<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1997
REGISTRATION NO. 333-17795
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7999 06-146-5402
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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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
WATERFORD, CONNECTICUT 06385
(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. / /
------------------------
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.
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<PAGE>
PROSPECTUS
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.
<PAGE>
, 1997
SUBJECT TO COMPLETION, DATED , 1997
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 , 1997
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 to the trustee of subordinated notes (the
"Subordinated Notes") issued by the Mohegan Tribal Gaming Authority, the owner
of the Mohegan Sun, having principal of approximately $20,000,000 plus accrued
and unpaid interest 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 , 1997,
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 14, 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.
THE DATE OF THIS PROSPECTUS IS , 1997.
(COVER PAGE CONTINUED)
<PAGE>
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 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. They 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.
Until , 1997 (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."
2
<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 and completed according to a single 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 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, 10 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
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<PAGE>
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
consisted 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.
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, $574 million and $601
million for 1994, 1995 and 1996, respectively. Foxwoods' average win per machine
per day for 1995 and 1996 was $407 and $382, respectively. Foxwoods has
generally maintained a high level of 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 $280 and $261 in 1995 and
1996, respectively.
The Mohegan Sun reported to the State of Connecticut a gross slot win per
machine per day of $345 for the month of March, 1997.
4
<PAGE>
THE COMPANY
The Company was formed in September 1996 and is a limited liability company
that is one of the two managing partners of the Manager. The Manager is a
partnership between the Company and Sun International, an international gaming
and resort company with properties in the Bahamas, Atlantic City, the Indian
Ocean and France. The Company owns a 50% voting interest and a 45% economic
interest in the Manager. The Company also owns a portion of the Subordinated
Notes. 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,
supervised the construction and development of the Mohegan Sun. Currently, the
principals of the Company are actively involved in the management of the
operation 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 Mohegan Sun has only recently begun operations and does not have a
long operating history.
The Manager has 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.
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
5
<PAGE>
operates resort hotels and casinos in The Bahamas, Atlantic City, the Indian
Ocean and France. In December 1996, Sun International acquired Griffin Gaming &
Entertainment, Inc. ("GGE"), a Delaware corporation, pursuant to a merger in
which GGE became a wholly owned subsidiary of Sun International. Following the
merger, GGE's name was changed to Sun International North America, Inc.
Sun International currently operates eleven hotels containing approximately
3,900 rooms and seven casinos with an aggregate of over 270,000 square feet of
gaming space containing more than 6,300 slot machines and 380 table games. Sun
International is unrelated to the Company and is not an affiliate of the
Company. Sun International has no obligations, directly or indirectly, on the
Notes.
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 66 2/3% and a 33 1/3% ownership interest, respectively, 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 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 has equal voting power.
6
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THE EXCHANGE OFFER
<TABLE>
<S> <C>
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."
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 , 1997, 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."
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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). As
of December 31, 1996, accrued and unpaid interest on the
Private Notes was $1,220,104 (or approximately $18.77 per
$1,000 of Private Notes outstanding). 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. Holders of Private Notes who receive Exchange
Notes will receive the same amount of accrued interest as
Holders of 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."
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 Fleet National Bank, 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
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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 for Tendering."
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."
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.
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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."
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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 required 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. There can be no
assurance that the Company will have the
financial resources necessary to repurchase
the Exchange Notes under
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such circumstances. See "Risk Factors--Risks
Associate with Buy/Sell Option Under TCA
Partnership Agreement." See "Description of
Exchange Notes--Mandatory Redemption with
Excess Cash Flow or Upon Exercise of Buy/Sell
Option."
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. The Indenture (i) prohibits the
Company and Finance from incurring any
Indebtedness other than the Notes and (ii)
prohibits the Company from having any direct
or indirect subsidiaries (other than
Finance). As of December 31, 1996, the
Manager had no long-term indebtedness
outstanding and approximately $120,000 in
trade payables outstanding. See "Description
of Notes--Certain Covenants-- Limitation on
Indebtedness and Disqualified Capital Stock"
and "--Limitation on Activities of the
Issuers."
Ranking of Subordinated Notes................ The Subordinated Notes that have been pledged
to the Trustee to secure a portion of the
Company's obligations under the Exchange
Notes are subordinate in right of payment to
the prior payment of the Authority Senior
Secured Notes and PARI PASSU or senior to all
other subordinated indebtedness of the
Authority. As of December 31, 1996, the
Authority had approximately $220.9 million of
indebtedness outstanding that was senior to
the Subordinated Notes and no indebtedness
that ranked PARI PASSU with the Subordinated
Notes. Payments of interest on the
Subordinated Notes may be made 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.
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See "Material Agreements--Note Purchase
Agreement."
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. There can be no
assurance that the Company will have the
financial resources necessary to repurchase
the Exchange Notes upon a Change of Control.
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.
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
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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.
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RISK FACTORS
See "Risk Factors," on pages 14 through 23 hereof, for a discussion of
certain factors that should be considered in connection with the Exchange Offer
and an investment in the Exchange Notes.
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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.
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 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 had long-term senior
indebtedness of $65.0 million, consisting solely 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
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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.
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."
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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
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.
UNCERTAINTIES REGARDING ABILITY TO REALIZE ON COLLATERAL AND ENFORCE MANAGEMENT
AGREEMENT
Although the Company's obligation to repay the Notes is secured by a pledge
to the trustee of approximately $20 million in principal plus accrued and unpaid
interest of Subordinated Notes and the cash and Cash Equivalents in the Cash
Collateral Account, the practical realization of value from these assets by the
trustee 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.
Moreover, the additional amounts of 11.5% to be paid on the Subordinated Notes
(the "Additional Amounts") have not been, and will not be, pledged as security
for the Exchange Notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of Exchange
Notes--Security." 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.
In addition, the holders of the Notes do not have any right to directly
foreclose or exercise remedies with respect to the Collateral. All such remedies
must be taken by the Trustee.
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The ability of the Trustee 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 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 could be precluded from judicially enforcing its 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.
Judgments resulting from the binding arbitration required by the Management
Agreement will generally be enforced in federal court, unless the execution of
such judgment requires enforcement on Mohegan Tribal lands. As discussed below,
disputes under the Subordinated Notes are not subject to arbritration and any
disputes arising thereunder will be subject to the jurisdiction of the Gaming
Disputes Court of the Mohegan Tribe.
Generally, 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
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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.
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.
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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.
ABILITY OF THE AUTHORITY TO BUYOUT THE MANAGEMENT AGREEMENT
Under the terms of the Management Agreement, the Authority has a one time
option to buyout the Manager on the last day of the 60th month following the
first full month of operations of the Mohegan Sun (i.e. November 30, 2001) (the
"Buyout Option"). The Buyout Option is subject, among other things, to the
condition that the parties determine a commercially reasonable price for such
Buyout Option at the time of exercise and is not determinable at the present
time. See "Management Agreement--General." In the event that the Authority
elects to exercise the Buyout Option, there can be no assurance that the
valuation of the Company's management interest will be sufficient to meet the
Company's obligation to repay Notes. See "Description of Notes--Mandatory
Redemption with Excess Cash Flow or Upon Exercise of Buy/Sell Option."
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 $318.0 million total budgeted project costs are based on
budgets and schedule estimates prepared by the Authority with the assistance of
the Company, Sun International, the Manager and the contractors. The Authority
has entered into a guaranteed maximum price contract with the general
contractor, Morse Diesel International, Inc. ("Morse Diesel") for the
construction of the Mohegan Sun. The final amount paid under such contract,
however, is subject to modification based upon the occurrence of certain events,
such as design change orders and costs associated with certain types of delays
including, in certain cases, force majeure events. The Authority (with the
assistance of Sun International and the Manager) and Morse Diesel currently are
negotiating whether certain costs incurred in construction of the Mohegan Sun
are covered under the guaranteed maximum price or whether such cost increases
are the result of change orders or other events that could result in an increase
in the contract price above the guaranteed maximum price. The Authority
currently is unable to quantify the total costs in dispute because Morse Diesel
has disputed amounts that the Manager claims are covered by the guaranteed
maximum price, and the Manager in turn has disputed amounts that Morse Diesel
claims are outside the scope of the guaranteed maximum price. The Manager and
Morse Diesel must review disputed amounts on a line-by-line basis, to determine
whether all or some of such costs, in whole or in part, are covered by the
guaranteed maximum price, and resolution regarding some disputed amounts are
likely to affect resolution of other disputed amounts. The resolution of all or
some of these issues 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. As of December 4, 1996, the Authority
has drawn $42.0 million under the Secured Completion Guarantee and has issued
additional subordinated notes to Sun International in principal amount equal to
the amount of the draw.
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
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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 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.
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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.
RISKS ASSOCIATED WITH 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.
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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 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 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
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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.
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."
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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, 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
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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. Holders have no right
to possess the collateral, which is solely controlled by the Trustee. 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
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, 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
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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, 1997 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
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
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<PAGE>
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 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,
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<PAGE>
(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 purpose 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 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
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<PAGE>
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 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 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.
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<PAGE>
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 Notes eligible to participate in the
Exchange Offer to receive damages that would have been payable if such actions
had not occurred.
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<PAGE>
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:
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL, BY OVERNIGHT
DELIVERY OR BY HAND: BY FACSIMILE:
<S> <C>
Fleet National Bank Fleet National Bank
CT OP TO6D Attn: Patricia Williams
Attn: Patricia Williams (860) 986-7920
150 Windsor Street
Hartford, CT 06120
</TABLE>
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 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.
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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. 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 Amounts 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 these Additional Amounts on its
Subordinated Notes. However, such Additional Amounts have not been pledged to
the Trustee as security for the Notes. Payment of the Additional Amounts reduces
the amount of the management fee available for distribution by the Manager.
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
to pay interest, principal and/or premium on the Notes or to fund the Company's
share of any required advances to the Authority.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 and as adjusted to give effect to (i) the Private Offering and
the application of the net proceeds therefrom and (ii) the Reorganization.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
(IN THOUSANDS)
Cash........................................................................................... $ 841
-------
-------
Long term debt:
12 3/4% Senior Notes due 2003 $ 65,000
-------
Total long-term indebtedness................................................................. 65,000
Members equity (deficit)....................................................................... $ (8,099)
-------
Total capitalization......................................................................... $ 56,901
-------
-------
</TABLE>
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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. Pursuant to the master
plan the Mohegan Sun's facilities were not designed and built in phases, as is
the case with many casino developments. Instead, the entire casino and related
facilities were planned and build together, resulting in a cohesive and logical
layout for the entire Mohegan Sun complex. The total costs of the development
and construction of the Mohegan Sun are estimated to be $305 million, exclusive
of working capital and equipment operating leases. The source of funds includes:
(i) $175 million from the sale of the Authority Senior Secured Notes, (ii) $40
million from the sale of Original Subordinated Notes (all of which were
initially purchased by Sun International), (iii) $50 million in advances from
Sun International under the Completion Guarantee subordinated Notes, and (iv)
$40 million in equipment financing.
The master plan, which was completed prior to the commencement of operation
by the Mohegan Sun, emphasized 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 was designed to accommodate expansion, including additional parking and, if
appropriate, 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
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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.
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-REGISTERED TRADEMARK-. 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.
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.
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<PAGE>
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 10 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.
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, $574 million and $601 million for 1994,
1995 and 1996, respectively. Foxwoods' average win per machine per day for 1995
and 1996 was $407 and $382, respectively. Foxwoods has generally maintained a
high level of 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 $280 and $261 in 1995 and 1996, respectively.
The Mohegan Sun reported to the State of Connecticut a gross slot win per
machine per day of $345 for the month of March 1997.
36
<PAGE>
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.
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.
37
<PAGE>
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 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.
38
<PAGE>
THE COMPANY
The Company was organized in September 1996 as a Delaware limited liability
company. The Company is a newly formed entity that is one of the two managing
partners of the Manager. The Company also owns the Subordinated Notes. 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.
39
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information set forth below with respect to the
Company's statements of operations for the period from September 30, 1996
(commencement of operations) to December 31, 1996 and the balance sheet data at
December 31, 1996 are derived from the financial statements of the Company. This
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the Company's financial
statements and related notes contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
(IN
THOUSANDS)
Balance Sheet Data
Assets
Cash and Temporary Investments............................................... $ 16,737
Investment in Trading Cove Associates(1)(2).................................. 12,682
Investment in Original Subordinated Notes(3)................................. 25,966
Deferred debt costs.......................................................... 2,789
-------------
Total assets............................................................. $ 58,174
-------------
-------------
Liabilities and Members' Equity
Accrued Expenses............................................................... 54
Accrued interest on notes payable.............................................. 1,220
-------------
Total current liabilities................................................ 1,274
12 3/4% Senior Notes due 2003................................................ 65,000
Members' equity (deficit)(1)(4).............................................. (8,099)
-------------
Total liabilities and members' equity.................................... $ 58,174
-------------
-------------
</TABLE>
- ------------------------
(1) Includes initial capital contribution by LMW and Slavik of each of their
interests in the Manager, recorded at their historical cost of $3.0 million.
The investment has been accounted for utilizing the equity method of
accounting and includes (i) aggregate initial cash contributions of $2.94
million and (ii) equity in net income of $61,000 (which consists of the
allocation of all revenues and expenses of the Manager from October 8, 1996
through November 8, 1996).
(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 as purchased from Sun International with the
proceeds of 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."
40
<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 CURRENT AND 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."
For the three month period ended December 31, 1996, the Company received
$750,094 in cash distributions from the Manager, which represented its share of
approximately $1,989,772 in net management fees earned by the Manager from the
Authority pursuant to the terms of the Management Agreement for the same period.
The actual amount of management fees earned by the Manager for any annual period
are subject to year-end adjustment, as set forth below.
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.
41
<PAGE>
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):
<TABLE>
<CAPTION>
I II III
----------- -------------------- -------------
<S> <C> <C> <C>
REVENUES IN
REVENUES IN TIER I TIERS I &
PLUS II PLUS 30%
40% OF NET 35% OF NET OF
REVENUES REVENUES NET REVENUES
UP TO BETWEEN ABOVE
----------- -------------------- -------------
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. One of the considerations used by the NIGC in determining whether or
not to approve a management contract is whether the Manager is providing a
portion of the capital required. Accordingly, the Manager agreed to provide or
cause to be provided $40 million of capital in the form of the Subordinated
Notes. However, at the time that the subordinated loan was made, the partners of
the Manager, including the Company's predecessors-in-interest, did not
participate in the loan in accordance with their economic interests in the
Manager. Therefore, the partners of the Manager agreed that those partners who
participated in funding the Subordinated Notes would be entitled to the
Additional Amounts as a priority allocation of the Management Fee to compensate
these partners for the additional risk of funding the Subordinated Notes. The
Additional Amounts represent a priority in the distribution of available cash by
the Manager. If every partner of the Manager participated in the Subordinated
Notes to the extent of its pro rata economic interest in the Manager, then the
Additional Amounts would have no economic effect on the partners. Such payments
by the Manager, along with the allocation of the other Management fees, are to
compensate the recipients for the services provided by them to the Mohegan Sun,
42
<PAGE>
including compensation for the provision of capital resources, and to provide
the initial investors in the Mohegan Sun with a return of capital for their
initial investment.
The following table sets forth the priority of the distribution of the
Management Fee from the Manager to its Partners:
*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.
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).
43
<PAGE>
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.
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.
DISCUSSION OF THE PERIOD FROM SEPTEMBER 30, 1996 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31, 1996
The Company had no operations prior to September 30, 1996.
INTEREST INCOME. The Company's sole source of revenue for the period ended
December 31, 1996 was interest income of approximately $623, which was primarily
attributable to accrued interest on the Subordinated Notes.
INTEREST EXPENSE. Interest expense of approximately $1,220 for the period
ended December 31, 1996 resulted from accrued and unpaid interest on the Private
Notes.
EQUITY IN LOSS OF THE MANAGER. Equity in loss of the Manager of
approximately $385 for the period ended December 31, 1996 was primarily
attributable to amortization of (i) $221 in connection with the interest in the
Manager that was purchased by the Company in connection with the Reorganization
and (ii) $164 which represented the Company's pro rata share of the Manager's
loss for the period from November 9, 1996 to December 31, 1996.
NET LOSS. Primarily as a result of the foregoing factors, the Company
experienced a net loss of $1,118 for the period ended December 31, 1996.
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."
44
<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.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Len Wolman........................................... 42 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.......................................... 39 Director
</TABLE>
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.
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
45
<PAGE>
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:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Solomon Kerzner...................................... 61 Chairman and Chief Executive Officer
Howard B. Kerzner.................................... 33 President
Charles Adamo........................................ 36 Executive Vice President--Corporate Development and
General Counsel
John R. Allison...................................... 50 Executive Vice President--Chief Financial Officer
Kevin DeSanctis...................................... 44 Chief Operating Officer--North America & Caribbean
James Boocher........................................ 41 Executive Vice President--Project Development
</TABLE>
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 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.
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<PAGE>
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.
JAMES BOOCHER. Mr. Boocher is the Executive Vice President--Project
Development. Mr. Boocher joined Sun International in November of 1996. He is the
executive in charge of Sun International's expansion on Paradise Island. Before
joining Sun International, Mr. Boocher was President of Ellis-Don Construction
Ltd., Canada's second largest construction company. Prior to joining Ellis-Don,
Mr. Boocher was a construction Director for Olympia and York Development. He was
involved in projects in the World Financial Center, New York, Canary Wharf,
London, England and two office buildings in Dallas, Texas. Mr. Boocher attended
Ball State University
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."
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Roland Harris........................................... Chairman and member, Management Board
Jayne Fawcett........................................... Vice Chairman and member, Management Board
William J. Valardo...................................... Executive Vice President and General Manager
Jeffrey E. Hartmann..................................... Senior Vice President and Chief Financial Officer
Mitchell Grossinger Etess............................... Senior Vice President, Marketing
Carlisle Fowler......................................... Treasurer and member, Management Board
Loretta Roberge......................................... Corresponding Secretary and member, Management Board
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
</TABLE>
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
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<PAGE>
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.
JEFFREY E. HARTMANN. Mr. Hartmann, who has been Senior Vice President of
Finance and the Chief Financial Officer of the Authority since December 1996,
has six years of experience in the casino and hotel industry. Prior to joining
the Authority, Mr. Hartmann worked for Foxwoods Resort Casino from August 1991
to December 1996, most recently as its Vice President of Finance. Mr. Hartmann
was employed by Coopers and Lybrand as an Audit Manager from 1984 to 1991. Mr.
Hartmann is a certified public accountant.
MITCHELL GROSSINGER ETESS. Mr. Etess has been Senior Vice President,
Marketing since November 1995 and has 16 years experience in the casino and
hotel industry. Prior to his employment with the Authority, Mr. Etess was Vice
President at Players Island and, from 1989 to 1994, was Senior Vice President of
Marketing and Hotel Operations at Trump Plaza Hotel and Casino. Prior thereto,
Mr. Etess held various management positions in the casino and hotel industry.
CARLISLE FOWLER. Mr. Fowler has been the Treasurer and a member of the
Management Board since July 15, 1995 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.
48
<PAGE>
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.
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.
49
<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 April 1997, the members of the council were:
TRIBAL COUNCIL
<TABLE>
<CAPTION>
NAME AGE
- ---------------------------------------------------------------------------------------- ---
<S> <C>
Mark Brown.............................................................................. 39
Jayne Fawcett........................................................................... 61
Carlisle Fowler......................................................................... 68
Courtland Fowler........................................................................ 69
Roland Harris........................................................................... 49
Loretta Roberge......................................................................... 65
Shirley Walsh........................................................................... 52
Maynard Strickland...................................................................... 57
Glenn R. LaVigne........................................................................ 36
</TABLE>
50
<PAGE>
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. 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
<TABLE>
<CAPTION>
NAME AGE
- ---------------------------------------------------------------------------------------- ---
<S> <C>
Pauline Brown........................................................................... 68
Carlton Eichelberg...................................................................... 67
Everett Eichelberg...................................................................... 63
Melissa Fawcett......................................................................... 37
Margaret LaVigne........................................................................ 66
Dorothy Long............................................................................ 69
Laurence Schultz........................................................................ 65
</TABLE>
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 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
51
<PAGE>
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.
52
<PAGE>
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 66 2/3% and a 33 1/3% 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).
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.
53
<PAGE>
MATERIAL AGREEMENTS
The following discussion summarizes the material terms of certain material
agreements which affect the operations of the Mohegan Sun. 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.
(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.
54
<PAGE>
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.
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,
55
<PAGE>
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 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.
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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 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
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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.
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
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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 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
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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 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
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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
----------- -------------------- -------------
<S> <C> <C> <C>
REVENUES IN
REVENUES IN TIER I TIERS I &
PLUS II PLUS 30%
40% OF NET 35% OF NET OF
REVENUES REVENUES NET REVENUES
UP TO BETWEEN ABOVE
----------- -------------------- -------------
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.
Class II Gaming (primarily bingo and certain types of card games) 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.
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(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.
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
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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.
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.
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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.
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
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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
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.
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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 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
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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 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
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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.
In addition to the 15% interest payment, holders of the Subordinated Notes
shall be entitled to an additional payment of 11.5% as an allocation of
management fees, referred to herein as the "Additional Amounts." See "--Omnibus
Financing Agreement."
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.
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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 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
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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 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;
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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.
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 the Additional Amounts at an annual
rate equal to 11.5%. However, the Manager's obligation to pay such Additional
Amounts over and above the stated 15% interest rate does not constitute interest
on the Subordinated Notes. See "Description of Exchange Notes--Security."
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. One of the considerations used by
the NIGC in determining whether or not to approve a management contract is
whether the Manager is providing a portion of the capital required. Accordingly,
the Manager agreed to provide or cause to be provided $40 million of capital in
the form of the Subordinated Notes. However, at the time that the subordinated
loan was made, the partners of the Manager, including the Company's
predecessors-in-interest, did not participate in the loan in accordance with
their economic interests in the Manager. Therefore, the partners of the Manager
agreed that those partners who participated in funding the Subordinated Notes
would be entitled to the Additional Amounts as a priority allocation of the
Management Fee to compensate those partners for the additional risk of funding
the Subordinated Notes. The Additional Amounts represent a priority in the
distribution of available cash by the Manager. If every partner of the Manager
participated in the Subordinated Notes to the extent of its pro rata economic
interest in the Manager, then the Additional Amounts would have no economic
effect on the partners.
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 Amounts 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.
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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 Amounts due on the Original Subordinated
Notes;
(c) Third, to pay Deferred Interest Amounts and Additional Amounts due
on First Tranche Completion Guarantee Subordinated Notes on a pari passu
basis;
(d) Fourth, to pay Additional Amounts 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;
(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% 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.
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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 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).
<TABLE>
<CAPTION>
YEAR %
- ------------------------------------------------------------------ ---------
<S> <C>
1997.............................................................. 113.5%
1998.............................................................. 112.0
1999.............................................................. 110.0
2000.............................................................. 105.0
2001.............................................................. 100.0
</TABLE>
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
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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 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
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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 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.
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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
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
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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.
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.
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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.
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
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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 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.
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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.
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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.
<TABLE>
<CAPTION>
NAME OF % OWNERSHIP
BENEFICIAL OWNER IN THE COMPANY
- ----------------------------------------------------------------------------- -----------------
<S> <C>
LMW, Inc.(1)................................................................. 32.26%
Slavik Suites, Inc.(2)....................................................... 67.74%
</TABLE>
- ------------------------
(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.
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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 the material provisions of the Indenture and the
Collateral Agreements are summaries and should be read in conjunction with the
provisions of the Indenture and the Collateral Agreements which have been filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to them in the Indenture. Set forth below is a summary of the material
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
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 (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 Indenture and the Collateral Agreements permit the Trustee only to collect
and pay the Noteholders in
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cash. Holders of the Company's notes cannot obtain ownership of the Subordinated
Notes or pursue remedies in their own right. 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. Moreover, the Company has pledged only the Subordinated Notes to
the Trustee and has not given a security interst in the requirement to pay the
Additional Amounts. Because the requirement to pay the Additional Amounts
constitutes an indirect interest in the management fee, the Company is
prohibited by the National Indian Gaming Regulatory Act of 1988 from pledging
this amount to any person who has not been approved by the National Indian
Gaming Commission as a manager. Thus, the security interest in the Subordinated
Notes includes only the principal and the stated interest of 15% and not the
Additional Amounts.
As a result of federal Indian gaming law prohibiting any non-Indian entity,
including the Manager, the Company and Sun International, from owning an equity
interest in an Indian casino, Sun International structured its initial
investment in the Mohegan Sun in the form of a deferred interest subordinated
loan (i.e. the Subordinated Notes). The obligation of the Manager to provide the
Additional Amounts over and above the stated 15% interest rate on the
Subordinated Notes is not an obligation to pay interest, and while it may
increase the overall effective rate of interest on the Subordinated Notes, if
the funds are not available to pay such Additional Amounts, then it will not be
paid. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview of Future Cash Flows."
The Manager, in connection with the overall financing plan for the Mohegan
Sun, retained the right to purchase one-half of the Original Subordinated Notes
from Sun International in the Omnibus Financing Agreement. In connection with
the Offering of the Private Notes, pursuant to any amendment to the Omnibus
Financing Agreement, the Company acquired such rights to purchase the Original
Subordinated Notes from Sun International and purchased such Original
Subordinated Notes. See "Offering Summary-- The Reorganization" and "Use of
Proceeds."
For a description of the material terms of the Subordinated Notes, see
"Material Agreements--Note Purchase Agreement."
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
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$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:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
1997.................................................................................. 112.750%
1998.................................................................................. 110.625
1999.................................................................................. 108.500
2000.................................................................................. 106.375
2001.................................................................................. 104.250
2002.................................................................................. 102.125
2003.................................................................................. 100.000
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
1999.................................................................................. 108.500%
2000.................................................................................. 106.375
2001.................................................................................. 104.250
2002.................................................................................. 102.125
2003.................................................................................. 100.000
</TABLE>
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
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<PAGE>
(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 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.
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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.
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
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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 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
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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, 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'
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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
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
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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 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
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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 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
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(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, 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
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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.
"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.
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"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 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
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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 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,
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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.
"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).
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
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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
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.
97
<PAGE>
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.
98
<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 discussion 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 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
99
<PAGE>
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 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.
100
<PAGE>
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.
101
<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
The validity of the Exchange Notes will be passed upon for the Company by
Latham & Watkins, New York, New York.
EXPERTS
The financial statements of the Company and Finance included as of and for
the period ended December 31, 1996 in the Prospectus have been included herein
in reliance on the report of Coopers & Lybrand L.L.P., independent certified
public accountants, given on the authority of that firm as experts in accounting
and auditing.
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
102
<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. Such
materials may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. 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, they 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.
103
<PAGE>
INDEX TO FINANCIAL STATEMENTS
WATERFORD GAMING, L.L.C.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheet as of December 31, 1996...................................................................... F-3
Statement of Operations for the period from September 30, 1996
(commencement of operations) to December 31, 1996........................................................ F-4
Statement of Changes in Members' Equity (Deficiency) for the period from
September 30, 1996 (commencement of operations) to December 31, 1996..................................... F-5
Statement of Cash Flows for the period from September 30, 1996 (commencement of operations) to December 31,
1996..................................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
WATERFORD GAMING FINANCE CORP.
