sun giving the Acceptance to the Selling Partner
within thirty (30) days after the receipt of the Offer Notice by Sun. The
Acceptance shall fix the Closing Date, such Closing Date to be not less
than fifteen (15) nor more than sixty (60) days after the expiration of
such thirty (30) day period. Failure of the Acceptance to fix the Closing
Date shall be deemed an election to consummate the purchase on the sixtieth
(60th) day. Failure by Sun to give the notice of Acceptance within the time
specified in Section 6.02 d.(5) shall be deemed an election by Sun not to
exercise such option. In the event that Sun shall fail to exercise its
rights to purchase such Partnership Interest as offered, the Selling
- 29 -
<PAGE>
Partner shall be free to transfer such Partnership Interest, but only in
accordance with the terms and conditions referred to in the Offer Notice
given pursuant to Section 6.02 d.(2) during a period thirty (30) days
following the expiration of the period of time in which Sun had the right
to purchase the same; but after said thirty (30) day period has expired,
the Non-Selling Partners' right of first refusal as provided and Sun's
rights under Section 6.02 d.(4) shall reapply to the Partnership Interest
so offered.
6.03 Admission of the Partners:
a. If a Partner makes an assignment of his Partnership interest or a
portion thereof which satisfies the requirements of Section 6.01 or Section 6.02
hereof (and subject in all respects to Section 4.10 d. hereof), the assignee
shall become a partner of the Partnership in respect of such Partnership
Interest or portion thereof, if all of the following requirements are satisfied:
(1) The assignor Partner executes and delivers to the assignee, and
delivers to the Managing Partners an executed counterpart of, an instrument
of assignment which provides, among other things, that it is the assignor
Partner's intention that the assignee become a partner of the Partnership
in the place and stead of the assignor Partner in respect of the
Partnership Interest or portion thereof assigned by the assignor Partner to
the assignee;
(2) The assignee executes and delivers to the assignor Partner, and
delivers to the Managing Partners an executed counterpart of, an assignment
under the terms of which he (i) accepts such assignment and admission as a
partner of the Partnership, (ii) assumes and agrees to perform the
obligations of the assignor Partner to the Partnership in respect of the
Partnership Interest or portion thereof assigned to him by the assignor
Partner from and after the date of the assignment, and (iii) agrees to be
bound by, and to perform the provisions of, this Agreement in respect of
the Partnership Interest or portion thereof assigned to him by the assignor
Partner from and after the date of the assignment; and the assignee
executes and delivers to the Managing Partners such other instruments and
documents as the Managing Partners shall require, which may include, but
shall not necessarily be limited to, a conformed counterpart of this
Agreement;
(3) The assignor Partner and/or the assignee reimburses the
Partnership for the reasonable legal fees and other expenses incurred by it
in connection with such assignment and admission as a partner of the
Partnership; and
(4) The Partners, as applicable, give their express written consent
to such admission as a partner of the Partnership, except to the extent
that such consent is not required under Section 6.01 or 6.02 hereof.
b. The assignor Partner shall cease to be, and the assignee shall become,
a partner of the Partnership in respect of the Partnership Interest or portion
thereof assigned to such assignee, as of the date on which all of the
requirements of Section 6.03 a. hereof have been satisfied.
- 30 -
<PAGE>
6.04 Transfers at Death or Incompetency of
a Principal of the Original Partners:
a. In the event of the occurrence of a Disability Event with respect to
(i) Hertz or Tyrol, (ii) both L. Wolman and Mark Wolman, or (iii) both Stephan
F. Slavik, Sr. and Del J. Lauria ("Option Triggering Event"), then the Original
Partner whose shareholder, shareholders or key employee had the occurrence of a
Disability Event (the "Disabled Party") shall have the option to appoint an
officer, shareholder or key employee to be substituted for such Disabled Party
("Substitute Party"), and, upon the approval of the Majority of the Remaining
Original Partners, such Substituted Party shall be substituted in the place and
stead of the Disabled Party; provided, however, if such Substitute Party is not
acceptable to the Majority of the Remaining Original Partners, then, in such
event, or if the Disabled Party elects it shall have the option to (-A-) sell
its entire Partnership Interest to the other Original Partners as set forth in
Section 6.04 c. hereof at the Purchase Price determined in accordance with
Section 6.04 b. hereof or (B) to have its Partnership Interest converted to a
beneficial interest in accordance with Section 6.04 e. hereof.
b. The purchase price for such Disabled Party's Partnership Interest
shall be the fair market value thereof as of the date upon which notice was
provided to the other Group pursuant to Section 6.03 b. hereof (the "Notice
Date"). If the Disabled Party and the remaining Original Partners cannot agree
as to such fair market value within sixty (60) days after the Notice Date, then
the purchase price of the Partnership Interest shall be the fair market value of
such Partnership Interest as of the Notice Date, as determined by a nationally
recognized accounting firm selected in the manner specified below, whose
decision shall be final. The Disabled Party and the remaining Original Partners
shall together appoint a qualified nationally recognized accounting firm to
value the Partnership Interests in the Partnership owned by the Partners and to
value any other assets of the Partnership in order to assist such accountants in
determining the fair market value of the Partnership Interest. If the Disabled
Party and the remaining Original Partners cannot agree as to a suitable
accounting firm within seventy-four (74) days after the Notice Date, then each
shall promptly select a qualified nationally recognized accounting firm and one
of such firms shall be chosen by lot to value the Partnership Interest of the
Disabled Party. In making its determination, such accountants may retain one or
more qualified appraisers (or such other persons as they deem appropriate) to
value the Partnership assets and shall not discount the Disabled Party's
Partnership Interest for not being freely transferable or not being a
controlling interest, but shall value such Partnership Interest based on its
allocable Percentage Interest in the fair market value of the Partnership assets
and liabilities and the rights and obligations relating to such Partnership
Interest and any outstanding Loans (the "Purchase Price").
c. The Disabled Party shall have the obligation to notify the remaining
Original Partners of its decision to appoint a Substituted Party or to sell or
to convert the Partnership Interest pursuant to Section 6.04 a. above within
ninety (90) days after the occurrence of the Disability Event. The remaining
Original Partners shall then immediately commence the determination of the
Purchase Price pursuant to Section 6.04 b. hereof. Upon receipt of the
notification of the Purchase Price, the Disabled Party shall give notice within
ten (10) days of its election to grant the Partners the option to purchase or to
convert its interest to a beneficial interest as set forth in Section 6.04 a.
above. The notice, if exercising the right to sell, shall fix a date for the
transfer ("Transfer Date") which date shall be not less than thirty (30) nor
more than sixty (60) days after the notice. Failure of such notice to establish
a Transfer Date shall be deemed an election of the Transfer Date to be the
sixtieth (60th) day. Failure to notify the remaining Original Partners within
said ten (10) day period shall be deemed a decision to convert.
d. If the Disabled Party exercises its option to sell its Partnership
Interest, the remaining Original Partners shall by unanimous decision have the
option to (i) require the Disabled Party to convert
- 31 -
<PAGE>
its Partnership Interest to a beneficial interest; or (ii) purchase the interest
of the Disabled Party in proportion to which each remaining Original Partners'
Percentage Interest bears to the total of all Percentage Interests of the
remaining Original Partners, unless the remaining Original Partners agree
unanimously to a different percentage or different purchasers (such purchasers
are hereinafter referred to as the "Purchasing Partners"). The Purchasing
Partners shall notify the Disabled Party of their decision to purchase or
convert within thirty (30) days of the receipt of the notice pursuant to Section
6.04 c. Failure to notify the Disabled Party within said thirty (30) day period
shall be deemed a decision to convert.
e. The Purchase Price shall be paid, at the election of each Purchasing
Partner as follows: (i) in cash or (ii) 10% thereof in cash on the Transfer
Date; the balance by each Purchasing Partner's execution and delivery of a
promissory note for the portion such Partner is purchasing dated as of the
Transfer Date, made payable to the order of the Disabled Party payable in equal
consecutive monthly installments of principal and interest that would fully
amortize such promissory note over the lesser of (-A-) a five year period or
(-B-) the remaining unexpired term of the Development Agreement, with the first
payment commencing thirty (30) days from the Transfer Date. Interest on the
unpaid balance shall be at the lowest rate of interest, presently known as the
"Test Rate" which pursuant to the provisions of Section 1274 of the Code (or any
successor statute of like purpose) and the regulations thereunder, without
regard to Section 1274A of the Code, is sufficient to avoid characterization of
any part of the purchase price as "unstated interest" as that term is described
in such statute and regulation. Such promissory note shall provide for the
privilege of prepayment at any time without premium or penalty and shall recite
that the total balance shall become due at the option of the holder if all or
any part of the principal or interest remains unpaid for thirty (30) days after
the date on which the same becomes due.
f. If the Disabled Party elects to convert its interest or the remaining
Original Partners elect to have the Disabled Parties' interest converted to a
beneficial interest, then the Disabled Party and the remaining Original Partners
shall take all steps necessary to evidence the assignment of the Disabled
Parties' Partnership Interest to the remaining Original Partners, in the
proportion each remaining Original Partners Partnership Interest bears to all of
the other remaining Original Partners Partnership Interests and the Original
Partners shall thereupon make an assignment of a beneficial interest in the
Profits, Losses and distributions of the Partnership to the Disabled Party with
respect to the Disabled Parties' Partnership Interest to the Disabled Parties;
provided, however, such Disabled Party shall continue to be liable for the
Disabled Party's obligations and liabilities under the Partnership Agreement.
g. The Original Partners, pro rata, shall pay all costs associated with
the valuation of the Disabled Parties Partnership Interest under this Section
6.04.
6.05 Withdrawal etc. of a Partner:
a. Except as provided in Sections 6.06 through 6.10 hereof, no Partner
may withdraw from the Partnership without the consent of all of the other
Partners (except in connection with an assignment of its entire Partnership
Interest and the admission of the assignee as a partner of the Partnership in
respect of its Partnership Interest, pursuant to, and in accordance with, the
provisions of Section 6.01, 6.02 and 6.03 hereof). If a Partner shall withdraw
from the Partnership in violation of the preceding sentence ("Withdrawn
Partner"), then:
(1) Unless the remaining Partners shall decide otherwise, the
remaining Partners shall continue the business of the Partnership;
- 32 -
<PAGE>
(2) The Withdrawn Partner shall be liable to the remaining Partners
for all damages caused to them by its withdrawal;
(3) The Withdrawn Partner shall cease to be a partner of the
Partnership and shall cease to have any interest in, any rights with
respect to, the Partnership, the management of the Partnership, or any
other property or asset of the Partnership or the business of the
Partnership, and anything contained in this Agreement to the contrary
notwithstanding, the Withdrawn Partner shall have no right to participate
in the management of the Partnership or receive any distributions or other
amounts from the Partnership or the remaining Partners under any Section of
this Agreement; however, the Withdrawn Partner shall nevertheless remain
liable for all of its existing unperformed obligations to, and with respect
to, the Partnership and for its share of all existing liabilities of the
Partnership to third parties; and
(4) The Withdrawn Partner shall be deemed to have renounced its
Partnership Interest and to have waived any right that it would otherwise
have under this Agreement, the Act or otherwise to demand or receive any
amounts from the Partnership or the remaining Partners in respect of the
value of its Partnership Interest or otherwise, or to be indemnified
against present or future Partnership liabilities, and the Partnership and
the remaining Partners shall have no obligation whatsoever to pay to the
Withdrawn Partner the value of its Partnership Interest or any other amount
or to indemnify it against any present or future Partnership liabilities.
If (and only if) the remaining Partners decide not to, or are otherwise unable
to, continue the business of the Partnership, the Partnership shall be wound up
and liquidated pursuant to the provisions of Article VII hereof.
b. The Withdrawn Partner shall be deemed to have appointed the other
Partners and each of them, with full power of substitution, as its true and
lawful attorney-in-fact, in its name and behalf, to execute and deliver any and
all documents and instruments that are necessary or advisable, in the judgment
of such attorney-in-fact, to effectuate the provisions of Section 6.05 a.
hereof. The foregoing power of attorney, and all other powers of attorney
granted hereunder or pursuant hereto, is a special power of attorney coupled
with an interest, is irrevocable and shall survive the assignment by a Partner
of its Partnership Interest and the occurrence of a Disability Event with
respect to a Partner.
6.06 Development Agreement Withdrawal:
a. Except for a delay or denial described in Section 6.06 b. hereof and
which delay or denial is cured by the Original Partners, if the Development
Agreement is not approved by the Commission, or if it is approved but on terms
substantially less favorable than set forth in the Development Agreement
attached hereto as Exhibit B, Sun may elect to withdraw from the Partnership. In
the event that Sun elects to withdraw from the Partnership pursuant to this
Section 6.06 a., Sun shall have no further rights or obligations hereunder and,
in such event, Sun shall not be entitled to receive a return of its Original
Capital Contribution, Additional Capital Contribution or any Additional
Contributions but shall be entitled to the repayment of any Loans made by it to
the Partnership upon the commencement of the construction of Phase One of the
Facility.
b. Notwithstanding anything to the contrary in this Section 6.06, if the
approval of the Development Agreement is not obtained because of the
Commission's objection to Sun's, its designee's or any of its key employee's
participation, which objection is not cured within ninety (90) days after
receipt by Sun of notice from the Original Partners of such objection, the
Original Partners, in their sole discretion upon written notice to Sun, may
elect to cause Sun to withdraw from the Partnership and proceed to develop the
Facility without the participation of Sun. Subject to the regulation of the
- 33 -
<PAGE>
Commission, if Sun is required to withdraw from the Partnership under this
Section 6.06 b., (i) the Partnership will have the right to utilize all plans
and materials previously prepared or supplied by Sun in connection with the
development of the Facility, (ii) irrespective of whether or not such plans or
materials are utilized, the Partnership shall reimburse Sun for the aggregate
amount of its Original Capital Contribution, Additional Capital Contribution and
any Additional Contribution it has funded and Loans which it has made to the
Partnership immediately upon the commencement of the construction of Phase One
of the Facility and (iii) Sun shall have no further rights or obligations
hereunder.
c. In the event the approval of the Development Agreement is denied or
delayed because of the Commission's objection to the participation of one or
more of the Original Partners or any of their key employees, which objection is
not cured within ninety (90) days after receipt by the Original Partners of such
objection, such Original Partners shall withdraw from the Partnership on the
terms and conditions set forth in Section 6.06 d. below. In the event all of the
Original Partners are disqualified, which disqualification with respect to all
of the Original Partners cannot be cured as provided above, Sun shall have the
right, at its option, to acquire all of the Partnership Interests in the
Partnership and continue the Partnership's rights under the Development
Agreement. In such event, subject to the regulation of the Commission, Sun shall
pay each Original Partner its total Capital Contributions and Loans made to the
Partnership as of the date of such withdrawal.
d. (1) Subject to the regulation of the Commission, if an Original
Partner is required to withdraw from the Partnership under Section 6.06 c.
above ("Withdrawing Original Partner"), the other Original Partners pro
rata, or on any other basis agreed to by the other Original Partners) shall
acquire the Partnership Interest of such Withdrawing Original Partner(s).
The purchase price for the Partnership Interest of the Withdrawing Original
Partner shall be the product of (i) times (ii) times (iii), where (i)
equals the Withdrawing Original Partner's Percentage Interest, (ii) equals
Seventy percent (70%) and (iii) equals the Excess Cash for the first five
(5) years of operation of the Project, increased by the Marketing and
Casinos Operations Fee and Organization and Administration Fee for the
first five (5) years of the operation of the Project and reduced by the
Development Services Fee for the first five (5) years of the operation of
the Project.
The purchase price shall be paid to the Withdrawing Original Partner
in five (5) annual installments with the first installment being due 425
days after the Project first opens for business and continuing annually
thereafter for four (4) additional years on the same date. Each annual
installment shall be calculated as described above for the preceding year,
with the first annual installment relating to the year commencing on the
date the Project opens for business and ending 365 days thereafter and
annually calculated thereafter for the same time period (e.g., if the
Project opened for business on September 1, 1995, the first annual
installment would relate to the year September 1, 1995 - August 31, 1996
and would be due on October 30, 1996, the second annual installment would
relate to the year September 1, 1996 - August 31, 1997 and would be due on
October 1997, etc.).
(2) Each Original Partner represents and warrants to each of the
other Original Partners the following:
That it, its officers, directors or persons holding ten percent (10%) or
more of the stock or equity of such Original Partner or any parent or
subsidiary companies of such Original Partner have never had or been
subject to any of the following:
i) a felony conviction in any jurisdiction;
- 34 -
<PAGE>
ii) an arrest or prosecution for any gaming related offense,
felony, misdemeanor or otherwise;
or
iii) a felony arrest or prosecution for any offense involving
fraud or deceit;
iv) a successful civil prosecution or settlement of any claim
involving fraud.
6.07 Financing Withdrawal:
The parties agree that in the event a satisfactory commitment for the Phase
One Financing is not obtained within one hundred twenty (120) days after the
later to occur of (i) the approval of the Development Agreement by the
Commission and (ii) the approval of the Compact by the Commission (the "Approval
Date"), the Original Partners Managing Partners shall have the right to cause
Sun to withdraw from the Partnership and the Partnership may proceed to plan,
develop, construct and operate the Facility without the participation of Sun;
provided, however, in the event that the Original Partners Managing Partners
elect to cause Sun to withdraw from the Partnership pursuant to this Section
6.07, the Original Partners Managing Partners shall give Sun written notice of
such intent to cause Sun to withdraw from the Partnership and, in such event,
Sun shall be deemed to have withdrawn from the Partnership upon the expiration
of the fourteen (14) day time period described below unless such satisfactory
commitment for the Phase One Financing is obtained within fourteen (14) days
after the delivery of written notice thereof by the Original Partners Managing
Partners, and further provided that the Original Partners Managing Partners may
not cause Sun to withdraw if the Original Partners are in material default under
their obligations under this Agreement. In the event that the Original Partners
Managing Partners elect to cause Sun to withdraw pursuant to this Section 6.07,
Sun shall not be entitled to receive a return of its Capital Contributions it
may have funded pursuant to this Agreement but shall be entitled to the
repayment of all Loans upon such withdrawal and Sun shall have no further rights
or obligations hereunder.
Notwithstanding the foregoing or any other provision in this Agreement to
the contrary, the Original Partners shall not have the right to cause Sun to
withdraw from the Partnership provided all of the following have been satisfied:
(1) Sun has approved the commitment for Phase One Financing;
(2) Sun, any of its affiliates or any stockholder of Sun or any of
its affiliates, has agreed to make a subordinated loan to the Mohegan Tribe
in the amount of twenty five million dollars ($25,000,000) (the
"Subordinated Loan"), at a market rate of interest, and in a manner which
is otherwise acceptable to the Phase I financing lender;
(3) Sun has agreed to execute a completion guaranty under the terms
and conditions as required by the Phase One Financing lender; and
(4) the Subordinated Loan and the Phase One Financing meet all the
requirements of the Commission.
- 35 -
<PAGE>
6.08 Insolvency of a Partner:
a. If a Partner shall become an Insolvent Partner, then, at the election
of the other Partner(s), the Insolvent Partner shall be deemed to be a Withdrawn
Partner within the meaning of Section 6.05 hereof and shall be deemed to have
withdrawn from the Partnership on the date on which it became an Insolvent
Partner (or such later date as shall be designated by a majority of the Other
Partners), and the provisions of Section 6.05 hereof shall apply.
b. As used in this Agreement, the term "Insolvent Partner" means a
Partner (i) which makes an assignment for the benefit of creditors, (ii) which
files a voluntary petition in bankruptcy, (iii) which is adjudicated a bankrupt
or insolvent, (iv) which files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, (v) which files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of the nature
described in clause (iv), (v) which seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for such Partner or all or any
substantial part of its properties and assets, or (vi) with respect to which a
trustee, receiver or liquidator of it or any substantial part of its properties
and assets has been appointed without its consent or acquiescence.
6.09 Power of Attorney:
In the event of a withdrawal of a Partner, other than in violation of
Section 6.05 hereof, such Partner shall be deemed to have appointed each of the
Managing Partners, with full power of substitution, as its true and lawful
attorney-in-fact, in its name and behalf, to execute and deliver the Withdrawal
Agreement attached hereto as Exhibit C, to effectuate the provisions of Article
VI hereof. The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the assignment by a
Partner of its Partnership Interest and the occurrence of a Disability Event
with respect to a Partner. Each Partner shall take such corporate and
shareholder actions as is necessary to effectuate the foregoing and concurrently
herewith shall deliver to the Managing Partners appropriate board of director
resolutions specifically authorizing the foregoing.
6.10 Dissolution of a Partner:
The dissolution of a Partner shall not cause the dissolution of the
Partnership and the remaining Partners shall continue the Partnership unless the
remaining Partners shall decide otherwise. Upon the dissolution of a Partner,
such Partner shall be deemed to have only a beneficial interest in the
Partnership and shall not have any voting or management rights.
ARTICLE VII
WINDING UP AND TERMINATION OF THE PARTNERSHIP
7.01 Liquidation of the Property and Assets of the
Partnership and Disposition of the Proceeds:
a. Upon the dissolution of the Partnership, the Managing Partners shall
proceed to wind up the affairs, and liquidate the property and assets, of the
Partnership, and the proceeds of such liquidation, and any amounts contributed
to the Partnership pursuant to Section 2.03 hereof, shall be applied and
distributed in the following order of priority:
- 36 -
<PAGE>
(1) To the expenses of the liquidation;
(2) To the payment of all debts and liabilities of the Partnership;
(3) To the establishment of any reserves which the Managing Partners
deem reasonably necessary to provide for any contingent or unforeseen
liabilities or obligations of the Partnership or of the Managing Partners
arising out of or in connection with the Partnership; provided, however,
that after the expiration of such period of time as the Managing Partners
deem advisable, the balance of such reserves remaining after payment of
such contingencies shall be distributed in the manner hereinafter set forth
in this Section 7.01; and
(4) Any remaining proceeds shall be distributed to, and allocated
among, the Partners pro rata in accordance with their Capital Account
balances. For this purpose, the determination of the Partners' Capital
Account balances shall be made after adjustment to reflect the allocation
of all Profits and Losses under Section 3.01 hereof. All distributions
pursuant to this Section 7.01 a.(4) shall be made by the end of the fiscal
year of liquidation (or, if later, within 90 days after the date of
liquidation); however, the Partnership may withhold (A) reserves
established under Section 7.01 a.(3) hereof and (B) receivables of the
Partnership for the purpose of collecting any amounts due thereunder. Any
amounts so withheld (or the proceeds of the collection of receivables so
withheld) shall be distributed as soon as practicable to, and allocated
among, the Partners in the ratio of their positive Capital Accounts.
b. A reasonable time shall be allowed for the orderly liquidation of the
property and assets of the Partnership and the payment of the debts and
liabilities of the Partnership in order to minimize the normal losses attendant
upon a liquidation.
c. The Partners hereby appoint the Managing Partners and each of them,
and any person designated by the Managing Partners or either of them, with full
power of substitution, as their true and lawful attorneys-in-fact to hold,
collect and disburse, in accordance with this Agreement, any Partnership
receivables existing at the time of the termination of the Partnership and the
proceeds of the collection of such receivables, including, but not limited to,
those arising from the sale of Partnership property and assets. The foregoing
power of attorney (and all other powers of attorney granted hereunder) is a
special power of attorney coupled with an interest, is irrevocable and shall
survive the transfer or assignment by a Partner of his Partnership Interest and
the death or disability of each Partner; provided, however, such power of
attorney shall terminate upon the distribution of the proceeds of all such
receivables in accordance with the provisions of this Agreement. Such attorneys-
in-fact shall be entitled to reimbursement for the reasonable expenses incurred
by them in acting under this power of attorney.
d. Anything contained in this Section 7.01 to the contrary
notwithstanding, if the Managing Partners shall determine that a complete
liquidation of all of the property and assets of the Partnership would involve
substantial losses or be impractical or ill advised under the circumstances, the
Managing Partners shall liquidate that portion of the property and assets of the
Partnership sufficient to pay the expenses of liquidation and the debts and
liabilities of the Partnership (excluding the debts and liabilities of the
Partnership to the extent they are adequately secured by mortgages on, or
security interests in, property and assets of the Partnership), and the
remaining property and assets shall be distributed to the Partners as
tenants-in- common, partitioned in accordance with applicable statutes or
distributed in such other reasonable manner as shall be determined by the
Managing Partners. The distribution of such remaining property and assets to the
Partners shall be made subject to any mortgages on, or security interests in,
such property and assets. If any assets are distributed (or, pursuant to Section
708(b)(l)(13) of the Code, deemed distributed) in kind, such assets shall be
distributed (or deemed distributed, as the
- 37 -
<PAGE>
case may be) in a manner which is consistent with the order of priority set
forth in Section 7.01 a. hereof. In determining such order of priority, the
Capital Account of each Partner shall be credited or debited immediately prior
to such distribution, in accordance with Sections 10.01 k.(2) and 10.01 o.
hereof, with the amount of gain or loss, respectively, with which such Partner's
Capital Account would be credited or debited if such assets were sold by the
Partnership at their fair market values. Upon distribution of such assets, the
Capital Account of each Partner shall be debited with the fair market value of
any such assets distributed to such Partner.
e. If, at the time of the dissolution and winding up of the Partners hip,
there is no Managing Partner, the Partners shall, by vote of a Majority in
Interest of the Partners, appoint a liquidator to wind up the affairs and
liquidate the property and assets of the Partnership, and such liquidator shall
have all powers necessary to perform all acts contemplated to be performed by
the Managing Partners under this Section 7.01, and shall be compensated as
agreed upon by such Majority in Interest of the Partners and such liquidator.
Such liquidator may, but need not be, a Partner.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES BY THE PARTNERS
8.01 Original Partner Representations:
The Original Partners severally represent and warrant to Sun that:
a. The Partnership was and continues to be a general partnership duly
organized and validly existing under the laws of the State of Connecticut.
b. RJH, Leisure, Slavik and LMW are the sole partners of the Partnership.
the Partnership and each of the Original Partners have the power and authority
to execute and deliver this Agreement, which has been duly authorized by all
necessary partnership action of the Partnership and corporate action of each of
its partners, as applicable.
c. There are no actions, suits or proceedings pending or, to the best
knowledge of any Original Partner, threatened against or affecting the
Partnership. The total liabilities of the Partnership did not currently exceed
$80,000.00 as of March 24, 1994.
d. The Partnership and each of the Original Partners have taken all
requisite partnership and corporate action, as applicable, on behalf of the
Partnership to enter into the Development Agreement.
e. Neither the Partnership nor any Original Partner is currently
insolvent or the subject of or a party to any pending bankruptcy, reorganization
or insolvency proceeding.
f. The sole shareholder of RJH is Richard J. Hertz.
g. The sole shareholder of Leisure is Lee R. Tyrol but Mr. Tyrol has
entered into agreements to transfer not more than 49% of his shares in Leisure
to others.
h. The sole shareholders of Slavik are trusts for the benefit of the
family of Joseph F. Slavik and of Stephan F. Slavik.
- 38 -
<PAGE>
i. The sole shareholders of LMW are Len Wolman and Mark Wolman.
8.02 Sun Representations:
Sun represents and warrants to the Original Partners that:
a. Sun is a corporation duly organized, validly existing and in good
standing under the laws of Connecticut.
b. Sun has power and authority to enter into this Agreement.
c. There are no actions, suits or proceedings pending, or to the best
knowledge of Sun, threatened against or affecting Sun or its ultimate corporate
parent before any court or any governmental department or agency which may
result in a material adverse change in the business or condition of Sun or Sun's
ultimate corporate parent or Sun's ability to perform its obligations under this
Agreement.
d. To the best of knowledge of Sun, each of Sun and Sun's ultimate
corporate parent has complied in all material respects with all applicable
statutes and regulations of all governmental authorities having jurisdiction
over it and it is not in default with respect to any material order, writ,
injunction or decree of any court or governmental agency.
e. Neither Sun nor Sun's ultimate corporate parent is currently insolvent
or the subject of or a party to any pending bankruptcy reorganization or
insolvency proceeding.
f. The shareholders of record of Sun are as set forth in Exhibit D
attached hereto.
8.03 Mutual Representations:
Each Partner severally (and not jointly) represents, warrants and agrees
with each other Partner as material inducement to cause each other Partner to
enter into this Agreement that (i) all transactions contemplated by this
Agreement to be performed by it have been duly authorized by all necessary
action of its directors and/or stockholders, as the case may be, as required,
(ii) it shall cause its officers, directors, and/or stockholders, as the case
may be, to act in accordance with the terms and provisions of this Agreement,
(iii) the consummation of such transactions shall not result in a breach or a
violation of, or a default under, its charter or bylaws, as the case may be, any
material agreement by which it or any of its properties or any of its
shareholders is or are bound, or any statute, regulation, order or other law to
which it or any of its stockholders is or are subject, (iv) it shall use its
reasonable best efforts to perform, or employ or engage others to perform,
including an Affiliate, all of its obligations under the Agreement and all
activities and furtherance of the purposes of the Partnership, (v) each Partner
is capable, financially and in all other respects, of fulfilling its
responsibilities under this Agreement, and (vi) this Agreement is binding upon
each Partner in accordance with its terms.
- 39 -
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Notices:
All notices to be given hereunder shall be deemed served upon (i) receipt
by the addressee by personal delivery or facsimile transmission, (ii) two (2)
business day after delivery by an overnight express delivery service for the
next business day delivery, or (iii) if mailed, upon the first to occur of
receipt or the expiration of one hundred twenty (120) hours after deposit in
United States Postal Service certified mail, postage postpaid, addressed to the
parties at the addresses appearing below. Such addresses may be changed by
notice given in the same manner.
If to Sun: c/o Sun International Management
(UK) LTD.
Badgemore House
Gravel Hill
Henley on Thames
Oxfordshire RG94NR United Kingdom
Att'n: Howard ("Butch") Kerzner
Telecopy No. 44491576526
With Copy to: Neal Gerber & Eisenberg
2 North LaSalle Street
Chicago, Illinois 60602
Att'n: Charles E. Gerber, Esq.
Telecopy No. (312) 269-1747
If to the Partnership
or the Original Partners: LMW Investments, Inc.
914 Hartford Turnpike
P.O. Box 715
Waterford, Connecticut 06385
Att'n: Len Wolman
Telecopy No. (203) 437-7752
With Copy to: RJH Development Corp.
25 River Road Drive
Box 579
Essex, Connecticut 06426
Att'n: Richard J. Hertz
Telecopy No. (203) 767-1439
With Copy to: Herrick, Feinstein
2 Park Avenue
New York, New York 10016
Att'n: Herbert Mendelson, Esq.
Telecopy No. (212) 889-7577
- 40 -
<PAGE>
With Copy to: Leisure Resort Technology, Inc.
c/o LMW Investments, Inc.
914 Hartford Turnpike
P.O. Box 715
Waterford, Connecticut 06385
Att'n: Lee R. Tyrol
Telecopy No. (203) 437-7752
With Copy to: Chorches & Novak, P.C.
81 Wolcott Hill Road
Wethersfield, Connecticut 06109
Att'n: Martin Chorches, Esq.
Telecopy No. (203) 257-1988
With Copy to: Slavik Suites, Inc.
32605 West 12 Mile Road
Suite 350
Farmington Hills, Michigan 48334
Att'n: Del J. Lauria
Telecopy No. (810) 488-5543
With Copy to: Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Att'n: Sheldon P. Winkelman, Esq.
Telecopy No. (313) 962-0176
9.02 Article and Section Heading:
The article and section headings in this Agreement are inserted for
identification and convenience only, and they are in no way intended to define
or limit the scope or intent of this Agreement or any of the provisions hereof.
9.03 Construction:
Whenever the singular number is used herein, the same shall include the
plural, and the masculine gender shall include the feminine and neuter genders.
If any language is stricken or deleted from this Agreement, such language shall
be deemed never to have appeared herein and no other implication shall be drawn
therefrom.
9.04 Severability:
If any provision hereof shall be judicially determined to be illegal, or if
the application thereof to any person or in any circumstance shall, to any
extent, be judicially determined to be invalid or unenforceable, the remainder
of this Agreement, or the application of such provision to persons or in
circumstances other than those to which it has been judicially determined to be
invalid or unenforceable, shall not be affected thereby, and each provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
- 41 -
<PAGE>
9.05 Governing Law:
This Agreement shall be construed and enforced in accordance with, and
governed by, the laws and decisions of the State of Connecticut.
9.06 Counterparts:
This Agreement may be executed in any number of counterparts, each of which
shall, for all purposes, constitute an original and all of which, taken
together, shall constitute one and the same Agreement.
9.07 Entire Agreement:
This Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof. All prior agreements among the parties
hereto with respect to the subject matter hereof, including the Agreement to
Participate between the Partnership and Sun dated March 24, 1994, whether
written or oral, are merged herein and shall be of no force or effect. This
Agreement cannot be amended, modified or changed orally, but only by an
agreement in writing.
9.08 Amendments to this Agreement:
This Agreement may be amended or modified only by a written instrument
executed by all of the Partners.
9.09 Benefits Limited to Partners:
Except as otherwise expressly provided in this Agreement, nothing in this
Agreement is intended to confer, and nothing in this Agreement shall confer, any
rights or benefits of any kind on any person who is not a Partner (or, to the
extent provided in this Agreement, an Affiliate or a Partner).
9.10 Further Assurances:
The parties will execute and deliver such further instruments and do such
further acts and things as may be required to carry out the intent and purposes
of this Agreement.
9.11 Successors and Assigns:
Subject to the restrictions on transferability contained herein, this
Agreement shall be binding upon, and shall inure to the benefit of, the
successors and assigns of the respective parties hereto.
ARTICLE X
GLOSSARY
10.01 Definitions:
As used in this Agreement, the following terms have the following
respective meanings, unless the context clearly indicates a different meaning:
- 42 -
<PAGE>
a. "Act" means the Connecticut Uniform Partnership Act, as amended.
b. "Acceptance" has the meaning specified in Section 6.01 c.(2) hereof.
c. "Additional Capital Contributions" has the meaning specified in
Section 2.08 hereof.
d. "Additional Contribution" or "Additional Contributions" has the
meaning specified in Section 2.02 hereof.
e. "Additional Reserve" has the meaning specified in Section 3.03 a.
hereof.
f. "Administrative Agents" has the meaning specified in Section 4.08
hereof.
g. "Affiliate" means (i) with respect to any Partner who is an
individual, (-1-) any individual related by blood or marriage to such Partner,
or (-2-) any entity controlled, directly or indirectly, by such Partner and/or
any one or more of the individuals described in clause (-1-) above, and any
trust created for the benefit of such Partner and/or any one or more individuals
referred to in clause (-1-) above, and (ii) with respect to any Partner which is
an entity, (-1-) any person who, on any relevant date, controls, directly or
indirectly, or is a member, partner, shareholder, director or officer of, such
entity, (-2-) any ancestor, descendant, sibling, spouse or spouse of a sibling
of any individual referred to in clause (-1-) above, (iii) any trust established
for the benefit of any one or more of the individuals referred to in clause
(-1-) and/or (-2-) above, and (iv) any entity controlled, directly or
indirectly, by such entity and/or any one or more of the individuals referred to
in clause (-1-) and/or (-2-) above, or any entity in which one or more of the
individuals referred to in clause (-1-) and/or (-2-) above is a shareholder,
officer, director, member or partner.
h. "Agreement" means this Amended and Restated Partnership Agreement of
Trading Cove Associates, as it may be amended from time to time.
i. "Alternative Facilities" has the meaning specified in Section 1.03 a.
hereof.
j. "Alternative Facility" has the meaning specified in Section 1.03 a.
hereof.
k. "Approval Date" has the meaning specified in Section 6.07 hereof.
l. "Assignment," "assign," "assignor" and "assignee," as used in Article
VI hereof, shall have the respective meanings specified in Section 6.01 f.
hereof.
m. "Book Value" means, with respect to any asset, such asset's adjusted
basis for federal income tax purposes, except as follows:
(1) The initial Book Value of any asset contributed by a Partner to
the Partnership shall be the fair market value of such asset, as determined
by the Partners;
(2) The Book Values of all Partnership assets shall be adjusted to
equal their respective fair market values, as determined by the Partners,
as of the following times: (i) the acquisition from the Partnership, in
exchange for more than a de minimis Capital Contribution, of (-1-) a
Partnership Interest by an additional Partner, or (-2-) an additional
Partnership Interest by an existing Partner; (ii) the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
property other than money; (iii) the termination of the Partnership
- 43 -
<PAGE>
for federal income tax purposes pursuant to Section 708(b)(l)(B) of the
Code on account of the sale or exchange of fifty percent (50%) or more of
the interests in capital and profits of the Partnership within a twelve
month period, and (iv) the Partnership's ceasing to be a going concern
(even though it may continue in existence for the purposes of winding up
its affairs, paying its debts, and distributing any proceeds of the
collection of its receivables to the Partners); and
(3) If the Book Value of an asset has been determined or adjusted
pursuant to Section 10.01 m.(l) or 10.01 m.(2) hereof, such Book Value
shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Profit and Loss.
Upon the admission of Sun to the Partnership, the Book Value of the
Partnership's assets (exclusive of any contribution of Sun) shall be adjusted so
that, in the aggregate, they exceed the liabilities of the Partnership (as
reflected on the Partnership's balance sheet) by the amount of cash previously
contributed by the other Partners, and each Partner's Capital Account shall be
correspondingly adjusted to equal the amount of such Partner's contribution(s)
to the Partnership.
n. "Budget" has the meaning specified in Section 4.11 hereof.
o. "Buy-Out Notice" has the meaning specified in Section 4.03 a. hereof.
p. "Buy-Out Price" has the meaning specified in Section 4.03 a. hereof.
q. "Capital Account" means a bookkeeping account maintained by the
Partnership with respect to each Partner which shall be
(1) credited with (i) such Partner's Capital Contributions, (ii) such
Partner's distributive share of Profits and any items of income or gain
allocated to such Partner pursuant to Section 3.01 hereof, and (iii) the
amount of any Partnership liabilities that are assumed by such Partner or
that are secured by any Partnership property distributed to such Partner,
and
(2) debited with (i) the amount of cash and the Book Value (as
adjusted pursuant to Section 10.01 m. hereof) of any Partnership property
distributed to such Partner pursuant to any provision of this Agreement,
(ii) such Partner's distributive share of Losses and any items of expense
or loss allocated to such Partner pursuant to Section 3.01 hereof, and
(iii) the amount of any liabilities of such Partner that are assumed by the
Partnership or that are secured by any property contributed by such Partner
to the Partnership.
In the event that a Partner's Partnership Interest or a portion thereof is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent that it relates
to the Partnership Interest or portion thereof so transferred.
In the event the Book Values of Partnership assets are adjusted pursuant to
Section 10.01 m.(2) hereof, the Capital Accounts of all Partners shall be
adjusted simultaneously to reflect the aggregate net adjustment as if the
Partnership recognized gain or loss equal to the amount of such aggregate net
adjustment.