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-11
Balance Sheet as of December 31, 1996...................................................................... F-12
Statement of Operations and Retained Earnings (Deficit) for the period
from November 6, 1996 (commencement of operations) to December 31, 1996.................................. F-13
Statement of Cash Flows for the period from November 6, 1996 (commencement
of operations) to December 31, 1996...................................................................... F-14
Notes to Financial Statements.............................................................................. F-15
MOHEGAN TRIBAL GAMING AUTHORITY
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-16
Balance Sheets of Mohegan Tribal Gaming Authority as of September 30, 1996 and 1995........................ F-17
Statement of Cash Flow of Mohegan Tribal Gaming Authority for the period from Inception (July 15, 1995)
through September 30, 1996............................................................................... F-18
Notes to Financial Statements of Mohegan Tribal Gaming Authority........................................... F-19
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Accountants' Review Report................................................................................. F-26
Condensed Balance Sheets of Mohegan Tribal Gaming Authority as of December 31, 1996 (unaudited) and
September 30, 1996....................................................................................... F-27
Condensed Statement of Income and Capital of Mohegan Tribal Gaming Authority for the Period October 12,
1996 (date of commencement of operations), through December 31, 1996 (unaudited)......................... F-28
Condensed Statement of Cash Flow of Mohegan Tribal Gaming Authority for the Period October 12, 1996 (date
of commencement of operations), through December 31, 1996 (unaudited).................................... F-29
Notes to Condensed Financial Statements of Mohegan Tribal Gaming Authority................................. F-30
</TABLE>
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.
(the "Company") as of December 31, 1996, and the related statements of
operations, changes in members' equity (deficiency) and cash flows for the
period from September 30, 1996 (commencement of operations) to December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Waterford Gaming, L.L.C. as
of December 31, 1996, and the results of its operations and its cash flows for
the period from September 30, 1996 (commencement of operations) to December 31,
1996 in conformity with generally accepted accounting principles.
Hartford, Connecticut
April 11, 1997
F-2
<PAGE>
WATERFORD GAMING, L.L.C.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash......................................................................... $ 841,512
Temporary Investments........................................................ 15,895,904
----------
Total current assets................................................... 16,737,416
----------
Investment in Trading Cove Associates.......................................... 12,682,469
Investment in 15% subordinated notes receivable................................ 25,965,897
Deferred bond costs, net of accumulated amortization of $58,731................ 2,788,529
----------
Total assets........................................................... $58,174,311
----------
----------
LIABILITIES AND MEMBERS' DEFICIENCY
Current liabilities:
Accrued expenses............................................................. $ 53,510
Accrued interest on bonds payable............................................ 1,220,104
----------
Total current liabilities.............................................. 1,273,614
12 3/4% senior bonds payable................................................... 65,000,000
----------
Total liabilities...................................................... 66,273,614
----------
Members' deficiency (Note 3)................................................... (8,099,903)
----------
Total liabilities and members' deficiency.............................. $58,174,311
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
WATERFORD GAMING, L.L.C.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 30, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenue
Interest income............................................................... $ 623,213
----------
Total revenue............................................................... 623,213
----------
Expenses:
Interest expense.............................................................. 1,220,104
Amortization on deferred bond costs........................................... 58,731
General and administrative.................................................... 77,150
----------
Total expenses.............................................................. 1,355,985
----------
(732,772)
Equity in loss of Trading Cove Associates....................................... (384,826)
----------
Net loss.................................................................... $(1,117,598)
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
WATERFORD GAMING, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM SEPTEMBER 30, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
SLAVIK LMW TOTAL
SUITES, INC. INVESTMENTS, INC. MEMBERS'
EQUITY EQUITY EQUITY
(DEFICIENCY) (DEFICIENCY) (DEFICIENCY)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Balance, September 30, 1996............................ $ 667 $ 333 $ 1,000
Capital contributions.................................. 2,011,530 1,005,765 3,017,295
Net Loss............................................... (757,695) (359,903) (1,117,598)
Distributions.......................................... (6,666,667) (3,333,333) (10,000,000)
----------------- ----------------- -----------------
Balance, December 31, 1996............................. $ (5,412,165) $ (2,687,138) $ (8,099,303)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
WATERFORD GAMING, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 30, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss...................................................... $(1,117,598)
----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization................................................ 58,731
Equity in loss in Trading Cove Associates................... 384,826
Changes in operating assets and liabilities:
Accrued interest receivable............................... (507,448)
Accrued interest on temporary investments................. (59,061)
Accrued expenses.......................................... 53,510
Accrued interest on bonds payable......................... 1,220,104
----------
Total adjustments....................................... 1,150,662
----------
Net cash provided by operating activities............... 33,064
----------
Cash flows from investing activities:
Purchases of temporary investments............................ (50,963,919)
Sales of temporary investments................................ 35,127,076
Investment in 15% subordinated notes receivable............... (25,072,543)
Return on investment in 15% subordinated notes receivable..... 612,500
Investments in Trading Cove Associates........................ (11,186,000)
Distributions from Trading Cove Associates.................... 137,594
Deferred Costs................................................ (2,847,260)
----------
Net cash used in investing activities................... (54,192,552)
----------
Cash flows from financing activities:
Proceeds from bond issuance................................... 65,000,000
Distributions to members...................................... (10,000,000)
----------
Net cash provided by financing activities............... 55,000,000
----------
Net increase in cash............................................ 840,512
Cash at beginning of period..................................... 1,000
----------
Cash at end of period........................................... $ 841,512
----------
----------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest........................ $ --
----------
----------
Supplemental schedule of noncash investing activities:
The members transferred their interests, totalling $3,017,295,
to the Company on November 8, 1996. This amount was recorded
as a capital contribution and as an investment in Trading
Cove Associates. Additionally, on November 8, 1996, the
Company received, as a distribution, a $850,000 note
receivable, along with accrued interest of $148,406 (Note
5).
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
WATERFORD GAMING, L.L.C.
NOTES TO FINANCIAL STATEMENTS
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 initially acquired and
owns an interest in Trading Cove Associates ("TCA") a Connecticut General
Partnership, and invests in certain financial instruments issued by the Mohegan
Tribal Gaming Authority ("MTGA"). TCA has a contract to manage a casino on
behalf of MTGA.
The Company is governed by a board of managers pursuant to the members'
agreement described in Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ACCOUNTING METHOD
The accrual method of accounting is used in the preparation of the financial
statements and the partnership income tax returns.
TEMPORARY INVESTMENTS
Temporary investments are comprised of commercial paper investments, all
having original maturities of less than 90 days. They are classified as
held-to-maturity and are reported at amortized cost plus accrued interest, which
approximates market.
INVESTMENT IN TRADING COVE ASSOCIATES
The investment in Trading Cove Associates is accounted for utilizing the
equity method. Included in the investment is $10,600,000, which represents the
purchase price paid to a corporation for their 12.5% interest in TCA. This
amount is being amortized on a straight-line basis over a 7-year term, which
represents the term of the management agreement between TCA and MTGA.
DEFERRED BOND COSTS
Costs incurred with the issuance of the bonds were capitalized and are
amortized on a straight-line basis over the 7-year term of the bonds.
INCOME TAXES
The Company, as a limited liability company, files Federal and State
partnership income tax returns which indicate each member's share of taxable
income or loss to be reported on each member's tax return. As a result, no
provision for Federal and State income taxes has been made in the accompanying
financial statements.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to a
concentration of credit risk, principally consist of cash in excess of the
financial institutions' insurance limits. The Company invests available cash
with high credit quality institutions.
F-7
<PAGE>
WATERFORD GAMING, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments" ("FAS 107"), requires that the Company disclose
the estimated fair values of its financial instruments. Fair values generally
represent estimates of amounts at which a financial instrument could be
exchanged between willing parties in a current transaction other than in forced
liquidation. However, in many instances, current exchange prices are not
available for certain of the Company's financial instruments, since no active
market generally exists for such financial instruments.
Fair value estimates are subjective and are dependent on a number of
significant assumptions, based on management's judgment regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. In addition, FAS 107 allows a
wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. MEMBER ALLOCATIONS:
The Limited Liability Company Agreement (the "Agreement") is effective until
September 30, 2020 and may be terminated by the unanimous decision of the
members or any other event as stated in the Agreement.
The members' profits interests, as defined, were adjusted after the 1996
distribution to the members of $10,000,000 made in order to purchase and retire
certain indirect ownership interests. The members' respective allocation of
income, gains, losses and deductions, as amended, are generally as follows:
<TABLE>
<S> <C>
Slavik Suites, Inc................................................ 67.7967%
LMW Investments, Inc.............................................. 32.2033
---------
100.0000%
---------
---------
</TABLE>
4. INVESTMENT IN TRADING COVE ASSOCIATES:
Trading Cove Associates (a general partnership) was formed primarily for the
purpose of acting as the exclusive managing agent of The Mohegan Tribal Gaming
Authority, an instrumentality of The Mohegan Nation. On November 8, 1996,
certain partners of Trading Cove Associates withdrew and, concurrently,
consented to the admission of the Company as a partner to TCA. Also, on November
8, 1996, the Company acquired an additional interest (12.5%) in TCA from a
corporation for $10,600,000. The Company now has a 50% voting and a 45% profits
interest in Trading Cove Associates. The remaining 50% voting interest is owned
by Sun Cove, LTD, an affiliate of Sun International Hotels Limited ("SIHL"). TCA
entered into an Omnibus Financing Agreement with SIHL on September 21, 1996, as
amended
F-8
<PAGE>
WATERFORD GAMING, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT IN TRADING COVE ASSOCIATES: (CONTINUED)
October 16, 1996, which establishes certain priorities for payments for services
to be made by TCA out of available cash flow, if any.
As of December 31, 1996, the following summary information relates to TCA.
Total revenues and net loss are for the period from November 9 through December
31, 1996, which represents the period that the Company was a partner in TCA:
<TABLE>
<S> <C>
Total assets................................................... $7,107,914
Total liabilities.............................................. 488,723
----------
Partners capital............................................... $6,619,191
----------
Total revenues (November 9-December 31, 1996).................. $1,252,196
----------
Net loss (November 9-December 31, 1996)........................ $ (326,930)
----------
Company's interest:
Initial contribution......................................... 3,017,295
Interest purchased........................................... 10,600,000
Additional contributions..................................... 586,000
----------
Total contributions........................................ 14,203,295
Distributions................................................ (1,136,000)
----------
13,067,295
----------
Loss from TCA (November 9-December 31, 1996)................. (163,465)
Amortization of interests purchased.......................... (221,361)
----------
Equity in loss in TCA........................................ (384,826)
----------
Investment in Trading Cove Associates........................ $12,682,469
----------
----------
</TABLE>
5. NOTES RECEIVABLE:
On November 8, 1996, the Company invested in 15% subordinated notes
receivable from MTGA (the "Notes") in the principal amount of $19,150,000 from
Sun International Hotels Limited. The Company also purchased the related accrued
and deferred interest as of November 8, 1996 of $5,922,543. In addition, the
Company received a distribution of an additional 15%, $850,000 subordinated note
receivable from MTGA, together with accrued interest of $148,406, on November 8,
1996.
The Notes represent Original Subordinated Notes of the Mohegan Tribal Gaming
Authority. The Notes bear interest at 15% and mature November 15, 2003. Interest
is payable semi-annually in arrears on each May 15 and November 15. Interest is
deferred and compounds semi-annually until MTGA retires or offers to purchase at
least 50% of its $175,000,000 senior secured notes. Interest on deferred
interest shall accrue and be deferred semi-annually at the above interest rate.
MTGA has the option to prepay the Notes, subject to certain restrictions of its
senior notes. Additional payments on the Notes are payable by TCA at an annual
rate of 11 1/2% on the outstanding amount of the Notes, contingent upon priority
payments, if any, as set forth by the Omnibus Financing Agreement for TCA. MTGA
is required to offer annually to purchase the senior secured notes with 50% of
its excess cash flow, as defined. If the holders of these senior secured notes
do not accept the offer, then such amounts of excess cash flow must be offered
F-9
<PAGE>
WATERFORD GAMING, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. NOTES RECEIVABLE: (CONTINUED)
to purchase the Notes. The Company must accept such offer to purchase the Notes
in the same proportion as SIHL.
The carrying value of the Notes, plus accrued interest, are stated at cost,
which approximates market.
6. BONDS PAYABLE:
The bonds at December 31, 1996 consist of $65,000,000 of exchange notes
("Senior Notes") issued on November 8, 1996 by the Company and an affiliate,
maturing November 15, 2003. The Senior Notes bear interest at a 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 Senior Notes will be redeemable at the option
of the Company in whole or in part at any time on or after November 15, 1999.
Accrued interest payable on the bonds totaled $1,220,104 as of December 31,
1996.
The Senior Notes will be collateralized by the Company's subordinated notes
receivable (Note 5), cash and temporary investments. The indenture on the bond
issuance prohibits the Company and its issuing affiliate from incurring any
other indebtedness other than the Senior Note.
The fair value of the Company's bonds payable is estimated, based on the
quoted market prices for the same or similar issues, or on current rates offered
to the Company for debt of the same remaining maturities.
7. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION:
The following is a reconciliation of net loss for financial statement
purposes to net loss for federal income tax purposes for the period from
September 30, 1996 (commencement of operations) to December 31, 1996:
<TABLE>
<S> <C>
Financial statement net loss.................................... $(1,117,598)
Financial statement equity in loss of investment in TCA over tax
basis equity in loss of investment in TCA..................... 148,102
----------
Financial income tax basis net loss............................. $ (989,496)
----------
----------
</TABLE>
The following is a reconciliation of members' equity (deficiency) for
financial statement purposes to members' deficiency for federal income tax
purposes as of December 31, 1996:
<TABLE>
<S> <C>
Financial statement members' deficiency......................... $(8,099,303)
Adjustment for cumulative difference between tax basis of
Investment in TCA and GAAP basis of Investment in TCA at date
of contribution............................................... 1,091,260
Current year financial statement net loss over federal income
tax basis net loss............................................ 148,102
----------
Federal income tax basis members' deficiency.................... $(6,859,941)
----------
----------
</TABLE>
F-10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
Waterford Gaming Finance Corp.:
We have audited the accompanying balance sheet of Waterford Gaming Finance
Corp. (the "Company") as of December 31, 1996, and the related statements of
operations and retained earnings (deficit) and cash flows for the period from
November 6, 1996 (commencement of operations) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements 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 financial statements referred to above present fairly,
in all material respects, the financial position of Waterford Gaming Finance
Corp. as of December 31, 1996, and the results of its operations and its cash
flows for the period from November 6, 1996 (commencement of operations) to
December 31, 1996 in conformity with generally accepted accounting principles.
Hartford, Connecticut
April 17, 1997
F-11
<PAGE>
WATERFORD GAMING FINANCE CORP.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Cash.................................................................................. $ 81
---
---
</TABLE>
STOCKHOLDER'S EQUITY
<TABLE>
<S> <C>
Stockholder's equity:
Common stock, $.01 par value:
1,000 shares authorized, issued and outstanding $ 10
Additional paid-in capital.......................................................... 90
Deficit............................................................................. (19)
---
Total stockholder's equity.................................................... $ 81
---
---
</TABLE>
The accompanying notes are an intergral part of the financial statements.
F-12
<PAGE>
WATERFORD GAMING FINANCE CORP.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE PERIOD FROM NOVEMBER 6, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31 1996
<TABLE>
<S> <C>
Revenue.............................................................................. $ --
Expenses:
Bank charges....................................................................... 19
---------
Net loss....................................................................... (19)
Retained earnings, beginning of period............................................... --
---------
Deficit, end of year................................................................. $ (19)
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
WATERFORD GAMING FINANCE CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 6, 1996 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.......................................................................... $ (19)
---
Net cash used in operating activities................................................. (19)
---
Net decrease in cash.................................................................. (19)
Cash at beginning of period........................................................... 100
---
Cash at end of year................................................................... $ 81
---
---
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
WATERFORD GAMING FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
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 acts as a co-issuer of financing transactions with its parent
company, Waterford Gaming, L.L.C.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements have been prepared utilizing the accrual method of
accounting.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Mohegan Tribal Gaming Authority:
We have audited the accompanying balance sheets of the Mohegan Tribal Gaming
Authority (a development stage entity) as of September 30, 1996 and 1995, and
cash flows for the period from inception (July 15, 1995) to September 30, 1996.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Mohegan Tribal Gaming
Authority as of September 30, 1996 and 1995, and its cash flows for the period
from inception (July 15, 1995) to September 30, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
November 27, 1996
F-16
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................................ $ 7,437 $ --
Restricted cash............................................................. 5,100 213,300
Deposits.................................................................... 5,900 --
Inventory................................................................... 819 --
Other current assets........................................................ 2,135 --
-------- --------
Total Current Assets.................................................... 21,391 213,300
-------- --------
CAPITALIZED PROPERTY COSTS:
Deferred lease cost......................................................... 30,081 --
Leasehold interest under construction....................................... 220,578 --
Furniture, fixture & equipment.............................................. 14,259 --
-------- --------
Total Capitalized Property Costs........................................ 264,918 --
-------- --------
OTHER ASSETS:
Pre-opening costs........................................................... 11,186 --
Deferred financing costs.................................................... 9,286 11,352
Organizational costs........................................................ 700 700
-------- --------
Total Other Assets...................................................... 21,172 12,052
-------- --------
Total Assets............................................................ $ 307,481 $ 225,352
-------- --------
-------- --------
LIABILITIES
CURRENT LIABILITIES:
Construction retainage...................................................... $ 9,738 $ --
Current maturities of long-term debt........................................ 250 --
Accounts payable............................................................ 33,077 10,352
Accrued interest............................................................ 15,232 --
Accrued liabilities......................................................... 1,208 --
Credit line................................................................. 4,749 --
Other current liabilities................................................... 227 --
-------- --------
Total Current Liabilities............................................... 64,481 10,352
-------- --------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 5)
NON-CURRENT LIABILITIES:
Senior notes................................................................ 175,000 175,000
Subordinated notes.......................................................... 67,000 40,000
Other long-term debt, net of current maturities............................. 1,000 --
-------- --------
Total Non-Current Liabilities........................................... 243,000 215,000
-------- --------
Total Liabilities....................................................... $ 307,481 $ 225,352
-------- --------
-------- --------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-17
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
STATEMENT OF CASH FLOW
FOR THE PERIOD FROM INCEPTION (JULY 15, 1995)
THROUGH SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-OPENING ACTIVITIES:
<S> <C>
Increase in inventory........................................................... $ (819)
Increase in deposits............................................................ (5,900)
Increase in other current assets................................................ (2,135)
Increase in construction retainage.............................................. 9,738
Increase in accounts payable.................................................... 33,077
Increase in accrued liabilities and interest.................................... 16,440
Increase in other current liabilities........................................... 727
---------
Net cash provided by pre-opening activities................................. 51,128
---------
INVESTING ACTIVITIES:
Deferred lease cost............................................................. (30,081)
Leasehold interest under construction........................................... (220,578)
Net equipment additions......................................................... (14,259)
Pre-opening costs............................................................... (11,186)
Deferred financing costs........................................................ (9,286)
Organizational costs............................................................ (700)
---------
Net cash used in investing activities....................................... (286,090)
---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........................................ 247,499
---------
Net cash provided by financing activities................................... 247,499
---------
Net increase in cash and cash equivalents................................... 12,537
---------
CASH AND CASH EQUIVALENTS, at beginning of period................................. --
---------
CASH AND CASH EQUIVALENTS, at end of period....................................... 12,537
---------
---------
SUPPLEMENTAL INFORMATION:
INTEREST PAID................................................................... $ 14,925
---------
---------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-18
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY:
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES:
The Mohegan Tribal Gaming Authority (the "Authority"), established on July
15, 1995, is an instrumentality of the Mohegan Tribe of Indians of Connecticut
(the "Tribe"). The Authority is developing a gaming and entertainment facility
(the "Mohegan Sun"). The Authority's year-end is September 30.
The Tribe and the Authority have entered into a land lease ("Lease") (see
Note 3) pursuant to which the Tribe is leasing to the Authority certain land
located in southeastern Connecticut on which the Mohegan Sun is being
constructed (the "Site"). The Site is a portion of a parcel of land that has
been acquired and held in trust for the Tribe by the United States of America,
with the Tribe retaining perpetual rights to the use of the Site.
The Tribe established the Authority with the exclusive power to conduct and
regulate gaming activities for the Tribe. Under the Indian Gaming Regulatory Act
of 1988, as amended ("IGRA"), federally recognized Indian tribes are permitted
to conduct full-scale casino gaming operations on tribal-land, subject to, among
other things, the negotiation of a tribal state compact with the affected state.
The Tribe and the State of Connecticut have entered into such a compact (the
"Compact") that has been approved by the Secretary of the Interior.
The Authority has engaged Trading Cove Associates ("TCA") to manage the
development, construction and operation of the Mohegan Sun. TCA is 50% owned by
Sun Cove, an affiliate of Sun International Hotels Limited ("Sun
International"), and 50% owned by Waterford Gaming, LLC.
The Authority is financing the development of the Mohegan Sun with the
proceeds of the sale of senior notes, subordinated notes and equipment and
working capital financing as described in Note 2. The total cost of development
and construction of Mohegan Sun and working capital is estimated to be $318
million, all of which has been obtained as of the balance sheet date as follows
(000's):
<TABLE>
<S> <C>
Senior Notes...................................................... $ 175,000
Subordinated Notes................................................ 40,000
Subordinated Notes: Secured
Completion Guarantee............................................ 50,000
Working Capital Financing......................................... 13,000
Equipment Financing............................................... 40,000
---------
$ 318,000
---------
---------
</TABLE>
The Secured Completion Guarantee provides that, subject to certain
qualifications, Sun International will provide up to $50.0 million to fund any
cost overruns incurred in connection with the construction, development,
equipping and opening of the Mohegan Sun. The Guarantee terminates on September
30, 1997, or, if certain other criteria are met as agreed upon by the Authority
and Sun International. Any draws on the Guarantee are evidenced by additional
subordinated notes issued by the Authority to Sun International. These
additional subordinated notes will bear interest at the prime rate plus 1% and
are payable under the same terms as the subordinated notes (see Note 2).
USE OF ESTIMATES IN THE PRESENTATION OF FINANCIAL STATEMENTS--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
F-19
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY: (CONTINUED)
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES: (CONTINUED)
FAIR VALUE OF FINANCING INSTRUMENTS--
The Authority's carrying amount of financial instruments including cash,
payables and debt, approximate fair market value.
DEVELOPMENT STAGE ENTERPRISE--
The Authority is classified as a Development Stage enterprise as defined by
Statement of Financial Accounting Standards No. 7.
CASH EQUIVALENTS--
For purposes of the Financial Statements, the Authority has considered all
investments with maturities of three months or less to be cash equivalents.
RESTRICTED CASH
Included in restricted cash are approximately $850,000 held as collateral
for road construction permits and land required for the completion of the
Authority's roadway access and approximately $4.3 million in working capital for
the impressment of the slot machines.
DEPOSITS AND OTHER CURRENT ASSETS
The Authority has expended approximately $5.9 million in deposits for items
relating to the development of the Mohegan Sun that will be refunded in full
during the first quarter of fiscal 1997.
INVENTORIES
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
CAPITALIZED PROPERTY COSTS--
Capitalized property costs consist of (i) deferred lease costs related to
the payment made by the Authority on behalf of the Tribe for the acquisition of
the Site, (ii) leasehold interest costs which represent costs incurred through
the balance sheet date for the construction of the Mohegan Sun and (iii)
equipment (primarily furniture and computers) that are being used in connection
with the pre-opening activities of the Authority. Upon the commencement of
operations, these costs will be depreciated or amortized, as applicable, on a
straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Deferred lease cost............................................. 50 years
40-50
Leasehold interest cost......................................... years
Equipment....................................................... 5-7 years
</TABLE>
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY: (CONTINUED)
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES: (CONTINUED)
DEFERRED LEASE COST--
Deferred lease cost consists of the following (000's):
<TABLE>
<S> <C>
Acquisition cost of the site....................................... $ 28,581
Acquisition cost of additional parcel.............................. 1,500
---------
$ 30,081
---------
---------
</TABLE>
The Site and the additional parcel were acquired from third parties
unrelated to the Tribe or the Authority. The Authority will not be reimbursed by
the Tribe for these payments.
OTHER ASSETS--
Other assets consist of pre-opening, deferred financing and organization
costs. Pre-opening costs are mainly payroll and related benefits and general
office overhead incurred through the balance sheet date. Deferred financing
costs have been incurred in connection with the issuance of the senior notes and
the subordinated notes. Organization costs represent primarily legal costs
incurred in the organization of the Authority.
Beginning on the opening date of the Mohegan Sun, these costs will be
amortized on a straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Pre-opening costs............................................... 12 months
Deferred financing costs........................................ 7 years
Organization costs.............................................. 5 years
</TABLE>
RETAINAGE
Retainage consists of amounts withheld from construction draws for the
General and Infrastructure contractor to ensure adequate performance and
completion of the development of Mohegan Sun and is expected to be remitted in
the 1997 fiscal year.
2. DEBT
A. The Authority has issued $175 million in Senior Notes due 2002 (the
"Senior Notes") with fixed interest payable at a rate of 13 1/2% per annum and
Cash Flow Participation Interest in an aggregate amount of 5.0% of the
Authority's Cash Flow up to a limit, during any two consecutive semi-annual
periods, ending September 30, of $250 million of the Authority's Cash Flow.
Fixed interest is payable semi-annually and commenced May 15, 1996. No Cash Flow
Participation Interest shall be payable with respect to any period prior to the
earlier of the first day the Mohegan Sun commences operations or October 31,
1996. The aggregate amount of Cash Flow Participation Interest payable will be
reduced pro rata for reductions in outstanding principal amount of Senior Notes.
The payment of Cash Flow Participation Interest may be deferred if the
Authority's Fixed Charge Coverage Ratio (as defined) is less than 2 to 1. The
Senior Notes are redeemable at set prices as set forth in the Senior Notes after
November 15, 1999, at the option of the Authority. Upon the occurrence of
certain events (as specified in the Indenture for the Senior Notes) each holder
of Senior Notes can require the Authority to repurchase the notes at prices
specified in the Senior Notes. Beginning with fiscal year ending September 30,
1997, the Authority will be
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY: (CONTINUED)
2. DEBT (CONTINUED)
required, under certain circumstances, to offer to purchase, at set prices,
certain amounts of Senior Notes then outstanding.
B. The Authority has obtained $67.0 million of subordinated financing from
Sun International and Waterford Gaming LLC in the form of two notes. The first
note for $40.0 million (Subordinated Notes) bears interest at 15% per year, paid
semi-annually. The second note for $27.0 million (Secured Completion Guarantee)
bears interest at 1% over prime. Both are due 2003; however, principal cannot be
paid until the Senior Notes have been paid in full, unless certain conditions
are met.
C. The Authority has obtained a mortgage note payable of approximately $1.3
million from a local bank to fund property purchased for the development of
Mohegan Sun payable in yearly payments of $250,000 for 5 years.
D. The Authority has obtained two lines of credit totaling $13.0 million.
The line of credit for $12.5 million, obtained from Fleet Bank, offers LIBOR and
Base rate options (9.25% as of September 30, 1996). The maximum borrowings under
the Fleet line of credit shall be reduced by $2,000,000 on April 1, 1997 and by
an additional $2,000,000 on each one month anniversary date thereafter. The
second line of credit for $500 thousand was obtained from Norwich Savings bears
interest at a rate of 7 3/4%. As of September 30, 1996, $4.8 million was
outstanding under both lines of credit. These amounts were used for the
impressment of slot machines and Bingo operations.