- 44 -
<PAGE>
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Section 1.704-l(b) of the Treasury Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations.
r. "Capital Call Notice" has the meaning specified in Section 2.02
hereof.
s. "Capital Contribution" means, with respect to each Partner, the total
amount of money and the initial Book Value of any property (other than money)
that such Partner has contributed or agreed to contribute, as the context
requires, to the capital of the Partnership, as provided in this Agreement. Any
reference to the Capital Contribution of a Partner shall include the Capital
Contribution of a predecessor holder of the Partnership Interest of such
Partner.
t. "Closing" has the meaning specified in Section 4.03 a. hereof.
u. "Closing Date" has the meaning specified in Section 6.01 c.(2) hereof.
v. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
w. "Commission" means the National Indian Gaming Commission.
x. "Compact" means the compact entered into between the Mohegan Tribe and
the State of Connecticut which will enable the Facility to include gambling
activities.
y. "Deadlock Dispute" has the meaning specified in Section 4.03 a.
hereof.
z. "Defaulting Original Partner" has the meaning specified in Section
2.09 hereof.
aa. "Deferred Development Fee" has the meaning specified in Section 4.08
b. hereof.
ab. "Depreciation" means, with respect to any asset of the Partnership for
each fiscal year of the Partnership or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to such asset for such year or other period, except that if the Book
Value of such asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation with
respect to such asset shall be an amount which bears the same ratio to such
beginning Book Value as the federal income tax depreciation, amortization or
other cost recovery deduction with respect to such asset for such year or other
period bears to such beginning adjusted tax basis; provided, however, that if
the federal income tax depreciation, amortization or other cost recovery
deduction with respect to such asset for such year is zero, Depreciation shall
be determined with reference to such beginning Book Value using any reasonable
method selected by the Partners.
ac. "Designated Representatives" means, with respect to (i) the Sun Group,
Howard ("Butch") Kerzner and (ii) the Original Partners Group, Hertz and L.
Wolman and any substitute Designated Representative appointed for the Sun Group
or the Original Partners Group, as the case may be, in accordance with the
provisions of Section 4.04 hereof.
ad. "Developer" has the meaning specified in Section 4.08 hereof.
ae. "Development Agreement" means, collectively, that certain Hotel/Resort
Facility Development and Construction Agreement for Mohegan Destination Resort
in Connecticut, that certain Gaming Facility Development and Construction
Agreement, and the Management Agreements, each to
- 45 -
<PAGE>
be entered into by the Mohegan Tribe and the Partnership, as the foregoing may
be amended, modified, restated or supplemented from time to time.
af. "Development Services Fee" has the meaning specified in Section 4.08
hereof.
ag. "Disabled Party" has the meaning specified in Section 6.04 a. hereof.
ah. "Disability Event" means with respect to any Partner or Affiliate, the
death, disability, incapacity, incompetency, dissolution, termination,
bankruptcy or insolvency of such Partner or Affiliate.
ai. "Excess Cash" has the meaning specified in Section 3.03 b. hereof.
aj. "Excluded Property" has the meaning specified in Section 4.05 c.
hereof.
ak. "Facility" has the meaning specified in Section 1.03 a. hereof.
al. "Facility Gross Revenues" has the meaning specified in Section 4.08
hereof.
am. "Group" means alternatively the Sun Group or the Original Partners
Group.
an. "Hertz" has the meaning specified in Section 4.04 b. hereof.
ao. "Insolvent Partner" has the meaning specified in Section 6.08 b.
hereof.
ap. "Initial Budget" means the initial budget for the obligations relating
to the Facility prior to the Closing on the Phase One Financing and the
commencement of construction on the Facility, totaling approximately $1,100,000
and set forth on Exhibit E hereto.
aq. "Kerzner" has the meaning specified in Section 4.04 a. hereof.
ar. "Leisure" has the meaning specified in the introductory paragraph of
this Agreement.
as. "Leisure Distribution" has the meaning specified in Section 2.09 b.(3)
hereof.
at. "Loans" has the meaning specified in Section 2.03 hereof.
au. "LMW" has the meaning specified in the introductory paragraph of this
Agreement.
av. "Major Business Decision of the Original Partners" has the meaning
specified in Section 4.02 b. hereof.
aw. "Majority in Interest of the Partners" means, at any relevant time,
Partners who have an aggregate Percentage Interest in excess of one half of the
aggregate Percentage Interests of all of the Partners.
ax. "Majority in Interest of the Original Partners" means, at any relevant
time, the Original Partners who have an aggregate Percentage Interest in excess
of one-half of the aggregate Percentage Interest of all Original Partners.
- 46 -
<PAGE>
ay. "Majority of the Original Partners" means more than 50% of the
Original Partners with each Original Partner having one vote.
az. "Majority of the Remaining Original Partners" means more than 50% of
the Non-Selling Partners, or the Original Partners whose shareholders, officers
or key employee's is not a Disabled Party, with each such Partner having one
vote.
ba. "Management Agreements" have the meaning specified in Section 4.08
hereof.
bb. "Management Services Company" has the meaning specified in Section
4.08 hereof.
bc. "Management Services Fee" has the meaning specified in Section 4.08
hereof.
bd. "Managing Partners" means the Sun Managing Partner and the Original
Partners Managing Partners.
be. "Marketing Agent" has the meaning specified in Section 4.08 hereof.
bf. "Marketing Agreement" has the meaning specified in Section 4.08
hereof.
bg. "Marketing and Casino Operations Fee" has the meaning specified in
Section 4.08 hereof.
bh. "Mohegan Tribe" has the meaning specified in Section 1.03 a. hereof.
bi. "Non-Selling Partners" has the meaning as specified in Section 6.02
c.(2) hereof.
bj. "Notice Date" has the meaning as specified in Section 6.04 b. hereof.
bk. "Offer Notice" has the meaning as specified in Section 6.01 c.(1)
hereof.
bl. "Option Triggering Event" has the meaning specified in Section 6.04 a.
hereof.
bm. "Organizational and Administrative Agreement" has the meaning
specified in Section 4.08 hereof.
bn. "Organizational and Administrative Fee" has the meaning specified in
Section 4.08 hereof.
bo. "Original Partner Loans" has the meaning specified in Section 2.07 b.
hereof.
bp. "Original Partners" has the meaning specified in Recital A to this
Agreement.
bq. "Original Partners Group" means the Original Partners and any
assignee, within the meaning of Section 6.01 f. hereof, of the Partnership
Interest or any portion thereof of either of them (or any direct or indirect
transferee or assignee of either of them) who is admitted to the Partnership as
a Partner with respect to such Partnership Interest or portion thereof pursuant
to the provisions of this Agreement, in his capacity as, and for so long as such
person is, a Partner.
- 47 -
<PAGE>
br. "Original Partners Managing Partners" means RJH and LMW in their
capacities as, and for so long as each is a Managing Partner of the Partnership,
and any other person who hereafter becomes, or who is otherwise made, a Managing
Partner of the Partnership for the Original Partners Group pursuant to the terms
of this Agreement, in his capacity as, and for so long as he is, a Managing
Partner of the Partnership.
bs. "Original Partners Shortfall Loan" has the meaning specified in
Section 2.09 hereof.
bt. "Original Partnership Agreement" has the meaning specified in Recital
A to this Agreement.
bu. "Partner" means any of the Partners.
bv. "Partners" means Sun, Slavik, RJH, Leisure and LMW and each in its
capacity as, and for so long as it is, a Partner of the Partnership and any
other person hereafter admitted to the Partnership as a partner in accordance
with the provisions of this Agreement, in his capacity as, and for so long as he
is, a Partner of the Partnership.
bw. "Partnership" has the meaning specified in Recital A to this
Agreement.
bx. "Partnership Interest" means, with respect to each Partner, such
Partner's (i) entire interest in the Partnership, and the property, assets,
business, and capital thereof, and (ii) share of the Profits, Losses, items of
income, gain, expense or loss and distributions of the Partnership allocable to
such Partner under the provisions of this Agreement.
by. "Percentage Interest" means, with respect to each Partner, the
percentage set forth opposite his name in column (3) on Exhibit A attached
hereto.
bz. "Phase One" has the meaning specified in Section 4.05 f. hereof.
ca. "Phase One Financing" has the meaning specified in Section 4.05 f.
hereof.
cb. "Principal" means any one of Hertz, Stephan F. Slavik, Sr., Del J.
Lauria, Mark Wolman, Wolman or Tyrol.
cc. "Profit" and "Loss" each means, for each fiscal year of the
Partnership or other period, the Partnership's taxable income or loss for such
fiscal year or other period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a)(l) of the Code shall be included in
taxable income or loss), adjusted as follows:
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profit or Loss
pursuant to this Section 10.01 cc., shall be added to such taxable income
or loss;
(ii) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(13)
expenditures pursuant to Section l.704-l(b)(2)(iv)(i) of the Treasury
Regulations, and not otherwise taken into account in computing Profit or
Loss pursuant to this Section 10.01 cc., shall be subtracted from such
taxable income or loss;
- 48 -
<PAGE>
(iii) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account with respect to any asset in
computing such taxable income or loss, there shall be taken into account
Depreciation with respect to such asset for such fiscal year or other
period, computed in accordance with Section 10.01 ah. hereof;
(iv) Any gain or loss realized by the Partnership for federal income
tax purposes upon the sale or other disposition of any property or asset of
the Partnership, or any part thereof or interest therein, shall be
determined by reference to the Book Value of such property or asset,
notwithstanding that its Book Value may differ from its adjusted tax basis;
(v) Notwithstanding any other provision of this Section 10.01 cc.,
any item of income, gain, expense or loss allocated pursuant to Section
3.01 b. or 3.01 C. hereof shall not be taken into account in computing
Profit or Loss; and
(vi) Any items which are allocated pursuant to Section 3.02 hereof
shall not be taken into account in computing Profit or Loss.
cd. "Property" has the meaning specified in Section 1.03 a. hereof.
ce. "Purchasing Group" has the meaning specified in Section 4.03 q.
hereof.
cf. "Purchasing Partners" has the meaning specified in Section 6.04 d.
hereof.
cg. "Purchase Price" has the meaning specified in Section 6.04 b. hereof.
ch. "Regulations" has the meaning specified in Section 3.01 d. hereof.
ci. "Regulatory Allocations" has the meaning specified in Section 3.01 c.
hereof.
cj. "RJH" has the meaning specified in the introductory paragraph of this
Agreement.
ck. "SEC Affiliate" means an "Affiliate" as such term is defined in Rule
405 of Securities Act of 1933.
cl. "Selling Group" has the meaning specified in Section 4.03 a.(1)
hereof.
cm. "Selling Partner" has the meaning specified in Section 6.02 c.(2)
hereof.
cn. "Services" has the meaning specified in Section 4.08 hereof.
co. "SIIL" means Sun International Investments Limited, a BVI company.
cp. "Slavik" has the meaning specified in the introductory paragraph of
this Agreement.
cq. "Subordinated Loan" has the meaning specified in Section 6.07 hereof.
cr. "Substitute Party" has the meaning specified in Section 6.04 a.
hereof.
cs. "Sun" has the meaning specified in the introductory paragraph to this
Agreement.
- 49 -
<PAGE>
ct. "Sun Group" means Sun and any assignee, within the meaning of Section
6.01 f. hereof, of the Partnership Interest or any portion thereof (or any
direct or indirect assignee of Sun who is admitted to the Partnership as a
Partner with respect to such Partnership Interest or portion thereof pursuant to
the provisions of this Agreement, in his capacity as, and for so long as each
such person is, a Partner.
cu. "Sun Loan" has the meaning specified in Section 2.07(c) hereof.
cv. "Sun Managing Partner" means Sun in its capacity as, and for so long
as it is, a Managing Partner of the Partnership, and any other person who
hereafter becomes, or who is otherwise made, a Managing Partner of the Sun Group
pursuant to the terms of this Agreement, in his capacity as, and for so long as
he is, a Managing Partner of the Partnership.
cw. "Tax Matters Partner" has the meaning specified in Section 5.05
hereof.
cx. "Transfer Date" has the meaning specified in Section 6.04 c. hereof.
cy. "Tyrol" means Lee R. Tyrol.
cz. "Withdrawal Notice" has the meaning specified in Section 4.03 b.
hereof.
da. "Withdrawing Original Partner" has the meaning specified in Section
6.06 d. hereof.
db. "Withdrawn Partner" has the meaning specified in Section 6.05 hereof.
dc. "L. Wolman" has the meaning specified in Section 4.04 b. hereof.
dd. "Wolman Construction" has the meaning specified in Section 4.08
hereof.
IN WITNESS WHEREOF, the undersigned Partners have executed this Agreement
the day and year above written.
PARTNERS:
SUN COVE, LTD.
______________________________________
a Connecticut corporation
By: /s/ Howard Kerzner
---------------------------------
"Sun"
Its: President
---------------------------------
- 50 -
<PAGE>
RJH DEVELOPMENT CORP.,
a New York corporation
By: /s/ Richard J. Hertz
---------------------------------
Its: President
---------------------------------
"RJH"
LEISURE RESORT TECHNOLOGY, INC.,
a Connecticut corporation
By: /s/ Lee Robert Tyrol
---------------------------------
Its: President
---------------------------------
"Leisure"
SLAVIK SUITES, INC.,
a Michigan corporation
By: /s/ Del J. Lauria
---------------------------------
Its: Executive Vice President
---------------------------------
"Slavik"
LMW INVESTMENTS, INC.,
a Connecticut corporation
By: /s/ Len Wolman
---------------------------------
Its: President
---------------------------------
"LMW"
<PAGE>
EXHIBIT A
TO
SECOND AMENDED AND RESTATED
PARTNERSHIP AGREEMENT OF
TRADING COVE ASSOCIATES
(1) (2) (3)
Capital Percentage
Name and Address Contribution Interest
---------------- ------------ --------
PARTNERS
RJH Development Corp., $117,500 11.25%
a New York corporation
25 River Road
Box 579
Essex, Connecticut 06426
Leisure Resort Technology, Inc., $ -- 5%
a Connecticut corporation
914 Hartford Turnpike
P.O. Box 715
Waterford, Connecticut 06385
Slavik Suites, Inc., $235,000 22.5%
a Michigan corporation
32605 West 12 Mile Road
Suite 350
Farmington Hills, Michigan 48334
LMW Investment, Inc., $117,500 11.25%
a Connecticut corporation
914 Hartford Turnpike
P.O. Box 715
Waterford, Connecticut 06385
Sun Cove, Ltd, $470,000* 50.0%
a Connecticut corporation
----
_________________________________
_________________________________ TOTAL 100%
* The capital contribution of Sun reflects the total aggregate cash advance
of SIIL or its SEC Affiliates made to the Partnership pursuant to the
Participation Agreement.
- 52 -
FIRST AMENDMENT TO AMENDED AND RESTATED
PARTNERSHIP AGREEMENT OF TRADING COVE ASSOCIATES
- --------------------------------------------------------------------------------
THIS FIRST AMENDMENT TO AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF
TRADING COVE ASSOCIATES ("Amendment") effective as of the Effective Date, as
hereinafter defined, is made by and among (i) SUN COVE, LTD., a Connecticut
corporation ("Sun"), as the existing partner, (ii) SLAVIK SUITES, INC., a
Michigan corporation ("Slavik"), RJH DEVELOPMENT CORP., a New York corporation
("RJH"), and LMW INVESTMENTS, INC., a Connecticut corporation ("LMW"), as the
withdrawing partners, and (iii) WATERFORD GAMING, L.L.C., a Delaware limited
liability company ("Waterford Gaming"), as the incoming partner.
RECITALS:
A. RJH, Slavik, LMW and Leisure Resort Technology, Inc., a Connecticut
corporation ("Leisure"), as partners (collectively, the "Original Partners"),
were parties to a partnership agreement dated July 23, 1993, as amended by that
certain First Amendment to Partnership Agreement of Trading Cove Associates
dated effective March 24, 1 994 (as amended, the "Original Partnership
Agreement"), pursuant to which the Original Partners formed Trading Cove
Associates, a Connecticut general partnership (the "Partnership").
B. On September 21, 1994, the Original Partnership Agreement was amended
and restated by that certain Amended and Restated Partnership Agreement of
Trading Cove Associates (as amended and restated to date the "Partnership
Agreement") pursuant to which, among other things, Sun was admitted as a partner
of the Partnership.
C. On February 3, 1995, Leisure withdrew as a partner of the Partnership
and its interest was allocated, pro rata, to Slavik, RJH and LMW.
D. RJH Development Corp. and Waterford Hotel Group, Inc. are parties to
that certain Agreement for Purchase and Sale of Partnership Interest dated
September 12, 1996, as assigned to Waterford Gaming pursuant to which Waterford
agreed to acquire the Partnership Interest of RJH in the Partnership and as of
the Effective Date hereof, Slavik and LMW will each be assigning and
contributing its Partnership Interest in the Partnership to Waterford Gaming.
E. The parties desire to amend the Partnership Agreement in order to (i)
admit Waterford Gaming as a partner of the Partnership, (ii) acknowledge the
withdrawal of Slavik, LMW and RJH and (iii) amend certain other portions of the
Partnership Agreement, all to be effective as of the Effective Date.
<PAGE>
Accordingly, it is agreed as follows:
1. Capitalized Terms:
Each capitalized term used, but not defined, in this Amendment has the
meaning ascribed to such term in the Partnership Agreement.
2. Admission of Waterford Gaming and Withdrawal of RJH, Slavik and LMW:
(a) Effective as of the Effective Date, RJH, Slavik and LMW hereby
withdraw as Partners of the Partnership and the parties consent to the admission
of Waterford Gaming as a Partner of the Partnership and, effective as of the
Effective Date, Waterford Gaming is hereby admitted as a Partner of the
Partnership.
(b) Effective as of the Effective Date, Waterford Gaming (i) accepts
the assignment and admission as a Partner of the Partnership, (ii) assumes and
agrees to perform the obligations of the assignor Partners to the Partnership in
respect of the Partnership Interest assigned to it by the assignor Partners,
(iii) agrees to be bound by, and to perform the provisions of, the Partnership
Agreement in respect of the Partnership Interest assigned to it by the assignor
Partners, and (iv) shall have all of the rights and privileges of any of the
assignor Partners or of the Original Partners, or of RJH under the Partnership
Agreement.
3. Definitions:
All references in the Partnership Agreement to the term "Original Partners"
shall be deemed to mean Waterford Gaming; all references in Partnership
Agreement to the term "Original Partners Managing Partners" shall be deemed to
mean Waterford Gaming; all references in the Partnership Agreement to the term
"Designated Representatives of the Original Partners" shall be deemed to mean
Len Wolman and Section 4.04(b) is amended accordingly; and all references in the
Partnership Agreement to the term "Majority of the Original Partners" shall be
deemed to mean Waterford Gaming. All references to the term "Majority of the
Remaining Original Partners" or "Remaining Original Partners" refer to Waterford
Gaming regardless of whether Waterford Gaming would also be a Disabled Party;
and all references to the Original Partners Group shall mean Waterford Gaming
and all references to the Tax Matters Partner shall mean Waterford Gaming and
Section 5.05 is hereby amended accordingly.
2
<PAGE>
4. Purposes:
Section 1.03 a.(ii) is hereby deleted; and except with respect to the
provisions of Section 4.05 c., and all references in the Partnership Agreement
to the term, "Alternative Facility" or "Alternative Facilities" and provisions
relating thereto are hereby deleted.
5. Deletion of Certain Provisions:
The following provisions are hereby deleted from the Partnership Agreement:
(i) Section 2.07 b;
(ii) Section 2.09 b (1), (2) and (3);
(iii) Section 4.01 (a)(4)
(iv) Section 4.02;
(v) Section 4.04 c.;
(vi) Section 4.05 d;
(vii) Section 4.09; and
(viii) Section 6.04.
6. Capital Contributions and Related Matters:
Section 2.03 shall be amended by adding, before the words "any Partner may,
but shall not be obligated to," the words "with the consent of the other
Partners."
7. Distribution of Excess Cash:
(a) The introductory sentence to Section 3.03 a. is hereby deleted
and replaced with the following:
"The Managing Partners shall, from time to time (but no less often
than monthly), determine whether the Partnership has Excess Cash, as
defined in Section 3.03 b. hereof, and whenever the Partnership has
Excess Cash, the Managing Partners shall cause the Excess Cash to be
paid:"
3
<PAGE>
(b) The last sentence of Section 3.03a is hereby deleted and the
words "other than Additional Reserves" are hereby deleted from clause (iii) of
Section 3.03 b.
(c) Section 3.03 d. is hereby added to the Partnership Agreement as
follows:
"d. Notwithstanding anything in Section 3.03 a. to the contrary, the
Partners acknowledge that the priority of distributions are subject to
that certain Omnibus Financing Agreement dated as of September 21,
1995 and as amended from time to time between the Partnership and Sun
International Hotels Limited."
8. Other Activities:
Section 4.05 c. is hereby amended by adding The following at the end of the
paragraph:
"In the event that the Partners determine to pursue additional
gaming activities pursuant to this Section 4.05 c., it is
acknowledged and agreed that such venture will not be pursued through
the Partnership, but will be pursued through a new entity, which
entity, unless otherwise agreed, shall be formed with (i) Sun or an
entity affiliated with Sun and (ii) the members of Waterford Gaming or
entities affiliated with the members of Waterford Gaming."
9. Management Services Fee:
Section 4.08 a. is hereby deleted and replaced with the following:
a. "Waterford Gaming, Slavik, LMW and Sun (collectively,
"Management Agents") shall perform certain of the services that the
Partnership is required to provide pursuant to the Management
Agreements. The Management Agents shall perform supervisory duties
with respect to how management duties, responsibilities and functions
will be carried out with respect to the day-to-day operations of the
Facility in conformance with the Management Agreements and to the
extent directed by the Partnership. The Management Agents shall be
entitled to compensation therefor as set forth below. The existing
4
<PAGE>
Management Services Agreement dated February 6, 1995, by and between
the Partnership and Sun-Waterford, a Connecticut general partnership,
shall be terminated, and a new Management Services Agreement (which
will replace the terminated Management Services Agreement)
incorporating the terms set forth in this Section 4.08 a. shall be
executed by the Management Agents and the Partnership.
b. Pursuant to such new Management Services Agreement, the
Management Agents shall make available to the Partnership adequate
supervisory personnel who will provide consultation services to the
Partnership to assist the Partnership in the supervision of the
day-to- day operation of the Facility.
c. In consideration of the services rendered by the Management
Agents, the Partnership shall pay an annual on-going fee of 1% of the
gross revenues of the Facility, but not greater than 25% of the Excess
Cash plus the Organizational and Administrative Fee and the Marketing
and Casino Operations Fee, payable on a monthly basis (the "Management
Services Fee"), as follows:
(-A-) To Sun, LMW and Slavik, the first $2,000,000 of the
annual Management Services Fee to allow for the expenses of the
Management Agents payable on a monthly basis; and
(-B-) All amounts of the annual Management Services Fee in
excess of $2,000,000, shall be distributed as follows:
(i) If the Facility's operating income plus depreciation,
amortization and other non-cash charges ("EBITDA") is equal
to or less than $200,000,000 in any fiscal year of the
Facility, then (-a-) 50% to Sun and (-b-) 50% to Waterford
Gaming;
(ii) If the Facility's EBITDA is greater than $200,000,000
but not more than
5
<PAGE>
$225,000,000 in any fiscal year of the Facility, then, (i)
50% to Sun, (ii) the first $500,000 of the remaining 50% to
Slavik and LMW, and (iii) the balance, to Waterford Gaming;
or
(iii) If the Facility's EBITDA is greater than $225,000,000
in any fiscal year of the Facility, then, (i) 50% to Sun,
(ii) the first $1,000,000 of the remaining 50% to Slavik and
LMW, and (iii) the balance, to Waterford Gaming.
10. Insolvency of a Partner:
Section 6.08 a is hereby deleted and the following shall be substituted:
"If a Partner shall become an Insolvent Partner, then such Partner shall
withdraw from the Partnership and such Partner's Partnership Interest shall
be converted into a Beneficial Interest, as defined below, to receive
distributions and other payments as it would have received otherwise, but
such Partner shall (i) not have any right to participate in the management
of, or the supervision of, the Partnership or the Facility, (ii) withdraw
as a Managing Partner, and (iii) not have any right to vote or consent on
any matters concerning the Partnership or this Agreement, except that no
amendment or waiver to the terms of this Agreement or any other agreement
to which such Partner was a party that would reduce the amount of
distributions or payments made to such Partner may be made without such
Partner's consent."
11. Regulatory Withdrawal:
Section 6.11 is hereby added to the Partnership Agreement as follows:
"6.11 Regulatory Withdrawal:
If any Partner, or any Person, as defined below, with a direct or indirect
beneficial interest in a Partner that the gaming regulatory authorities of
the United States or the State of Connecticut with jurisdiction over the
Facility or the Management Agreements (the "Regulatory Authorities")
6
<PAGE>
determine needs to be qualified in order to hold such interest (an
"Applicable Person"), is found not to be qualified by the Regulatory
Authorities and such finding is final and non-appealable (a "Disqualifying
Event"), the following provisions shall apply:
a. If the Disqualifying Event applies to a Partner, such Partner (the
"Disqualified Partner") shall automatically be deemed to have
withdrawn from the Partnership as a partner as of the date of the
Disqualifying Event. In such event, the Disqualified Partner's
Percentage Interest shall be deemed to have been automatically
assigned to the remaining Partner, or its designee. Under such
circumstances, the Disqualified Partner shall be deemed to have
received a fifty (50%) per cent Beneficial Interest in the
Partnership. As used herein, the term "Beneficial Interest" shall mean
a Partner's interest in Profits, Loss and Excess Cash and all fees
otherwise payable to such Disqualified Partner or any of its
Affiliates; and the term "Person" shall mean any natural person,
corporation, trust, partnership, limited partnership, limited
liability company or other form of entity; provided, however, the term
"Person" shall not include Leisure. The Disqualified Partner shall be
deemed to have appointed the remaining Partner, or its designee, with
full power of substitution, its true and lawful attorney-in-fact, in
its name and on its behalf, to execute any and all documents necessary
to effectuate the provisions of this Section 6.11 a. The foregoing
power of attorney is a special power of attorney, is coupled with an
interest, is irrevocable and shall survive the withdrawal of the
Partner as contemplated hereby. Each Partner shall take such actions
as are necessary to effectuate the foregoing. In the event the
Regulatory Authorities do not allow the Disqualified Partner to
continue to hold the Beneficial Interest described above, the
Disqualified Partner must sell its Beneficial Interest within 90 days
from notice from such Regulatory Agency that the Disqualified Partner
is not allowed to hold a Beneficial Interest in the Partnership;
provided, however, the other Partner shall have a right of first
refusal with respect to such sale which right must be
7
<PAGE>
exercised within ten (10) days after the delivery of a notice to the
other Partner of such proposed sale, which notice shall contain a copy
of the purchase offer. In the event that the Disqualified Partner does
not sell its interest within such 90 day period, the Beneficial
Interest of the Disqualified Partner will be transferred in trust to
the other Partner and the other Partner, as trustee, shall diligently
pursue the sale of such Beneficial Interest for the benefit of the
Disqualified Partner.
b. If the Disqualifying Event applies to an Applicable Person (the
"Disqualified Party"), the Partner in which such Disqualified Party
holds an interest, either directly or indirectly, shall cause such
Disqualified Party to withdraw or be removed from such Partner as of
the date of the Disqualifying Event. If the Partner in which the
Disqualified Party holds such interest (either directly or indirectly)
fails to act in a timely manner under this subparagraph 6.11 b. so
that the withdrawal or revocation of the Partnership's license or
other authority to manage the Facility is effective, the Partner in
which the Affected Party holds or held its interest shall be deemed a
Disqualified Partner and the provisions of Section 6.11 a. hereof
shall immediately apply.
c. In the event that any Regulatory Authority takes any action that
materially and adversely affects the Partnership or the Facility
(an "Administrative Action") as a result of a preliminary
determination that a Partner or an Applicable Person is not qualified,
the Partner subject to such preliminary determination shall take all
reasonable actions to cause such Administrative Action to be stayed or
otherwise result in the Partnership or the Facility no longer being
materially and adversely affected pending a final and non-appealable
determination.
d. Notwithstanding anything in Section 6.11 (a) or (b) to the contrary,
provided the Beneficial Interest has not been sold by the other
Partner pursuant to Section 6.11 (a) above, in the event subsequent
to the date on which the Disqualifying Event occurs or
8
<PAGE>
the date on which the Beneficial Interest of a Disqualified Partner is
assigned to the other Partner pursuant to Section 6.11 (a) the
Disqualified Partner is able to cure the Disqualifying Event, such
that such Disqualified Partner becomes qualified by the Regulatory
Authorities, such Disqualified Partner shall be reinstated as a
Partner of the Partnership with the interest such Partner had prior to
the Disqualifying Event.
e. No amendment or waiver to the terms of this Agreement or any other
agreement to which the Disqualified Partner was a party that would
reduce the amount of distributions or payments to such Disqualified
Partner may be made without the Disqualified Partner's consent so
long as the Disqualified Partner has any interest in the Beneficial
Interest, including while such interest is held by the other Partner
in trust.
12. Notice:
Paragraph 9.01 is amended by deleting the notice provisions for the
Partnership or the Original Partners and replacing it with the following:
"If to the Partnership or Waterford Gaming:
LMW Investments, Inc.
914 Hartford Turnpike
P.O. Box 715
Waterford, Connecticut 06385
Attention: Len Wolman
Telecopy No.: (203) 437-7752
With a copy to:
Slavik Suites, Inc.
32605 West 1 2 Mile Road, Suite 350
Farmington Hills, Michigan 48334
Attention: Del J. Lauria
Telecopy No.: (810) 438-5543
9
<PAGE>
With a copy to:
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: Sheldon P. Winkelman, Esq.
Telecopy No.: (313) 962-0176"
13. Exhibit A
Exhibit A to the Partnership Agreement is replaced with the Exhibit A
attached hereto.
14. Effective Date: The Effective Date of this Agreement shall be the date
on which:
(a) Waterford shall have successfully completed a debt offering to
finance the transactions referred to in Recital D hereof; and
(b) Waterford owns the entire Original Partners' Percentage Interest
in the Partnership and by itself is the Original Partner within the meaning
of the Original Partnership Agreement as then amended and in effect.
15. Additional Cooperation
Sun covenants that it shall cooperate with Waterford Gaming in obtaining
any approvals required for Waterford Gaming to participate as a Partner of the
Partnership or a manager of the Facility, including, without limitation, all
licensing approvals and tribal authority approvals.
16. Continuation of Partnership Agreement:
The Partnership Agreement, as amended by this Amendment, shall continue in
full force and effect and is hereby ratified, confirmed and approved.
17. Counterparts
This Amendment may be executed in any number of counterparts, each of which
shall, for all purposes, constitute an original and all of which, taken
together, shall constitute one and the same agreement.
[SIGNATURE BLOCK ON NEXT PAGE]
10
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
effective as of the date and year as provided above.
SUN COVE, LTD., a Connecticut corporation
By: /s/ Howard Kerzner
---------------------------------
Its: President
----------------------------
Date: "SUN"
----------------
INCOMING PARTNER
WATERFORD GAMING, L.L.C., a Delaware
limited liability company
By: Slavik Suites, Inc.
Its: Member
By:
---------------------------------
Its: Executive Vice President
----------------------------
Date:
----------------
By: LMW INVESTMENTS, INC.,
a Connecticut corporation
Its: Member
By:
---------------------------------
Its:
----------------------------
Date: "WATERFORD GAMING"
----------------
[Signatures continued
on next page]
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
effective as of the date and year as provided above.
SUN COVE, LTD., a Connecticut corporation
By:
---------------------------------
Its:
----------------------------
Date: "SUN"
----------------
INCOMING PARTNER
WATERFORD GAMING, L.L.C., a Delaware
limited liability company
By: Slavik Suites, Inc.
Its: Member
By: /s/ Del J. Lauria
---------------------------------
Its: Executive Vice President
----------------------------
Date: 10/22/96
----------------
By: LMW INVESTMENTS, INC.,
a Connecticut corporation
Its: Member
By:
---------------------------------
Its:
----------------------------
Date: "WATERFORD GAMING"
----------------
[Signatures continued
on next page]
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
effective as of the date and year as provided above.
SUN COVE, LTD., a Connecticut corporation
By:
---------------------------------
Its:
----------------------------
Date: "SUN"
----------------
INCOMING PARTNER
WATERFORD GAMING, L.L.C., a Delaware
limited liability company
By: Slavik Suites, Inc.
Its: Member
By:
---------------------------------
Its:
----------------------------
Date:
----------------
By: LMW INVESTMENTS, INC.,
a Connecticut corporation
Its: Member
By: /s/ Len Wolman
---------------------------------
Its: President
----------------------------
Date: "WATERFORD GAMING"
----------------
[Signatures continued
on next page]
11
<PAGE>
[Signatures continued
from preceding page]
WITHDRAWING PARTNERS:
RJH DEVELOPMENT CORP., a New York
corporation
By: /s/ Richard J. Hertz
---------------------------------
Its: President
----------------------------
Date: "RJH"
----------------
SLAVIK SUITES, INC., a Michigan corporation
By:
---------------------------------
Its:
----------------------------
Date: "SLAVIK"
----------------
LMW INVESTMENTS, INC., a Connecticut
corporation
By: /s/ Len Wolman
---------------------------------
Its: President
----------------------------
Date: "LMW"
----------------
12
<PAGE>
[Signatures continued
from preceding page]
WITHDRAWING PARTNERS:
RJH DEVELOPMENT CORP., a New York
corporation
By:
---------------------------------
Its:
----------------------------
Date: "RJH"
----------------
SLAVIK SUITES, INC., a Michigan corporation
By: /s/ Del J. Lauria
---------------------------------
Its: EXECUTIVE VICE PRESIDENT
----------------------------
Date: 10/22/96 "SLAVIK"
----------------
LMW INVESTMENTS, INC., a Connecticut
corporation
By:
---------------------------------
Its:
----------------------------
Date: "LMW"
----------------
12
$65,000,000
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
12 3/4% Senior Notes due 2003
PURCHASE AGREEMENT
November 5, 1996
<PAGE>
PURCHASE AGREEMENT
November 5, 1996
BEAR, STEARNS & CO. INC.
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
c/o BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Waterford Gaming, L.L.C., a limited liability company organized and
existing under the laws of Delaware (the "Company") and Waterford Gaming Finance
Corp., a corporation organized and existing under the laws of Delaware
("Finance" and, together with the Company, the "Issuers"), propose, subject to
the terms and conditions stated herein, to issue and sell to the initial
purchasers named in Schedule A hereto (the "Initial Purchasers") $65,000,000
aggregate principal amount of their 12 3/4% Senior Notes due 2003 (the "Notes"),
to be issued pursuant to an indenture dated as of November 8, 1996 (the
"Indenture") among the Issuers and Fleet National Bank, as trustee (the
"Trustee"). The Notes will be secured by certain assets of the Company, such
security to be evidenced by a note pledge agreement and cash collateral and
disbursement agreement, (collectively, the "Collateral Agreements").
The Notes will be offered and sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on an exemption therefrom. The Issuers have prepared a preliminary offering
memorandum, dated October 21, 1996 (such preliminary offering memorandum, being
hereinafter referred to as the "Preliminary Offering Memorandum"), and an
offering memorandum, dated November 5, 1996, as supplemented (such offering
memorandum being hereinafter referred to as the "Offering Memorandum"), setting
forth information regarding the Issuers and the Notes. The Issuers hereby
confirm that they have authorized the use of the Preliminary Offering Memorandum
and
<PAGE>
the Offering Memorandum in connection with the offering and resale of the Notes.
The Company understands that you propose to make an offering of the Notes
on the terms set forth in the Offering Memorandum, as soon as you deem advisable
after this Agreement has been executed and delivered, (i) to persons in the
United States whom you reasonably believe to be qualified institutional buyers
("Qualified Institutional Buyers") as defined in Rule 144A promulgated by the
Securities and Exchange Commission (the "Commission") under the Act, as such
rule may be amended from time to time ("Rule 144A"), in a transaction under Rule
144A and (ii) to institutional "accredited investors" (as defined in Rule
501(A)(1), (2), (3) or (7) under the Act), provided that such offers and sales
are made in the manner contemplated by Section 3(c), (d) and (e) hereof.
1. Representations and Warranties of the Issuers. The Issuers, jointly
and severally, represent and warrant to, and agree with, the several Initial
Purchasers that:
(a) As of their respective dates, the Preliminary Offering
Memorandum and the Offering Memorandum do not contain and any amendment or
supplement thereto will not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection shall not
apply to statements in or omissions from the Preliminary Offering Memorandum or
Offering Memorandum (or any supplement or amendment thereto) made in reliance
upon and in conformity with information furnished to the Company in writing by
the Initial Purchasers expressly for use in the Preliminary Offering Memorandum
or Offering Memorandum. The Issuers acknowledge for all purposes under this
Agreement (including this paragraph and Section 6 hereof) that the statements
set forth in the last paragraph of the cover page and the first and third
paragraphs and the fourth and fifth sentences of the fourth paragraph of the
section entitled "Plan of Distribution" in the Offering Memorandum constitute
the only written information furnished to the Company by the Initial Purchasers
for use in the Preliminary Offering Memorandum or Offering Memo-
2
<PAGE>
randum (or any amendment or supplement thereto) and that the Initial Purchasers
shall not be deemed to have provided any information (and therefore are not
responsible for any statements or omissions) pertaining to any arrangement or
agreement with respect to any party other than the Initial Purchasers.
(b) When the Notes are issued and delivered pursuant to this
Agreement, the Issuers will have no securities outstanding which are listed on a
national securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system.
(c) None of the Issuers or the Manager (as defined in paragraph (e)
below) or any affiliate of any of them (as defined in Rule 501(b) under the Act)
has, directly or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the Act)
which is subject to integration with the sale of the Notes in a manner that
would require the registration of the Notes under the Act.
(d) None of the Issuers or the Manager or any person acting on their
behalf has engaged, in connection with the offering of the Notes, in any form of
general solicitation or general advertising (as those terms are used within the
meaning of Regulation D under the Act); it has not solicited offers for, or
offered or sold, such Notes by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the Act) or
in any manner involving a public offering within the meaning of Section 4(2) of
the Act.
(e) The only entity in which the Issuers have an equity or other
ownership interest is Trading Cove Associates, a Connecticut general partnership
(the "Manager"). The Issuers and the Manager have been duly organized, each of
the Issuers is validly existing and in good standing under the laws of its
jurisdiction of organization and each of the Issuers and the Manager has full
power and authority to carry on its business as it is currently being conducted
(and, in the case of the Issuers, to authorize the offering of the Notes and to
issue, sell and deliver the Notes) and to own, lease and
3
<PAGE>
operate its properties. Each of the Issuers and the Manager are duly qualified
and in good standing as a foreign corporation or other entity in each
jurisdiction where the nature of its business or its ownership or leasing of
property requires such qualification except where the failure to be so qualified
or in good standing does not and would not (x) individually or in the aggregate,
have a material adverse effect on the properties, results of operations,
condition (financial or otherwise), affairs or prospects of the Issuers and the
Manager, taken as a whole, (y) interfere with or adversely affect the issuance
or marketability of the Notes pursuant hereto or (z) in any manner draw into
question the validity of this Agreement, the Indenture, the Related Agreements,
the Registration Rights Agreement or the Collateral Agreements (any of the
events set forth in clauses (x), (y) or (z), a "Material Adverse Effect)".
(f) The Company directly owns a 45% economic and 50% voting
partnership interest in the Manager, Leisure Resorts Technology, Inc. owns a 5%
non-voting beneficial interest in the Manager and Sun Cove, Ltd. owns the
remaining 50% partnership interest in the Manager. The Company directly owns all
the issued and outstanding capital stock of Finance. Except as described in the
Offering Memorandum in connection with the buy/sell option, the Company's
partnership interest in the Manager and shares of capital stock in Finance are
owned by the Company free and clear of any security interest, mortgage, pledge,
claim, lien or encumbrance (each, a "Lien"). Except as described in the Offering
Memorandum in connection with the buy/sell option, there are no outstanding
subscriptions, rights, warrants, options, calls, convertible or exchangeable
securities, commitments of sale, or Liens related to or entitling any person to
purchase or otherwise to acquire the Company's partnership interest in the
Manager or shares of capital stock in Finance.