Long-term debt consists of the following(000's):
<TABLE>
<S> <C>
Senior Secured Notes (A).......................................... $ 175,000
Subordinated Notes (B)............................................ 67,000
Mortgage Note Payable (C)......................................... 1,250
Line of Credit (D)................................................ 4,749
---------
Total Debt.................................................. 247,999
Less Current Maturities........................................... 4,999
---------
$ 243,000
---------
---------
</TABLE>
The above described debt is secured by substantially all the assets of the
Authority.
REPAYMENTS OF DEBT FOR NEXT FIVE YEARS
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNTS
- ---------------------------------------------------------------------------------- ----------
<S> <C>
(000'S)
1997.............................................................................. $ 4,999
1998.............................................................................. 250
1999.............................................................................. 250
2000.............................................................................. 250
2001.............................................................................. 250
THEREAFTER........................................................................ 242,000
----------
$ 247,999
----------
----------
</TABLE>
F-22
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY: (CONTINUED)
2. DEBT (CONTINUED)
The ability of the Authority to meet its debt service requirements will be
entirely dependent upon the completion and future successful performance of the
Mohegan Sun, which is subject to financial, economic, political, competitive,
and other factors, many of which are beyond the Authority's control.
The amount of interest capitalized in leasehold interest under construction
on the balance sheet for the period from inception to September 30, 1996, was
approximately $30.2 million.
3. LEASE AGREEMENTS--
As discussed in Note 1, the Authority has entered into a Lease with the
Tribe with respect to the Site. The initial term of the Lease is 25 years, with
an option to extend the term for an additional 25 years provided that the
Authority is not in default under the Lease. The Lease also provides that all
improvements constructed on the Site will become the property of the Tribe and
subject to the Lease. The Lease is a net Lease requiring that the Authority be
responsible for all costs of operating, constructing, maintaining, repairing,
replacing and insuring the leased property, plus paying the Tribe an annual rent
of $1.00. In addition to the rent, the Authority has used the proceeds from the
issuance of the Subordinated Notes, described in Note 2, to acquire the Site on
behalf of the Tribe. Due to these payments and other terms of the Lease
described above, expenditures made by the Authority in connection with the
acquisition of the Site and the Additional Parcel have been recorded as deferred
lease costs. These deferred lease costs will be amortized on a straight-line
basis over the term of the Lease, plus the option period (a total of 50 years).
The leasehold interest will be amortized on a straight-line basis over the
estimated life of the buildings (40 years).
The Authority leases various equipment and vehicles under operating leases.
Future minimum lease payments under the noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
AMOUNTS
---------
<S> <C>
(000'S)
---------
1997............................................................................... $ 3,664
1998............................................................................... 3,650
1999............................................................................... 3,421
2000............................................................................... 3,041
Thereafter......................................................................... -0-
---------
$ 13,776
---------
---------
</TABLE>
4. INCOME TAXES--
The Tribe is an "Indian Tribal Government" within the meaning of sections
7701(a)(40) and 7871 of the Internal Revenue Code of 1986, as amended. As such,
the Authority has tax-exempt status with respect to federal and state income and
certain excise taxes.
5. COMMITMENTS AND CONTINGENCIES:
The Tribe, by itself and acting through the Authority, and TCA have entered
into an Amended and Restated Gaming Facility Development and Construction
Agreement ("the Construction Agreement") providing for the design, construction,
furnishing and site development of the Mohegan Sun by TCA. The
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY: (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
total cost of the Mohegan Sun as outlined in the Construction Agreement, is not
to exceed $325 million. The Tribe has assigned its rights and obligations in the
Agreement to the Authority.
The Tribe has entered into a seven-year Amended and Restated Gaming Facility
Management Agreement ("the Management Agreement") with TCA to provide for the
management of the Mohegan Sun. Under the terms of the Management Agreement, the
Tribe has granted TCA the exclusive right and obligation to develop, manage,
operate and maintain the Mohegan Sun and all other related facilities that are
owned by the Tribe or any of its instrumentalities. The Management Agreement
authorizes TCA to pay itself a monthly management fee from the Mohegan Sun's net
revenues (as defined). The management fee under the Management Agreement is
expressed as a percentage of net revenues, which ranges from 30% to 40%,
depending on the level of the net revenues generated by the Mohegan Sun. The
Tribe has assigned its rights in and delegated its obligations under the
Management Agreement to the Authority.
The Authority has entered into a guaranteed maximum price contract with the
general contractor, Morse Diesel International, for the construction of the
Mohegan Sun. The final amount paid under such contract, however, is subject to
modification based upon the occurrence of certain events, such as design change
orders and costs associated with certain types of delays. The Authority and
Morse Diesel International currently are negotiating whether certain costs
incurred in construction or the Mohegan Sun are covered under the guaranteed
maximum price or whether such cost increases are the result of change orders or
other events that could result in an increase in the contract price above the
guaranteed maximum price. The resolution of all or some of these issues in favor
of Morse Diesel International may result in the final cost of Mohegan Sun
exceeding its current budget. Based upon its review of the budget and the open
cost items, the Authority believes that the final, total cost of developing,
constructing, equipping and opening the Mohegan Sun will not exceed the sum of
the proceeds from the sale of the Senior Notes and the Subordinated Notes and
amounts available under the Secured Completion Guarantee, the Equipment
Financing and the Working Capital Financing. However, there is no assurance that
such costs will not exceed budgeted amounts. As of December 4, 1996, the
Authority has drawn $42 million under the Secured Completion Guarantee and
issued additional subordinated notes to Sun International in principal amount
equal to the amount of the draw. The Authority may not obligate itself to pay
development costs in excess of $325 million without the further consent of the
National Indian Gaming Commission (the "NIGC"). In the event the resolution of
the issues with Morse Diesel International result in total development costs
being in excess of $325 million, the Authority would require the consent of the
NIGC, and there can be no assurances such consent would be given.
The Authority has established a Cash Maintenance Account as a way of
accumulating funds to protect the Bond Holders in the event of a default. For
the calendar years ended 1997-2001, the annual deposit required is $6.0 million
per year and thereafter, such amount necessary to keep at least $36.0 million in
the Cash Maintenance Account.
The Authority also has established an Interest and Excess Cash Flow Account
into which it must place the fixed interest accrued during each month on the
Senior Debt and the Subordinated Debt, 50% of the Excess Cash Flow (as defined)
generated by the Mohegan Sun in the previous month and the Cash Flow
Participating interest accrued for the prior month. These amounts are to be used
to pay current interest and to provide funds for redemption of Senior Debt as
provided in the Indenture. If the Senior Debt holders decline redemption, these
funds may be used to redeem the subordinated debt, with any remaining balance
available for distribution to the Tribe.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENT OF MOHEGAN TRIBAL GAMING AUTHORITY: (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Authority shall also make a minimum monthly payment to the Tribe of
$50,000. In addition, the Authority may make a monthly payment to the Tribe with
respect to net revenues (as defined), generated by the Mohegan Sun in the
preceding month. Such amount shall only be made after certain other minimum
Priority Payments and required deposits in to certain reserve accounts (as
defined) have been made. No payments have been made or are due as of September
30, 1996.
6. COMPACT WITH THE STATE OF CONNECTICUT
The Tribe's Compact with the State of Connecticut stipulates that a portion
of the revenues earned on slot machines will be paid to the State of
Connecticut. For each twelve-month period commencing July 1, 1995, the minimum
contribution of the Tribe to the State of Connecticut shall be the lesser of (a)
30% of gross revenues from slot machines, or (b) the greater of (i) 25% of gross
revenues from slot machines or (ii) $80,000,000. These payments will not be
required if the State of Connecticut legalizes any other gaming operations with
slot machines to be operated in the State of Connecticut (other than on certain
Indian lands). No payments have been made or are due as of September 30, 1996.
7. TOWN OF MONTVILLE
The Tribe has entered into an agreement with the Town of Montville,
Connecticut (the "Town") pursuant to which the Tribe has agreed to pay to the
Town (i) an annual payment of $500,000 to compensate the Town for the financial
impact of removing the Site from the Town's tax rolls and jurisdiction and (ii)
a one-time fee of $3.0 million to make improvements to the Town's water system,
which improvements are necessitated by the development and operation of the
Mohegan Sun. The one-time payment is due and the annual payments commence one
year after the commencement of slot machine gaming activities.
It is anticipated that these payments will be made by the Authority on
behalf of the Tribe. When that occurs, the one-time fee of $3.0 million for
improvement of the Town's water system will be capitalized as part of leasehold
interest (see Note 3), while the annual payments of $500,000 will be treated as
operating expenses of the Authority since they are effectively in lieu of
property taxes that would be the responsibility of the Authority under the
Lease. It is not anticipated that the Tribe will reimburse the Authority for
these payments.
8. SUBSEQUENT EVENTS
As of September 30, 1996, the Authority has entered into or is negotiating
various commitments to obtain (through purchase or under capital or operating
leases) approximately $56.9 million worth of assets. Also, the Authority has
drawn down an additional $6 million on the working capital line of credit
subsequent to September 30, 1996.
Mohegan Sun plans on implementing a 401(k) plan during the second quarter of
fiscal 1997.
Mohegan Sun opened to the general public on October 12, 1996.
F-25
<PAGE>
To the Mohegan Tribal Gaming Authority:
We have reviewed the accompanying condensed balance sheet of Mohegan Tribal
Gaming Authority ("Authority") as of December 31, 1996, and the related
condensed statements of income and capital for the period October 12, 1996 (date
of commencement of operations), through December 31, 1996, and the related
condensed statements of cash flows for the period October 12, 1996 (date of
commencement of operations), through December 31, 1996. These condensed
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the condensed balance sheet of Mohegan Tribal Gaming Authority as of
September 30, 1996, and the related cash flow for the year then ended (not
presented herein), and, in our report dated November 27, 1996, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet of Mohegan
Tribal Gaming Authority as of September 30, 1996, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
Arthur Andersen LLP
Hartford, Connecticut
February 7, 1997
F-26
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 31,211 $ 7,437
Restricted cash................................................................... 9,917 5,100
Receivables, net.................................................................. 1,749 --
Inventories....................................................................... 3,519 819
Other current assets.............................................................. 1,325 8,035
------------ -------------
Total current assets............................................................ 47,721 21,391
NON-CURRENT ASSETS:
Capitalized property and equipment, net........................................... 293,926 264,918
Other assets, net................................................................. 22,804 21,172
------------ -------------
Total assets.................................................................... $ 364,451 $ 307,481
------------ -------------
------------ -------------
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt.............................................. $ 20,174 $ 4,999
Accounts payable and accrued expenses............................................. 47,791 44,250
Accrued interest payable.......................................................... 12,966 15,232
------------ -------------
Total current liabilities....................................................... 80,931 64,481
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities......................................... 282,552 243,000
------------ -------------
Total Liabilities............................................................... 363,483 307,481
------------ -------------
CAPITAL:
Accumulated income................................................................ 1,967 --
Distribution to tribe............................................................. (999) --
------------ -------------
Total capital................................................................... 968 --
------------ -------------
Total liabilities & capital..................................................... $ 364,451 $ 307,481
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
F-27
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED STATEMENT OF INCOME AND CAPITAL
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD OCTOBER 12, 1996
(DATE OF COMMENCEMENT OF
OPERATIONS)
THROUGH DECEMBER 31, 1996
----------------------------------
<S> <C>
REVENUES:
Gaming...................................................................... $ 90,896
Food and beverage........................................................... 9,620
Other....................................................................... 2,444
--------
Gross revenues............................................................ 102,960
Less--Promotional allowance................................................. (5,948)
--------
Net revenues.............................................................. 97,012
--------
COST AND EXPENSES:
Gaming...................................................................... 43,644
Loss from bingo operations.................................................. 1,322
Food and beverage........................................................... 6,561
General and administration.................................................. 21,595
Depreciation and amortization............................................... 7,664
Management fee.............................................................. 2,358
Other....................................................................... 2,400
--------
Total costs and expenses.................................................. 85,544
--------
Income from operations.................................................... 11,468
--------
NONOPERATING INCOME AND (EXPENSES):
Interest income and other income............................................ 235
Interest expense............................................................ (9,736)
--------
(9,501)
--------
Net income.............................................................. $ 1,967
--------
--------
CAPITAL
Balance October 12, 1996...................................................... $ --
Net income.................................................................... 1,967
Distribution to tribe......................................................... (999)
--------
Balance December 31, 1996..................................................... $ 968
--------
--------
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
F-28
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED STATEMENT OF CASH FLOW
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD OCTOBER 12, 1996
(DATE OF COMMENCEMENT OF
OPERATIONS)
THROUGH DECEMBER 31, 1996
----------------------------------
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income.................................................................... $ 1,967
Adjustments to reconcile net income to net cash flow provided by operating
activities-
Depreciation and amortization of property and equipment................... 7,664
Provisions for losses on receivables...................................... 19
Changes in assets and liabilities
Increase in receivables and other current assets.......................... (3,983)
Increase in accounts payable and accrued expenses......................... 20,533
--------
Net cash flow provided by operating activities.............................. 26,200
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................................ (32,079)
Decrease in construction payable.............................................. (19,258)
--------
Net cash flow used in investing activities.................................. (51,337)
--------
CASH FLOW FROM FINANCING ACTIVITIES:
Distribution to Tribe......................................................... (999)
Increase in short-term borrowings............................................. 8,094
Proceeds from Equipment Financing............................................. 32,500
Additional Borrowing From Subordinated Notes.................................. 15,000
Payments on current maturities of long-term debt.............................. (867)
--------
Net cash flow provided by financing activities.............................. 53,728
--------
Net increase in cash and cash equivalents................................... 28,591
Cash and Cash Equivalents at October 12, 1996................................. 12,537
--------
Cash and Cash Equivalents at December 31, 1996................................ $ 41,128
--------
--------
Cash Interest Paid............................................................ $ 12,567
--------
--------
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
F-29
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
BASIS OF PRESENTATION:
The Mohegan Tribal Gaming Authority (the "Authority"), established on July
15, 1995, is an instrumentality of the Mohegan Tribe of Indians of Connecticut
(the "Tribe"). The Authority commenced operation of its gaming and entertainment
facility (the "Mohegan Sun") on October 12, 1996.
Prior to October 12, 1996, the Authority was classified as a Development
Stage enterprise as defined by Statement of Financial Accounting Standards No.
7.
The Authority has engaged Trading Cove Associates ("TCA") to manage the
development, construction and operation of the Mohegan Sun. TCA is 50% owned by
Sun Cove, an affiliate of Sun International Hotels Limited ("Sun
International"), and 50% owned by Waterford Gaming, LLC.
The condensed financial statements have been prepared in accordance with the
accounting policies described in the Authority's 1996 Annual Report on Form 10-K
and should be read in conjunction with the Notes to Condensed Financial
Statements which appear in that report. The Condensed Balance Sheet at September
30, 1996, contained herein was derived from audited financial statements, but
does not include all disclosures contained in the Form 10-K and applicable under
generally accepted accounting principles.
In the opinion of the Authority, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for the
interim periods have been included. The results reflected in the condensed
financial statements for the first quarter of 1997 are not necessarily
indicative of expected results for the full year, as the casino industry in
Connecticut is seasonal in nature.
The Authority's operation of a casino in Connecticut is subject to
significant regulatory controls which affect virtually all of its operations.
2. ISSUANCE OF LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
Authority: (000's) (000's)
Senior Secured Notes (A)............................................................ $ 175,000 $ 175,000
Subordinated Notes (B).............................................................. 82,000 67,000
Lines of Credit (working capital) (C)............................................... 12,806 4,749
Equipment Financing (D)............................................................. 31,920 --
Other............................................................................... 1,000 1,250
------------ -------------
302,726 247,999
Less--Current Maturities............................................................ 20,174 4,999
------------ -------------
$ 282,552 $ 243,000
------------ -------------
------------ -------------
</TABLE>
F-30
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(UNAUDITED)
2. ISSUANCE OF LONG-TERM DEBT
A. On September 29, 1995, the Authority issued $175 million in Senior Secured
Notes due 2002 (the "Senior Notes") with fixed interest payable at a rate of
13.50% per annum and Cash Flow Participation Interest in an aggregate amount
of 5.0% of the Authority's Cash Flow up to a limit, during any two
consecutive semi-annual periods, ending September 30, of $250 million of the
Authority's Cash Flow. Fixed interest is payable semi-annually and commenced
May 15, 1996. The aggregate amount of Cash Flow Participation Interest
payable will be reduced pro rata for reductions in outstanding principal
amount of Senior Notes. The payment of Cash Flow Participation Interest may
be deferred if the Authority's Fixed Charge Coverage Ratio is less than 2 to
1. The Senior Notes are redeemable at set prices as set forth in the Senior
Notes after November 15, 1999, at the option of the Authority. Upon the
occurrence of certain events (as specified in the Indenture for the Senior
Notes) each holder of Senior Notes can require the Authority to repurchase
the notes at prices specified in the Senior Notes. Beginning with fiscal
year ending September 30, 1997, the Authority will be required, under
certain circumstances, to offer to purchase, at set prices, certain amounts
of Senior Notes then outstanding.
B. The Authority has obtained $82.0 million of subordinated financing from Sun
International and Waterford Gaming LLC in the form of notes. The Authority
has issued 20.0 million dollars of subordinated notes to each of Sun
International and Waterford Gaming LLC (Subordinated Notes), which notes
bear interest at 15% per year, payable semi-annually. Interest on the
Subordinated Notes is being deferred and will not be paid until at least
half of the Senior Notes have been retired (or offered to be retired,
pursuant to the terms of the Indenture governing the Senior Notes) and
certain other conditions have been fulfilled. The Authority also has issued
$42.0 million in subordinated notes to Sun International evidencing draws
made by the Authority under the $50.0 million secured completion guarantee
provided by Sun International (Secured Completion Guarantee), which notes
bear interest at 1% over prime. As of January 3, 1997, the Authority
borrowed the final $8.0 million available under the Secured Completion
Guarantee for a total of $50.0 million and issued additional subordinated
notes to Sun International for such amount. All such notes are due 2003;
however, principal cannot be paid until the Senior Notes have been paid in
full, unless certain conditions are met.
C. The Authority has obtained two lines of credit totaling $13.2 million. The
line of credit for $12.5 million, obtained from Fleet Bank, provides for
interest based on various floating indexes (9.25% as of December 31, 1996).
The second line of credit for $650,000 was obtained from Norwich Savings
Society and bears interest at a rate of 7.75%. As of December 31, 1996,
$12.8 million was outstanding under both lines of credit. These amounts were
used for working capital and Bingo operations.
D. The Authority has received gaming equipment financing of $23.0 million from
CIT-Group/Equipment Financing, Inc. ("CIT Group"). The terms of this
agreement provide that borrowings bear interest of 2% over prime, commencing
from the date of delivery of the equipment. Principal payments will be over
48 months and commenced December 1996.
The Authority has received equipment financing of $9.0 million from the CIT
Group and Phoenixcor, Inc. ("Phoenixcor"). The CIT Group agreement provides for
funding of $5.0 million with an interest rate of 9.17%. Principal payments will
be over 48 months and commenced December 1996. The Phoenixcor
F-31
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(UNAUDITED)
2. ISSUANCE OF LONG-TERM DEBT (CONTINUED)
terms of this agreement consist of funding for $4.0 million with an interest
rate of 8.95%. Principal payments will be over 48 months and commenced December
1996.
The Authority received working capital financing of $500,000 from New
Horizon Kids Quest IV, Inc. The terms consist of an interest rate of 2% over
prime. Principal payments will be over 36 months, which commenced October 1996.
3. OPERATING LEASES:
The Authority has entered into three operating leases.The PDS Financial
Corporation has two operating leases with the Authority. The proceeds of the
first agreement are $10.4 million with a fixed monthly payment of $253,000. The
lease payments will be over 48 months and commenced October 1996. The proceeds
of the second lease agreement are $4.1 million with a fixed monthly payment of
$95,000. The lease payments will be over 48 months and commenced November 1996.
The third agreement is with Pitney Bowes Credit Corp. provided $4.0 million
with a fixed monthly payment of $112,000. The lease payments will be over 42
months commencing in January 1997.
4. COMMITMENTS:
The Tribe's Compact with the State of Connecticut stipulates that a portion
of the revenues earned on slot machines must be paid to the State of Connecticut
("Slot Win contribution"). For each twelve-month period commencing July 1, 1995,
the minimum contribution of the Tribe to the State of Connecticut shall be the
lesser of (a) 30% of gross revenues from slot machines, or (b) the greater of
(i) 25% of gross revenues from slot machines or (ii) $80,000,000. These payments
will not be required if the State of Connecticut legalizes any other gaming
operations with slot machines to be operated in the State of Connecticut (other
than on certain Indian lands). The Authority has reflected $16,712,000 in
expense in its financial statements for the required Slot Win Contribution
payments to the State of Connecticut for the fiscal period ended December 31,
1996.
5. RELATED PARTY TRANSACTIONS:
For the period ending December 31, 1996, the Tribe provided Governmental and
Administrative services to the Authority in conjunction with the operation of
Mohegan Sun. The Authority paid the Tribe $1,371,000 for such service.
In addition, the Tribe, through two of its limited liability companies, has
entered into various land lease agreements with the Authority. Amounts paid by
the Authority under these lease agreements to the limited liability companies
was $902,000 for the period ended December 31, 1996.
F-32
<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. 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
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 14
The Exchange Offer.............................. 24
Use of Proceeds................................. 32
Capitalization.................................. 33
The Mohegan Sun................................. 34
The Company..................................... 39
Pro Forma Financial Information................. 40
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 41
Management...................................... 45
Mohegan Tribe of Indians of Connecticut......... 50
Certain Transactions............................ 53
Material Agreements............................. 54
Government Regulation........................... 76
Principal Security Holders...................... 81
Description of Exchange Notes................... 82
Certain Federal Income Tax Consequences......... 99
Plan of Distribution............................ 102
Legal Matters................................... 102
Experts......................................... 102
Available Information........................... 102
Index to Financial Statements................... F-1
</TABLE>
$65,000,000
SENIOR NOTES DUE 2003
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
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.
10.7 Note Purchase Agreement, dated as of October 19, 1996, among Sun International Hotels Limited,
Waterford Gaming L.L.C. and Trading Cove Associates.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.8* Note Purchase Agreement, dated as of September 29, 1995, between the Mohegan Tribal Gaming Authority
and Sun International Hotels Limited relating to the Subordinated Notes.
10.9* Management Agreement, dated as of July 28, 1994, between the Mohegan Tribe of Indians of Connecticut
and Trading Cove Associates.
21.1 Subsidiaries of Waterford Gaming L.L.C.
21.2 Subsidiaries of Waterford Gaming Finance Corp.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Arthur Andersen LLP.
23.3* Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
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.
99.1* Form of Letter of Transmittal and related documents to be used in conjunction with the Exchange
Offer.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed under separate cover.
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
II-3
<PAGE>
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.
(e) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirement of section 10(a)(3) of the Act and in used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, each Registrant has duly
caused this Amendment to the 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 April 29, 1997.
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
By: /s/ LEN WOLMAN
--------------------------------------
Len Wolman
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Director and Chief
Executive Officer,
/s/ LEN WOLMAN Waterford Gaming, L.L.C.
- ------------------------------ and Director, President April 29, 1997
Len Wolman and Chief Executive
Officer, Waterford Gaming
Finance Corp.
Director, Chief Financial
Officer and principal
accounting officer and
/s/ DEL J. LAURIA* Secretary of Waterford
- ------------------------------ Gaming, L.L.C. and April 29, 1997
Del J. Lauria Director, Secretary and
Treasurer Waterford
Gaming Finance Corp.
Director, Waterford Gaming,
/s/ MARK WOLMAN* L.L.C. and Director,
- ------------------------------ Waterford Gaming Finance April 29, 1997
Mark Wolman Corp.
Director, Waterford Gaming,
/s/ STEPHEN SLAVIK, SR.* L.L.C. and Director,
- ------------------------------ Waterford Gaming Finance April 29, 1997
Stephen Slavik, Sr. Corp.
*By: /s/ LEN WOLMAN
-------------------------
Len Wolman
(ATTORNEY-IN-FACT)
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
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.
10.7 Note Purchase Agreement, dated as of October 19, 1996, among Sun International Hotels Limited,
Waterford Gaming L.L.C. and Trading Cove Associates.
10.8* Note Purchase Agreement, dated as of September 29, 1995, between the Mohegan Tribal Gaming Authority
and Sun International Hotels Limited relating to the Subordinated Notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.9* Management Agreement, dated as of July 28, 1994, between the Mohegan Tribe of Indians of Connecticut
and Trading Cove Associates.
21.1 Subsidiaries of Waterford Gaming L.L.C.
21.2 Subsidiaries of Waterford Gaming Finance Corp.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Arthur Andersen LLP.
23.3* Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
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.
99.1* Form of Letter of Transmittal and related documents to be used in conjunction with the Exchange
Offer.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed under separate cover.
<PAGE>
[Latham & Watkins Letterhead]
April 29, 1997
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
914 Hartford Turnpike
P.O. Box 715
Waterford, Connecticut 06385
Re: Registration Statement No. 333-17795 on Form S-4; $65,000,000
Aggregate Principal Amount of 12 3/4 Senior Notes due 2003
Ladies and Gentlemen:
In connection with the registration under the Securities Act of
1933, as amended (the "Act"), of $65,000,000 in aggregate principal amount of
12 3/4% Senior Notes due 2003 (the "Securities") of 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"), on Form S-4 (File No. 333-17795) filed with the
Securities and Exchange Commission (the "Commission") on December 13, 1996, as
amended by Amendment No. 1 filed with the Commission on February 13, 1997 and
Amendment No. 2 filed with the Commission on April 29, 1997 (collectively, the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below.
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken by the Issuers in
connection with the authorization and issuance of the Securities. In addition,
we have made such legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and instruments, as we have
deemed necessary or appropriate for purposes of this opinion.
<PAGE>
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
April 29, 1997
Page 2
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject transaction
only of the internal law of the State of New York and the General Corporation
Law of the State of Delaware, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any other local agencies within the state.
Subject to the foregoing and the other matters set forth herein, it
is our opinion that as of the date hereof, the Securities have been duly
authorized by all necessary corporate or company action of the Issuers, and
when executed, authenticated and delivered by or on behalf of the Issuers in
accordance with the terms of the Indenture, will constitute legally valid and
binding obligations of the Issuers, enforceable against the Issuers in
accordance with their terms.
The foregoing opinion relating to the enforceability of the
Securities is subject to the following exceptions, limitations and
qualifications: (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) we express no opinion concerning the
enforceability of the waiver of rights or defenses contained in Section 4.16 of
the Indenture; and (iv) we express no opinion with respect to whether
acceleration of the Securities may affect the collectibility of that portion of
the stated principal amount thereof which might be determined to constitute
unearned interest thereon.
To the extent that the obligations of the Issuers under the
Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee
is duly qualified to engage in the activities contemplated by the Indenture;
that the Indenture has been duly authorized, executed and delivered by the
Trustee and constitutes the legally valid, binding and enforceable obligation
of the Trustee; that the Trustee is in compliance, generally and with respect
to acting as a trustee under the Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under the Indenture.
<PAGE>
Waterford Gaming, L.L.C.
Waterford Gaming Finance Corp.