(g) All the issued and outstanding shares of capital stock of
Finance have been duly authorized and validly issued and are fully paid,
nonassessable and not subject to any preemptive or similar rights.
(h) The Indenture has been duly authorized by all necessary
corporate action on the part of the Issuers and, when executed and delivered by
the
4
<PAGE>
Issuers in accordance with its terms (assuming the due execution and delivery
thereof by the Trustee), will be the legal, valid and binding agreement of each
of the Issuers, enforceable against each of the Issuers in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws now or hereafter in effect relating
to creditors' rights generally and to general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
(i) The Notes have been duly authorized by the Issuers and, on the
Closing Date, the Indenture and the Notes will have been duly executed by each
of the Issuers and will conform in all material respects to the descriptions
thereof in the Offering Memorandum. When the Notes are issued, executed and
authenticated in accordance with the Indenture and paid for in accordance with
the terms of this Agreement, the Notes will be the legal, valid and binding
obligations of each of the Issuers, enforceable against the Issuers in
accordance with their terms and entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws now or hereafter in effect relating
to creditors' rights generally and to general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
(j) None of the Issuers or the Manager is (i) in violation of or in
default in the performance of (A) any of their respective certificate of
incorporation, certificate of formation, bylaws, operating agreement or
partnership agreement or (B) any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or other material
contract, lease, license, permit, franchise or other instrument to which either
of the Issuers or the Manager is a party or by which it or any of them is bound,
or to which any of the property or assets of either of the Issuers or the
Manager is subject or (ii) in violation of any judgment, order or decree of any
court or governmental agency or authority entered in any proceeding to which
either of the Issuers or the Manager is a party or by which any of them is bound
or to which any of the property or assets of either of the Issuers or the
Manager is subject or any
5
<PAGE>
applicable Federal, tribal, state or local law, rule, administrative regulation
or ordinance applicable to Issuers, the Manager or any of their respective
property except in the case of (i)(B), and (ii), for such violations or defaults
that would not, singly or in the aggregate, have a Material Adverse Effect.
(k) This Agreement and the registration rights agreement of even
date herewith relating to the Notes (the "Registration Rights Agreement") have
been duly and validly authorized, executed and delivered by the Issuers and
constitute legal, valid and binding agreements of each of the Issuers,
enforceable against each of the Issuers in accordance with their terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and except as
rights to indemnity and contribution hereunder and thereunder may be limited by
state or Federal securities laws or the public policy underlying such laws.
(l) The Collateral Agreements have been duly and validly authorized,
executed and delivered by the Company, and constitute legal, valid and binding
agreements of the Company, enforceable against the Company, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(m) The Amended and Restated Partnership Agreement of Trading Cove
Associates, as amended by the First Amendment thereto dated October 22, 1996
(the "Partnership Agreement"), the Note Purchase Agreement, dated October 19,
1996, among the Company, Sun International Hotels Limited and Trading Cove
Associates (the "Note Purchase Agreement") and the Omnibus Financing Agreement
among the Company, Sun International Hotels Limited and Trading Cove Associates,
as amended by the First Amendment thereto dated October 19, 1996 (the "Omnibus
Agreement", and together with the Partnership Agreement and the Note Purchase
Agreement, the "Related
6
<PAGE>
Agreements") have been duly and validly authorized, executed and delivered by
the parties thereto, and constitute the legal, valid and binding agreements of
the parties thereto, enforceable against the parties thereto, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(n) The execution and delivery of this Agreement, the Registration
Rights Agreement, the Collateral Agreement, the Related Agreements and the
Indenture by the Issuers, the issuance and sale of the Notes, the performance of
this Agreement, the Registration Right Amendment, the Collateral Agreement, the
Related Agreements and the Indenture and the consummation of the transactions
contemplated hereby and thereby will not (i) conflict with or result in a breach
of any of the terms or provisions of, or constitute a default or cause an
acceleration of any obligation under, (A) any of the respective certificate of
incorporation, certificate of formation, bylaws, operating agreement or
partnership agreement of the Issuers or the Manager or (B) any bond, note,
debenture or other evidence of indebtedness or any indenture, mortgage, deed of
trust or other material contract, lease, license, permit, franchise or other
instrument to which the Issuers or the Manager is a party or by which any of
them is bound, or to which any of the property or assets of the Issuers or the
Manager is subject, or any judgment, order or decree of any court or
governmental agency or authority entered in any proceeding to which either of
the Issuers or the Manager is a party or by which any of them is bound or to
which any of the property or assets of the Issuers or the Manager is subject, or
(ii) violate or conflict with any applicable Federal, tribal, state or local
law, rule, administrative regulation or ordinance applicable to Issuers, the
Manager or any of their respective property except in the case of (i)(B) and
(ii) for such violations, conflicts, breaches or defaults that would not result
in a Material Adverse Effect. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
any public, governmental or regulatory agency or body having jurisdiction over
the Issuers or the Manager or any of their respective proper-
7
<PAGE>
ties or assets (including, without limitation, the Bureau of Indian Affairs of
the Department of the Interior, the Secretary of the Interior, the National
Indian Gaming Commission, the Mohegan Tribal Gaming Authority Director of
Regulation or the Gaming Disputes Court of the Mohegan Tribe (collectively, the
"Gaming Authorities")) is required for the execution, delivery and performance
of this Agreement, the Registration Rights Agreement, the Indenture, the
Collateral Agreements, the Related Agreements or the Notes and the consummation
of the transactions contemplated hereby and thereby, including the issuance,
sale and delivery of the Notes, except such approvals as must be obtained or
made under the Act and the Trust Indenture Act of 1939, as amended, or with the
National Association of Securities Dealers, Inc. (the "NASD") with respect to
the Registration Rights Agreement or as may be required under the securities or
Blue Sky laws of the various states or where the failure to obtain any such
consent, approval, authorization, order, registration, filing, qualification,
license or permit would not result in a Material Adverse Effect.
(o) Except as set forth in the Offering Memorandum, there is no
action, suit or proceeding before or by any court or governmental agency or body
(including, but not limited to, the Gaming Authorities) pending against the
Issuers or the Manager and, to the best of the Issuers' knowledge, no such
proceedings are contemplated or threatened. No action has been taken with
respect to the Issuers or the Manager, and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency which
prevents the issuance of the Notes, prevents or suspends the use of the Offering
Memorandum or suspends the sale of the Notes in any jurisdiction referred to in
Section 3(d) hereof; no injunction, restraining order or order of any nature by
a Federal, state or tribal court of competent jurisdiction has been issued with
respect to the Issuers or the Manager which would prevent the issuance of the
Notes, prevent or suspend the use of the Offering Memorandum or suspend the sale
of the Notes in any jurisdiction referred to in Section 3(d) hereof; no action,
suit or proceeding before any court or arbitrator or any governmental body or
agency (including, but not limited to, the Gaming Authorities), is pending
against or, to the knowledge of the Issuers, threatened against, the Issuers or
the Manager which, if adversely determined,
8
<PAGE>
could reasonably be expected to (a) interfere with or adversely affect the
issuance of, the Notes or (b) in any manner invalidate this Agreement, the
Registration Rights Agreement or the Indenture; and every request of any
securities authority or agency of any jurisdiction for additional information
(to be included in the Offering Memorandum or otherwise) has been complied with
in all material respects.
(p) Coopers & Lybrand LLP, the firm of accountants that has
certified the applicable financial statements of the Company as set forth in the
Offering Memorandum, are independent public accountants with respect to the
Company as defined in the Act and the rules and regulations promulgated
thereunder (the "Regulations"). The financial statements, together with notes
thereto, set forth in the Offering Memorandum comply as to form in all material
respects with the requirements of the Act and the Regulations. Such financial
statements fairly present in all material respects the consolidated financial
position of the Company at the date indicated, and have been prepared in
accordance with generally accepted accounting principles ("GAAP"). The other
financial and statistical information and data set forth in the Offering
Memorandum, historical and pro forma, are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company.
(q) Except as disclosed in the Offering Memorandum, subsequent to
the respective dates as of which information is given in the Offering
Memorandum, (i) none of the Issuers or the Manager has incurred any liability or
obligation, direct or contingent, or entered into any transaction, (ii) there
has been no decision or judgment in the nature of litigation adverse to the
Issuers or the Manager, and (iii) there has been no material adverse change in
the financial condition or in the results of operations, business affairs or
business prospects of the Issuers or the Manager (any of the above, a "Material
Adverse Change").
(r) Each of the Issuers and the Manager and the key executive of
each possesses such licenses, certificates, authorizations, approvals,
franchises, trademarks, service marks, trade names, permits and other rights
issued by local, tribal state or Federal regulato-
9
<PAGE>
ry agencies or bodies (collectively, "Permits"), including, without limitation,
all such Permits with respect to engaging in gaming operations, from all
regulatory or governmental officials, bodies and tribunals, as are necessary to
own, lease and operate its respective properties and to conduct the businesses
now conducted by it except where the failure to have such Permits would not have
a Material Adverse Effect; each of the Issuers and the Manager and such key
executives have fulfilled and performed all of its material obligations with
respect to such Permits and none of the Issuers, the Manager or such key
personnel have received any notice of proceedings relating to the revocation or
modification of any such Permit.
(s) All tax returns required to be filed by the Issuers and the
Manager in any jurisdiction have been filed, other than those filings being
contested in good faith, and all taxes, including withholding taxes, penalties
and interest, assessments, fees and other charges due from such entities have
been paid.
(t) Except as disclosed in the Offering Memorandum or except as
would not result in a Material Adverse Effect, (a) none of the Issuers or the
Manager is in violation of any Federal, state or local laws and regulations
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of toxic or hazardous substances, materials or wastes, or petroleum and
petroleum products ("Materials of Environmental Concern"), or otherwise relating
to the storage, disposal, transport or handling of Materials of Environmental
Concern (collectively, "Environmental Laws"), which violation includes, but is
not limited to, noncompliance with any permits or other governmental
authorizations; (b) none of the Issuers nor the Manager has received any
communication (written or oral), whether from a governmental authority or
otherwise, alleging any such violation or noncompliance, and to the knowledge of
the Issuers there are no circumstances, either past, present or that are
reasonably foreseeable, that may lead to such violation in the future; (c) there
is no pending or, to the knowledge of the Issuers, threatened claim, action,
investigation or
10
<PAGE>
notice (written or oral) by any person or entity alleging potential liability
for investigatory, cleanup, or governmental response costs, or natural resources
or property damages, or personal injuries, attorney's fees or penalties relating
to (x) the presence, or release into the environment, of any Material of
Environmental Concern at any location owned or operated by the Issuers or the
Manager, now or in the past, or (y) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law (collectively,
"Environmental Claims"); and (d) there are no past or present actions,
activities, circumstances, conditions, events or incidents, that could form the
basis of any Environmental Claim against the Issuers or the Manager or against
any person or entity whose liability for any Environmental Claim the Issuers or
the Manager has retained or assumed either contractually or by operation of law.
(u) None of the Issuers or the Manager is in material violation of
any Federal, tribal, state or local law relating to discrimination in the
hiring, promotion or pay of employees or any applicable wage or hour laws. There
is (A) no significant unfair labor practice complaint pending against the
Issuers or the Manager or, to the best knowledge of the Issuers, threatened
against any of them, before the National Labor Relations Board or any state or
local labor relations board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Issuers or the Manager or, to the best
knowledge of the Issuers, threatened against any of them, and (B) no material
labor dispute in which the Issuers or the Manager is involved nor, to the best
knowledge of the Issuers, is any labor dispute imminent, other than routine
disciplinary and grievance matters.
(v) Each of the Issuers and the Manager has good and marketable
title, free and clear of all Liens (except Permitted Liens (as defined in the
Indenture)), to all property and assets described in the Offering Memorandum as
being owned by it, except as described in the Offering Memorandum in connection
with the buy/sell option. All leases to which the Issuers or the Manager is a
party are valid and binding and no material default has occurred or is
continuing thereunder as a result of any action or omission by any of the
Issuers or
11
<PAGE>
the Manager, and to the best knowledge of the Issuers, by the landlord or lessor
and the Issuers and the Manager enjoy peaceful and undisturbed possession under
all such leases to which any of them is a party as lessee.
(w) Neither the Company nor Finance is, or as a result of the
transactions contemplated by the Offering Memorandum would be, required to make
any filing or to register under the Investment Company Act of 1940, as amended
(the "Investment Company Act").
(x) The Company does not intend to, nor does it believe that it
will, incur debts beyond its ability to pay such debts as they mature. The
present fair saleable value of the assets of the Company on a consolidated basis
exceeds the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of the
Company on a consolidated basis as they become absolute and matured. The assets
of the Company on a consolidated basis do not constitute unreasonably small
capital to carry out the business of the Company, taken as a whole, as conducted
or as proposed to be conducted. Upon the issuance of the Notes, the present fair
saleable value of the assets of the Company on a consolidated basis will exceed
the amount that will be required to be paid on or in respect of the existing
debts and other liabilities (including contingent liabilities) of the Company on
a consolidated basis as they become absolute and matured. Upon the issuance of
the Notes, the assets of the Company on a consolidated basis will not constitute
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of the Company on a consolidated basis, taking into
account the projected capital requirements and capital availability.
2. Purchase, Sale and Delivery of the Notes.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Initial Purchasers, severally and not jointly, agree to purchase from
the Issuers, at a purchase price of 96.5% of the principal amount thereof, plus
accrued interest, if any, from November 8, 1996 to the Closing Date hereinafter
referred to, the Notes in the respective
12
<PAGE>
principal amount set forth opposite their names in Schedule A hereto.
Delivery of and payment of the purchase price for the Notes shall be
made in the offices of Bear, Stearns & Co. Inc. at 245 Park Avenue, New York,
New York 10167, or at such other location as may be mutually acceptable. Such
delivery and payment shall be made at 10:00 a.m., New York time, on November 8,
1996, or at such other time as shall be agreed upon by the Initial Purchasers
and the Issuers. The time and date of such delivery and payment are herein
called the "Closing Date." Delivery of the Notes shall be made to you for the
respective accounts of the several Initial Purchasers against payment by the
several Initial Purchasers of the purchase price for the Notes by wire transfer
of immediately available funds to an account or accounts to be designated by the
Issuers at least one business day prior to the Closing Date.
(b) The Notes shall be in definitive form and registered in the name
of Cede & Co. The Issuers will permit you to examine and package such Notes for
delivery at least one full business day prior to the Closing Date.
(c) The Initial Purchasers have advised the Issuers that they
propose to offer the Notes for resale upon the terms and conditions set forth in
this Agreement and in the Offering Memorandum. The Initial Purchasers hereby
represent and warrant to, and agree with, severally, and not jointly, the
Issuers that they (i) have not and will not solicit offers for, or offer or
sell, such Notes by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act, (ii) will solicit offers for such Notes pursuant to Rule 144A or resales
not involving a public offering, as applicable, only from, and will offer, sell
or deliver such Notes, as part of its distribution, only to, respectively, (A)
persons in the United States whom it reasonably believes to be qualified
institutional buyers within the meaning of Rule 144A ("Qualified Institutional
Buyers") and (B) institutional "accredited investors," as defined in Rule
501(A)(1), (2), (3) or (7) under the Act, provided, however, that such
"accredited investor" must
13
<PAGE>
complete and deliver to it an investment letter substantially in the form of
Annex A to the Offering Memorandum prior to acceptance of any order and (iii)
such Initial Purchasers are Qualified Institutional Buyers, with such knowledge
and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Notes.
Each Initial Purchaser understands that the Issuers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 5
hereof, counsel to the Issuers and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby
expressly consents to such reliance.
3. Covenants of the Issuers: The Issuers covenant and agree with the
several Initial Purchasers as follows:
(a) At any time prior to the completion of the distribution of the
Notes by the Initial Purchasers, the Issuers will give the Initial Purchasers
notice of its intention to prepare any supplement or amendment to the Offering
Memorandum, will furnish the Initial Purchasers with copies of any such
amendment, supplement or other document a reasonable amount of time prior to
such proposed filing or use, and will not use any such amendment or supplement
to which the Initial Purchasers or counsel for the Initial Purchasers shall
reasonably object within a reasonable amount of time after being furnished a
copy thereof.
(b) The Issuers have furnished or will furnish to the Initial
Purchasers such number of copies of the Offering Memorandum (as amended or
supplemented) as the Initial Purchasers may reasonably request.
(c) At any time prior to the completion of the distribution of the
Notes by the Initial Purchasers, if any event shall occur as a result of which
it is necessary, in the reasonable opinion of counsel for the Initial
Purchasers, to amend or supplement the Offering Memorandum in order to make the
Offering Memorandum not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, the Issuers will forthwith amend or
supplement the Offering Memorandum (in
14
<PAGE>
form and substance reasonably satisfactory to counsel for the Initial
Purchasers) so that, as so amended or supplemented, the Offering Memorandum will
not include an untrue statement of material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to the purchaser, not
misleading, and the Issuers will furnish to the Initial Purchasers a reasonable
number of copies of such amendment or supplement.
(d) The Issuers will endeavor in good faith, in cooperation with the
Initial Purchasers, at or prior to the date of the Offering Memorandum, to
qualify the Notes for offering and sale under the securities laws relating to
the offering or sale of the Notes of such jurisdictions as the Initial
Purchasers and the Issuers may agree upon and to maintain such qualification in
effect for so long as required for the distribution thereof.
(e) The Issuers will not, and will cause the Manager not to, solicit
any offer to buy or offer or sell the Notes by means of any form of general
solicitation or general advertising.
(f) None of the Issuers or any of their affiliates (as defined in
Rule 501(b) of the Act) will offer, sell or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) which will be
integrated with the sale of the Notes in a manner that would require the
registration of the Notes under the Act.
(g) The Issuers will, so long as the Notes are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the Act,
either (i) file reports and other information with the Commission under Section
13 or 15(d) of the Exchange Act, or (ii) in the event it is not subject to
Section 13 or 15(d) of the Exchange Act, make available to holders of the Notes
and prospective purchasers of the Notes designated by such holders, upon request
of such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in
connection with resales of the Notes.
15
<PAGE>
(h) The Issuers will, if requested by the Initial Purchasers, use
its best efforts in cooperation with the Initial Purchasers to permit the Notes
to be eligible for clearance and settlement through The Depository Trust Company
("DTC").
(i) Each of the Notes will bear the legend contained in "Notice to
Investors" in the Offering Memorandum upon the terms stated therein, except
after such Note is resold or exchanged pursuant to a registration statement
effective under the Act.
(j) The Issuers will apply the proceeds from the sale of the Notes
as set forth under the caption "Use of Proceeds" in the Offering Memorandum.
(k) Prior to the Closing Date, the Issuers shall furnish to the
Initial Purchasers, as soon as reasonably practicable after they have been
prepared, copies of unaudited interim consolidated financial statements, if any,
of the Issuers, for any periods subsequent to the periods covered by the
financial statements appearing in the Offering Memorandum.
(l) The Issuers will not claim the benefit of any usury laws
against any holders of the Notes.
4. Payment of Expenses. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Issuers hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Preliminary
Offering Memorandum and the Offering Memorandum and any amendments thereof or
supplements thereto (including, without limitation, fees and expenses of the
Company's accountants and counsel), the Indenture, the Collateral Agreements,
the underwriting documents (including this Agreement and the Registration Rights
Agreement), and all other documents related to the offering of the Notes
(including those supplied to the Initial Purchasers in quantities as hereinabove
stated), (ii) the preparation, issuance, transfer and delivery of the Notes to
the Initial Purchasers, including any transfer or other taxes payable thereon
and any charges of DTC in connection therewith, (iii) the qualification of the
Notes under
16
<PAGE>
state and foreign securities or Blue Sky laws and the eligibility of the Notes
for investment under state and foreign law, including the costs of printing and
mailing a preliminary and final "Blue Sky Survey" and a "Legal Investment
Memorandum" and the reasonable fees and disbursements of Initial Purchasers'
Counsel (as defined below) in relation thereto, (iv) the rating of the Notes by
one or more rating agencies, (v) the fees and expenses of the Trustee and any
agent of the Trustee and the fees and disbursements of counsel for the Trustee
in connection with the Indenture and the Notes, (vi) any fees payable for the
review of the NASD in connection with the initial and continued designation of
the Notes as PORTAL Securities under the PORTAL Market Rules pursuant to NASD
Rule 5322 and (vii) one-half of the out-of-pocket expenses of the Initial
Purchasers, including, but not limited to, fees and expenses of their counsel.
5. Conditions of Initial Purchasers' Obligations. The Initial Purchasers'
obligations to purchase and pay for the Notes shall be subject to the absence
from any certificates, opinions, written statements or letters furnished to the
Initial Purchasers pursuant to this Section 5 or to their counsel, Skadden,
Arps, Slate, Meagher & Flom LLP ("Initial Purchasers' Counsel"), pursuant to
this Section 5 of any misstatement or omission, to the performance by the
Company of its obligations hereunder, and to the following additional
conditions:
(a) All the representations and warranties of the Issuers
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date. The Issuers
shall have performed or complied with all of their agreements herein contained
and required to be performed or complied with by them at or prior to the Closing
Date.
(b) (i) Since the date of the latest balance sheet included in the
Offering Memorandum, there shall not have been any Material Adverse Change,
whether or not arising in the ordinary course of business, (ii) since the date
of the latest balance sheet included in the Offering Memorandum, there shall not
have been any change, or any development involving a prospective change, in the
capital stock or long-term debt, or in-
17
<PAGE>
crease in short-term debt, of the Issuers or the Manager, except as disclosed in
the Offering Memorandum and (iii) the Issuers shall have no liability or
obligation, direct or contingent, that is material to the Issuers taken as a
whole and is required to be disclosed in the notes to the Company's financial
statements in accordance with GAAP and which is not disclosed in the Offering
Memorandum.
(c) You shall have received a certificate of the Issuers, dated the
Closing Date, executed on behalf of the Issuers by the Chairman of the Board and
Chief Executive Officer and the Chief Financial Officer of the Company,
confirming the matters set forth in paragraphs (a) and (b) of this Section 5.
(d) You shall have received an opinion (satisfactory to the Initial
Purchasers and their counsel), dated the Closing Date, of Latham & Watkins,
special counsel for the Company, to the effect that:
(i) the Issuers have been duly organized or formed, as
applicable, and each of the Issuers is validly existing as a corporation
or limited liability company in good standing under the laws of Delaware
and each of the Issuers has the power and authority, to own their
properties and to conduct their businesses as described in the Offering
Memorandum;
(ii) each of the Issuers is duly qualified and in good
standing as a foreign corporation or other entity authorized to do
business in each jurisdiction where the Issuers and the Manager own or
lease property or conduct business;
(iii) the Issuers have the power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, the
Collateral Agreements and the Indenture and to issue, sell and deliver the
Notes; this Agreement, the Registration Rights Agreement, the Collateral
Agreements, the Related Agreements and the Indenture have been duly and
validly authorized by all necessary action, corporate or other, by the
Issuers, and have
18
<PAGE>
been duly executed and delivered by the Issuers;
(iv) all of the issued and outstanding shares of capital stock
of Finance have been duly authorized and validly issued, and are fully
paid and nonassessable, and the shares of capital stock of Finance and the
Company's partnership interest in the Manager are owned directly by the
Company free and clear of any perfected security interest and, to such
counsel's knowledge, any other security interests, claims, liens or
encumbrances, except as provided in the Partnership Agreement;
(v) the Indenture, assuming due authorization, execution and
delivery thereof by the Trustee, is a valid and binding agreement of the
Issuers, enforceable against the Issuers in accordance with its terms
subject to (i) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or law, and the discretion of the court before which any proceeding
therefor may be brought; (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability
where such indemnification or contribution is contrary to public policy;
and (iv) such counsel expressing no opinion concerning the enforceability
of the waiver of rights or defenses contained in Section 4.16 of the
Indenture;
(vi) the Notes have been duly authorized for issuance and sale
to the Initial Purchasers pursuant to this Agreement and, when issued,
executed and authenticated in accordance with the terms of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, will constitute valid and binding obliga-
19
<PAGE>
tions of the Issuers, enforceable against the Issuers in accordance with
their terms, subject to (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors; (ii)
the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or law, and the discretion of the
court before which any proceeding therefor may be brought; and (iii) the
unenforceability under certain circumstances under law or court decisions
of provisions providing for the indemnification of or contribution to a
party with respect to a liability where such indemnification or
contribution is contrary to public policy;
(vii) the Collateral Agreements are valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, subject to (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors; (ii)
the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or law, and the discretion of the
court before which any proceeding therefor may be brought; and (iii) the
unenforceability under certain circumstances under law or court decisions
of provisions providing for the indemnification of or contribution to a
party with respect to a liability where such indemnification or
contribution is contrary to public policy;
(viii) the Registration Rights Agreement is a valid and
binding obligation of the Issuers, enforceable against the Issuers in
accordance with its terms, subject to (i) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether
20
<PAGE>
enforcement is considered in a proceeding in equity or law, and the
discretion of the court before which any proceeding therefor may be
brought; and (iii) the unenforceability under certain circumstances under
law or court decisions of provisions providing for the indemnification of
or contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy;
(ix) the provisions of the note pledge agreement, together
with delivery of the notes pledged to the trustee pursuant to the note
pledge agreement, assuming that the trustee has taken such notes in good
faith without notice of any adverse claim within the meaning of Section
8-302 of the New York Uniform Commercial (the "New York Code"), creates
under the pledge agreement a valid and perfected first priority security
interest and lien upon the pledged notes under the New York Code in the
favor of the trustee for the benefit of the Note holders;
(x) to the knowledge of such counsel, no authorization,
approval, consent or order of any court or Federal or New York
governmental authority or agency is required to be obtained by the Issuers
in connection with the sale by the Company of the Notes to the Initial
Purchasers, except (a) such as may be required under the state securities
or Blue Sky laws or regulations of any jurisdiction in the United States
in connection with the purchase and distribution of the Notes by the
Initial Purchasers and (b) such counsel need not express an opinion with
respect to gaming consents, approvals, authorizations or orders;
(xi) the Notes and the Indenture conform in all material
respects to the descriptions thereof contained in the Offering Memorandum
under the heading "Description of Notes";
21
<PAGE>
(xii) none of the issuance and sale of the Notes or the
performance of the Issuers' obligations pursuant to this Agreement, the
Registration Rights Agreement, the Collateral Agreements, the Related
Agreements or the Indenture will (A) conflict with, result in a breach of,
or constitute a default under the terms of any indenture or other
agreement or instrument and to which either of the Issuers is a party or
bound, (B) violate any Federal or New York statute, rule or regulation to
which either of the Issuers is subject or by which either of them is
bound, or to which any of the properties of the Issuers is subject, which
statute, rule or regulation, in the experience of such counsel, is
normally applicable to transactions of the type contemplated under this
Agreement or the Indenture, or to the knowledge of such counsel, any order
of any Federal or New York court or governmental agency or body having
jurisdiction over the Issuers or any of their properties, except that such
counsel need not express an opinion with respect to gaming consents,
approvals, authorizations or orders, or (C) violate any of the provisions
of the certificate of incorporation, certificate of formation, by-laws,
operating agreement or partnership agreement of the Issuers or the Manager
as in effect on the date of the opinion, except, in the case of (A) and
(B), for such conflicts, violations, defaults and breaches as would not
have Material Adverse Effect;
(xiii) to the knowledge of such counsel, there is no current,
pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Issuers or the Manager or to which any of their respective property is
subject of a character required to be disclosed in the Offering Memorandum
which is not adequately disclosed therein;
(xiv) neither of the Issuers is, or as a result of the
transactions contemplated by the Offering Memorandum would be,
22
<PAGE>
required to make any filing or to register under the Investment Company
Act;
(xv) the offer, issuance, sale and delivery of the Notes to
the Initial Purchasers and, assuming compliance with the transfer
restrictions, the reoffer, resale and delivery by the Initial Purchasers
in the manner and to the persons contemplated by this Agreement and the
Offering Memorandum do not require registration under the Act or
qualification of the Indenture under the Trust Indenture Act of 1939; and
(xvi) the Company will be classified, for Federal income tax
purposes, as a partnership and will not be subject to treatment as an
association, or a publicly traded partnership, taxable as a corporation.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Issuers,
representatives of the independent public accountants for the Issuers,
representatives of the Initial Purchasers and their counsel at which the
contents of the Offering Memorandum and related matters were discussed and,
although such counsel did not independently verify such information and is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum,
on the basis of the foregoing no facts have come to the attention of such
counsel which would lead such counsel to believe that either the Offering
Memorandum or any amendment or supplement thereto, as of its date and the
Closing Date, contained an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel need
express no belief or opinion with respect to the financial statements and other
financial and statistical data included therein).
(e) You shall have received an opinion (satisfactory to the Initial
Purchasers and their counsel), dated the Closing Date, of Dorsey & Whitney and
23
<PAGE>
Rome McGuigan Sabanosh P.C., special counsel for the Company, to the effect
that:
(i) none of the issuance and sale of the Notes or the
performance of the Issuers' obligations pursuant to this Agreement, the
Registration Rights Agreement, the Collateral Agreements, the Related
Agreements or the Indenture will violate any Federal, tribal or
Connecticut statute, rule or regulation with respect to gaming to which
either of the Issuers is subject or by which either of them is bound or to
which any of the properties of the Issuers are subject;
(ii) no authorization, approval, consent or order of any
Federal, tribal or Connecticut authority with jurisdiction over gaming is
required to be obtained by the Issuers in connection with the sale by the
Issuers of the Notes to the Initial Purchasers, the pledge of the
collateral pursuant to the Collateral Agreements and the amendment of the
Partnership Agreement and Omnibus Agreement;
(iii) there is no requirement under any Federal, tribal or
Connecticut statute, rule or regulation with respect to gaming which
requires that any holder of the Notes, solely in its capacity as a holder
of the Notes, to apply for or receive any individual license, any
individual certificate or any other authorization from any Federal, tribal
or Connecticut authority to acquire or hold Notes under the Indenture;
(iv) each of the Issuers and the Manager has such Permits from
all regulatory or governmental officials, bodies and tribunals, Federal,
tribal or Connecticut, with respect to engaging in gaming operations, as
are necessary to own, lease and operate its respective properties and to
conduct its business in the manner described in the Offering Memorandum;
24
<PAGE>
(v) the statements contained under the caption "Government
Regulation" and "Risk Factors -- Highly Regulated Industries" in the
Offering Memorandum, insofar as they purport to summarize Federal, tribal
and Connecticut law, are correct in all material respects;
(vi) the cash collateral and disbursement agreement is
sufficient under Connecticut law (including general common law) to create
a valid and perfected security interest in the accounts described therein
to the extent that such accounts are "deposit accounts" within the meaning
of the Connecticut Uniform Commercial Code and in the financial assets and
securities maintained in and credited to such accounts in favor of the
trustee for the benefit of the Note holders;
(vii) the Partnership Agreement and the Omnibus Agreement are
valid and binding agreements of the Company, enforceable against the
Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws now or hereafter in effect relating to creditors' rights generally
and to general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity); and
(viii) the provisions of the note pledge agreement, together
with delivery of the notes pledged to the trustee pursuant to the note
pledge agreement, assuming that the trustee has taken such notes in good
faith without notice of any adverse claim within the meaning of Section
8-302 of the Connecticut Uniform Commercial Code (the "Connecticut Code"),
creates under the pledge agreement a valid and perfected first priority
security interest and lien upon the pledged notes under the Connecticut
Code in the favor of the trustee for the benefit of the Note holders.
25
<PAGE>
(f) The Initial Purchasers shall have received letters on and as of
the date hereof as well as on and as of the Closing Date (in the latter case
constituting an affirmation of the statements set forth in the former, based on
limited procedures), in form and substance satisfactory to the Initial
Purchasers, from Coopers & Lybrand LLP, independent public accountants, with
respect to the financial statements and certain financial information contained
in the Offering Memorandum.
(g) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers or caused to be furnished to the Initial Purchasers such
further information, certificates and documents as the Initial Purchasers may
reasonably request.
(h) On the Closing Date, the net proceeds of the Offering, net of
amounts required to complete the Reorganization (as defined in the Offering
Memorandum) and to purchase the Original Subordinated Notes, shall be deposited
in the Account (as defined in the cash collateral and disbursement agreement),
the Original Subordinated Notes shall be paid for and delivered in accordance
with the terms of the Note Purchase Agreement and delivered to the Trustee in
accordance with the note pledge agreement and the partnership interest in the
Manager of RJH Development Corp. shall have been purchased.
(i) At the Closing Time, the Notes shall have been designated for
trading on PORTAL.
(j) All proceedings taken in connection with the sale of the Notes
as herein contemplated shall be reasonably satisfactory in form and substance to
the Initial Purchasers and to Initial Purchasers' Counsel, and the Initial
Purchasers shall have received from said Initial Purchasers' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale of
the Notes, the Offering Memorandum and such other related matters, as you may
reasonably require, and the Company shall have furnished to Initial Purchasers'
Counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
26
<PAGE>
If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Initial Purchasers or
to Initial Purchasers' Counsel pursuant to this Section 5 shall not be in all
material respects reasonably satisfactory in form and substance to the Initial
Purchasers and to Initial Purchasers' Counsel, all obligations of the Initial
Purchasers hereunder may be cancelled by you at, or at any time prior to, the
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone, telex or telegraph, confirmed in writing.
6. Indemnification.
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, against any and all losses, liabilities, claims, damages
and out-of-pocket expenses whatsoever (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Issuers will not be liable in any such case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Issuers by or on
behalf of
27
<PAGE>
the Initial Purchasers expressly for use therein and provided, further, that the
Issuers will not be liable to the Initial Purchasers or any person who controls
an Initial Purchaser with respect to any untrue statement or omission or alleged
untrue statement or omission made in the Preliminary Offering Memorandum which
is corrected in the Offering Memorandum, or in any supplement thereto or
amendment thereof, if the Issuers sustain the burden of proving that an Initial
Purchaser sold Notes to the person asserting any such loss, liability, claim or
damage without sending or giving, at or prior to the written confirmation of the
sale of such Notes to such person, a copy of the Offering Memorandum (as amended
or supplemented), if the Issuers had previously furnished copies thereof to the
Initial Purchasers. This indemnity agreement will be in addition to any
liability which the Issuers may otherwise have, including under this Agreement.
(b) Each Initial Purchaser severally, and not jointly, agrees to
indemnify and hold harmless the Issuers, each of their directors or managers,
and each other person, if any, who controls the Issuers within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Offering Memorandum or the
Offering Memorandum, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or
28
<PAGE>
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Issuers by or on behalf of the Initial Purchasers
expressly for use therein, provided, however, that in no case shall any Initial
Purchaser be liable or responsible for any amount in excess of the discounts and
commissions received by such Initial Purchaser, as set forth in the cover pages
of the Offering Memorandum. This indemnity will be in addition to any liability
which any Initial Purchaser may otherwise have, including under this Agreement.
The Issuers acknowledge that the statements set forth in the last paragraph of
the cover page and the first and third paragraphs and the fourth and fifth
sentences of the fourth paragraph under the caption "Plan of Distribution" in
the Offering Memorandum constitute the only information furnished in writing by
or on behalf of the Initial Purchasers expressly for use in the Offering
Memorandum or the Preliminary Offering Memorandum or in any amendment thereof or
supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of
29
<PAGE>
the defense of such action within a reasonable time after notice of commencement
of the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the indemnifying parties,
it being understood, however, that the indemnifying parties shall not, in
connection with any one such action or separate but substantially similar
related actions arising out of the same general allegations or circumstances, be
liable for fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for the indemnified parties. Anything
in this subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected without its
written consent; provided, however, that such consent was not unreasonably
withheld.
7. Contribution. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 6 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Issuers and the Initial Purchasers
shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Issuers, any contribution received by
the Issuers from persons, other than the Initial Purchasers, who may also be
liable for contribution, including persons who control the Issuers within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and
directors and managers of the Issuers) to which the Issuers and one or more of
the Initial Purchasers may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Issuers, on the one hand, and the
Initial Purchasers, on the other hand, from the offering of the Notes or, if
30
<PAGE>
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Issuers, on the one hand, and the Initial Purchasers,
on the other hand, in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Issuers, on the one hand, and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Issuers and (y) the underwriting discounts and
commissions received by the Initial Purchasers, respectively, in each case as
set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Issuers, on the one hand, and of the Initial Purchasers,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers or the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Issuers and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7, (i) in no case shall any
Initial Purchaser be liable or responsible for any amount in excess of the
underwriting discount applicable to the Notes purchased by such Initial
Purchaser hereunder, less the amounts of any loss, claim, damage, liability or
expense already paid by such Initial Purchaser and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls an Initial Purchaser within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Initial Purchaser, and each person, if any, who controls
the Issuers within the meaning of Section 15 of the Act or Section
31
<PAGE>
20(a) of the Exchange Act, and each employee, officer, representative, director
or manager of the Issuers shall have the same rights to contribution as the
Issuers, subject in each case to clauses (i) and (ii) of this Section 7. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 7 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
8. Default by an Initial Purchaser.
(a) If any Initial Purchaser shall default in its obligation to
purchase Notes hereunder, you may in your discretion arrange for yourself or for
another party or parties to purchase such Notes to which such default relates on
the terms contained herein. In the event that within five (5) calendar days
after such a default you do not arrange for the purchase of the Notes to which
such default relates as provided in this Section 8, this Agreement shall
thereupon terminate, without liability on the part of the Issuers with respect
thereto (except in each case as provided in Section 4, 6(a) and 7 hereof) or the
non-defaulting Initial Purchaser, but nothing in this Agreement shall relieve a
defaulting Initial Purchaser of its liability, if any, to the other Initial
Purchaser and the Issuers for damages occasioned by its or their default
hereunder.
(b) In the event that the Notes to which the default relates are to
be purchased by the non-defaulting Initial Purchaser, or are to be purchased by
another party or parties as aforesaid, you or the Company shall have the right
to postpone the Closing Date for a period, not exceeding seven (7) business
days, in order to effect whatever changes may thereby be made necessary in the
Offering Memorandum or in any other documents and arrangements. The term
"Initial Purchaser" as used in this Agreement shall include any party
substituted under
32
<PAGE>
this Section 8 with like effect as if it had originally been a party to this
Agreement with respect to such Notes.
9. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Initial Purchasers and the Issuers
contained in this Agreement, including the agreements contained in Section 4,
the indemnity agreements contained in Section 6 and the contribution agreements
contained in Section 7, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Initial Purchaser or
any controlling person thereof or by or on behalf of the Issuers, any of their
officers and directors or any controlling person thereof, and shall survive
delivery of any payment for the Notes to and by the several Initial Purchasers.
The representations contained in Section 1 and the agreements contained in
Sections 4, 6 and 7 hereof shall survive the termination of this Agreement
including pursuant to Section 10 hereof.