April 29, 1997
Page 3
We do not render any opinion as to the applicability to the
obligations of the Issuers under the Securities of Section 548 of the Bankruptcy
Code or applicable state law (including, without limitation, Article 10 of the
New York Debtor and Creditor Law) relating to fraudulent transfers and
obligations.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 10.8
EXECUTION COPY
================================================================================
NOTE PURCHASE AGREEMENT
by and between
THE MOHEGAN GAMING AUTHORITY, ISSUER
and
SUN INTERNATIONAL HOTELS LIMITED, PURCHASER
----------------------------------------
Dated as of September 29, 1995
----------------------------------------
$40,000,000
(plus such additional principal amount of Subordinated Notes
as may be issued hereunder from time to time)
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Definitions ................................................ 1
Section 1.02 Other Definitions .......................................... 9
Section 1.03 Schedules, Exhibits, Etc ................................... 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY
Section 2.01 Organization; Good Standing; No Subsidiaries ............... 10
Section 2.02 Power and Authority ........................................ 10
Section 2.03 Due Authorization of this Agreement ........................ 10
Section 2.04 Due Authorization of the Subordinated Notes ................ 10
Section 2.05 No Violations .............................................. 10
Section 2.06 No Litigation .............................................. 11
Section 2.07 No Governmental Action ..................................... 12
Section 2.08 Taxes ...................................................... 12
Section 2.09 Investment Company ......................................... 12
Section 2.10 Liabilities ................................................ 12
Section 2.11 No Other Offers ............................................ 12
Section 2.12 Commissions ................................................ 13
Section 2.13 Additional Representations ................................. 13
Section 2.14 Full Disclosure ............................................ 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
ARTICLE IV
SALE AND REPAYMENT; REDEMPTION AND REPURCHASE
Section 4.01 Sale of the Subordinated Notes ............................. 14
Section 4.02 Stated Maturity ............................................ 14
Section 4.03 Interest on the Subordinated Notes ......................... 14
Section 4.04 Default Interest ........................................... 15
-i-
<PAGE>
Section 4.05 No Mandatory Redemption .................................... 15
Section 4.06 Optional Redemption ........................................ 15
Section 4.07 Notices to Holders ......................................... 16
Section 4.08 Selection of Subordinated Notes for Redemption or Repurchase 16
Section 4.09 Effect of Notice of Redemption ............................. 16
Section 4.10 Deposit of Redemption or Purchase Price .................... 16
Section 4.11 Subordinated Notes Purchased or Redeemed in Part ........... 17
Section 4.12 Repurchase Offers .......................................... 17
ARTICLE V
COVENANTS
Section 5.01 Payment of Subordinated Notes .............................. 19
Section 5.02 Maintenance of Office or Agency ............................ 19
Section 5.03 Reports .................................................... 20
Section 5.04 Compliance Certificate ..................................... 20
Section 5.05 Taxes ...................................................... 20
Section 5.06 Stay, Extension and Usury Laws ............................. 20
Section 5.07 Cash Maintenance Account ................................... 21
Section 5.08 Limitations on Incurrence of Indebtedness .................. 22
Section 5.09 Transactions with Affiliates ............................... 23
Section 5.10 Liens ...................................................... 23
Section 5.11 Line of Business ........................................... 23
Section 5.12 Existence of the Authority ................................. 23
Section 5.13 Offer to Repurchase Upon Change of Control ................. 24
Section 5.14 Use of Proceeds ............................................ 24
Section 5.15 Gaining Licenses ........................................... 25
Section 5.16 Construction ............................................... 25
Section 5.17 Limitation on Status as Investment Company ................. 25
Section 5.18 Further Assurances ......................................... 25
Section 5.19 Limitation on Creation of Subsidiaries, etc ................ 25
Section 5.20 Appointment of Custodian ................................... 26
Section 5.21 Remaining Excess Cash Purchase Offer ....................... 26
Section 5.22 Stipulated Judgment ........................................ 26
ARTICLE VI
CLOSING; CONDITIONS OF THE PURCHASER'S OBLIGATIONS
Section 6.01 Closing .................................................... 27
Section 6.02 Conditions to Closing ...................................... 27
-ii-
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01 Events of Default .......................................... 30
Section 7.02 Acceleration ............................................... 31
Section 7.03 Other Remedies ............................................. 31
Section 7.04 Waiver of Past Defaults .................................... 32
Section 7.05 Rights of Holders of Subordinated Notes to Receive Payment . 32
ARTICLE VIII
SUBORDINATION
Section 8.01 Agreement to Subordinate ................................... 32
Section 8.02 Liquidation, Dissolution, Bankruptcy ...................... 33
Section 8.03 Default on Other Senior Indebtedness ....................... 33
Section 8.04 Acceleration of Payment of the Subordinated Notes .......... 34
Section 8.05 When Distribution Must Be Paid Over ........................ 34
Section 8.06 Subrogation ................................................ 34
Section 8.07 Relative Rights ............................................ 35
Section 8.08 Subordination May Not Be Impaired by the Authority ......... 35
Section 8.09 Distribution or Notice to Representative ................... 35
Section 8.10 Article VIII not to Prevent Events of Default .............. 35
Section 8.11 Reliance by Holders of Senior Indebtedness on
Subordination Provisions ................................... 35
Section 8.12 Amendments ................................................. 35
ARTICLE IX
LIQUIDATION AND DISSOLUTION
ARTICLE X
THE SUBORDINATED NOTES; TRANSFER
Section 10.01 Form of Subordinated Notes ................................. 36
Section 10.02 Restrictive Legends on Subordinated Notes .................. 36
Section 10.03 Transfer of the Subordinated Notes ......................... 37
Section 10.04 Registration of Transfer ................................... 37
Section 10.05 Register ................................................... 37
-iii-
<PAGE>
ARTICLE XI
TERMINATION
Section 11.01 Termination ................................................ 38
Section 11.02 Liability .................................................. 38
ARTICLE XII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 12.01 Option to Effect Legal Defeasance or Covenant Defeasance ... 38
Section 12.02 Legal Defeasance and Discharge ............................. 38
Section 12.03 Covenant Defeasance ........................................ 39
Section 12.04 Conditions to Legal or Covenant Defeasance ................. 39
Section 12.05 Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions ................... 41
Section 12.06 Repayment to Authority ..................................... 41
Section 12.07 Reinstatement .............................................. 42
Section 12.08 Note Collateral ............................................ 42
ARTICLE XIII
MISCELLANEOUS
Section 13.01 Expenses ................................................... 42
Section 13.02 Survival of Representations and Warranties; Severability ... 42
Section 13.03 Entire Agreement; Amendment and Waiver ..................... 43
Section 13.04 Notices, etc ............................................... 43
Section 13.05 Successors and Assigns ..................................... 43
Section 13.06 Descriptive Headings ....................................... 44
Section 13.07 No Personal Liability of Directors, Officers,
Employees and Stockholders ................................. 44
Section 13.08 Governing Law .............................................. 44
Section 13.09 Judicial Proceedings; Waiver of Jury ....................... 44
Section 13.10 Dispute Resolution and Consent to Suit ..................... 45
Section 13.11 Counterparts ............................................... 45
-iv-
<PAGE>
NOTE PURCHASE AGREEMENT (this "Agreement") dated as of September 29, 1995
by and between the Mohegan Tribal Gaming Authority (the "Authority") of the
Mohegan Tribe of Indians of Connecticut (the "Tribe") and Sun International
Hotels Limited ("Purchaser").
WHEREAS, the Authority is authorized to issue and sell up to $40,000,000
aggregate principal amount of its Subordinated Notes due November 15, 2003, plus
such additional aggregate principal amount of Subordinated Notes due November
15, 2003 as may be issued hereunder or contemplated by the Secured Completion
Guarantee (as defined herein) (collectively, the "Subordinated Notes")); and
WHEREAS, the Authority desires to sell to Purchaser, and Purchaser desires
to purchase from the Authority, the Subordinated Notes upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement, the following terms
shall have the meanings specified below:
"Additional Project Financing" shall have the meaning specified in the
Disbursement and Escrow Agreement.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that, for purposes of Section 5.09 only, beneficial ownership of 10% or more of
the voting securities of a Person shall be deemed to be control.
"Authority" means the Mohegan Tribal Gaming Authority, together with any
subdivision, agency, subunit or Subsidiary thereof and any successor and
assignee thereto.
-1-
<PAGE>
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized and reflected as a liability on the
balance sheet in accordance with GAAP.
"Capital Stock" means with respect to any Person, any and all shares,
interests, participations, rights or other equivalent (however designated) in
the profits or losses of such Person, including, (i) if such Person is a
partnership, partnership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of; such partnership or
(ii) with respect to the Authority, any interest or participation in the profits
or losses of the Authority or its business other than fees paid to the Manager
under the Gaming Facility Management Agreement, amounts paid to the state of
Connecticut under the Compact or the memorandum of understanding thereunder,
Cash Flow Participation Interest on the Senior Secured Notes or any fees for
goods and services provided to the Authority in the ordinary course of business
and which is measured by revenues or income.
"Cash Available for Cash Maintenance Account" shall have the meaning
specified in the Senior Secured Note Indenture.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any commercial bank having capital
and surplus in excess of $300 million, (iv) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper rated A-1
or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group and in each case maturing within one year after the date of
acquisition and (vi) investment funds investing solely in securities of the
types described in clauses (ii) - (v) above.
"Cash Flow Participation Interest" shall have the meaning specified in
paragraph 1 of the Senior Secured Notes.
"Cash Maintenance Account" means the cash collateral account required to
be established pursuant to Section 5.07.
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"Change of Control" means the occurrence of any of the following: (i) the
Authority ceases to be a wholly owned unit, instrumentality or subdivision of
the government of the Tribe, (ii) the Authority ceases to have the exclusive
legal right to operate gaming operations of the Tribe, (iii) the Authority fails
to retain in full force and effect at all times all material governmental
consents, permits or legal rights necessary for the operation of the Resort and
such failure continues for a period of 90 consecutive days, (iv) TCA or any
other entity in which Sun International owns, directly or indirectly, at least
50% of the Capital Stock ceases to be the manager of the Resort or fails to hold
any material governmental consent or permit required to manage the Resort and
such failure continues for a period of 90 consecutive days or (v) Sun
International fails to own, directly or indirectly, at least 50% of the Capital
Stock of the manager.
"Compact" means the tribal-state Compact entered into between the Tribe
and the State of Connecticut pursuant to the Indian Gaming Regulatory Act of
1988, PL 100-497, 25 U.S.C. 2701 et seq. as the same may, from time to time, be
amended, or such other Compact as may be substituted therefor.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Development and Construction Agreement" means the Amended and Restated
Gaming Facility Development and Construction Agreement between the Tribe and the
Manager.
"Disbursement and Escrow Agreement" means the Disbursement and Escrow
Agreement among Sun International, the Authority, TCA, the Trustee, First
Fidelity Bank, as Escrow Agent, and Chicago Title Insurance Company, as
Disbursement Agent, substantially in the form delivered to the Trustee under the
Senior Secured Note Indenture.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Eligible Institution" means (a) the Trustee, (b) an affiliate of the
Trustee or (c) a commercial banking institution that is federally chartered or
organized under the laws of the State of Connecticut, is not affiliated with or
chartered by the Tribe, has combined capital and surplus in excess of $500
million, conducts banking operations in the State of Connecticut, and whose debt
is rated "A" (or higher) according to Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.
"Escrow Account" shall have the meaning set forth in the Disbursement and
Escrow Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Fixed Charge Coverage Ratio" shall have the meaning set forth in the
Senior Secured Note Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession.
"Gaming" means any and all activities defined as Class II or Class III
Gaming under IGRA or authorized under the Compact.
"Gaming Facility Management Agreement" or "Management Agreement" means
that certain Amended and Restated Gaming Facility Management Agreement between
the Tribe and the Manager dated August 30, 1995, which shall be assigned by the
Tribe to the Authority on or before the Issuance Date.
"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
and any other agency with authority to regulate any gaming operation (or
proposed gaming operation) owned, managed or operated by the Tribe or the
Authority.
"Gaming License" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct gaming activities of the
Tribe or the Authority, including without limitation, all such licenses granted
under the gaming ordinance of the Tribe, and the regulations promulgated
pursuant thereto, and other applicable federal, state, foreign or local laws.
"Government Securities" means securities that are (a) direct obligations
of the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act, as custodian with respect to any such Government Security or
a specific payment of principal of or interest on any such Government Security
held by such custodian for the account of the holder of such depository receipt;
provided, however, that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
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Government Security or the specific payment of principal of or interest on the
Government Security evidenced by such depository receipt.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"Holder" means a Person in whose name a Subordinated Note is registered.
"IGRA" means the Indian Gaming Regulatory Act of 1988, PL 100-497, 25
U.S.C. 2701 et seq. as same may, from time to time, be amended.
"Indebtedness" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money,
including accrued and unpaid Cash Flow Participation Interest, (ii) evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof), (iii) representing the balance
deferred and unpaid of the purchase price of any property (including Capital
Lease Obligations), except any such balance that constitutes an accrued expense
or trade payable or (iv) representing any Hedging Obligations, if and to the
extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, (b) to the extent not otherwise
included, any obligation by such Person to be liable for, or to pay, as obligor,
guarantor or otherwise, on the Indebtedness of another Person (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business) and (c) to the extent not otherwise included, Indebtedness of another
Person secured by a Lien on any asset of the referent Person (whether or not
such Indebtedness is assumed by such referent Person).
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Management Board, (i) qualified to perform the task for which it
has been engaged and (ii) disinterested and independent with respect to the
Authority and each Affiliate of the Authority.
"Issuance Date" means the closing date for the sale and original issuance
of the Subordinated Notes.
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"Lease" means the Land Lease between the Tribe and the Authority,
delivered pursuant to the Senior Secured Note Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
the interest that was due for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, Security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Board" means the Management Board of the Authority or any
authorized committee of the Management Board of the Authority, as applicable.
"Management Fee" means the management fee under the Gaming Facility
Management Agreement.
"Manager" means TCA or any successor permitted pursuant to this Agreement.
"Note Collateral" has the meaning ascribed to it in the Senior Secured
Note Indenture.
"Obligations" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other monetary liabilities payable under the documentation governing
any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice President of such Person and, in the case of the
Authority, shall include members of the Management Board.
"Officers' Certificate" means a certificate signed on behalf of the
Authority by two Officers of the Authority one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Authority.
"Opinion of Counsel" means an opinion from legal counsel that meets the
requirements of Section 6.02(e) hereof.
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"Paying Agent" means the office maintained by the Authority for the
payment of the Subordinated Notes.
"Permitted Liens" means (i) Liens to secure the Indebtedness permitted by
the terms of the Senior Secured Note Indenture on the hotel assets (excluding
any Lien on land held in trust for the Tribe by the United States of any real
property interest therein, including for buildings, improvements, and fixtures,
other than any leasehold interest) or revenues financed by such Indebtedness, or
on after acquired personal property or intangibles used in connection therewith,
(ii) Liens in favor of the Tribe representing the ground lessor's interest under
the Lease, (iii) Liens on property existing at the time of acquisition thereof
by the Authority; provided, however, that such Liens were in existence prior to
the contemplation of such acquisition, (iv) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business, (v)
Liens to secure Indebtedness (including capital lease obligations) permitted by
clause (c) of the second paragraph of Section 4.09 of the Senior Secured Note
Indenture, covering only the assets acquired with such Indebtedness, (vi) Liens
existing on the date hereof, (vii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor and (viii) Liens
incurred in the ordinary course of business of the Authority with respect to
obligations that do not exceed $250,000 at any one time outstanding and that (a)
are not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of business)
and (b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of business by
the Authority, provided, however, it is acknowledged that Permitted Liens will
not include any Lien on the land held in trust for the Tribe by the United
States or any interest in real property thereon, including the buildings,
improvements and fixtures (other than the leasehold interest pursuant to the
Lease) or which will give the holder thereof a proprietary interest in any
gaming activity as prohibited by 11(b)(2)(A) of IGRA.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Principal Business" means the casino gaming and resort business and any
activity or business incidental, directly related or similar thereto, or any
business or activity that is a reasonable extension, development or expansion
thereof or ancillary thereto, including any hotel, entertainment, recreation or
other activity or business designed to promote, market, support, develop,
construct or enhance the casino gaming and resort business operated by the
Authority.
"Project" means the Resort.
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"Resort" means the multi-amenity gaming and entertainment complex proposed
to be constructed in Montville, Connecticut as described in the Authority's
Offering Memorandum dated September 21, 1995 in connection with the issuance of
the Senior Secured Notes.
"SEC" means the Securities and Exchange Commission.
"Secured Completion Guarantee" means that certain Secured Completion
Guarantee dated as of September 29, 1995 by Sun International in favor of the
Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means all Obligations of the Authority under the
Senior Secured Notes, the Senior Secured Note Indenture and the related
Collateral Documents (as defined in the Senior Secured Note Indenture) and all
Obligations under any other Indebtedness of the Authority that was not issued in
violation of the covenants contained in this Agreement (including the Working
Capital Financing, as permitted by the Senior Secured Note Indenture as in
effect on the Issuance Date), unless the instrument under which such
Indebtedness is incurred expressly provides that such Indebtedness is pari passu
with or subordinated in right of payment to the Subordinated Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include (i) any Indebtedness of the Authority to the Tribe or any
other Affiliate of the Tribe or the Authority (other than any such Indebtedness
expressly authorized, permitted or required to be incurred by the terms of the
Senior Secured Note Indenture), or (ii) trade payables.
"Senior Secured Note Indenture" means that certain Indenture dated as of
September 29, 1995 by and among the Tribe, the Authority and First Fidelity
Bank, as trustee, pursuant to which the Senior Secured Notes are issued.
"Senior Secured Notes" means the Authority's Series A Senior Secured Notes
due November 15, 2002 and its Series B Senior Secured Notes due November 15,
2002.
"Subordinated Indebtedness" means any Indebtedness of the Tribe or the
Authority which is expressly by its terms subordinated in right of payment to
the Senior Secured Notes and any Guarantee thereof.
"Subordinated Notes" means the Subordinated Notes due November 15, 2003
issued by the Authority pursuant hereto.
"Subsidiary" means (i) any instrumentality, or subdivision or subunit of
the Authority that has a separate legal existence or status or whose property
and assets would not be bound by the terms of the Senior Secured Note Indenture
or the Collateral Documents (as defined in the Senior Secured Note Indenture) or
(ii) with respect to any Person, any corporation, association or other business
entity of which more than 50% of the total voting power of
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shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of such Person or a combination thereof.
The Tribe and any other instrumentality of the Tribe that is not also an
instrumentality of the Authority shall not be a Subsidiary of the Authority.
"Sun International" means Sun international Hotels Limited, a Bahamian
corporation, or any of its Affiliates.
"TCA" means Trading Cove Associates, a Connecticut general partnership.
"Tribe" means the Mohegan Tribe of Indians of Connecticut, a sovereign
tribe recognized by the United States of America pursuant to 25 C.F.R. ss.83.
"Trustee" means First Fidelity Bank, as trustee, under the Senior Secured
Note Indenture until a successor replaces it in accordance with the applicable
provisions of the Senior Secured Note Indenture and thereafter means the
successor serving hereunder.
Section 1.02 Other Definitions.
Defined in
Term Section
"Affiliate Transaction" .......................... 5.09
"Cash Available for Cash Maintenance Account" .... 5.07
"Change of Control Offer" ........................ 5.13
"Change of Control Payment" ...................... 5.13
"Closing" ........................................ 6.01
"Closing Date" ................................... 6.01
"Covenant Defeasance" ............................ 12.03
"Deferred Amount" ................................ 5.07
"Defeasance Agent" ............................... 12.04
"Event of Default" ............................... 7.01
"Legal Defeasance" ............................... 12.02
"Material Adverse Effect" ........................ 2.06
"Offer Amount" ................................... 4.12
"Offer Period" ................................... 4.12
"Payment Blockage Period" ........................ 8.03
"Payment Notice" ................................. 8.03
"Project Costs" .................................. 4.01
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"Purchase Date" .................................. 4.12
"Purchase Price" ................................. 4.01
"Refinancing Indebtedness" ....................... 5.08
"Remaining Excess Cash Purchase Amount" .......... 5.21
"Remaining Excess Cash Purchase Offer" ........... 5.21
"Repurchase Offer" ............................... 4.12
"Weighted Average Life to Maturity" .............. 5.08
Section 1.03 Schedules, Exhibits, Etc. References to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement; references to a "Section" or a "subdivision" are, unless
otherwise specified, to a Section or a subdivision of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY
Section 2.01 Organization; Good Standing; No Subsidiaries. The Authority
is duly organized and validly existing as an instrumentality of the Tribe and
has all requisite power and authority to carry on its business as it is being
conducted. The Authority has no Subsidiaries other than those listed on the
organizational chart attached hereto as Exhibit B.
Section 2.02 Power and Authority. The Authority has all requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and the Subordinated Notes and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the power and
authority to issue, sell, deliver and perform all Obligations relating to the
Subordinated Notes as provided herein and therein.
Section 2.03 Due Authorization of this Agreement. This Agreement has been
duly and validly authorized, executed and delivered by the Authority and is the
legally valid and binding agreement of the Authority, enforceable against it in
accordance with its terms.
Section 2.04 Due Authorization of the Subordinated Notes. The Subordinated
Notes have been duly and validly authorized for issuance and sale to Purchaser
by the Authority pursuant to this Agreement and, when issued, authenticated and
delivered against payment therefor in accordance with the terms hereof, will be
the legally valid and binding obligations of the Authority, enforceable against
the Authority in accordance with their terms and entitled to the benefits
hereof.
Section 2.05 No Violations. (a) Neither the Tribe nor the Authority is (i)
in violation of its organizational and governing instruments, (ii) in default
in the performance of
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any bond, debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which it is a party or by which it is bound or to which any of
its properties is subject or (iii) in violation of any law, statute, rule,
regulation, judgment or court decree applicable to it or any of its assets or
properties. There exists no condition that, with notice, the passage of time or
otherwise, would constitute a default under any such document or instrument.
(b) None of (i) the execution, delivery or performance by the
Authority of this Agreement, (ii) the issuance and sale of the Subordinated
Notes or (iii) the transactions contemplated by this Agreement violate, conflict
with or constitute a breach of or of any of the terms or provisions applicable
to the Authority or the Tribe, or a default under (or an event that with notice
or the lapse of time, or both, would constitute a default), or require consent
under, or result in the imposition of a lien or encumbrance on any properties of
the Authority or the Tribe, or an acceleration of any indebtedness of the
Authority or the Tribe pursuant to, (A) the organizational or governing
instruments of the Authority or the Tribe, (B) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which the
Authority or the Tribe is a party or by which any of them or their respective
property is or may be bound, (C) any statute, rule or regulation applicable to
the Authority, the Tribe or their respective assets or properties or (D) any
judgment, order or decree of any court or governmental agency, body or
administrative agency or authority having jurisdiction over the Authority, the
Tribe or their respective assets or properties. No consent, approval,
authorization or order of, or filing, registration, qualification, license or
permit of or with, any court or governmental agency, body or administrative
agency or authority is required for (1) the execution, delivery and performance
by the Authority or the Tribe of this Agreement, (2) the issuance and sale of
the Subordinated Notes, (3) the transactions contemplated by this Agreement,
except such as have been made and obtained. No consents or waivers from any
other person are required for the execution, delivery and performance by the
Authority of this Agreement and the issuance and sale of the Subordinated Notes,
and the transactions contemplated by this Agreement, other than such consents
and waivers as have been obtained.
Section 2.06 No Litigation. There is (a) no action, suit, proceeding or
investigation before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending or threatened or contemplated to
which the Authority or the Tribe is or may be a party or to which the business
or property of the Authority or the Tribe is or may be subject, (b) no statute,
rule, regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body or (c) no
injunction, restraining order or order of any nature by a federal, state or
tribal court or foreign court of competent jurisdiction to which the Authority
or the Tribe is or may be subject or which their respective business, assets, or
property is or may be subject, has been issued that, in the case of clauses (a),
(b) and (c) above, (i) might, singly or in the aggregate, result in a material
adverse effect on the assets, liabilities, business, results of operations,
condition (financial or otherwise), cash flows, affairs or prospects of the
Authority or the
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Tribe, (ii) would interfere with or adversely affect the issuance of the
Subordinated Notes pursuant hereto or (iii) in any manner draw into question the
validity of this Agreement or the Subordinated Notes (any of the events set
forth in clauses (i), (ii) or (iii), a "Material Adverse Effect").
Section 2.07 No Governmental Action. No action has been taken and no
statute, rule, regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Subordinated Notes; no
injunction, restraining order or order of any nature by a federal, state, tribal
or municipal court or any governmental authority or agency or any other tribunal
of competent jurisdiction has been issued that prevents the issuance of the
Subordinated Notes or prevents or suspends the sale of the Subordinated Notes;
and every request of any securities authority or agency of any jurisdiction for
additional information has been complied with in all material respects.
Section 2.08 Taxes. All tax returns required to be filed, and other
filings required to be made, by the Authority and the Tribe in all
jurisdictions, have been so filed. All taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges due or claimed to be
due from such entities or that are due and payable have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided or those currently payable without penalty or interest. To the
knowledge of the Authority, there are no material proposed additional tax
assessments against the Authority, the Tribe or their respective assets or
properties.
Section 2.09 Investment Company. Neither the Authority nor the Tribe is
(i) an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or analogous foreign laws and regulations, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or analogous foreign laws and regulations.
Section 2.10 Liabilities. Other than the obligations of the Authority
under the Senior Secured Notes, the Senior Secured Note Indenture, the
Subordinated Notes, this Agreement and the other documents referred to herein or
therein, neither the Authority nor the Tribe has incurred any liabilities or
obligations, direct or contingent, which are material to the Authority or the
Tribe or entered into any transaction not in the ordinary course of business.
When the Senior Secured Notes are issued and delivered pursuant to the Senior
Secured Note Indenture and the Subordinated Notes are issued and delivered
pursuant to this Agreement, the Senior Secured Notes and Subordinated Notes and
such other Indebtedness referred to therein will be the only Indebtedness of the
Authority or the Tribe.
Section 2.11 No Other Offers. Within the preceding twelve months neither
the Authority nor any person acting on behalf of the Authority has offered or
sold to, or solicited offers to buy from, any Person any Subordinated Notes or
any securities of the same or a
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similar class as the Subordinated Notes, other than the Subordinated Notes
offered or sold to Purchaser.
Section 2.12 Commissions. There are no contracts, agreements or
understandings between the Authority and any other Person that would give rise
to a valid claim against the Authority for a brokerage commission, finder's fee
or like payment in connection with the issuance, purchase and sale of the
Subordinated Notes.
Section 2.13 Additional Representations. Each certificate signed by any
Officer of the Authority and delivered to Purchaser or counsel for Purchaser
shall be deemed to be a representation and warranty by the Authority to
Purchaser as to the matters covered thereby. The Authority shall make such
additional representations on the Issuance Date as may reasonably be requested
by Purchaser, such additional representations to be consistent with those
representations relating to the sale of the Senior Secured Notes.
Section 2.14 Full Disclosure. All of the factual information heretofore or
contemporaneously furnished by or on behalf of the Authority and the Tribe in
writing to Purchaser is, in its entirety, correct and accurate in all material
respects and is not incomplete by omitting to state any fact necessary to make
such information not misleading in light of the circumstances under which such
information was provided to Purchaser. There is no fact or liability known to
the Authority which could reasonably be expected to have a Material Adverse
Effect which has not been disclosed herein or in such other documents,
certificates and statements furnished to purchaser or its counsel.