10. Termination.
(a) You shall have the right to terminate this Agreement at any time
prior to the Closing Date if (A) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or United
States securities in general; or (B) if trading on the New York or American
Stock Exchanges or the Nasdaq Stock Market shall have been suspended, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required, on the New York or American
Stock Exchanges or the Nasdaq Stock Market by the New York or American Stock
Exchanges or the Nasdaq Stock Market or by order of the Commission or any other
governmental authority having jurisdiction; or (C) if a banking moratorium has
been declared by a New York or Federal authority or if any new restriction
materially adversely affecting the distribution of the Notes shall have become
effective; or (D)(i) if the United States becomes engaged in hostilities or
there is an escalation of hostilities involving the United States or there is a
declaration of a national emergency or war by the United States or (ii) if there
shall have been a change in
33
<PAGE>
political, financial or economic conditions if the effect of any such event in
(i) or (ii) is such as in your judgment makes it impracticable or inadvisable to
proceed with the offering, sale and delivery of the Notes on the terms
contemplated by the Offering Memorandum.
(b) Any notice of termination pursuant to this Section 10 shall be
by telephone, telex, or telegraph, confirmed in writing by letter.
(c) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 10(a) hereof or (ii) Section 8(a) hereof), or if the sale of
the Notes provided for herein is not consummated because any condition to the
obligations of the Initial Purchasers set forth herein is not satisfied or
because of any refusal, inability or failure on the part of the Issuers to
perform any agreement herein or comply with any provision hereof, the Issuers
will, subject to demand by the Initial Purchasers, reimburse the Initial
Purchasers for all out-of-pocket expenses (including the fees and expenses of
the Initial Purchasers' Counsel), incurred by the Initial Purchasers in
connection herewith.
11. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and (a) if sent to the Initial
Purchasers, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to Bear, Stearns & Co. Inc., 245 Park Avenue, New York, N.Y. 10167,
Attention: Corporate Finance Department; (b) if sent to the Issuers, shall be
mailed, delivered, or telexed or telegraphed and confirmed in writing to the
Company, 914 Hartford Turnpike, Waterford, Connecticut 06358, with a copy to
Latham & Watkins, 909 Third Avenue, New York, New York 1002, Attention: Raymond
Lin; and, in each case, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP
at 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071, Attention:
Nicholas P. Saggese; or in any case to such other address as the person to be
notified may have requested in writing.
12. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon the Initial Purchasers, the Issuers and the controlling
persons, directors, officers, employees and agents referred
34
<PAGE>
to in Sections 6 and 7, and their respective successors and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Notes from any Initial Purchaser.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
35
<PAGE>
If the foregoing correctly sets forth the understanding between the
Initial Purchasers and the Issuers, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement.
Very truly yours,
WATERFORD GAMING, L.L.C.
By: /s/ Len Wolman
------------------------------
Name: Len Wolman
Title: Chief Executive Officer
WATERFORD GAMING FINANCE CORP.
By: /s/ Len Wolman
------------------------------
Name: Len Wolman
Title: President
Accepted, as of the date
first above written.
BEAR, STEARNS & CO. INC.
By: /s/ Philip E. Berney
-----------------------------
Name: Philip E. Berney
Title: Managing director
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Edmond N. Moriarty
-----------------------------
Name: Edmond N. Moriarty
Title: Director
36
<PAGE>
Schedule A
Initial Purchasers Principal Amount
- ------------------ ----------------
Bear, Stearns & Co. Inc.................................. 42,250,000
Merrill, Lynch, Pierce,
Fenner & Smith Incorporated............................ 22,750,000
-----------
$65,000,000
===========
37
LIMITED LIABILITY COMPANY AGREEMENT
OF
WATERFORD GAMING, L.L.C.
A Delaware Limited Liability Company
THIS AGREEMENT ("Agreement") is entered into effective September 30, 1996
by Slavik Suites, Inc., a Michigan corporation ("Slavik"), and LMW Investments
Inc., a Connecticut corporation ("LMW"), as members (individually, a "Member"
and collectively, the "Members") of WATERFORD GAMING, L.L.C., a Delaware Limited
Liability Company (the "Company"), who agree as follows:
RECITALS:
A. Slavik and LMW are partners, along with others, in Trading Cove
Associates, a Connecticut general partnership ("TCA"). Slavik has a 25% voting,
and a 22.5% profits, interest in TCA, and LMW has a 12.5% voting, and an 11.25%
profits, interest in TCA.
B. Slavik and LMW formed the Company to succeed to, and be admitted to TCA
in respect of, their interests in TCA.
C. Slavik and LMW intend for the Company to borrow approximately $65
million, secured by a pledge by the Company of all of the 15% Subordinated Notes
due 2003 issued by the Mohegan Tribal Gaming Authority (the "Subordinated
Notes") owned by the Company and cash and cash equivalents in a certain cash
collateral account.
D. Slavik and LMW intend for the proceeds of the above-referenced
borrowing to be used, in part, as follows: (i) to fund a distribution in the
aggregate amount of $10 million from the Company to Slavik and LMW and (ii) to
purchase, from a third party, an additional 12.5% voting, and 11.25% profits,
interest in TCA for approximately $10.6 million.
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
ORGANIZATION
1.1 Continuation. The Company was organized as a Delaware Limited
Liability Company pursuant to the Delaware Limited Liability Company Act (the
"Act") by the filing of a Certificate of Formation (the "Certificate") with the
Delaware Secretary of State on September 30, 1996. The Members shall continue
the Company for the term and purposes, and on the conditions, hereinafter set
forth.
<PAGE>
1.2 Name. The name of the Company shall be Waterford Gaming, L.L.C. The
Company may also conduct its business under one or more assumed names.
1.3 Purposes. The Company has been established solely for the purposes of
(i) holding the TCA partnership interests, (ii) holding the Subordinated Notes,
(iii) engaging in activities in connection with its role as a managing general
partner of TCA, (iv) issuing the Senior Notes and (v) engaging in those
activities as the Members may reasonably deem necessary or advisable to carry
out the foregoing purposes of the Company. For so long as any of the Senior
Notes remain outstanding and have not been defeased in accordance with the terms
of the Indenture under which the Senior Notes were issued, the Company shall not
conduct any business activities or pursue any purpose other than those
activities and purposes described in the preceding sentence.
1.4 Term. The term of the Company commenced upon the filing of the
Certificate and shall end, and the Company shall dissolve, on September 30,
2020; provided, however, that if any of the events set forth in Section 8.1 of
this Agreement occurs prior thereto, the Company shall dissolve upon the first
to occur of such events.
1.5 Members. For so long as any of the Senior Notes remain outstanding and
have not been defeased in accordance with the terms of the Indenture under which
the Senior Notes were issued, the Company shall not have, and the Members shall
not permit the Company to have, at any time, fewer than two Members (the
"Minimum Member Requirement").
1.6 Offices and Resident Agent. The principal office of the Company shall
be at 914 Hartford Turnpike, Waterford, Connecticut 06385, or such other office
within or without the State of Delaware as the Board may from time to time
determine. The Registered Office and Resident Agent of the Company shall be as
designated in the Certificate or any amendment thereof.
1.7 Definitions. The terms set forth below shall have the following
meanings when used in this Agreement:
(a) "Act" has the meaning specified in Section 1.1 of this
Agreement.
(b) "Adjusted Augmented Capital Account" has the meaning specified
in Section 4.1(d)(1) hereof.
(c) "Augmented Capital Account" has the meaning specified in Section
4.1(a) hereof.
(d) "Board" or "Board of Directors" means the body so named in
Article VI of this Agreement.
- 2 -
<PAGE>
(e) "Capital Account" has the meaning specified in Section 2.3
hereof.
(f) "Certificate" has the meaning specified in Section 1.1 of this
Agreement.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" has the meaning specified in the introductory
paragraph to this Agreement.
(i) "Director" or "Directors" means a member or members of the Board
of Directors.
(j) "Disabled Member" has the meaning specified in Section 5.4(a)
hereof.
(k) "Estimation Period" means the period for which a partner who is
an individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year partnership in connection with
determining his estimated federal income tax liability for such period.
(l) "Excess Cash" has the meaning specified in Section 4.3(c)
hereof.
(m) "LMW" has the meaning specified in the introductory paragraph to
this Agreement.
(n) "Majority in Interest" means a majority in interest within the
meaning of Section 301.7701-2(b)(1) of the Treasury Regulations, determined in
accordance with Revenue Procedure 94-46, 1994-28 I.R.B. 129, or any successor
revenue procedure or pronouncement of the Internal Revenue Service.
(o) "Manager" or "Managers" have the respective meanings specified
in Section 6.1 hereof.
(p) "Member" and "Members" have the respective meanings specified in
the introductory paragraph to this Agreement.
(q) "Member Creditors" has the meaning specified in Section 8.2
hereof.
(r) "Membership Interest" shall mean all of the right, title and
interest of a Member (in his capacity as a member of the Company within the
meaning of the Act) in and to the Company.
- 3 -
<PAGE>
(s) "Minimum Member Requirement" has the meaning specified in
Section 1.5 hereof.
(t) "Percentage Interest" means, with respect to a Member, the
percentage set forth opposite such Member's name below, subject to adjustment as
provided in Section 4.4 below.
Slavik 66.67%
LMW 33.33%
(u) "Permitted Quarterly Tax Distributions" means quarterly
distributions of Tax Amounts determined on the basis of the estimated taxable
income of the Company, for the related Estimation Period, as determined by the
Tax Amounts CPA in a statement delivered to the Company.
(v) "Profit" and "Loss" have the meaning specified in Section
4.1(d)(2) hereof.
(w) "Quarterly Payment Period" means the period commencing on the
tenth day and ending on and including the twentieth day of each month in which
federal individual estimated tax payments are due (provided, that payments in
respect of estimated state income taxes due in January may instead, at the
option of the Company, be paid during the last five days of the immediately
preceding December).
(x) "Regulations" has the meaning specified in Section 4.1(d)(3)
hereof.
(y) "Senior Notes" means the Senior Notes due 2003, in the original
aggregate principal amount of $65,000,000, issued pursuant to an Indenture dated
as of November 8, 1996 between the Company and Waterford Gaming Finance Corp., a
Delaware corporation, as joint and several obligors, and Fleet National Bank, as
trustee.
(z) "Slavik" has the meaning specified in the introductory paragraph
to this Agreement.
(aa) "Special Distribution" has the meaning specified in Section 4.4
hereof.
(bb) "Subordinated Notes" has the meaning specified in Recital C. of
this Agreement.
(cc) "Successor" has the meaning specified in Section 5.4(b) hereof.
(dd) "Tax Amounts" means, with respect to any taxable period, an
amount not greater than (A) the product of (x) the taxable income of the Company
for such period as
- 4 -
<PAGE>
determined by the Tax Amounts CPA and (y) the Tax Percentage reduced by (B) to
the extent not previously taken into account, any income tax benefit
attributable to the Company which could be realized (without regard to the
actual realization) by its Members in the current or any prior taxable year, or
portion thereof, commencing on or after the original date of issuance of the
Senior Notes (including any tax losses or tax credits), computed at the
applicable Tax Percentage for the year in which such benefit is taken into
account for purposes of this computation.
(ee) "Tax Amounts CPA" means a nationally recognized certified
public accounting firm.
(ff) "Tax Percentage" means, for a particular taxable year, the
highest effective marginal combined rate of federal and state income tax,
imposed on an individual taxpayer, as determined by the Tax Amounts CPA. The
rate of "state income tax" to be taken into account for purposes of determining
the Tax Percentage for a particular taxable year shall be deemed to be the
higher of (A) the highest Connecticut income tax rate imposed on individuals for
such year or (B) the sum of (x) the highest Michigan income tax rate imposed on
individuals for such year and (y) the Michigan intangibles tax rate.
(gg) "Targeted Distribution Amount" has the meaning specified in
Section 4.1(c) hereof.
(hh) "TCA" has the meaning specified in Recital A. of this
Agreement.
(ii) "True-up Amount" means, in respect of a particular taxable
year, an amount determined by the Tax Amounts CPA equal to the difference
between (x) the aggregate Permitted Quarterly Tax Distributions actually
distributed in respect of such taxable year and (y) the aggregate amount
permitted to be distributed in respect of such year as determined by reference
to the Company's Internal Revenue Service Form 1065 filed for such year. For
purposes of this Agreement, the amount equal to the excess, if any, of the
amount described in clause (x) above over the amount described in clause (y)
above shall be referred to as the "True-up Amount due to the Company" and the
excess, if any, of the amount described in such clause (y) over the amount
described in such clause (x) shall be referred to as the "True-up Amount due to
the Members."
ARTICLE II
BOOKS, RECORDS AND ACCOUNTING
2.1 Books and Records. The Company shall maintain complete and accurate
books and records of its business and affairs as required by the Act and such
books and records shall
- 5 -
<PAGE>
be kept at Company's principal office. Each Member shall have complete access to
all books and records of the Company at the Company's offices during normal
business hours.
2.2 Fiscal Year; Accounting. The Company's fiscal year shall be the
calendar year. The particular accounting methods and principles to be followed
by the Company shall be chosen by the Board.
2.3 Capital Accounts. The Company shall maintain a separate capital
account for each Member (each such account, a "Capital Account"). Each Member's
Capital Account shall be increased by the Member's capital contributions and the
Member's share of any Profits and items of income or gain of the Company. Each
Member's Capital Account shall be decreased by distributions made to the Member
and the Member's share of any Losses and items of expense or loss of the
Company. In accordance with Section 1.704-1(b)(2)(iv)(q) of the Treasury
Regulations, each Member's Capital Account shall be adjusted in a manner that
maintains equality between the aggregate of all of the Members' Capital Accounts
and the amount of capital reflected on the Company's balance sheet as computed
for book purposes.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions.
(a) Slavik shall contribute all of its interest in TCA to the
capital of the Company. The parties agree that the fair market value of such
interest is $21.2 million, which amount shall be credited to Slavik's Capital
Account.
(b) LMW shall contribute all of its interest in TCA to the capital
of the Company. The parties agree that the fair market value of such interest is
$10.6 million, which amount shall be credited to LMW's Capital Account.
(c) No interest shall accrue on any capital contribution and no
Member shall have any right to withdraw or to be repaid any capital contribution
except as provided in this Agreement.
3.2 Additional Capital Contributions. The Members shall contribute to the
capital of the Company such amounts as the Board may determine to be necessary
or appropriate to conduct the business or carry out the purposes of the Company.
Any such additional capital shall be contributed by the Members pro rata, in
proportion to their Percentage Interests, or on any other basis agreeable to
them.
- 6 -
<PAGE>
3.3 Loans. In the event that the Board determines that the Company
requires additional funds, and any Member is unwilling to contribute its share
of such additional funds to the capital of the Company pursuant to Section 3.2
above, then the other Member shall be permitted, but not obligated, to advance
such funds to the Company as a loan. Any such loan shall (i) be unsecured,
unless all of the Members agree otherwise, (ii) bear interest at the prime rate
as publicly announced from time to time by NBD Bank, and (iii) be repayable from
the first funds available to the Company.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 Allocations of Profit and Loss.
(a) After giving effect to the special allocations set forth in
Section 4.1(b) hereof, Profit and Loss for any fiscal year shall be allocated
between the Members so that their Capital Accounts, increased by their
respective "shares of partnership minimum gain" and "shares of partner
nonrecourse debt minimum gain" (as so increased, a Member's Capital Account is
hereinafter referred to as its "Augmented Capital Account") are, as nearly as
possible, in the ratio of their Percentage Interests; provided, however, that no
Loss or item of expense or loss shall be allocated to any Member for any fiscal
year to the extent that such Loss or item of expense or loss would create or
increase a deficit in such Member's Adjusted Augmented Capital Account.
(b) The following special allocations shall be made in the following
order:
(1) Except as otherwise provided in Section 1.704-2(f) of the
Regulations, if there is a net decrease in "partnership minimum gain"
during any fiscal year, each Member shall be specially allocated items of
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Member's share of the net decrease in
"partnership minimum gain," determined in accordance with Section
1.704-2(g) of the Regulations. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to each Member pursuant thereto. This Section 4.1(b)(1) is
intended to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(2) Except as otherwise provided in Section 1.704-2(i)(4) of
the Regulations, if there is a net decrease in "partner nonrecourse debt
minimum gain" attributable to a "partner nonrecourse debt" during any
fiscal year, each Member who has a "share of partner nonrecourse debt
minimum
- 7 -
<PAGE>
gain" attributable to such "partner nonrecourse debt," determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of income and gain for such fiscal year (and, if
necessary, for subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in "partner nonrecourse debt minimum
gain" attributable to such "partner nonrecourse debt," determined in
accordance with Section 1.704-2(i)(4) of the Regulations. Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant
thereto. This Section 4.1(b)(2) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations
and shall be interpreted consistently therewith.
(3) In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Section 1.704-
1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section 1.704-
1(b)(2)(ii)(d)(6) of the Regulations, items of income and gain shall be
specially allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, any deficit in the
Adjusted Augmented Capital Account of such Member as quickly as possible.
(4) Any "nonrecourse deductions" for any fiscal year shall be
specially allocated between the Members pro rata, in accordance with their
Percentage Interests.
(5) Any "partner nonrecourse deductions" for any fiscal year
shall be specially allocated to the Member who bears the economic risk of
loss with respect to the "partner nonrecourse debt" to which such "partner
nonrecourse deductions" are attributable in accordance with Section 1.704-
2(i)(1) of the Regulations.
(c) It is intended that the amount to be distributed to a Member
pursuant to Section 8.2 of this Agreement shall equal the amount such Member
would receive if liquidation proceeds were instead distributed in accordance
with Section 4.3 (disregarding Section 4.3(c)) of this Agreement. This intended
distribution amount for a Member is referred to as such Member's "Targeted
Distribution Amount." Notwithstanding any preceding provision to the contrary in
this Section 4.1, if, upon a termination and liquidation of the Company, any
Member's ending Capital Account balance immediately prior to the distributions
to be made pursuant to Section 8.2 of this Agreement would otherwise be less
than such Member's Targeted Distribution Amount, then, to the extent amended tax
returns can be filed for prior fiscal years of the Company, such Member shall be
specially allocated items of income or gain for such prior years, and items of
loss or deduction for such prior years shall be allocated away from such Member
to the other Member, until Profit or Loss for
- 8 -
<PAGE>
the year(s) of termination and liquidation of the Company can be allocated so as
to cause each Member's actual Capital Account balance to equal the Targeted
Distribution Amount for such Member (and such Profit or Loss shall be so
allocated pursuant to Section 4.1(a) hereof).
(d) For purposes of this Agreement:
(1) "Adjusted Augmented Capital Account" means, with respect
to any Member, such Member's Augmented Capital Account (i) reduced by
those anticipated allocations, adjustments and distributions described in
Section 1.704-l(b)(2)(ii)(d)(4)-(6) of the Regulations, and (ii) increased
by the amount of any deficit in such Member's Capital Account that such
Member is deemed obligated to restore under Section 1.704-1(b)(2)(ii)(c)
of the Regulations.
(2) "Profit" and "Loss" each means, for each fiscal year of
the Company or other period, the Company's profit or loss (as determined
for purposes of preparing the balance sheet referenced in Section 2.3
hereof), computed without taking into account any items of income, gain,
expense or loss allocated pursuant to Section 4.1(b) hereof.
(3) "Regulations" means the regulations promulgated by the
U.S. Department of Treasury under the Code.
(4) All items set off in quotation marks and not otherwise
defined shall have the meanings ascribed to them in the Regulations.
4.2 Allocations Solely for Tax Purposes. In accordance with Section 704(c)
of the Code, and the Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated between the Members so as to take account
of any variation between the fair market value and adjusted tax basis of such
asset at the time of such contribution. Accordingly, any taxable gain recognized
by the Company on the sale or other disposition of the interests in TCA
contributed by the Members shall be allocated (i) first, to each Member in the
amount by which the fair market value of the interest in TCA contributed by such
Member to the Company exceeds such Member's tax basis in such interest at the
time of contribution, and (ii) then, between the Members, pro rata, the ratio in
which the book gain on such sale or other disposition is allocated between them
pursuant to Section 4.1 hereof; provided, however, that if taxable gain on such
sale or other disposition is reported on the installment method for federal
income tax purposes, then any such taxable gain reported for a fiscal year shall
be allocated between the Members in the ratio that all such taxable gain would
have been
- 9 -
<PAGE>
allocable between the Members in the year of such sale or other disposition
pursuant to this Section 4.2 if the installment method of reporting had been
inapplicable.