The Authority acknowledges that Purchaser and, for purposes of the
opinions to be delivered to Purchaser pursuant to Section 6.02(e) hereof,
counsel to the Authority and counsel to Purchaser will rely upon the accuracy
and truth of the foregoing representations and hereby consent to such reliance.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents that (i) it is purchasing the Subordinated Notes for
its own account and not with a view to distribution thereof, (ii) it will offer
or sell the Subordinated Notes only in accordance with the provisions of Section
10.03 hereof, (iii) it is an "accredited investor within the meaning of Rule 501
under the Securities Act and (iv) no part of the source of funds to be used by
Purchaser to pay the purchase price of the Subordinated Notes purchased by
Purchaser hereunder constitutes assets of any employee benefit plan.
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ARTICLE IV
SALE AND REPAYMENT; REDEMPTION AND REPURCHASE
Section 4.01 Sale of the Subordinated Notes. At the Closing (as defined
herein), the Authority will issue and sell to Purchaser and, subject to the
terms and conditions of this Agreement, Purchaser will purchase from the
Authority, Subordinated Notes in an aggregate principal amount of $40,000,000 at
an aggregate purchase price equal to 100% of such principal amount, plus accrued
interest, if any, from the date hereof to the date of delivery (collectively,
the "Purchase Price"), $38.3 million of which shall be payable by wire transfer
of immediately available funds and the $1.7 million balance of which shall be
payable by the exchange of amounts owed from the Authority to Purchaser or any
of its Affiliates. The Authority acknowledges that it has assumed all
responsibility for the repayment of such $1.7 million, which was advanced to the
Tribe prior to the Closing by the Purchaser or any Affiliate of the Purchaser,
in exchange for an assignment from the Tribe of the benefits of such advances.
In addition, in the event Purchaser or any Affiliate of Purchaser pays or
advances any amounts in satisfaction of obligations under the Secured Completion
Guarantee from time to time, not later than the second Business Day following
each date on which the Authority receives written notice advising that a payment
under the Secured Completion Guarantee has been made and indicating the amount
of such payment, the Authority will issue additional Subordinated Notes as
directed by Purchaser in the total amount of recoupment of development costs
(exclusive of interest), including the aggregate principal amount of the amount
paid under the Secured Completion Guarantee; provided that the total amount of
recoupment of development costs (exclusive of interest), including the aggregate
principal amount of borrowings for Project Costs (as defined in the "Senior
Secured Note Indenture") and any advances under the Secured Completion
Guarantee, shall under no circumstances exceed $325,000,000.
Section 4.02 Stated Maturity. Principal, together with all accrued and
unpaid interest on the Subordinated Notes, is payable on November 15, 2003.
Section 4.03 Interest on the Subordinated Notes. Interest on the
Subordinated Notes shall be payable as set forth in the form of Subordinated
Note attached hereto as Exhibit A.
Section 4.04 Default Interest. If the Authority defaults in a payment of
interest, the Authority shall pay the defaulted interest in any lawful manner
plus, to the extent lawful, interest payable on the defaulted interest, to the
Persons who are Holders on a subsequent special record date, in each case at the
rate provided in the Subordinated Notes. The Authority shall notify the Holders
in writing of the amount of such defaulted interest proposed to be paid on each
Note and the date of the proposed payment. The Authority shall fix each such
special record date and payment date; provided, however, that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted
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interest. At least 15 days before the special record date, the Authority shall
mail or cause to be mailed to Holders a notice that states the special record
date, the related payment date and he amount of such interest to be paid.
Section 4.05 No Mandatory Redemption. The Authority shall not be required
to make mandatory redemption or sinking fund payments with respect to the
Subordinated Notes.
Section 4.06 Optional Redemption. (a) The Authority may not redeem or,
except as permitted by Sections 5.13 or 5.21 hereof, otherwise repurchase the
Subordinated Notes until the Senior Secured Notes have been repaid in full.
Thereafter, the Subordinated Notes may be redeemed, in whole or in part, at the
option of the Authority, at par plus accrued and unpaid interest thereon to the
applicable date of redemption.
(b) Notwithstanding any other provision hereof but subject to the
provisions of Article VIII, if any Gaming Regulatory Authority requires that a
Holder or beneficial owner of the Subordinated Notes be licensed, qualified or
found suitable under any applicable gaming laws in order to maintain any gaming
license or franchise of the Authority under any applicable gaming laws, and the
Holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so by such
Gaming Regulatory Authority (or such lesser period that may be required by such
Gaming Regulatory Authority) or if such Holder or beneficial owner is not so
licensed, qualified or found suitable, the Authority has the right, at its
option, (i) to require such Holder or beneficial owner to dispose of such
Holder's or beneficial owner's Subordinated Notes within 30 days of receipt of
such notice of such finding by the applicable Gaming Regulatory Authority (or
such earlier date as may be required by the applicable Gaming Regulatory
Authority) or (ii) to call for redemption of the Subordinated Notes of such
Holder or beneficial owner at a redemption price equal to the lesser of the
principal amount thereof or the price at which such Holder or beneficial owner
acquired the Subordinated Notes, together with, in either case, accrued and
unpaid interest (including deferred interest) 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; provided, however; that the
Authority may not redeem any Subordinated Notes pursuant to this provision if an
Event of Default has occurred and is continuing under the Senior Secured Note
Indenture until there ceases to be any such Event of Default under the Senior
Secured Note Indenture. The Authority shall not be required to pay or reimburse
any Holder or beneficial owner of Subordinated Notes who is required to apply
for any such license, qualification or finding of suitability for the costs of
the licensure or investigation for such qualification or finding of suitability.
Such expenses shall be the obligation of such Holder or beneficial owner.
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(c) Notwithstanding any other provision contained herein, the Tribe at any
time shall be entitled to acquire the Subordinated Notes from the Holders
thereof at a price equal to 100% of the principal amount thereof plus all
accrued and unpaid interest thereon.
Section 4.07 Notices to Holders. If the Authority elects to redeem
Subordinated Notes pursuant to the optional redemption provisions of Section
4.06 or if it is required to make an offer to repurchase the Subordinated Notes
pursuant to Section 5.13 hereof, it shall furnish to the Holders an Officers'
Certificate stating (i) the redemption date, (ii) the principal amount of
Subordinated Notes to be redeemed and the amount of any accrued and unpaid
interest thereon, (iii) the redemption price, (iv) that if any Subordinated Note
is being redeemed in part, the portion of the principal amount of such
Subordinated Note to be redeemed and that, after the redemption date upon
surrender of such Subordinated Note, a new Subordinated Note or Subordinated
Notes in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Subordinated Note, (v) the name and address of the
Paying Agent, (vi) that Subordinated Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price, (vii) that,
unless the Authority defaults in making such redemption payment, interest on
Subordinated Notes called for redemption ceases to accrue on and after the
redemption date and (viii) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or printed on the
Subordinated Notes.
Section 4.08 Selection of Subordinated Notes for Redemption or Repurchase.
If less than all of the Subordinated Notes are being redeemed or offered to be
repurchased at any time, the offer or redemption shall be deemed to be made on a
pro rata basis in such a manner as the Authority may deem fair; provided,
however; that such offer may be adjusted by the Authority in a manner it deems
fair so that the aggregate principal amount of Subordinated Notes held by a
holder is not less than $1,000.
Section 4.09 Effect of Notice of Redemption. Once notice of redemption is
mailed in accordance with Section 4.07 hereof, Subordinated Notes called for
redemption become irrevocably due and payable on the redemption date at the
redemption price. A notice of redemption may be conditioned only on the
completion of any similar offer required to be made in respect of Senior
Indebtedness.
Section 4.10 Deposit of Redemption or Purchase Price. On or prior to any
purchase date with respect to an offer to purchase the Subordinated Notes
required hereunder or redemption date, the Authority shall deposit with the
Paying Agent money sufficient to pay the redemption or purchase price of, and
accrued and unpaid interest, if any, on all Subordinated Notes to be purchased
or redeemed on that date. The Paying Agent shall promptly return to the
Authority any money deposited with the Paying Agent by the Authority in excess
of the amounts necessary to pay the purchase or redemption price of, and accrued
and unpaid interest, on all Subordinated Notes to be redeemed.
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If the Authority complies with the provisions of the preceding paragraph,
on and after the purchase or redemption date, interest shall cease to accrue on
the Subordinated Notes or she portions of Subordinated Notes called for
redemption or accepted for repurchase. If a Subordinated Note is purchased or
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Subordinated Note was registered at the close of
business on such record date. if any Subordinated Note tendered for purchase or
called for redemption shall not be so paid upon surrender for such tender or
redemption because of the failure of the Authority to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the purchase or
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in
the Subordinated Notes and in Section 4.06 hereof.
Section 4.11 Subordinated Notes Purchased or Redeemed in Part. Upon
surrender of a Subordinated Note that is purchased or redeemed in part, the
Authority shall issue to the Holder a new Subordinated Note equal in principal
amount to the unpurchased or unredeemed portion of the Subordinated Note
surrendered.
Section 4.12 Repurchase Offers.
In the event that, pursuant to Section 5.13 or 5.21 hereof, the Authority
shall be required to commence an offer to all Holders to purchase Subordinated
Notes (a "Repurchase Offer"), it shall follow the procedures specified below.
The Repurchase Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Authority shall purchase at the purchase price (as determined in accordance
with Section 5.13 or 5.21 hereof, as the case may be) (the "Offer Amount"), or,
if the aggregate principal amount of Subordinated Notes properly tendered is
less than the Offer Amount, all Subordinated Notes properly tendered in response
to the Repurchase Offer. Payment for any Subordinated Notes so purchased shall
be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest, if
any, shall be paid to the Person in whose name a Subordinated Note is registered
at the close of business on such record date, and no additional interest shall
be payable to Holders who tender Subordinated Notes pursuant to the Repurchase
Offer.
Upon the commencement of a Repurchase Offer, the Authority shall send, by
first class mail, a notice to each of the Holders. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Subordinated Notes pursuant to the Repurchase
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Offer. The Repurchase Offer shall be made to all Holders. The notice, which
shall govern the terms of the Repurchase Offer, shall state:
(a) that the Repurchase Offer is being made pursuant to this Section 4.12
and Section 5.13 or 5.21 hereof, as the case may be, and the length of time of
the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Subordinated Note not properly tendered or accepted for
payment shall continue to accrue interest;
(d) that, unless the Authority defaults in making such payment, any
Subordinated Note accepted for payment pursuant to the Repurchase Offer shall
cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Subordinated Note purchased pursuant
to any Repurchase Offer shall be required to surrender the Subordinated Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Subordinated Note completed, to the Authority, a depositary, if appointed by
the Authority, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(f) that Holder shall be entitled to withdraw their election if the
Authority, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Subordinated Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Subordinated
Note purchased; and
(g) that, if the aggregate principal amount of Subordinated Notes
surrendered by Holders exceeds the Offer Amount, the Subordinated Notes shall be
selected for purchase pursuant to the terms of Section 4.08 hereof, and that
Holders whose Notes were purchased only in part shall be issued new Notes equal
in principal amount to the unpurchased portion of the Notes surrendered.
On or before the Purchase Date, the Authority shall, to the extent lawful,
accept for payment, pursuant to the terms of Section 4.08 hereof, the Offer
Amount of Subordinated Notes or portions thereof properly tendered pursuant to
the Repurchase Offer, or if less than the Offer Amount has been properly
tendered, all Subordinated Notes properly tendered, and shall deliver to the
Holders who elect to have a Subordinated Note purchased an Officers' Certificate
stating that at such Subordinated Notes or portions thereof were accepted for
payment by the Authority in accordance with the terms of this Section 4.12. The
Authority, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later
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than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Subordinated Notes properly
tendered by such Holder and accepted by the Authority for purchase, and the
Authority shall promptly issue a new Subordinated Note and mail or deliver such
new Note to such Holder, in a principal amount equal to any unpurchased portion
of the Subordinated Note surrendered. Any Subordinated Note not so accepted
shall be promptly mailed or delivered by the Authority to the Holder thereof.
The Authority shall publicly announce the results of the Repurchase Offer on the
Purchase Date.
Other than as specifically provided in this Section 4.12, any purchase
pursuant to this Section 4.12 shall be made pursuant to the provisions of
Sections 4.07 through 4.11 hereof to the extent applicable.
ARTICLE V
COVENANTS
From the date hereof until all Subordinated Notes issued pursuant hereto
are no longer outstanding, the Authority covenants with the Purchaser and the
Holders as follows:
Section 5.01 Payment of Subordinated Notes. The Authority shall pay or
cause to be paid the principal of, premium, if any, and interest on the
Subordinated Notes on the dates and in the manner provided in the Subordinated
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Authority, holds as of 10:00
a.m. Eastern Time on the due date money deposited by the Authority in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due.
The Authority shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Subordinated
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
Section 5.02 Maintenance of Office or Agency. The Authority shall maintain
in the Borough of Manhattan, the City of New York, an office or agency where
Subordinated Notes may be surrendered for registration of transfer or for
exchange and where notices and demands to or upon the Authority in respect of
the Subordinated Notes and this Agreement may be served. The Authority shall
give prompt written notice to the Holders of the location, and any change in the
location, of such office or agency. If at any time the Authority shall fail to
maintain any such required office or agency or shall fail to furnish the Holders
with the
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address thereof, such presentations, surrenders, notices and demands may be made
or served at the office designated pursuant to Section 13.04 hereof.
Section 5.03 Reports. The Authority shall provide the Holders with copies
of its annual report and of the information, documents and other reports
specified in Section 13 and 15(d) of the Exchange Act which it files with the
SEC, in each case within five Business Days following such filing. The Authority
will also promptly provide to a Holder such other information concerning the
business, property or financial condition of the Authority and the Resort such
Holder may reasonably request.
Section 5.04 Compliance Certificate. (a) The Authority shall deliver to
the Holders, within 90 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the Authority during the
preceding fiscal year has been made under the supervision of the signing
Officers of the Authority with a view to determining whether the Authority is in
compliance with this Agreement and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Authority
is in compliance with each and every covenant contained in this Agreement and is
not in default in the performance or observance of any of the terms, provisions
and conditions of this Agreement (or, if a Default or Event of Default shall
exist, describing all such Defaults or Events of Default of which he or she may
have knowledge and what action the Authority is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred that remains in existence by reason of which payments on account of the
principal of or interest on the Subordinated Notes is prohibited or if such
event exists, a description of the event and what action the Authority or such
obligor, as the case may be, is taking or proposes to take with respect thereto.
(b) The Authority shall, so long as any of the Subordinated Notes
are outstanding, deliver to the Holders, within five Business Days upon any
Officer becoming aware of any Default or Event of Default or any event of
default under any document, instrument or agreement representing Indebtedness of
the Authority, an Officers' Certificate specifying such Default or Event of
Default and what action the Authority is taking or proposes to take with respect
thereto.
Section 5.05 Taxes. The Authority shall pay, prior to delinquency, all
material taxes, assessments, and governmental levies except such as are
contested in good faith and by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders.
Section 5.06 Stay Extension and Usury Laws. The Authority covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Agreement, and the Authority (to the extent that it may lawfully do so)
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hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Holders, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
Section 5.07 Cash Maintenance Account. Subject to the provisions of the
next paragraph, commencing with respect to January 1997, the Authority shall
deposit into the Cash Maintenance Account, on a monthly basis, 1/12 of the
amounts set forth below for each year indicated plus any amounts deferred from
any prior month pursuant to the next paragraph no later than 25 days after the
end of such calendar month:
Year Amount
---- ------
1997 $6,000,000
1998 $6,000,000
1999 $6,000,000
2000 $6,000,000
2001 $6,000,000
2002 thereafter, such amount necessary to
maintain at least $36,000,000 in the
Cash Maintenance Account.
To the extent that any amount required to be deposited into the Cash
Maintenance Account in any month exceeds the Cash Available for Cash Maintenance
Account for the prior month, then the deposit of such excess amount may be
deferred until the next succeeding month or months in which the Cash Available
for Cash Maintenance Account is sufficient. Until all Obligations in respect of
the Senior Secured Notes have been paid in full in cash, the Trustee may
withdraw amounts from and otherwise deal with and control the Cash Maintenance
Account in accordance with the terms of the Senior Secured Note Indenture and
the Cash Collateral Accounts Pledge and Security Agreement (as defined in the
Senior Secured Note Indenture). The holders of each Subordinated Note
acknowledge that by accepting a Subordinated Note, the Trustee does not hold or
maintain the Cash Maintenance Account for the benefit of any holder of
Subordinated Notes and that the Trustee in exercising any right or remedy in
respect of the Cash Maintenance Account for the benefit of the Senior Secured
Notes owes no duty or obligation to the holders of the Subordinated Notes to
satisfy the Obligations under the Senior Secured Notes from any other source or
to maximize or leave any residual amount in the Cash Maintenance Account.
The Authority shall establish the Cash Maintenance Account with an
Eligible Institution. The Cash Maintenance Account and any investments
constituting funds thereof shall be in the name of the Trustee for the ratable
benefit of the Holders of the Senior Secured Notes and, upon payment thereof in
full, the Subordinated Notes.
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The Authority shall grant and maintain a perfected, first priority
security interest in favor of the Trustee for the ratable benefit of the holders
of Senior Secured Notes and a 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; provided,
however, that the perfected, second priority security interest in favor of the
Holders shall not impair the right of the Authority or the Trustee to transfer
or direct the transfer of the amounts in, or investments constituting amounts
in, the Cash Maintenance Account to the Holders of the Senior Secured Notes free
and clear of such second priority security interest in accordance with the terms
of the Senior Secured Note Indenture; provided, further, that the security
interest in favor of the Holders may be subordinate to the security interest in
favor of the provider of the Working Capital Financing, as permitted by the
Senior Secured Note Indenture as in effect on the Issuance Date. Immediately
upon the repayment in full of all Obligations under the Senior Secured Notes,
the Senior Secured Note Indenture and, if applicable, the Working Capital
Financing, and the discharge thereof, the second priority security interest in
favor of the Holders shall become (and the Authority shall take all action
necessary to ensure the same shall become) a perfected, first priority security
interest in favor of the Holders for their ratable benefit in all amounts in, or
investments constituting amounts in, the Cash Maintenance Account.
If an Event of Default has occurred and is continuing and all Obligations
under the Senior Secured Notes and the Senior Secured Note Indenture and the
Working Capital Financing, if applicable, have been repaid and the Senior
Secured Note Indenture has been discharged, the Holders shall have the authority
to direct any investments in the Cash Maintenance Account, liquidate or sell any
investments therein, or to take possession of any cash or investments therein
and to hold such amounts as additional collateral, apply any such cash or
investments to the payment of principal and interest on the Subordinated Notes,
maintain, repair or otherwise protect the collateral or the other rights of the
Holders or to take any other appropriate action or remedy.
Upon repayment in full of all obligations under the Subordinated Notes and
this Agreement and the discharge hereof, then the security granted herein shall
be released, the Holders shall execute such documents as may be necessary to
evidence and effect such release, release and any amounts in the Cash
Maintenance Account shall be returned to the Authority or to whomsoever a court
of competent jurisdiction may so direct.
Section 5.08 Limitations on Incurrence of Indebtedness. Excluding the
Subordinated Notes to be issued and sold at the Closing, the total outstanding
principal balance of Indebtedness of the Authority shall not exceed an aggregate
of $270 million, plus Subordinated Notes to evidence indebtedness incurred
pursuant to the Secured Completion Guarantee, at any one time outstanding;
provided, however, that the total Indebtedness of the Authority permitted to be
outstanding at any one time shall be reduced to the extent that the outstanding
principal amount of the Senior Secured Notes is reduced from time to time, and
provided further that with respect to any incurrence by the Authority of
Indebtedness (the "Refinancing
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Indebtedness") issued in exchange for, or the proceeds of which are used to
extend, refinance, renew, replace, or refund outstanding Indebtedness (i) the
principal amount of such Refinancing Indebtedness shall not exceed the principal
amount of Indebtedness so extended, refinanced, renewed, replaced, substituted
or refunded (plus the amount of reasonable expenses incurred and any premium
paid in connection therewith), and (ii) if Refinancing Indebtedness is being
issued to refinance the Senior Secured Notes or any portion thereof, such
Refinancing Indebtedness shall have a Weighted Average Life to Maturity (as
defined in the Senior Secured Note Indenture) not less than the Weighted Average
Life to Maturity of the Senior Secured Notes.
Section 5.09 Transactions with Affiliates. The Authority shall not sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, the Tribe, the Manager or any of their Affiliates (each of the foregoing, an
"Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms that
are no less favorable to the Authority than those that would have been obtained
in a comparable transaction by the Authority with an unrelated Person and (b)
the Authority delivers to the Holders (i) with respect to any Affiliate
Transaction involving aggregate payments in excess of $2 million, a resolution
adopted by a majority of the disinterested members of the Management Board
approving such Affiliate Transaction and set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
(ii) with respect to any Affiliate Transaction involving aggregate payments in
excess of $5 million, a written opinion as to the fairness to the Authority from
a financial point of view issued by an independent financial advisor with assets
in excess of $1 billion. The foregoing provisions shall not apply to payments
pursuant to the Development and Construction Agreement, the Gaming Facility
Management Agreement or the Secured Completion Guarantee.
Section 5.10 Liens. The Authority shall not directly or indirectly create,
incur, assume or suffer to exist any Lien, except Permitted Liens, on any asset
owned as of the Issuance Date or thereafter acquired by the Authority, or any
income or profits therefrom, or assign or convey any right to receive income
therefrom.
Section 5.11 Line of Business. For so long as any Subordinated Notes are
outstanding, the Authority shall not engage in any business or activity other
than the Principal Business.
Section 5.12 Existence of the Authority. Subject to Article IX, the
Authority shall do or cause to be done all things necessary to preserve and keep
in full force and effect (i) its existence in accordance with the respective
organizational, statutory, constitutional or legal documents (as the same may be
amended from time to time) of the Authority or the Tribe and (ii) the rights
(charter and statutory), licenses and franchises of the Authority.
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Section 5.13 Offer to Repurchase Upon Change of Control. (a) Upon the
occurrence of a Change of Control, the Authority shall make an offer to each
Holder to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of the Subordinated Notes pursuant to the offer described below (the
"Change of Control Offer") at a price in cash (the "Change of Control Payment")
equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid
interest, to the date of purchase; provided, however, that the Authority shall
not be required to make such an offer to purchase if such event deemed to be a
Change of Control ceases to exist prior to the closing of such offer to
purchase; provided further, however, that the Authority shall not be required to
begin such an offer to purchase if, on or before the 120th day after the Change
of Control (if such Change of Control arises under either clause (iv) or (v) of
the definition thereof) the Manager is replaced with a Person, or the Authority
is using its best efforts to retain a Person, with experience and reputation in
the gaming industry which is comparable to that of Sun International. Such
Change of Control Offer shall be made in accordance with the procedures set
forth in Article IV hereof. The Authority shall commence such Change of Control
Offer by mailing the notice set forth in Section 4.07 hereof to Holders. The
Authority shall comply with the requirements of Rule 14e-1 under the Exchange
Act, and any other securities laws and regulations thereunder to the extent such
laws or regulations are applicable in connection with the repurchase of the
Subordinated Notes pursuant to a Change of Control Offer.
(b) Notwithstanding the provisions of Section 5.13(a), if at the
time of a Change of Control, the Authority is prohibited by the terms of the
Senior Secured Note Indenture from purchasing or offering to purchase any of the
Subordinated Notes that may be tendered by Holders pursuant to a Change of
Control Offer, then prior to the mailing of notice to Holders but in any event
within 30 days following any Change of Control, the Authority shall (i) offer to
repurchase all Senior Secured Notes and effect such repurchase with respect to
all Senior Secured Notes which are tendered therefor or (ii) obtain the
requisite consent under the Senior Secured Note Indenture to permit the purchase
of the Subordinated Notes. If the Authority is unable to repurchase all Senior
Secured Notes tendered for repurchase and, after using its best efforts, is
unable to obtain the requisite consent of the holders of Senior Secured Notes to
make a Change of Control Offer to the Holders, then the Authority shall not be
required to make such Change of Control Offer to the Holders to the extent such
Change of Control Offer would violate the terms of the Senior Secured Note
Indenture until such time as such Change of Control Offer would not violate such
terms. The deferral of the Change of Control Offer in accordance with the terms
hereof shall not constitute an Event of Default hereunder.
Section 5.14 Use of Proceeds. The Authority shall use the net proceeds
from the sale of the Subordinated Notes, the Senior Secured Notes and the
Additional Project Financing only (a) to finance a loan to the Tribe to enable
the Tribe to acquire the real property on which the Resort will be built, (b)
for any use permitted under the Senior Secured Note Indenture and (c) to pay
fees and expenses in connection with the uses described in clauses (a) and (b).
The Authority shall cause the net proceeds from the sale of the Subordinated
Notes
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(other than any portion of such net proceeds used immediately to acquire the
land on which the Resort is to be built) the sale of the Senior Secured Notes
and the Additional Project Financing to be deposited into the Escrow Account and
disbursed only in accordance with the Disbursement and Escrow Agreement.
Section 5.15 Gaming Licenses. The Authority covenants 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 Resort provided, that, if in the
course of the exercise of its governmental or regulatory functions that the
Authority is required to suspend or revoke any consent, permit or license or
close or suspend any operation of any part of the Resort as a result of any
noncompliance with law, the Authority will use its best efforts to promptly and
diligently correct such noncompliance or replace any personnel causing such
noncompliance so that the Resort will be opened and fully operating.
The Authority shall provide Holders promptly after receipt by the
Authority any Notice of Violation, Order of Temporary Closure or Assessment of
Civil Fines from the National Indian Gaming Commission pursuant to 25 C.F.R.
Part 573 or 575 and any notice of noncompliance issued by or cause of action
commenced by the State of Connecticut under Section 3 of the Compact.
Section 5.16 Construction. The Authority shall cause construction of the
Resort, including the furnishing, fixturing and equipping thereof, to be
prosecuted with diligence and continuity in a good and workmanlike manner
substantially in accordance with the plans and within the budget therefor.
Section 5.17 Limitation on Status as Investment Company. The Authority
shall not become an Investment Company subject to registration as an "investment
company" (as that term is defined in the Investment Company Act of 1940, as
amended), or from otherwise becoming subject to regulation under the Investment
Company Act of 1940.
Section 5.18 Further Assurances. The Authority shall do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments as may be required
from time to time in order to carry out more effectively the purposes of this
Agreement.
Section 5.19 Limitation on Creation of Subsidiaries, etc. The Authority
will not create any instrumentality, subdivisions or subunits unless the actions
and assets of such instrumentalities, subdivisions or subunit are subject to or
bound by the terms of the Senior Secured Note Indenture and the Collateral
Documents (as defined in the Senior Secured Note Indenture) and this Note
Purchase Agreement. The Authority will not form, acquire or own any Subsidiary.
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Section 5.20 Appointment of Custodian. The Authority will not, pursuant to
or within the meaning of Bankruptcy Law, appoint, or consent to, permit or
suffer the appointment of a Custodian of the Authority or for all or
substantially all of the property of the Authority.
Section 5.21 Remaining Excess Cash Purchase Offer. Capitalized terms used
but not defined in this Section 5.21 shall have the meanings ascribed thereto in
Section 4.28 of the Senior Secured Note Indenture. To the extent that the
aggregate principal amounts of Senior Secured Notes and premium, if any,
properly tendered pursuant to any Excess Cash Purchase Offer required to be made
pursuant to the Senior Secured Note Indenture together with any premium thereon
is less than the Excess Cash Purchase Amount with respect thereto, the Authority
shall, subject to the provisions of Article VIII, within 15 days after the date
fixed for the closing of such Excess Cash Purchase Offer, make an offer to all
Holders of 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 (the "Remaining Excess Cash Purchase
Amount") in respect of the fiscal year then ended, at an offer price in cash
equal to the principal amount of the Subordinated Notes to be purchased plus
accrued and unpaid interest, if any, to the date fixed for the closing of such
Remaining Excess Cash Purchase Offer. If less than all Subordinated Notes
tendered in such Remaining Excess Cash Purchase Offer are required to be
purchased by the Authority, the Authority will purchase Subordinated Notes pro
rata from each tendering holder in accordance with the principal amount of
indebtedness properly tendered.
To the extent that the aggregate principal amounts properly tendered
pursuant to any Remaining Excess Cash Purchase Offer is less than the Remaining
Excess Cash Purchase Amount with respect thereto, the Authority may, subject to
other provisions of the Senior Secured Note Indenture, use any remaining Excess
Cash Flow for general purposes of the Authority.
Any offer to repurchase Subordinated Notes pursuant to this Section 5.21
shall be made in accordance with the procedures set forth in Section 4.12
hereof.
Section 5.22 Stipulated Judgment. The stipulated judgment entered pursuant
to Section 12.07(c) of the Senior Note Indenture shall include a declaration
that the Subordinated Notes and this Note Purchase Agreement are duly
authorized, lawful and valid obligations of the Authority, enforceable in
accordance with their terms.
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ARTICLE VI
CLOSING; CONDITIONS OF THE PURCHASER'S OBLIGATIONS
Section 6.01 Closing. The sale of the Subordinated Notes to be purchased
by Purchaser shall take place at the offices of Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York, at 10:00 a.m, New York City time, at a
closing (the "Closing") on September 29, 1995 or such other place and time as
may be agreed to by Purchaser and the Authority (such date on which the Closing
shall actually have occurred, the "Closing Date"). At the Closing, the Authority
will deliver to Purchaser the Subordinated Notes to be purchased by Purchaser on
such date in the form of a single Subordinated Note (or such greater number of
Subordinated Notes as Purchaser may request) dated the Closing Date and
registered in Purchaser's name (or in the name of Purchaser's nominee), against
delivery by Purchaser to the Authority of the Purchase Price.
Section 6.02 Conditions to Closing. Purchaser's obligation to purchase and
pay for the Subordinated Notes is subject to the fulfillment to Purchaser's
reasonable satisfaction, prior to or at the Closing, of the following
conditions:
(a) All of the representations and warranties of the Authority
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively, except that any representations and
warranties that relate solely to a particular date or period shall be true and
correct as of such date or period.
(b) The Authority shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it prior to or at the Closing and at the time of the Closing
no Default or Event of Default shall have occurred and be continuing.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, have a Material Adverse Effect; no action,
suit, proceeding or investigation shall have been commenced and be pending
against or affecting or, to the best knowledge of the Authority threatened
against, the Authority before any court or governmental agency, body or
administrative agency or authority that, if adversely determined, might result
in a Material Adverse Effect; and no stop order shall have been issued
preventing the issuance of the Subordinated Notes or which might have a Material
Adverse Effect.
(d) Purchaser shall have received certificates, dated the Closing
Date, signed by two members of the Management Board confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b) and (c) of this
Section 6.02.
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(e) Purchaser shall have received on the Closing Date the opinion
(satisfactory to Purchaser and Purchaser's counsel), dated the Closing Date of
Hobbs, Straus, Dean & Walker, counsel for the Authority, addressed to Purchaser,
to the effect that:
(i) The Authority is validly existing as an instrumentality of
the Tribe and has all requisite power and authority to carry on its
business as it is being conducted and as it is proposed to be conducted.
(ii) The Authority has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, including, without
limitation, the power and authority to issue, sell, deliver and perform
its obligations under the Subordinated Notes as provided herein.
(iii) This Agreement has been duly and validly authorized,
executed and delivered by the Authority and is the legally valid and
binding agreement of the Authority enforceable against it in accordance
with its terms, except as rights of indemnity may be limited by state and
federal securities laws, and except as such enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity.
(iv) The Subordinated Notes have been duly and validly
authorized for issuance and sale to Purchaser by the Authority pursuant to
this Agreement and are the legally valid and binding obligations of the
Authority, enforceable against the Authority in accordance with their
terms and entitled to the benefits hereof, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity.
(v) No registration under the Securities Act of the
Subordinated Notes is required for the sale thereof to Purchaser as
contemplated hereby assuming (i) Purchaser is an "accredited investor" as
defined under the Securities Act, (ii) the absence of general solicitation
in connection with the sale of the Subordinated Notes; and (iii) the
accuracy of the Authority's representations in Article II.
(vi) None of (A) the execution, delivery or performance by the
Authority of this Agreement, (B) the issuance, sale and performance by the
Authority of the Subordinated Notes or (C) the transactions contemplated
by this Agreement, violate, conflict with or constitute a breach of any of
the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or
require consent under, or result in the imposition of a lien or
encumbrance on any properties of the Authority or an acceleration of any
indebtedness
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of the Authority pursuant to, (i) the governing instruments of the
Authority, (ii) any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which the Authority is a party
or by which the Authority is a party or by which it or its property is or
may be bound, (iii) any statute, rule or regulation, known to such
counsel, applicable to the Authority or its assets or properties or (iv)
any judgment, order or decree of any court or governmental agency, body or
administrative agency or authority having jurisdiction over the Authority
or its assets or properties. Except as such as have been obtained or made,
no consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or governmental
agency, body or administrative agency or authority is required for (1) the
execution, delivery and performance by the Authority of this Agreement,
(2) the issuance, sale and performance by the Authority of the
Subordinated Notes or (3) the transactions contemplated by this Agreement,
except such as have been obtained and made under the Securities Act, and
state securities or "blue sky" laws and regulations.
(vii) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Subordinated Notes;
no injunction, restraining order or order of any nature by a federal,
state or tribal court of competent jurisdiction has been issued that
prevents the issuance of the Subordinated Notes to Purchaser; and every
request of any securities authority or agency of any jurisdiction for
additional information has been complied with in all material respects.
(viii) The Authority is not, and after the sale of the
Subordinated Notes will not be (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act, or analogous foreign laws and regulations, or (ii)
a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or analogous foreign laws and regulations.
(f) The Authority shall cause such additional opinions to be issued
as may be reasonably requested by Purchaser, such additional opinions to be
consistent with those opinions delivered in connection with the sale of the
Senior Secured Notes.
(g) The Authority shall have consummated the sale of the Senior
Secured Notes on substantially the terms set forth and described in that certain
Offering Memorandum dated September 21, 1995 distributed in connection with the
offer and sale of the Senior Secured Notes.
(h) Purchaser shall have received an opinion (reasonably
satisfactory to Purchaser), dated the Closing Date, of Neal Gerber & Eisenberg
counsel to Purchaser, covering such matters as are customarily covered in such
opinions.
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(i) The Authority shall have paid the fees, expenses and
disbursements required to be paid pursuant hereto, including, without
limitation, the fees and expense set forth in Section 13.01, which are reflected
in statements rendered prior to or on the Closing Date.
(j) The Authority shall cause such additional conditions to be
satisfied as may be reasonably requested by Purchaser, such additional
conditions to be consistent with those conditions to be satisfied in connection
with the sale of the Senior Secured Notes.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01 Events of Default. An "Event of Default" occurs if:
(a) the Authority defaults in the payment when due of interest on
the Subordinated Notes and such default continues for a period of 30 days;
provided, however, that payments of interest that are permitted to be deferred
as provided in the Subordinated Notes shall not become due for this purpose
until such payment is required to be made pursuant to the terms of the
Subordinated Notes;
(b) the Authority defaults in the payment when due of principal of
or premium, if any, on the Subordinated Notes when the same becomes due and
payable at maturity, upon redemption (or in connection with an offer to
purchase) or otherwise;
(c) the Authority fails to observe or perform any other covenant,
representation, warranty, or other agreement hereunder or under the Subordinated
Notes for 90 days after written notice to the Authority by Holders of 25% in
aggregate principal amount of the then outstanding Subordinated Notes;
(d) the Authority pursuant to or within the meaning of Bankruptcy
Law or similar law or tribal ordinance:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it
in an involuntary case;
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
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(v) generally is not paying its debts as they become due; or
(e) a court or tribal authority of competent jurisdiction enters an
order or decree under any Bankruptcy Law or similar law or tribal ordinance
that:
(i) is for relief against the Authority in an involuntary
case;
(ii) appoints a custodian of the Authority for all or
substantially all of the property of the Authority; or
(iii) orders the liquidation of the Authority;
and the order or decree remains unstayed and in effect for 60 consecutive days.
Section 7.02 Acceleration. If any Event of Default (other than an Event of
Default specified in clause (d) or (e) of Section 7.01 hereof), occurs and is
continuing, the Holders of at least 25% in principal amount of the then
outstanding Subordinated Notes may declare the principal, premium, if any,
interest (including interest accrued or deferred) and any other monetary
obligations on all of the Subordinated Notes to be due and payable immediately;
provided, however, that no such declaration may be made unless and until all
Obligations under the Senior Secured Notes and the Senior Secured Note Indenture
have been paid in full and the same have been discharged. Notwithstanding the
foregoing, if (i) an Event of Default specified in clause (d) or (e) of Section
7.01 hereof occurs and (ii) all obligations under the Senior Secured Notes and
the Senior Secured Note Indenture have been paid in full, then the principal,
premium, if any, interest (including all interest accrued or deferred) and any
other monetary obligations on all of the outstanding Subordinated Notes shall be
due and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Subordinated
Notes may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
Section 7.03 Other Remedies. Subject to Article VIII, if an Event of
Default occurs and is continuing, the Holders (by action of the Holders of a
majority in aggregate principal amount of the then outstanding Subordinated
Notes) may pursue any available remedy to collect the payment of principal,
premium, if any, and interest on the Subordinated Notes or to enforce the
performance of any provision of the Subordinated Notes or this Agreement.
A delay or omission by the Holders in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
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Section 7.04 Waiver of Past Defaults. Holders of not less than a majority
in aggregate principal amount of the then outstanding Subordinated Notes may on
behalf of the Holders of all of the Subordinated Notes waive an existing Default
or Event of Default and its consequences hereunder, except a continuing Default
or Event of Default in the payment of the principal of or premium, if any, or
interest on the Subordinated Notes (including in connection with an offer to
purchase); provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Subordinated Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. 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 Agreement; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
Section 7.05 Rights of Holders of Subordinated Notes to Receive Payment.
Notwithstanding any other provision of this Agreement, but subject to Article
VIII hereof, the right of any Holder to receive payment of principal, premium,
if any, and interest on the Subordinated Notes on or after the respective due
dates expressed in the Subordinated Notes (including in connection with an offer
to purchase), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
ARTICLE VIII
SUBORDINATION
Section 8.01 Agreement to Subordinate. The Authority agrees, and each
Holder by accepting a Subordinated Note agrees, that the indebtedness evidenced
by the Subordinated Notes is subordinated in right of payment, to the extent and
in the manner provided in this Article VIII, to the prior payment of all
Obligations in respect of all Senior Indebtedness and that the subordination is
for the benefit of the holders of Senior Indebtedness. The Subordinated Notes
shall in all respects rank pari passu or senior to all other Subordinated
Indebtedness of the Authority.
Payments of interest in accordance with the terms of the Subordinated
Notes as in effect on the date of this Agreement may be made only if, at the
time of such payment, no Default or Event of Default (as such terms are defined
in the Senior Secured Note Indenture) exists and is continuing. No payment in
respect of the principal of or premium, if any, on the Subordinated Notes may be
made, and no Subordinated Notes may be defeased, repurchased, redeemed or
otherwise retired, until all Obligations in respect of the Senior Secured Notes
have been paid in full, except that (i) payments of principal and premium, if
any, of 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
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Control Offer (as defined in the Senior Secured Note Indenture) and no other
Default or Event of Default has occurred and is continuing under the Senior
Secured Note Indenture, (ii) payments of principal of and interest on
Subordinated Notes to be redeemed in accordance with the provisions 4.06(b) may
be made if no Default or Event of Default has occurred and is continuing under
the Senior Secured Note Indenture and (iii) payments of principal of and
interest on Subordinated Notes tendered in connection with a Remaining Excess
Cash Purchase Offer if no Default or Event of Default has occurred and is
continuing under the Senior Secured Note Indenture.
Section 8.02 Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of the Authority to creditors in a total or partial
liquidation or a total or partial dissolution of the Authority, or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Authority or its property, in an assignment for the benefit of
creditors or any marshalling of the Authority's assets and liabilities:
(a) holders of Senior Indebtedness shall be entitled to receive
payment in full of all Obligations in respect of the Senior Indebtedness before
the Holders shall be entitled to receive any payment in respect of principal of,
or premium, if any, or interest on the Subordinated Notes; and
(b) until all Obligations in respect of the Senior Indebtedness are
paid in full, any distribution to which the Holders would be entitled but for
this Article VIII shall be made to holders of Senior Indebtedness as their
interests may appear, except that the Holders may receive equity securities or
debt securities that are subordinated in right and priority of payment to the
Senior Secured Notes (or any securities issued in exchange for the Senior
Secured Notes) to at least the same extent as the Subordinated Notes are
subordinated to the Senior Secured Notes.
Section 8.03 Default on Other Senior Indebtedness. In addition to the
provisions with respect to the Senior Secured Notes set forth above, the
Authority may not pay principal of, premium, if any, or interest on, the
Subordinated Notes or make any deposit pursuant to Article XII and may not
repurchase, redeem or otherwise retire any Subordinated Notes (collectively,
"pay the Subordinated Notes") if (i) any other Senior Indebtedness is not paid
when due or (ii) any other default on any other Senior Indebtedness occurs and
the maturity of such other Senior Indebtedness is accelerated in accordance with
its terms unless, in either case, the default has been cured or waived, any such
acceleration has been rescinded or such other Senior Indebtedness has been paid
in full; provided, however, that the Authority may make payments in respect of
the Subordinated Notes without regard to the foregoing if the Authority receives
written notice approving such payment from the authorized representative in
respect of such other Senior Indebtedness and provided further that nothing
contained in this Section 8.03 shall impair the rights of the Holders in respect
of the Cash Maintenance Account as set forth in the fourth paragraph of Section
5.07 hereof. During the continuance of any default (other than a default
described in clause (i) of the preceding sentence) with respect to
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any Senior Indebtedness (other than the Senior Secured Notes) pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Authority may not pay the
Subordinated Notes for a period (a "Payment Blockage Period") commencing upon
the receipt by the written notice of such default from the authorized
representative of such Senior Indebtedness specifying an election to effect such
prohibition (a "Payment Notice") and ending 179 days thereafter (or unless
earlier terminated (i) by written notice to the Authority from the authorized
representative which gave such Payment Notice, (ii) because such default is no
longer continuing or (iii) because such Senior Indebtedness has been repaid in
full). Notwithstanding the provisions described in the immediately preceding
sentence, unless the holders of such Senior Indebtedness or the authorized
representative of such holders shall have accelerated the maturity of such
Senior Indebtedness and not rescinded such acceleration, the Authority may
resume payments on the Subordinated Notes after the end of such Payment Blockage
Period. Not more than one Payment Notice may be given in any consecutive 360-day
period, irrespective of the number of defaults with respect to Senior
Indebtedness during such period. For purposes of this Section, no default or
event of default which existed or was continuing on the date of the commencement
of any Payment Blockage Period with respect to the Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the authorized
representative of such Senior Indebtedness (whether or not within a period of
360 consecutive days) unless such default or event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
Section 8.04 Acceleration of Payment of the Subordinated Notes. If the
payment of the Subordinated Notes is accelerated because of an Event of Default,
the Authority and the Holders shall promptly notify holders of Senior
indebtedness (if any) of the acceleration. If any Senior Indebtedness is
outstanding, 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 this Article VIII and Article VII otherwise permits the payment at that
time.
The provisions of this Article VIII, the provision of Article VII with
respect to the acceleration of the Subordinated Notes, the provisions of Section
4.03 and paragraph 1 of the Subordinated Notes are intended for the benefit of,
and shall be directly enforceable by, the holders of the Senior Secured Notes.
Section 8.05 When Distribution Must Be Paid Over. If a distribution is
made to the Holders that because of this Article VIII should not have been made
to them, the Holders who receive the distribution shall hold such amounts in
trust for holders of Senior Indebtedness and pay such amounts over to such
holders of the Senior Indebtedness as their interests may appear.
Section 8.06 Subrogation. After all Senior Indebtedness has been paid in
full and until the Holders have been paid in full, such Holders shall be
subrogated to the rights of
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holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness. A distribution made under this Article VIII to holders of Senior
Indebtedness which otherwise would have been made to the Holders is not, as
between the Authority and the Holders, a payment by the Authority on Senior
Indebtedness.
Section 8.07 Relative Rights. This Article VIII defines the relative
rights of the Holders and the holders of Senior Indebtedness. Nothing in this
Agreement shall:
(a) impair, as between the Authority and the Holders, the obligation
of the Authority, which is absolute and unconditional, to pay principal of,
premium, if any, and interest on the Subordinated Notes in accordance with their
terms; or
(b) prevent any Holder of the Subordinated Notes from exercising its
available remedies upon a Default, subject to the rights of holders of Senior
Indebtedness to receive distributions otherwise payable to the Holders.
Section 8.08 Subordination May Not Be Impaired by the Authority. No right
of any holder of Senior Indebtedness to enforce the subordination of the
indebtedness evidenced by the Subordinated Notes shall be impaired by any act or
failure to act by the Authority or by its failure to comply with this Agreement.
Section 8.09 Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their representative, if
any, as may be designated in the instruments governing such Senior Indebtedness.
Section 8.10 Article VIII not to Prevent Events of Default. The failure to
make payment pursuant to the Subordinated Notes by reason of any provision of
this Article VIII shall not be construed as preventing the occurrence of a
Default.
Section 8.11 Reliance by Holders of Senior Indebtedness on Subordination
Provisions. Each Holder by accepting a Subordinated Note acknowledges and agrees
that the foregoing subordination provisions and the provisions in the
Subordinated Notes with respect to the limitation or deferral of the payment of
interest are, and are intended to be, an inducement and a consideration to each
holder of any Senior Indebtedness, whether such Senior Indebtedness was created
or acquired before or after the issuance of the Subordinated Notes, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
Section 8.12 Amendments. The provisions of this Article VIII and the
provisions in the Subordinated Notes with respect to the limitation or deferral
of the payment of interest
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shall not be amended or modified without the written consent of the holders of
all Senior Indebtedness.
ARTICLE IX
LIQUIDATION AND DISSOLUTION
The Authority shall not sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions. The Authority shall not consolidate or merge with or into
any other Person.
ARTICLE X
THE SUBORDINATED NOTES; TRANSFER
Section 10.01 Form of Subordinated Notes. The Subordinated Notes will be
substantially in the form attached as Exhibit A hereto, with such changes
therefrom, if any, as may be approved by the Authority and Purchaser.
Section 10.02 Restrictive Legends on Subordinated Notes. Each Subordinated
Note issued pursuant to this Agreement shall be stamped or otherwise imprinted
with a legend substantially in the following form:
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE NOTE
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 NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE TRIBE AND THE AUTHORITY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
AUTHORITY SO REQUESTS), (2) TO THE AUTHORITY OR (3) PURSUANT TO
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AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT 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 NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Section 10.03 Transfer of the Subordinated Notes. Purchaser shall not
sell, transfer, assign, convey or otherwise dispose of the Subordinated Notes to
any person unless such transfer is made pursuant to an available exemption from
registration under, or otherwise in compliance with, the Securities Act and
applicable state securities laws.
Purchaser shall not be prohibited or limited in any respect from
transferring any Subordinated Note to any Affiliates of Purchaser, and, subject
to the preceding sentence, pledging any such Subordinated Note to a commercial
bank or other institutional lender or granting a participation in any such
Subordinated Note.
Section 10.04 Registration of Transfer. Each Subordinated Note shall be
issued in registered form. Ownership of a Subordinated Note shall be proved by
the register to be maintained pursuant to Section 10.05, and a Subordinated
Note shall be transferable only upon the surrender of such Subordinated Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the Holder thereof or such Holder's attorney duly
authorized in writing. Upon surrender of any Subordinated Note for registration
or transfer, the Authority will execute and deliver in exchange therefor a new
Subordinated Note of the same tenor and registered as such Holder may request.
The Authority may require payment by such Holder of a sum sufficient to cover
any stamp tax or governmental charge imposed in respect of any such transfer.
Prior to due presentment for registration of transfer of any Subordinated Note,
the Authority, any paying agent for the Subordinated Notes or any registrar or
coregistrar for the Subordinated Notes may deem and treat the person in whose
name a Subordinated Note is registered as the absolute owner of such
Subordinated Note for the purpose of receiving payment of principal of, premium,
if any, or interest on such Subordinated Note and for all other purposes
whatsoever, and none of the Authority, such Paying Agent or such registrar or
coregistrar shall be affected by notice to the contrary.
Section 10.05 Register. The Authority shall maintain a register of the
Holders of all of the Subordinated Notes issued pursuant to this Agreement. The
Authority will allow any Holder of a Subordinated Note to inspect and copy such
list at the Authority's principal place of business during normal business
hours.
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ARTICLE XI
TERMINATION
Section 11.01 Termination. Purchaser of the Subordinated Notes initially
issuable hereunder, by notice to the Authority, may terminate this Agreement at
any time at or prior to the Closing Date if any condition specified in Article
VI shall not have been fulfilled when and as required to be fulfilled or if the
Closing shall not have occurred by December 31, 1995.
Section 11.02 Liability. If this Agreement is terminated in accordance
with this Article XI, such termination shall be without liability of any party
to any other party, except that the indemnity provisions contained in Article
XII shall remain operative and in full force and effect.
ARTICLE XII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 12.01 Option to Effect Legal Defeasance or Covenant Defeasance.
The Authority may, at the option of its Management Board evidenced by a
resolution set forth in an Officers' Certificate delivered to the Trustee, at
any time, elect to have either Section 12.02 or 12.03 hereof be applied to all
outstanding Subordinated Notes upon compliance with the conditions set forth
below in this Article XII.
Section 12.02 Legal Defeasance and Discharge. Upon the Authority's
exercise under Section 12.01 hereof of the option applicable to this Section
12.02, the Authority shall, subject to the satisfaction of the conditions set
forth in Section 12.04 hereof, be deemed to have been discharged from its
obligations with respect to all outstanding Subordinated Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Authority shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Subordinated Notes and cured all existing Events of Default, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 12.05
hereof and the other Sections of this Agreement referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Subordinated
Notes and this Agreement (and the Holders, on demand of and at the expense of
the Authority, shall execute proper instruments acknowledging the same), except
for the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders to receive payments in respect
of the principal of, premium, if any, and interest on such Subordinated Notes
when such payments are due, (b) the Authority's obligations with respect to such
Subordinated Notes under Article X and Section 5.02 hereof, (c) the rights,
powers, trusts, duties and immunities of the Holders hereunder and the
Authority's obligations in connection
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therewith and (d) this Article XII. Subject to compliance with this Article XII,
the Authority may exercise its option under this Section 12.02 notwithstanding
the prior exercise of its option under Section 12.03 hereof.
Section 12.03 Covenant Defeasance. Upon the Authority's exercise under
Section 12.01 hereof of the option applicable to this Section 12.03, the
Authority shall, subject to the satisfaction of the conditions set forth in
Section 12.04 hereof, be released from their obligations under the covenants
contained in Sections 5.03, 5.07, 5.08, 5.09, 5.10, 5.11, 5.13, 5.16, 5.18 and
7.01 and Article IX hereof with respect to the outstanding Subordinated Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Subordinated Notes 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 (it being understood that such Subordinated
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding
Subordinated Notes, the Authority may omit to 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 such omission to
comply shall not constitute a Default or an Event of Default under Section 7.01
hereof, but, except as specified above, the remainder of this Agreement and such
Subordinated Notes shall be unaffected thereby. In addition, upon the
Authority's exercise under Section 12.01 hereof of the option applicable to this
Section 12.03 hereof, subject to the satisfaction of the conditions set forth in
Section 12.04 hereof, Section 7.01(c) hereof shall not constitute Events of
Default.
Section 12.04 Conditions to Legal or Covenant Defeasance. The following
shall be the conditions to the application of either Section 12.02 or 12.03
hereof to the outstanding Subordinated Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Authority must irrevocably deposit with an agent, which may
be the Purchaser (the "Defeasance Agent"), in trust, for the benefit of the
Holders, cash in United States dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants as evidenced by a
certificate delivered to the Trustee, to pay the principal of, premium, if any,
and interest on the outstanding Subordinated Notes on the stated maturity date
or on the applicable redemption date, as the case may be, of such principal of,
premium, if any, or interest on the outstanding Subordinated Notes on the stated
Maturity or on the applicable redemption date, as the case may be and the
Authority must specify whether the Subordinated Notes are being defeased to
maturity or to a particular redemption date;
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(b) in the case of an election under Section 12.02 hereof, the
Authority shall have delivered to the Defeasance Agent an Opinion of Counsel in
the United States reasonably acceptable to the Defeasance Agent confirming that,
subject to customary assumptions and exclusions, (A) the Authority has received
from, or there has been published by, the Internal Revenue Service a ruling or
(B) since the Issuance Date, 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, subject to customary assumptions and
exclusions, the Holders of the outstanding Subordinated Notes will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
Legal Defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 12.03 hereof, the
Authority shall have delivered to the Defeasance Agent an Opinion of Counsel in
the United States reasonably acceptable to the Defeasance Agent confirming that,
subject to customary assumptions and exclusions, the Holders of the outstanding
Subordinated Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing pursuant to Section 7.01(a), 7.01(b), 7.01(c) or 7.01(d) hereof on
the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Agreement) to which the Authority is a party or
by which the Authority is bound;
(f) the Authority shall have delivered to the Defeasance Agent an
opinion of counsel to the effect that after the 91st day following the deposit
following the deposit and as of the date of such opinion and subject to
customary assumptions and exclusions, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally under any applicable United States law;
(g) the Authority shall have delivered to the Defeasance Agent an
Officers' Certificate stating that the deposit was not made by the Authority
with the intent of defeating, hindering, delaying or defrauding any creditors of
the Authority or others; and
(h) the Authority shall have delivered to the Defeasance Agent an
Officers' Certificate and an Opinion of Counsel, which Opinion of Counsel may be
subject to customary assumptions and exclusions, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
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Section 12.05 Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions. Subject to Section 12.06 hereof, all
money and non-callable Government Securities (including the proceeds thereof)
deposited with the Defeasance Agent pursuant to Section 12.04 hereof in respect
of the outstanding Subordinated Notes shall be held in trust and applied by the
Defeasance Agent, in accordance with the provisions of such Subordinated Notes
and this Agreement, to the payment, either directly or through any Paying Agent
(including the Authority acting as Paying Agent) as the Defeasance Agent may
determine, to the Holders of such Subordinated Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Authority shall pay and indemnify the Defeasance Agent against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 12.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Subordinated Notes.