4.3 Distributions.
(a) For so long as any of the Senior Notes remain outstanding and
have not been defeased in accordance with the terms of the Indenture under which
the Senior Notes were issued, the Company shall not make any distributions to
the Members, other than:
(1) the Special Distribution; and
(2) for so long as the Company is a partnership or
substantially similar pass-through entity for federal income tax purposes,
pro rata distributions to the Members based on their Percentage Interests,
during each Quarterly Payment Period, in an aggregate amount not to exceed
the Permitted Quarterly Tax Distribution in respect of the related
Estimation Period.
For purposes of clause (2) above, if any portion of a Permitted Quarterly Tax
Distribution is not distributed during such Quarterly Payment Period, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be increased by such undistributed portion.
Within 10 days following the Company's filing of Internal Revenue Service Form
1065 for the immediately preceding taxable year, the Tax Amounts CPA shall
deliver to the Company a written statement indicating in reasonable detail the
calculation of the True-up Amount. In the case of a True-up Amount due to the
Members, the Permitted Quarterly Tax Distribution payable during the immediately
following Quarterly Payment Period shall be increased by such True-up Amount. In
the case of a True-up Amount due to the Company, the Permitted Quarterly Tax
Distribution payable during the immediately following Quarterly Payment Period
shall be reduced by such True-up Amount and the excess, if any, of the True-up
Amount over such Permitted Quarterly Tax Distribution shall be applied to reduce
the immediately following Permitted Quarterly Tax Distributions until such
True-up Amount is entirely offset.
(b) Commencing on the date that none of the Senior Notes remain
outstanding or undefeased in accordance with the terms of the Indenture under
which the Senior Notes were issued, the Excess Cash of the Company shall be
distributed, at such times as the Board shall determine, to the Members pro
rata, based on their Percentage Interests.
(c) As used in this Agreement,"Excess Cash" means (i) all cash and
cash equivalent assets of the Company, less (ii) any amounts that the Board
decides to retain in the Company (A) as reserves to pay expenses and meet
obligations of the Company or (B) for future investment in accordance with the
purposes of the Company.
- 10 -
<PAGE>
(d) In the event of any inconsistency between the provisions of this
Section 4.3 and the provisions of Section 8.2 hereof, the provisions of Section
8.2 hereof shall govern and control.
4.4 Special Distribution From Proceeds of Borrowing. The Company is
expected to borrow approximately $65 million from institutional lenders. Ten
million dollars ($10,000,000) of the proceeds of the borrowing shall be
distributed to the Members in accordance with their original Percentage
Interests (the "Special Distribution"). If, concurrently with or following such
distribution, the principals of LMW (who are Len and Mark Wolman) purchase (or
pay for the purchase of) stock of Slavik, then the Members' Percentage Interests
shall be adjusted automatically and prospectively to be as follows:
Slavik 67.7967%
LMW 32.2033%
ARTICLE V
ASSIGNMENT OF MEMBERSHIP INTERESTS
5.1 General. No sale, assignment, transfer, exchange, mortgage, pledge,
grant, hypothecation or other disposition of any Member's Membership Interest
shall be made except with the express written consent of the other Member(s),
which consent may be withheld in such other Member's sole and absolute
discretion. Any attempted disposition of a Member's Membership Interest, or any
portion thereof, in violation of this provision is null and void ab initio and
the Company shall not be obligated to recognize any such attempted disposition.
5.2 Admission of Substitute Members. An assignee of a Member's Membership
Interest shall be admitted as a substitute member and shall be entitled to all
the rights and powers of the assignor, provided that (i) the other Member(s)
consent(s) to the admission of such assignee as a substitute member,which
consent may be withheld in such other Member's sole and absolute discretion, and
(ii) the assignee accepts, adopts, approves and agrees, in writing, to be bound
by all of the terms and provisions of this Agreement. If admitted, the assignee,
as a substitute member, shall have, to the extent assigned, all of the rights
and powers, and shall be subject to all of the restrictions and liabilities, of
the assigning Member. The assignor shall not thereby be relieved of any of its
unperformed obligations to the Company.
- 11 -
<PAGE>
5.3 Withdrawal. Subject to the other provisions of this Article V, each
Member agrees not to withdraw from the Company without the consent of the other
Member(s). If a Member withdraws in violation of this provision, then (i) such
Member's Membership Interest shall be forfeited and such Member shall cease to
have any interest in, or rights with respect to, the Company, and (ii) such
Member shall be liable for its unperformed obligations to the Company and any
damages caused by its withdrawal.
5.4 Dissolution, etc., of a Member.
(a) Upon the dissolution, insolvency or bankruptcy of a Member which
is a legal entity, or the death, incompetency, insolvency or bankruptcy of a
Member who is a natural person (each, a "Disabled Member"), the Company shall
dissolve unless, within ninety (90) days thereafter, the remaining Member (or,
if there is, at such time, more than one remaining Member, then a Majority in
Interest of the remaining Members) decides to continue the business and affairs
of the Company in accordance with Section 801(4) of the Act.
(b) Subject to the Minimum Member Requirement, if, following the
dissolution, insolvency or bankruptcy of a Member which is a legal entity, or
the death, incompetency, insolvency or bankruptcy of a Member who is a natural
person, the business and affairs of the Company are continued pursuant to
Section 5.4(a) hereof, then the Company shall purchase, and the Disabled Member
or its estate or other successor in interest ("Successor") shall sell, the
Disabled Member's entire Membership Interest in, and any loans from the Disabled
Member to, the Company for such price and on such terms as the Disabled Member
or its Successor and the other Member(s) shall mutually agree, unless the
remaining Member (or, if there is, at such time, more than one remaining Member,
then a Majority in Interest of the remaining Members) agrees to admit the
Disabled Member's Successor to the Company as a substitute member. If the
remaining Member (or, if there is, at such time, more than one remaining Member,
then a Majority in Interest of the remaining Members) agrees to admit the
Disabled Member's Successor to the Company as a substitute member, but the
Disabled Member's Successor refuses to be so admitted, then the Disabled Partner
shall be deemed to have withdrawn from the Company, and the provisions of
Section 5.3 shall apply.
(c) If the Disabled Member or its Successor and the other Member(s)
cannot agree on the purchase price for the Disabled Member's Membership Interest
in, and loans to, the Company, then such purchase price shall be the amount that
would be distributed in respect of such Membership Interest, plus the amount of
such loans that would be repaid, if the assets of the Company were sold for
their fair market value, the proceeds of such sale were used to pay the
Company's liabilities (as determined by the Company's regular accountant),
including loans from Members, and any remaining proceeds were distributed to the
Members pursuant to Section 8.2 hereof. For purposes of applying the foregoing,
(i) the fair market value of the assets of the Company shall be determined by an
appraiser selected by the parties or, if the parties cannot agree on an
appraiser, then by an appraiser selected by
- 12 -
<PAGE>
the Company's regular accountant, and (ii) such fair market value, and the
Company's liabilities, shall be determined as of the date of dissolution, death,
incompetency, insolvency or bankruptcy of the Member whose Membership Interest
is being purchased.
5.5 Closing. The closing of the purchase of a Membership Interest pursuant
to Section 5.4 hereof shall take place on the business day which is (or is
nearest to) sixty (60) days after the earlier of (a) the expiration of the
90-day period prescribed in Section 5.4(a) hereof or (b) the decision to
continue the business and affairs of the Company referred to in such Section
5.4(a). At the closing, the following shall occur:
(1) The purchase price for the Membership Interest shall be
paid to the seller by certified or cashier's check payable to the order of
the seller.
(2) The seller shall execute and deliver to the purchaser an
assignment of the Membership Interest and such other documents, in form
and substance satisfactory to the purchaser, as may be necessary to assign
and transfer the Membership Interest to the purchaser.
ARTICLE VI
BOARD OF DIRECTORS
6.1 General Powers. The property, affairs and business of the Company
shall be managed by Slavik and LMW as managers (individually, a "Manager" and
collectively, the "Managers") pursuant to Section 18-402 of the Act. Slavik and
LMW will retain all of the management authority vested in them under this
Agreement and the Act, but in order to assist with the administration of their
management responsibilities, they shall each appoint Directors as their
representatives on the Board of Directors as provided in Section 6.2. The
Managers shall in the aggregate own at least 20% of the total interests in the
Company.
6.2 Number; Election; Term of Office; and Qualifications. The number of
Directors of the Company shall be four, consisting of two Directors appointed by
Slavik and two Directors appointed by LMW. Such appointment shall be by written
notice thereof given by Slavik or LMW, as the case may be, to the other. Any
Director may be removed at any time by the Manager who appointed him, by giving
written notice of such removal to the other Manager, with a copy to the Board of
Directors. Each Director shall continue in office until his removal in the
manner just described or until his earlier death or resignation in the manner
provided in Section 6.3 below. Each Director shall be an officer of a Manager
and shall at all times remain subject to the direction and control of his
appointing Manager.
- 13 -
<PAGE>
6.3 Resignation. Any Director may resign at any time by giving written
notice to the Managers and the Board of Directors. Unless otherwise specified
therein, such resignation shall take effect on receipt thereof by the Manager
who appointed the resigning Director.
6.4 Vacancies. If any vacancy shall occur in the Board of Directors by
reason of death, resignation or removal, such vacancy may be filled at any time
by the appointment of a new Director by the Manager whose appointee's death,
resignation or removal resulted in such vacancy. Such appointment shall be in
the manner provided in Section 6.2 above. In the event that the resignation of
any Director shall specify that it shall take effect at a future date, the
vacancy resulting from such resignation may be filled prospectively in the same
manner as provided above.
6.5 Annual and Regular Meetings. Annual and regular meetings of the Board
of Directors may be held at such times and places, within or without the State
of Delaware, as the Board of Directors may from time to time determine by
resolution duly adopted at any meeting of the Board of Directors, and unless
otherwise determined by the Board of Directors shall be held at least once
annually. The time, place and purpose of such meeting shall be stated as set
forth in Section 6.7 below, unless such notice is waived by the Directors
entitled thereto in the manner provided in Section 6.14 below.
6.6 Special Meetings. A special meeting of the Board of Directors may be
called at any time by the Chairman of the Board, and shall be called by the
Chairman of the Board on the written request of at least one-half (1/2) of the
Directors then in office, and shall be held at such time and place, within or
without the State of Delaware, as may be fixed by the Chairman of the Board or
by such Directors in such request, as the case may be, provided that the time so
fixed shall permit the giving of notice as provided in Section 6.7 below.
6.7 Notice of Meetings. Notice of the time, place and purposes of each
meeting of the Board of Directors shall be sent to each Director by mail or
verified facsimile addressed to him at the address or fax number as it appears
on the records of the Company, or telephoned or delivered to him personally, at
least thirty (30) days before the meeting is to be held. Any notice may be
waived as provided in Section 6.14 below.
6.8 Quorum. At all meetings of the Board of Directors, the presence of all
of the four Directors shall be necessary to constitute a quorum for the
transaction of business. If a quorum shall be present, the act of a majority of
the total number of Directors shall be required to constitute the act of the
Board of Directors. In the absence of a quorum, any Director present, without
notice other than by announcement at the meeting, may adjourn the meeting from
time to time, for a period of not more than thirty (30) days at any one time,
until a quorum shall be present.
- 14 -
<PAGE>
6.9 Regulations. The Board of Directors may adopt such rules and
regulations for the conduct of its meetings and for the management of the
property, affairs and business of the Company as it may deem proper, not
inconsistent with law or this Agreement.
6.10 Compensation. Directors may receive such compensation for their
services, and allowances for expenses, as the Board of Directors may fix from
time to time.
6.11 Participation in a Meeting by Conference Telephone. Any member of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at such meeting within the meaning of Section 6.8 above, or for any other
purpose.
6.12 Written Consent in Lieu of Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if a written consent thereto shall be signed by each member of the
Board, and such written consent or consents shall be filed with the minutes or
proceedings of the Board.
6.13 Minutes. The Chief Financial Officer of the Company or such other
person as is designated by the Board of Directors shall prepare written minutes
or proceedings of all Board and committee meetings, including all actions taken,
and promptly mail such minutes or proceedings to all Directors.
6.14 Waiver of Notice. Whenever any notice is required to be given by this
Agreement, a written waiver thereof by the person or persons entitled to such
notice, given before or after the time stated therein, shall be deemed
equivalent to such notice.
ARTICLE VII
OFFICERS
7.1 Number. The officers of the Company shall be a Chairman of the Board
and Chief Executive Officer and a Chief Financial Officer and Secretary. Other
officers may be elected or appointed in accordance with the provisions of
Section 7.2 below. Any two (2) or more offices may be held by the same person.
7.2 Selection, Term of Office and Qualification.
(a) The initial Chairman of the Board and Chief Executive Officer of
the Company shall be Len Wolman and the initial Chief Financial Officer
and Secretary of the Company shall be Del J. Lauria, who shall hold office
until their successors are
- 15 -
<PAGE>
chosen and shall qualify in their stead or they resign or are removed.
Successors to the officers enumerated in Section 7.1 above shall be
elected by the Board of Directors and shall hold office until their
successors are chosen and shall qualify in their stead, they resign or are
removed.
(b) Other officers, including without limitation Vice Presidents, a
Secretary, a Treasurer, Assistant Secretaries and Assistant Treasurers,
may be chosen in such manner, hold office for such period, have such
authority, perform such duties and be subject to removal as may be
determined by the Board of Directors.
7.3 Resignation. Any officer may resign at any time, unless otherwise
provided in any contract with the Company, by giving written notice to the
Secretary or, if there is no Secretary, to the Managers. Unless otherwise
specified therein, such resignation shall take effect on receipt thereof by both
Managers.
7.4 Removal. Any officer may be removed at any time, either with or
without cause, by the affirmative vote of three-fourths (3/4) of the Directors
then in office.
7.5 Chairman of the Board. The Chairman of the Board and Chief Executive
Officer shall be the chief executive officer of the Company and shall, if
present, preside at all meetings of the Members and of the Board of Directors.
7.6 Chief Financial Officer. The Chief Financial Officer shall be the
chief financial and accounting officer and shall perform such duties as from
time to time directed by the Board of Directors.
7.7 Surety Bonds. In the event that the Board of Directors shall so
require, any officer or agent of the Company shall execute to the Company a bond
in such sum and with such surety or sureties as the Board of Directors may
direct, conditioned on the faithful performance of his duties to the Company.
ARTICLE VIII
DISSOLUTION AND WINDING UP
8.1 Dissolution. The Company shall dissolve and its affairs shall be wound
up on the first to occur of the following events:
(a) at any time specified in the Certificate or this Agreement;
(b) upon the happening of any event specified in this Agreement; or
- 16 -
<PAGE>
(c) provided that none of the Senior Notes remain outstanding or
undefeased in accordance with the terms of the Indenture under which the Senior
Notes were issued, the unanimous decision of the Members to dissolve the
Company.
8.2 Winding Up. Upon dissolution, the Company shall cease carrying on its
business and affairs and shall commence the winding up of the Company's business
and affairs and the liquidation of its assets. Upon the winding up of the
Company, the assets of the Company shall be distributed first to creditors,
other than creditors who are Members or former Members or their affiliates
(collectively, "Member Creditors"), to the extent permitted by law, in
satisfaction of the Company's debts, liabilities and obligations, second to
Member Creditors, and finally to Members in accordance with their Capital
Account balances. Such proceeds shall be paid to such Members within ninety (90)
days after the date of winding up.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Indemnification. Except as otherwise provided in the Act, the Company
shall indemnify, defend and hold harmless a Member from any claim or liability,
and from any loss, cost or expense, including, but not limited to, attorneys'
fees and court costs, which may be made or imposed upon such Member by reason of
any act performed for or on behalf of the Company or in furtherance of the
Company's business, or any omission to act, except for acts and omissions that
constitute wilful misconduct, fraud, bad faith or improper distributions to the
extent set forth in the Act.
9.2 Terms. Nouns and pronouns will be deemed to refer to the masculine,
feminine, neuter, singular and plural, as the identity of the person or persons,
firm or corporation may in the context require.
9.3 Article Headings. The Article headings contained in this Agreement
have been inserted only as a matter of convenience and for reference, and in no
way shall be construed to define, limit or describe the scope or intent of any
provision of this Agreement.
9.4 Counterparts. This Agreement may be executed in several counterparts,
each of which will be deemed an original but all of which will constitute one
and the same.
9.5 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof. This
Agreement supersedes any and all other agreements, either oral or written, among
the parties hereto with respect to the subject matter hereof.
- 17 -
<PAGE>
9.6 Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
9.7 Amendment. This Agreement may only be amended by unanimous written
consent of the Members of the Company; provided, however, that unless the
written consent of the holders of more than 66-2/3% of the aggregate principal
amount of Senior Notes then outstanding (as determined under the Indenture under
which the Senior Notes were issued) has been obtained, for so long as any of the
Senior Notes remain outstanding and have not been fully defeased pursuant to
Article VII of the Senior Note Indenture, no purported amendment shall be made,
and any such purported amendment shall be void and ineffective, to the extent
that such amendment would result in, or have the effect of, (A) causing the
Company to be treated, for Federal income tax purposes, as an association or a
publicly traded partnership taxable as a corporation or (B) modifying Sections
1.3, 1.5, 4.3(a), 8.1(c) and this Section 9.7 of this Agreement.
9.8 Notices. Any notice permitted or required under this Agreement shall
be conveyed to the party at the address reflected in the introductory paragraph
of this Agreement and will be deemed to have been given, when deposited in the
United States mail, postage prepaid, or when delivered in person, or by courier
or by facsimile transmission.
9.9 Binding Effect. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and shall inure to the
benefit of the parties, and their respective heirs, successors and assigns.
9.10 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
ARTICLE X
DISPUTE RESOLUTION PROCEDURE
10.1 Dispute Resolution Procedure. In the event any dispute or controversy
arises under this Agreement or in connection with the operations of the Company,
the parties agree to make a good faith effort to resolve said matter. In the
event that the parties have not resolved the dispute set forth above within a
thirty (30) day period, the parties agree to the appointment of an arbitrator
under the rules of the American Arbitration Association whose decision shall be
final and binding and may be certified to any court of competent jurisdiction
for the entry of a judgment. Such arbitration shall take place in Waterford,
Connecticut, or such other location as the Members may mutually agree. Each
party shall bear its own costs of the arbitration, except that the fees of the
arbitrator and any other common costs shall be borne equally by the parties to
the arbitration. The parties further agree to release and hold harmless the
arbitrator from his decision with respect to said disputed provision or
provisions and will assert no claims against the arbitrator resulting from his
actions in conjunction with the specific provisions of this Article.
- 18 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto make and execute this Agreement as
of the date first above written. SLAVIK SUITES, INC.
By: /s/ Del J. Lauria
------------------------------
Its: Executive Vice President
LMW INVESTMENTS INC.
By: /s/ Len Wolman
------------------------------
Its: President
- 19 -
Exhibit 21.1
Subsidiaries of Waterford Gaming L.L.C.
Waterford Gaming Finance Corp.
Exhibit 21.2
Subsidiaries of Waterford Gaming Finance Corp.
None
[Letterhead of Cooper & Lybrand L.L.P.]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
reports for Waterford Gaming, L.L.C. and Waterford Gaming Finance Corporation
(the "Companies"), dated October 18, 1996 and December 12, 1996, respectively,
on our audits of the balances sheets of the Companies. We also consent to the
reference to our firm under the caption "Experts."
Hartford, Connecticut /s/ Coopers & Lybrand L.L.P.
December 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> OCT-17-1996
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<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>