Anything in this Article XII to the contrary notwithstanding, the
Defeasance Agent shall deliver or pay to the Authority from time to time upon
the request of the Authority any money or non-callable Government Securities
held by it as provided in Section 12.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Defeasance Agent (which may be
the opinion delivered under Section 12.04(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.
Section 12.06 Repayment to Authority. Any money deposited with the
Defeasance Agent or any Paying Agent, or then held by the Authority, in trust
for the payment of the principal of, premium, if any, or interest on any
Subordinated Note and remaining unclaimed for two years after such principal,
premium, if any, or interest has become due and payable shall be paid to the
Authority on its request or (if then held by the Authority) shall be discharged
from such trust; and the Holder of such Subordinated Note shall thereafter, as a
secured creditor, look only to the Authority for payment thereof, and all
liability of the Defeasance Agent or such Paying Agent with respect to such
trust money, and all liability of the Authority as trustee thereof, shall
thereupon cease; provided, however, that the Defeasance Agent or such Paying
Agent, before being required to make any such repayment, may at the expense of
the Authority 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 Authority.
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Section 12.07 Reinstatement. If the Defeasance Agent or Paying Agent is
unable to apply any United States dollars or non-callable Government Securities
in accordance with Section 12.02 or 12.03 hereof, 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 Authority's
obligations under this Agreement and the Subordinated Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 12.02 or 12.03
hereof until such time as the Defeasance Agent or Paying Agent is permitted to
apply all such money in accordance with Section 12.02 or 12.03 hereof, as the
case may be; provided, however, that, if the Authority make any payment of
principal of, premium, if any, or interest on any Subordinated Note following
the reinstatement of its obligations, the Authority shall be subrogated to the
rights of the Holders of such Subordinated Notes to receive such payment from
the money held by the Defeasance Agent or Paying Agent.
Section 12.08 Note Collateral. Upon the Authority's exercise under Section
12.01 hereof of the option applicable to either Section 12.02 or 12.03, any
security interest in the Cash Maintenance Account shall terminate.
ARTICLE XIII
MISCELLANEOUS
Section 13.01 Expenses. The Authority agrees to pay (a) all reasonable
out-of-pocket expenses of Purchaser, including reasonable fees and disbursements
of Purchaser's counsel, in connection with the negotiation and preparation of
this Agreement and all additional and subsequent documentation contemplated
hereby, any waiver or consent hereunder or thereunder or any amendment hereof or
thereof or any Default or alleged Default hereunder or thereunder, (b) if a
Default occurs, all reasonable out-of-pocket expenses incurred by Purchaser,
including fees and disbursements of counsel, in connection with such Default and
collection and other enforcement proceedings resulting therefrom and (c) the
reasonable out-of-pocket expenses of Holders in connection with any waiver or
consent hereunder or any Default or alleged Default hereunder.
Section 13.02 Survival of Representations and Warranties; Severability.
All representations and warranties contained in this Agreement or made in
writing by or on behalf of the Authority in connection with the transactions
contemplated by this Agreement shall survive, for the duration of any statutes
of limitation applicable thereto, the execution and delivery of this Agreement,
any investigation at any time made by Purchaser or on Purchaser's behalf, the
purchase of the Subordinated Notes by Purchaser under this Agreement and any
disposition or payment of the Subordinated Notes. All statements contained in
any certificate or other instrument delivered by or on behalf of the Authority
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement shall be deemed representations and warranties of the
Authority under this Agreement. Any provision of this
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Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction.
Section 13.03 Entire Agreement; Amendment and Waiver. This Agreement
contains the entire understanding between the parties with respect to the
subject matter hereof. At any time prior to the Effective Time, the Authority
and the Holders of a majority in aggregate principal amount of then outstanding
Subordinated Notes may, by written agreement, (i) extend the time for the
performance of any of the obligations or other acts of the parties hereto (other
than the payment of principal, premium, if any, or interest or (ii) waive
compliance with any of the covenants or agreements contained in this Agreement.
This Agreement shall not be altered or otherwise amended except pursuant to an
instrument in writing executed and delivered on behalf of the Authority and the
Holders of a majority in aggregate principal amount of the then outstanding
Subordinated Notes. Notwithstanding the foregoing, the provisions of Article
VIII shall not be amended or modified without the written consent of the holders
of all Senior Indebtedness.
Section 13.04 Notices, etc. Except as otherwise provided in this
Agreement, any notice, waiver, consent or other communication required or
permitted hereunder shall be in writing and shall be delivered personally
(including delivery by a nationally recognized courier service), by facsimile
transmission, by pre-paid telegram or by pre-paid registered or certified mail,
return receipt requested, addressed (a) if to Purchaser, at such address as
Purchaser shall have furnished to the Authority in writing, with a copy to Neal
Gerber & Eisenberg, Two North LaSalle Street, Chicago, Illinois 60602,
Attention: Charles Evans Gerber or (b) if to any other holder of any Note, at
such address as such other holder shall have furnished to the Authority in
writing, or, until any such other holder so furnishes to the Authority an
address, then to and at the address of the last holder of such Subordinated Note
who has furnished an address to the Authority, or (c) if to the Authority, at
the address of its principal executive offices, to the attention of the
Treasurer, or at such other address, or to the attention of such other officer,
as the Authority shall have furnished to Purchaser and each such other holder in
writing, with a copy to Lew Rome, Rome, McGuigan, Hoberman, Sabanosh &
Klebanoff, P.C., One State Street, Hartford, CT 06103.
Notice hereunder shall be deemed to have been received and be effective
for all purposes hereunder (a) if given by facsimile transmission, upon
confirmation that such transmittal is received, (b) if given by pre-paid
certified or registered mail, return receipt requested, on the fifth Business
Day after mailing or (c) if given by any other means, when delivered at the
address specified in this Section. The address or facsimile number of any party
hereto may be changed by a notice in writing given in accordance with the
provisions hereof.
Section 13.05 Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of
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such party, and all covenants and agreements of the Authority and Purchaser in
this Agreement or any Subordinated Note shall bind their respective successors
and assigns. The Authority may not assign or transfer its rights or obligations
hereunder without the prior written consent of Holders of a majority in
aggregate principal amount of the Subordinated Notes.
Section 13.06 Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
Section 13.07 No Personal Liability of Directors, Officers, Employees and
Stockholders. Neither the Tribe, nor any officer, office holder, agent,
representative employee, member of the Authority or the Tribe, as such, shall
have any liability for any obligations of the Authority under the Subordinated
Notes or this Agreement, as applicable, or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Subordinated Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Subordinated
Notes.
Section 13.08 Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
(EXCLUSIVE OF CONFLICTS OF LAWS PRINCIPLES) SHALL GOVERN AND BE USED TO CONSTRUE
THIS AGREEMENT AND THE SUBORDINATED NOTES.
Section 13.09 Judicial Proceedings; Waiver of Jury. Any judicial
proceeding brought against the Authority with respect to this Agreement or the
Subordinated Notes may be brought in any court of competent jurisdiction in the
State of New York or of the United States of America for the State of New York
and, by execution and delivery of this Agreement, the Authority (a) accepts,
generally and unconditionally, the nonexclusive jurisdiction of such courts and
any related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement or the Subordinated Notes,
subject to any rights of appeal, and (b) irrevocably waives any objection it may
now or hereafter have as to the venue of any such suit, action or proceeding
brought in such a court or that such court is an inconvenient forum. The
Authority hereby waives personal service of process and consent that service of
process upon it may be made by certified or registered mail, return receipt
requested, at its address specified or determined in accordance with the
provisions of Section 13.04, and service so made shall be deemed completed on
the third Business Day after such service is deposited in the mail. Nothing
herein shall affect the right to serve process in any other manner permitted by
law or shall limit the right of any holder of Subordinated Notes to bring
proceedings against the Authority in the courts of any other jurisdiction. THE
AUTHORITY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT, THE SUBORDINATED NOTES OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
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Section 13.10 Dispute Resolution and Consent to Suit. The Authority does
hereby consent to the enforcement and execution of any judgment, whether
obtained as a result of judicial, administrative, or arbitrational proceedings,
against any assets of the Authority. Subject to the foregoing, the Authority
does hereby waive its sovereign immunity from unconsented suit, whether such
suit be brought in law or in equity, or in administrative proceedings or
proceedings in arbitration, to permit the commencement, maintenance, and
enforcement of any action, by any person with standing to maintain an action, to
interpret or enforce the terms of this Agreement or the Subordinated Notes, and
to enforce and execute any judgment resulting therefrom against the Authority or
the assets of the Authority. Notwithstanding any other provision of law or canon
of construction, the Authority intends this waiver to be interpreted liberally
to permit the full litigation of disputes arising under or out of this Agreement
or the Subordinated Notes. Without limiting the generality of the foregoing,
Authority waives its immunity from unconsented suit to permit the maintenance of
the following actions:
(a) Courts. The Authority waives its immunity from unconsented suit
to permit any court of competent jurisdiction to (i) enforce and interpret the
terms of this Agreement or the Subordinated Notes, and award and enforce the
award of damages owing as a consequences of a breach thereof, whether such award
is the product of litigation, administrative proceedings, or arbitration; (ii)
determine whether any consent or approval of the Authority has been improperly
granted or unreasonably withheld; (iii) enforce any judgment prohibiting the
Authority to take any action, including a judgment compelling the Authority to
submit to binding arbitration; and, (iv) adjudicate any claim under the Indian
Civil Rights Act of 1968, 25 U.S.C. ss. 1302 (1944).
(b) Arbitration. The Authority waives its immunity from unconsented
suit to permit arbitrators, appointed and acting under the commercial
arbitration rules of the American Arbitration Association, to (i) enforce and
interpret the terms of this Agreement or the Subordinated Notes, and to award
and enforce the award of any damages owing as a consequence thereof; (ii)
determine whether any consent or approval of the Authority has been unreasonably
withheld; and (iii) enforce any judgment prohibiting the Authority from taking
any action, including a judgment compelling the Authority to submit to binding
arbitration.
Section 13.11 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
THE AUTHORITY:
MOHEGAN TRIBAL GAMING AUTHORITY,
an instrumentality of the Nation
By: /s/ Ralph W. Sturges
------------------------------------
Name: Ralph W. Sturges
Title: Chairman, Management Board
PURCHASER:
SUN INTERNATIONAL HOTELS LIMITED,
a Bahamian corporation
By: /s/ Howard B. Kerzner
------------------------------------
Name: Howard B. Kerzner
Title: Executive Vice-President
THE TRIBE (with respect to Section
4.06(c) only):
MOHEGAN TRIBE OF INDIANS OF CONNECTICUT
By: /s/ Ralph W. Sturges
------------------------------------
Name: Ralph W. Sturges
Title: Lifetime Chief and Chairman
<PAGE>
Exhibit A
(Face of Note)
15%(1) Subordinated Notes due 2003
No. $________________
MOHEGAN TRIBAL GAMING AUTHORITY
promises to pay to
or registered assigns,
the principal sum of
Dollars on November 15, 2003
Interest Payment Dates: May 15 and November 15
Record Dates: April 30 and October 31
Dated: September __, 1995
MOHEGAN TRIBAL GAMING AUTHORITY
By: __________________________________
Name: ________________________________
Title: _______________________________
By: __________________________________
Name: ________________________________
Title: _______________________________
(SEAL)
- ----------
(1) The rate of interest on the Subordinated Notes issued substantially
concurrently with the Senior Secured Notes will be a fixed rate, while
Subordinated Notes thereafter issued to evidence the Authority's obligation to
repay funds advanced pursuant to the Completion Guarantee, will bear interest at
the rate per annum then most recently announced by Chemical Bank of New York,
New York as its prime rate plus 1%, which rate will be set and revised at
six-month intervals.
<PAGE>
(Back of Note)
15%(1) Subordinated Notes due 2003
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE NOTE
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 NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE TRIBE AND THE AUTHORITY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
AUTHORITY SO REQUESTS), (2) TO THE AUTHORITY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT 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 NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Note Purchase Agreement referred to below unless otherwise indicated.
1. Interest. (a) Mohegan Tribal Gaming Authority (or any successor thereto
as provided in the Note Purchase Agreement, the "Authority"), promises to pay
interest ("Interest") at the rate of 15% per annum (the "Interest Rate") on the
principal amount of this Subordinated Note from the Issuance Date to the date of
payment of such principal amount of this Subordinated Note.(2) Subject to the
mandatory deferral of Interest pursuant to the provisions
- ----------
(1) See Note 1 on page A-1.
(2) This sentence will be deleted from each Subordinated Note issued to
evidence the Authority's obligation to repay funds advanced pursuant to the
Completion Guarantee and the following shall be substituted therefor:
A-2
<PAGE>
set forth below ("Deferred Interest") and the provisions of Article VIII of the
Note Purchase Agreement, installments of Interest shall become due and payable
semi-annually in arrears on each May 15 and November 15 (each an "Interest
Payment Date") to the holders of record at the close of business on the
immediately preceding April 30 or October 31, respectively, for the six-month
period ending on such preceding April 30 or October 31 (each a "Semi-annual
Period"). Interest shall be computed on the basis of a 360-day year, consisting
of twelve 30-day months.
Interest on Deferred Interest shall accrue and be deferred semi-annually
at the Interest Rate and shall be deemed part of Deferred Interest upon such
deferral.
Each installment of Interest shall be calculated to accrue from, but not
including the most recent date to which such Interest has been paid or provided
for or through which Interest has been calculated and deferred (or from and
including the Issuance Date if no installment of Interest has been paid,
provided for or deferred) to, and including, either (a) the last day of the
preceding Semi-annual Period if the corresponding principal of this Subordinated
Note has not become due and payable or (b) the date of payment if the
corresponding principal of this Subordinated Note has become due and payable
(whether at stated maturity, upon acceleration, upon maturity of repurchase
obligation or otherwise).
Interest in respect of the most recently ended Semi-annual Period
("Current Interest") shall be deferred unless (i) $87.5 million in aggregate
principal amount of Senior Notes have been repurchased or returned (for purposes
of such determination, the aggregate principal amount of Senior Notes offered to
be repurchased in any Offer shall be deemed to have been repurchased, whether or
not such amount was pursuant to such Repurchase Offer) and (ii) the Authority's
Fixed Change Coverage Ratio for the four full fiscal quarters last ended is
equal to or greater than 2.5 to 1 and no deferred Cash Flow Participation
Interest on the Senior Notes remains unpaid. Deferred Interest shall continue to
be deferred unless (an 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 to 1. Notwithstanding
the foregoing, all accrued
- ----------
Mohegan Tribal Gaming Authority (or any successor thereto as provided in
the Note Purchase Agreement, the "Authority") promises to pay interest
("Interest") on the principal amount of this Subordinated Note from the
Issuance Date to the date of payment of such principal amount of this
Subordinated Note at the rate per annum equal to the Reference Rate (as
hereinafter defined) as in effect on the Issuance Date plus 1%, which rate
shall be set and revised at intervals of six months (commencing six months
after the Issuance Date and until this Subordinated Note is fully paid)
(each, an "Adjustment Date") to be equal to the Reference Rate as in
effect on such Adjustment Date plus 1%. "Reference Rate" means the rate
per annum then most recently announced by Chemical Bank of New York as its
prime rate at New York, New York.
A-3
<PAGE>
and unpaid Interest shall be payable in cash on the Interest Payment Dates and
shall not be deferred if the Authority has paid in full all Obligations under
the Senior Notes and the Senior Note Indenture and the same shall have been
discharged.
(b) Notwithstanding anything herein to 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 this
Subordinated Note that matures (whether at stated maturity, upon acceleration,
upon maturity of repurchase obligations or otherwise) upon such maturity of such
principal amount of this Subordinated Note. The Authority shall pay interest
(including post-petition interest in any proceeding under any proceeding under
any Bankruptcy Law) overdue principal and premium, if any, from time to time on
demand at a rate equal to the Interest Rate plus one percent per annum. The
Authority shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue installments of Interest (without regard to
any applicable grace periods) from time to time on demand at the same rate as on
overdue principal to the extent lawful.
2. Method of Payment. The Authority shall pay Interest (except defaulted
Interest) to the Holders of Subordinated Notes at the close of business on the
April 30 or October 31 next preceding the Interest Payment Date, even if such
Subordinated Notes are cancelled after such record date and on or before such
Interest Payment Date (the "Record Date"), except as provided in Section 4.04 of
the Note Purchase Agreement with respect to defaulted interest. The Holder
hereof must surrender this Subordinated Note to a Paying Agent to collect
principal payments. The Subordinated Notes shall be payable as to principal,
premium, if any, and interest at the office or agency of the Authority
maintained for such purpose within or without 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 at their addresses set forth in the register of Holders
and provided that payment by wire transfer of [immediately available/next day]
funds will be required with respect to principal of and premium, if any, and
interest on Subordinated Notes the Holders of which shall have provided wire
transfer instructions to the Authority or the Paying Agent. Such payment shall
be in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, _________________________ shall
act as Paying Agent and registrar (the "Registrar"). The Authority may change
any Paying Agent or Registrar without notice to any Holder. The Authority or any
of its Subsidiaries may act in any such capacity.
4. Note Purchase Agreement. The Authority issued the Subordinated Notes
under a Note Purchase Agreement dated as of September 29, 1995 (as it may be
amended from time to time, the "Note Purchase Agreement") between the Authority
and Sun International Hotels Limited, a Bahamian corporation ("Purchaser"). The
terms of the Subordinated Notes include and are subject to all terms stated in
the Note Purchase Agreement and Holders are referred to the Note Purchase
Agreement for a statement of such terms. The Subordinated Notes are obligations
of the Authority limited to $40 million in aggregate principal amount plus an
aggregate principal amount equal to amounts paid under the Completion Guarantee.
The terms
A-4
<PAGE>
of the Note Purchase Agreement shall govern any inconsistencies between the Note
Purchase Agreement and the Subordinated Notes. The Subordinated Notes are
secured by a perfected, second priority security interest in the Cash
Maintenance Account and, upon the repayment in full of all Obligations under the
Senior Notes and the Senior Note Indenture and the discharge thereof, will be
secured by a perfected, first priority interest in such account (subject to any
liens permitted by the terms of the Senior Notes and the Senior Note Indenture).
5. Optional Redemption. The Authority may not redeem or, except as
permitted by the terms of the Note Purchase Agreement, otherwise repurchase the
Subordinated Notes until the Senior Notes have been repaid in full. Thereafter,
the Subordinated Notes may be redeemed, in whole or in part, at the option of
the Authority, at par plus accrued and unpaid Interest thereon to the applicable
date of redemption.
Notwithstanding any provision contained herein to the contrary, the Tribe
at any time shall be entitled to acquire the Subordinated Notes from the Holders
thereof at a price equal to 100% of the principal amount thereof plus all
accrued and unpaid interest thereon.
Notwithstanding any other provisions of the Note Purchase Agreement, if
any Gaming Regulatory Authority requires that a Holder or beneficial owner of
the Subordinated Notes be licensed, qualified or found suitable under any
applicable gaming laws in order to maintain any gaming license or franchise of
the Authority or any Subsidiary under any applicable gaming laws, and the Holder
or beneficial owner fails to apply for a license, qualification or finding of
suitability within 30 days after being requested to do so by such Gaming
Regulatory Authority (or such lesser period that may be required by such Gaming
Regulatory Authority) or if such Holder or beneficial owner is not so licensed,
qualified or found suitable, the Authority has the right, at its option, (i) to
require such Holder or beneficial owner to dispose of such Holder's or
beneficial owner's Subordinated Notes within 30 days of receipt of such notice
of such finding by the applicable Gaming Authority (or such earlier date as may
be required by the applicable Gaming Regulatory Authority) or (ii) to call for
redemption of the Subordinated Notes of such Holder or beneficial owner at a
redemption price equal to the lesser of the principal amount thereof or the
price at which such Holder or beneficial owner acquired the Subordinated Notes,
together with, in either case, accrued and unpaid Interest (including Deferred
Interest) 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 Authority;
provided, however, that the Authority may not redeem any Subordinated Notes
pursuant to this provision if an Event of Default has occurred and is continuing
under the Senior Note Indenture until such time as there ceases to be any such
Event of Default under the Senior Note Indenture. The Authority shall not be
required to pay or reimburse any Holder or beneficial owner of Subordinated
Notes who is required to apply for any such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability. Such expenses shall be the obligation
of such Holder or beneficial owner.
6. Mandatory Redemption. The Authority shall not be required to make
mandatory redemption or sinking fund payments with respect to the Subordinated
Notes.
A-5
<PAGE>
7. Repurchase at Option of Holder. Upon a Change of Control, as defined in
the Note Purchase Agreement, the Authority may be required to offer to purchase
all of the Outstanding Subordinated Notes in accordance with the provisions set
forth in the Note Purchase Agreement. Holders of Subordinated Notes will receive
an offer to purchase from the Authority prior to any related purchase date, and
may elect to have their Subordinated Notes purchased by completing the form
entitled "Option of Holders to Elect Purchase" appearing below. Such offer and
the obligation to repurchase tendered Subordinated Notes is subject to certain
restrictions related to the priority of the Senior Notes.
8. Notice of Redemption. Notice of redemption shall be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Subordinated Notes are to be redeemed at its registered address. Subordinated
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Subordinated Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to accrue
on Subordinated Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Subordinated Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Subordinated Notes may be registered and
Subordinated Notes may be exchanged as provided in the Note Purchase Agreement.
The Registrar and the Authority may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Authority may
require a Holder to pay any taxes and fees required by law or permitted by the
Note Purchase Agreement. The Authority need not exchange or register the
transfer of any Subordinated Note or portion of a Subordinated Note selected for
redemption, except for the unredeemed portion of any Subordinated Note being
redeemed in part. Also, it need not exchange or register the transfer of any
Subordinated Notes for a period of 15 days before a selection of Subordinated
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Registrar for
registration of the transfer of this Subordinated Note, the Registrar, the
Paying Agent, the Defeasance Agent (collectively, the "Agents") and the
Authority may deem and treat the Person in whose name this Subordinated Note is
registered as the absolute owner thereof for the purpose of receiving payment of
principal of and premium, if any, and interest on this Subordinated Note and for
all other purposes whatsoever, whether or not this Subordinated Note is overdue,
and neither any Agent nor the Authority shall be affected by notice to the
contrary. The registered holder of a Subordinated Note shall be treated as its
owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Note Purchase Agreement and the Subordinated Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Subordinated Notes, and any existing default or
compliance with any provision of the Note Purchase Agreement or the Subordinated
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Subordinated Notes.
A-6
<PAGE>
12. Defaults and Remedies. Events of Default include (as more fully
described in, and subject to the terms and conditions of, the Note Purchase
Agreement as it may be amended from time to time): (i) default in payment of
interest when due and payable on any Note for 30 days, (ii) default in payment
of principal of or premium, if any, on any Subordinated Note when due, (iii)
failure by the Authority for 90 days after written notice to it to comply with
any of its other agreements in the Note Purchase Agreement or the Subordinated
Notes and (iv) certain events of bankruptcy or insolvency. If any Event of
Default occurs and is continuing, the Holders of at least 25% in principal
amount of the then outstanding Subordinated Notes may declare the principal of
and premium, if any, interest and any other monetary obligations on all of the
Subordinated Notes to be due and payable; provided, however, that no such
declaration may be made unless and until all Obligations under the Senior Notes
and the Senior Note Indenture have been paid in full and the same have been
discharged. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, if all Obligations
under the Senior Notes and the Senior Note Indenture have been paid in full and
the same have been discharged, all outstanding Subordinated Notes shall become
due and payable without further action or notice. The Holders of a majority in
aggregate principal amount of the Subordinated Notes then outstanding may on
behalf of the Holders of all of the Subordinated Notes waive any existing
Default or Event of Default and its consequences under the Note Purchase
Agreement and the Subordinated Notes except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Subordinated
Notes. The Authority is required to deliver to the Holders annually a statement
regarding compliance with the Note Purchase Agreement, and the Authority is
required, within five Business Days upon becoming aware of any Default or Event
of Default, to deliver to the Holders a statement specifying such Default or
Event of Default.
13. Subordination. The Subordinated Notes are subordinated in right of
payment to Senior Indebtedness pursuant to Article VIII of the Note Purchase
Agreement.
14. No Recourse Against Others. Neither the Tribe nor any officer, office
holder, employee, agent, representative, member of the Authority or the Tribe,
as such, shall have any liability for any obligations of the Authority under the
Subordinated Notes or the Note Purchase Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Subordinated Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Subordinated
Notes.
15. Abbreviations. Customary abbreviations may be used in the name of a
Holder 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).
16. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Authority has
caused CUSIP numbers to be printed on the Subordinated Notes and the Authority
may use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such
A-7
<PAGE>
numbers either as printed on the Subordinated Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Authority shall furnish to any Holder upon written request and without
charge a copy of the Note Purchase Agreement. Requests may be made to:
Mohegan Tribal Gaming Authority
c/o Mohegan Tribe of Indians of Connecticut
27 Church Lane
Uncasville, CT 06392
Attn: Ralph Sturgis, Chief
Carlisle Fowler and Roland Harris,
Business Board Members
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Subordinated Note, fill in the form below: (1) or (we)
assign and transfer this Subordinated Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Subordinated Note on the books of the Authority. The agent may
substitute another to act for him.
Date:
Your Signature: ______________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee:
A-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Authority pursuant
to a Change of Control, check the following box and specify the amount: |_|
$___________________
Date: Your Signature:
(Sign exactly as your name appears
on the Note)
Tax Identification No.: ______________
Signature Guarantee:
A-10
<PAGE>
EXHIBIT B
NOTE PURCHASE AGREEMENT
--------------- -------------------
Tribe Tribal Court
--------------- -------------------
---------------
Tribal Council
---------------
-----------------------
Tribal Gaming Authority
-----------------------
- ----------- ----------
Director of Management
Regulations Board
- ----------- ----------
- ---------- ------------- -------------------
Regulatory Manager Executive Committee
Staff
- ---------- ------------- -------------------
--------------
Business
Board
--------------
--------------
Enterprise
--------------
<PAGE>
Attachment to Note Purchase Agreement
SECTION 81 COMPLIANCE
In compliance with Section 81 of Title 25 U.S.C.A., the addresses and
occupations of the parties are as follows:
Party in Interest: Mohegan Tribe of Indians of Connecticut
Address: 27 Church Lane
Uncasville, CT 06382
Occupation: Indian Tribe
Party in Interest: Mohegan Tribal Gaming Authority
Address: 27 Church Lane
Uncasville, CT 06382
Occupation: Tribal Gaming Authority
Party in Interest: Sun International Hotels Limited
Address: Badegemore House - Gravel Hill
Henley-on-Thames
RG9 4NR United Kingdom
Occupation Hotel, Casino and Resort Operations
Fixed limited time to run: Notes become due November 15, 2003
The Chairman of the Mohegan Tribe of Indians of Connecticut ("Tribe") is
authorized to execute the attached document by Resolution No. 95-3 of the Tribal
Council of the Tribe, dated August 30, 1995. The Chairman exercises his
authority in this instance because the Tribe has determined that execution of
the attached document will further the economic development objectives of the
Tribe.
The Chairman of the Management Board of the Mohegan Tribal Gaming Authority
("Management Board") is authorized to execute the attached document by
Resolution No. 95-4 of the Management Board, dated August 30, 1995. The Chairman
of the Management Board exercises his authority in this instance because the
Management Board has determined that execution of the attached document will
further the economic development objectives of the Tribe.
<PAGE>
The document was executed on or about 12.30 p.m. (time) on September 28, 1995,
at New York, NY (place), for the particular purpose set forth above.
The undersigned parties agree that the foregoing agreement is in compliance with
25 U.S.C. ss. 81.
WITNESS:
Mohegan Tribe of Indians of Connecticut
/s/ [ILLEGIBLE] By: /s/ Ralph W. Sturges
- ---------------------------- -------------------------------------
Ralph Sturges
Title: Chairman
Mohegan Tribal Gaming Authority
/s/ [ILLEGIBLE] By: /s/ Ralph W. Sturges
- ---------------------------- -------------------------------------
Ralph Sturges
Title: Chairman, Management Board
/s/ [ILLEGIBLE] Sun International Hotels Limited
- ----------------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title:
Approved Pursuant to 25 U.S.C. ss. 81
United States Department of Interior
Bureau of Indian Affairs:
Date: September 29, 1995 By: /s/ [ILLEGIBLE]
-------------------------------------
Director (Acting)
Eastern Area Office
Bureau of Indian Affairs
for the Secretary of the Interior and the
Commissioner of Indian Affairs, acting
under delegated authority.
2
<PAGE>
(Face of Note)
15%(1) Subordinated Notes due 2003
No. $1,700,000
MOHEGAN TRIBAL GAMING AUTHORITY
promises to pay to Trading Cove Associates
or registered assigns,
the principal sum of $1,700,000
Dollars on November 15, 2003
Interest Payment Dates: May 15, and November 15
Record Dates: April 30 and October 31
Dated: September 29, 1995
MOHEGAN TRIBAL GAMING AUTHORITY
By: /s/ Ralph W. Sturges
-------------------------------------
Name:Ralph W. Sturges
Title: Chairman, Management Board
By: /s/ Carlisle Fowler
-------------------------------------
Name: Carlisle Fowler
Title: Treasurer, Management Board
(SEAL)
- ----------
(1) The rate of interest on the Subordinated Note issued substantially
concurrently with the Senior Secured Notes will be a fixed rate, while
Subordinated Notes thereafter issued to evidence the Authority's obligation to
repay funds advanced pursuant to the Completion Guarantee, will bear interest at
the rate per annum then most recently announced by Chemical Bank of New York,
New York as its prime rate plus 1%, which rate will be set and revised at
six-month intervals.
A-1
<PAGE>
(Back of Note)
15%(1) Subordinated Notes due 2003
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE NOTE
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 NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE TRIBE AND THE AUTHORITY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
AUTHORITY SO REQUESTS), (2) TO THE AUTHORITY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATIONS STATEMENT UNDER THE ACT 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 NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Note Purchase Agreement referred to below unless otherwise indicated.
1. INTEREST. (A) Mohegan Tribal Gaming Authority (or any successor thereto
as provided in the Note Purchase Agreement, the "Authority"), promises to pay
interest ("Interest") at the rate of 15% per annum (the "Interest Rate") on the
principal amount of this Subordinated Note from the Issuance Date to the date of
payment of such principal amount of this Subordinated Note.(2) Subject to the
mandatory deferral of Interest pursuant to the provisions
- ----------
(1) See Note 1 on page A-1
(2) This sentence will be deleted from each Subordianted Note issued to
evidence the Authority's obligation to repay funds advanced pursuant to the
Completion Guarantee and the following shall be substituted therefor:
A-2
<PAGE>
set forth below ("Deferred Interest") and the provisions of Article VIII of the
Note Purchase Agreement, installments of Interest shall become due and payable
semi-annually in arrears on each May 15 and November 15 (each an "Interest
Payment Date") to the holders of record at the close of business on the
immediately preceding April 30 or October 31, respectively, for the six-month
period ending on such preceding April 30 or October 31 (each a "Semi-annual
Period"). Interest shall be computed on the basis of a 360-day year, consisting
of twelve 30-day months.
Interest on Deferred Interest shall accrue and be deferred semi-annually
at the Interest Rate and shall be deemed part of Deferred Interest upon such
deferral.
Each installment of Interest shall be calculated to accrue from, but not
including the most recent date to which such Interest has been paid or provided
for or through which Interest has been calculated and deferred (or from and
including the Issuance Date if no installment of Interest has been paid,
provided for or deferred) to, and including, either (a) the last day of the
preceding Semi-annual Period if the corresponding principal of this Subordinated
Note has not become due and payable or (b) the date of payment if the
corresponding principal of this Subordinated Note has become due and payable
(whether at stated maturity, upon acceleration, upon maturity of repurchase
obligation or otherwise).
Interest in respect of the most recently ended Semi-annual Period
("Current Interest") shall be deferred unless (i) $87.5 million in aggregate
principal amount of Senior Notes have been repurchased or retired (for purposes
of such determination, the aggregate principal amount of Senior Notes offered to
be repurchased in any Offer shall be deemed to have been repurchased, whether or
not such amount was pursuant to such Repurchase Offer) and (ii) the Authority's
Fixed Change Coverage Ratio for the four full fiscal quarters last ended is
equal to or greater than 2.5 to 1 and no deferred Cash Flow Participation
Interest on the Senior Notes remains unpaid. Deferred Interest shall continue to
be deferred unless (and then only to the extent) Current Interest may be paid in
cash and the Authority's 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 to 1. Notwithstanding
the foregoing, all accrued
- ----------
Mohegan Tribal Gaming Authority (or any successor thereto as provided
in the Note Purchase Agreement, the "Authority") promises to pay
interest ("Interest") on the principal amount of this Subordinated Note
from the Issuance Date to the date of payment of such principal amount
of this Subordinated Note at the rate per annum equal to the Reference
Rate (as hereinafter defined) as in effect on the Issuance Date plus
1%, which rate shall be set and revised at intervals of six months
(commencing six months after the Issuance Date and until this
Subordinated Note is fully paid) (each, an "Adjustment Date") to be
equal to the Reference Rate as in effect on such Adjustment Date plus
1%. "Reference Rate" means the rate per annum then most recently
announced by Chemical Bank of New York as its prime rate at New York,
New York.
A-3
<PAGE>
and unpaid Interest shall be payable in cash on the Interest Payment Dates and
shall not be deferred if the Authority has paid in full all Obligations under
the Senior Notes and the Senior Note Indenture and the same shall have been
discharged.
(b) Notwithstanding anything herein to 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 this
Subordinated Note that matures (whether at stated maturity, upon acceleration,
upon maturity of repurchase obligation or otherwise) upon such maturity of such
principal amount of this Subordinated Note. The Authority shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
equal to the Interest Rate plus one percent per annum. The Authority shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of Interest (without regard to any
applicable grace periods) from time to time on demand at the same rate as on
overdue principal to the extent lawful.
2. METHOD OF PAYMENT. The Authority shall pay Interest (except defaulted
Interest) to the Holders of Subordinated Notes at the close of business on the
April 30 or October 31 next preceding the Interest Payment Date, even if such
Subordinated Notes are canceled after such record date and on or before such
Interest Payment Date (the "Record Date"), except as provided in Section 4.04 of
the Note Purchase Agreement with respect to defaulted interest. The Holder
hereof must surrender this Subordinated Note to a Paying Agent to collect
principal payments. The Subordinated Notes shall be payable as to principal,
premium, if any, and interest at the office or agency of the Authority
maintained for such purpose within or without 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 at their addresses set forth in the register of Holders
and provided that payment by wire transfer of [immediately available/next day]
funds will be required with respect to principal of and premium, if any, and
interest on Subordinated Notes the Holders of which shall have provided wire
transfer instructions to the Authority or the Paying Agent. Such payment shall
be in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, First Fidelity Bank shall act as
Paying Agent and registrar (the "Registrar"). The Authority may change any
Paying Agency or Registrar without notice to any Holder. The Authority or any of
its Subsidiaries may act in any such capacity.
4. NOTE PURCHASE AGREEMENT. The Authority issued the Subordinated Notes
under a Note Purchase Agreement dated as of September 29, 1995 (as it may be
amended from time to time, the "Note Purchase Agreement") between the Authority
and Sun International Hotels Limited, a Bahamian corporation ("Purchaser"). The
terms of the Subordinated Notes include and are subject to all terms stated in
the Note Purchase Agreement and Holders are referred to the Note Purchase
Agreement for a statement of such terms. The Subordinated Notes are obligations
of the Authority limited to $40 million in aggregate principal amount plus an
aggregate principal amount equal to amounts paid under the Completion Guarantee.
The terms
A-4
<PAGE>
of the Note Purchase Agreement shall govern any inconsistencies between the Note
Purchase Agreement and the Subordinated Notes. The Subordinated Notes are
secured by a perfected, second priority security interest in the Cash
Maintenance Account and, upon the repayment in full of all Obligations under the
Senior Notes and the Senior Note Indenture and the discharge thereof, will be
secured by a perfected, first priority interest in such account (subject to any
liens permitted by the terms of the Senior Notes and the Senior Note Indenture).
5. OPTIONAL REDEMPTION. The Authority may not redeem or, except as
permitted by the terms of the Note Purchase Agreement, otherwise repurchase the
Subordinated Notes until the Senior Notes have been repaid in full. Thereafter,
the Subordinated Notes may be redeemed, in whole or in part, at the option of
the Authority, at par plus accrued and unpaid Interest thereon to the applicable
date of redemption.
Notwithstanding any provision contained herein to the contrary, the Tribe
at any time shall be entitled to acquire the Subordinated Notes from the Holders
thereof at a price equal to 100% of the principal amount thereof plus all
accrued and unpaid interest thereon.
Notwithstanding any other provisions of the Note Purchase Agreement, if
any Gaming Regulatory Authority requires that a Holder or beneficial owner of
the Subordinated Notes be licensed, qualified or found suitable under any
applicable gaming laws in order to maintain any gaming license or franchise of
the Authority or any Subsidiary under any applicable gaming laws, and the Holder
or beneficial owner fails to apply for a license, qualification or finding of
suitability within 30 days after being requested to do so by such Gaming
Regulatory Authority (or such lesser period that may be required by such Gaming
Regulatory Authority) or if such Holder or beneficial owner is not so licensed,
qualified or found suitable, the Authority has the right, at its option (i) to
require such Holder or beneficial owner to dispose of such Holder's or
beneficial owner's Subordinated Notes within 30 days of receipt of such notice
of such finding by the applicable Gaming Authority (or such earlier date as may
be required by the applicable Gaming Regulatory Authority) or (ii) to call for
redemption of the Subordinated Notes of such Holder or beneficial owner at a
redemption price equal to the lesser of the principal amount thereof or the
price at which such Holder or beneficial owner required the Subordinated Notes,
together with, in either case, accrued and unpaid Interest (including Deferred
Interest) 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 Authority;
provided, however, that the Authority may not redeem any Subordinated Notes
pursuant to this provision if an Event of Default has occurred and is continuing
under the Senior Note Indenture until such time as there ceases to be any such
Event of Default under the Senior Note Indenture. The Authority shall not be
required to pay or reimburse any Holder or beneficial owner of Subordinated
Notes who is required to apply for any such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability. Such expenses shall be the obligation
of such Holder or beneficial owner.
6. MANDATORY REDEMPTION. The Authority shall not be required to make
mandatory redemption or sinking fund payments with respect to the Subordinated
Notes.
A-5
<PAGE>
7. REPURCHASE AT OPTION OF HOLDER. Upon a Change of Control, as defined in
the Note Purchase Agreement, the Authority may be required to offer to purchase
all of the outstanding Subordinated Notes in accordance with the provisions set
forth in the Note Purchase Agreement. Holders of Subordinated Notes will receive
an offer to purchase from the Authority prior to any related purchase date, and
may elect to have their Subordinated Notes purchase by completing the form
entitled "Option of Holders to Elect Purchase" appearing below. Such offer and
the obligation to repurchase tendered Subordinated Notes is subject to certain
restrictions related to the priority of the Senior Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30
days not more than 60 days before the redemption date to each Holder whose
Subordinated Notes are to be redeemed at it registered address. Subordinated
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Subordinated Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to accrue
on Subordinated Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Subordinated Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Subordinated Notes may be registered and
Subordinated Notes may be exchanged as provided in the Note Purchase Agreement.
The Registrar and the Authority may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Authority may
require a Holder to pay any taxes and fees required by law or permitted by the
Note Purchase Agreement. The Authority need not exchange or register the
transfer of any Subordinated Note or portion of a Subordinated Note selected for
redemption, except for the unredeemed portion of any Subordinated Note being
redeemed in part. Also, it need not exchange or register the transfer of any
Subordinated Notes for a period of 15 days before a selection of Subordinated
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the Registrar for
registration of the transfer of this Subordinated Note, the Registrar, the
Paying Agent, the Defeasance Agent (collectively, the "Agents") and the
Authority may deem and treat the Person in whose name this Subordinated Note is
registered as the absolute owner thereof for the purpose of receiving payment of
principal of and premium, if any, and interest on this Subordinated Note and for
all other purposes whatsoever, whether or not this Subordinated Note is overdue,
and neither any Agent nor the Authority shall be affected by notice to the
contrary. The registered holder of a Subordinated Note shall be treated as its
owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Note Purchase Agreement and the Subordinated Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Subordinated Notes, and any existing default or
compliance with any provision of the Note Purchase Agreement or the Subordinated
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Subordinated Notes.
A-6
<PAGE>
12. DEFAULTS AND REMEDIES. Events for Default include (as more fully
described in, and subject to the terms and conditions of the Note Purchase
Agreement as it may be amended from time to time): (i) default in payment of
interest when due and payable on any Note for 30 days, (ii) default in payment
of principal of or premium, if any, on any Subordinated Note when due, (iii)
failure by the Authority for 90 days after written notice to it to comply with
any of its other agreements in the Note Purchase Agreement or the Subordinated
Notes and (iv) certain events of bankruptcy or insolvency. If any Event of
Default occurs and is continuing, the Holders of at least 25% in principal
amount of the then outstanding Subordinated Notes may declare the principal of
and premium, if any, interest and any other monetary obligations on all of the
Subordinated Notes to be due and payable; provided, however, that no such
declaration may be made unless and until all Obligations under the Senior Notes
and the Senior Note Indenture have been paid in full and the same have been
discharged. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, if all Obligations
under the Senior Notes and the Senior Note Indenture have been paid in full and
the same have been discharged, all outstanding Subordinated Notes shall become
due and payable without further action or notice. The Holders of a majority in
aggregate principal amount of the Subordinated Notes then outstanding may on
behalf of the Holders of all of the Subordinated Notes waive any existing
Default or Event of Default and its consequences under the Note Purchase
Agreement and the Subordinated Notes except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Subordinated
Notes. The Authority is required to deliver to the Holders annually a statement
regarding compliance with the Note Purchase Agreement, and the Authority is
required, within five Business Days upon becoming aware of any Default or Event
of Default, to deliver to the Holders a statement specifying such Default or
Event of Default.
13. SUBORDINATION. The Subordinated Notes are subordinated in right of
payment to Senior Indebtedness pursuant to Article VIII of the Note Purchase
Agreement.
14. NO RECOURSE AGAINST OTHERS. Neither the Tribe nor any officer, office
holder, employee, agent, representative, member of the Authority or the Tribe,
as such, shall have any liability for any obligations of the Authority under the
Subordinated Notes or the Note Purchase Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Subordinated Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Subordinated
Notes.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder 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).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Authority has
caused CUSIP numbers to be printed on the Subordinated Notes and the Authority
may use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such
A-7
<PAGE>
numbers either as printed on the Subordinated Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Authority shall furnish to any Holder upon written request and without
charge a copy of the Note Purchase Agreement. Requests may be made to:
Mohegan Tribal Gaming Authority
c/o Mohegan Tribe of Indians of Connecticut
27 Church Lane
Uncasville, CT 06392
Attn: Ralph Sturgis, Chief
Carlisle Fowler and Roland Harris,
Business Board Members
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Subordinated Note, fill in the form below: (I) or (we)
assign and transfer this Subordinated Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________________________________________ to
transfer this Subordinated Note on the books of the Authority. The agent may
substitute another to act for him.
Date:
Your Signature:____________________________
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
A-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Authority pursuant
to a Change of Control, check the following box and specify the amount: |_|
$______________
Date: Your Signature:
(Sign exactly as your name appears on
the Note)
Tax Identification No.: ______________
Signature Guarantee.
A-10
<PAGE>
(Face of Note)
15%(1) Subordinated Notes due 2003
No. $38,300,000
MOHEGAN TRIBAL GAMING AUTHORITY
promises to pay to Sun International Hotels Limited
or registered assigns,
the principal sum of $38,300,000
Dollars on November 15, 2003
Interest Payment Dates: May 15, and November 15
Record Dates: April 30 and October 31
Dated: September 29, 1995
MOHEGAN TRIBAL GAMING AUTHORITY
By: /s/ Ralph W. Sturges
------------------------------------
Name: Ralph W. Sturges
Title: Chairman, Management Board
By: /s/ Carlisle Fowler
------------------------------------
Name: Carlisle Fowler
Title: Treasurer, Management Board
(SEAL)
- ----------
(1) The rate of interest on the Subordinated Note issued substantially
concurrently with the Senior Secured Notes will be a fixed rate, while
Subordinated Notes thereafter issued to evidence the Authority's obligation to
repay funds advanced pursuant to the Completion Guarantee, will bear interest at
the rate per annum then most recently announced by Chemical Bank of New York,
New York as its prime rate plus 1%, which rate will be set and revised at
six-month intervals.
<PAGE>
(Back of Note)
15%(1) Subordinated Notes due 2003
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE NOTE
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 NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE TRIBE AND THE AUTHORITY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
AUTHORITY SO REQUESTS), (2) TO THE AUTHORITY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT 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 NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Note Purchase Agreement referred to below unless otherwise indicated.
1. INTEREST. (a) Mohegan Tribal Gaming Authority (or any successor thereto
as provided in the Note Purchase Agreement, the "Authority"), promises to pay
interest ("Interest") at the rate of 15% per annum (the "Interest Rate") on the
principal amount of this Subordinated Note from the Issuance Date to the date of
payment of such principal amount of this Subordinated Note.(2) Subject to the
mandatory deferral of Interest pursuant to the provisions
- ----------
(1) See Note 1 on page A-1
(2) This sentence will be deleted from each Subordinated Note issued to
evidence the Authority's obligation to repay funds advanced pursuant to the
Completion Guarantee and the following shall be substituted therefor:
A-2
<PAGE>
set forth below ("Deferred Interest") and the provisions of Article VIII of the
Note Purchase Agreement, installments of Interest shall become due and payable
semi-annually in arrears on each May 15 and November 15 (each an "Interest
Payment Date") to the holders of record at the close of business on the
immediately preceding April 30 or October 31, respectively, for the six-month
period ending on such preceding April 30 or October 31 (each a "Semi-annual
Period"). Interest shall be computed on the basis of a 360-day year, consisting
of twelve 30-day months.
Interest on Deferred Interest shall accrue and be deferred semi-annually
at the Interest Rate and shall be deemed part of Deferred Interest upon such
deferral.
Each installment of Interest shall be calculated to accrue from, but not
including the most recent date to which such Interest has been paid or provided
for or through which Interest has been calculated and deferred (or from and
including the Issuance Date if no installment of Interest has been paid,
provided for or deferred) to, and including, either (a) the last day of the
preceding Semi-annual Period if the corresponding principal of this Subordinated
Note has not become due and payable or (b) the date of payment if the
corresponding principal of this Subordinated Note has become due and payable
(whether at stated maturity, upon acceleration, upon maturity of repurchase
obligation or otherwise).
Interest in respect of the most recently ended Semi-annual Period
("Current Interest") shall be deferred unless (i) $87.5 million in aggregate
principal amount of Senior Notes have been repurchased or retired (for purposes
of such determination, the aggregate principal amount of Senior Notes offered to
be repurchased in any Offer shall be deemed to have been repurchased, whether or
not such amount was pursuant to such Repurchase Offer) and (ii) the Authority's
Fixed Change Coverage Ratio for the four full fiscal quarters last ended is
equal to or greater than 2.5 to 1 and no deferred Cash Flow Participation
Interest on the Senior Notes remains unpaid. Deferred Interest shall continue to
be deferred unless (and then only to the extent) Current Interest may be paid in
cash and the Authority's 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 to 1. Notwithstanding
the foregoing, all accrued
- ----------
Mohegan Tribal Gaming Authority (or any successor thereto as provided in
the Note Purchase Agreement, the "Authority") promises to pay interest
("Interest") on the principal amount of this Subordinated Note from the
Issuance Date to the date of payment of such principal amount of this
Subordinated Note at the rate per annum equal to the Reference Rate (as
hereinafter defined) as in effect on the Issuance Date plus 1%, which rate
shall be set and revised at intervals of six months (commencing six months
after the Issuance Date and until this Subordinated Note is fully paid)
(each, an "Adjustment Date") to be equal to the Reference Rate as in
effect on such Adjustment Date plus 1%. "Reference Rate" means the rate
per annum then most recently announced by Chemical Bank of New York as its
prime rate at New York, New York.
A-3
<PAGE>
and unpaid Interest shall be payable in cash on the Interest Payment Dates and
shall not be deferred if the Authority has paid in full all Obligations under
the Senior Notes and the Senior Note Indenture and the same shall have been
discharged.
(b) Notwithstanding anything herein to 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 this
Subordinated Note that matures (whether at stated maturity, upon acceleration,
upon maturity of repurchase obligation or otherwise) upon such maturity of such
principal amount of this Subordinated Note. The Authority shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
equal to the Interest Rate plus one percent per annum. The Authority shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of Interest (without regard to any
applicable grace periods) from time to time on demand at the same rate as on
overdue principal to the extent lawful.
2. METHOD OF PAYMENT. The Authority shall pay Interest (except defaulted
Interest) to the Holders of Subordinated Notes at the close of business on the
April 30 or October 31 next preceding the Interest Payment Date, even if such
Subordinated Notes are cancelled after such record date and on or before such
Interest Payment Date (the "Record Date"), except as provided in Section 4.04 of
the Note Purchase Agreement with respect to defaulted interest. The Holder
hereof must surrender this Subordinated Note to a Paying Agent to collect
principal payments. The Subordinated Notes shall be payable as to principal,
premium, if any, and interest at the office or agency of the Authority
maintained for such purpose within or without 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 at their addresses set forth in the register of Holders
and provided that payment by wire transfer of [immediately available/next day]
funds will be required with respect to principal of and premium, if any, and
interest on Subordinated Notes the Holders of which shall have provided wire
transfer instructions to the Authority or the Paying Agent. Such payment shall
be in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, First Fidelity Bank shall act as
Paying Agent and registrar (the "Registrar"). The Authority may change any
Paying Agent or Registrar without notice to any Holder. The Authority or any of
its Subsidiaries may act in any such capacity.
4. NOTE PURCHASE AGREEMENT. The Authority issued the Subordinated Notes
under a Note Purchase Agreement dated as of September 29, 1995 (as it may be
amended from time to time, the "Note Purchase Agreement") between the Authority
and Sun International Hotels Limited, a Bahamian corporation ("Purchaser"). The
terms of the Subordinated Notes include and are subject to all terms stated in
the Note Purchase Agreement and Holders are referred to the Note Purchase
Agreement for a statement of such terms. The Subordinated Notes are obligations
of the Authority limited to $40 million in aggregate principal amount plus an
aggregate principal amount equal to amounts paid under the Completion Guarantee.
The terms
A-4
<PAGE>
of the Note Purchase Agreement shall govern any inconsistencies between the Note
Purchase Agreement and the Subordinated Notes. The Subordinated Notes are
secured by a perfected, second priority security interest in the Cash
Maintenance Account and, upon the repayment in full of all Obligations under the
Senior Notes and the Senior Note Indenture and the discharge thereof, will be
secured by a perfected, first priority interest in such account (subject to any
liens permitted by the terms of the Senior Notes and the Senior Note Indenture).
5. OPTIONAL REDEMPTION. The Authority may not redeem or, except as
permitted by the terms of the Note Purchase Agreement, otherwise repurchase the
Subordinated Notes until the Senior Notes have been repaid in full. Thereafter,
the Subordinated Notes may be redeemed, in whole or in part, at the option of
the Authority, at par plus accrued and unpaid Interest thereon to the applicable
date of redemption.
Notwithstanding any provision contained herein to the contrary, the Tribe
at any time shall be entitled to acquire the Subordinated Notes from the Holders
thereof at a price equal to 100% of the principal amount thereof plus all
accrued and unpaid interest thereon.
Notwithstanding any other provisions of the Note Purchase Agreement, if
any Gaming Regulatory Authority requires that a Holder or beneficial owner of
the Subordinated Notes be licensed, qualified or found suitable under any
applicable gaming laws in order to maintain any gaming license or franchise of
the Authority or any Subsidiary under any applicable gaming laws, and the Holder
or beneficial owner fails to apply for a license, qualification or finding of
suitability within 30 days after being requested to do so by such Gaming
Regulatory Authority (or such lesser period that may be required by such Gaming
Regulatory Authority) or if such Holder or beneficial owner is not so licensed,
qualified or found suitable, the Authority has the right, at its option, (i) to
require such Holder or beneficial owner to dispose of such Holder's or
beneficial owner's Subordinated Notes within 30 days of receipt of such notice
of such finding by the applicable Gaming Authority (or such earlier date as may
be required by the applicable Gaming Regulatory Authority) or (ii) to call for
redemption of the Subordinated Notes of such Holder or beneficial owner at a
redemption price equal to the lesser of the principal amount thereof or the
price at which such Holder or beneficial owner acquired the Subordinated Notes,
together with, in either case, accrued and unpaid Interest (including Deferred
Interest) 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 Authority;
provided, however, that the Authority may not redeem any Subordinated Notes
pursuant to this provision if an Event of Default has occurred and is continuing
under the Senior Note Indenture until such time as there ceases to be any such
Event of Default under the Senior Note Indenture. The Authority shall not be
required to pay or reimburse any Holder or beneficial owner of Subordinated
Notes who is required to apply for any such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability. Such expenses shall be the obligation
of such Holder or beneficial owner.
6. MANDATORY REDEMPTION. The Authority shall not be required to make
mandatory redemption or sinking fund payments with respect to the Subordinated
Notes.
A-5
<PAGE>
7. REPURCHASE AT OPTION OF HOLDER. Upon a Change of Control, as defined in
the Note Purchase Agreement, the Authority may be required to offer to purchase
all of the outstanding Subordinated Notes in accordance with the provisions set
forth in the Note Purchase Agreement. Holders of Subordinated Notes will receive
an offer to purchase from the Authority prior to any related purchase date, and
may elect to have their Subordinated Notes purchased by completing the form
entitled "Option of Holders to Elect Purchase" appearing below. Such offer and
the obligation to repurchase tendered Subordinated Notes is subject to certain
restrictions related to the priority of the Senior Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Subordinated Notes are to be redeemed at its registered address. Subordinated
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Subordinated Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to accrue
on Subordinated Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Subordinated Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Subordinated Notes may be registered and
Subordinated Notes may be exchanged as provided in the Note Purchase Agreement.
The Registrar and the Authority may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Authority may
require a Holder to pay any taxes and fees required by law or permitted by the
Note Purchase Agreement. The Authority need not exchange or register the
transfer of any Subordinated Note or portion of a Suboprdinated Note selected
for redemption, except for the unredeemed portion of any Subordinated Note being
redeemed in part. Also, it need not exchange or register the transfer of any
Subordinated Notes for a period of 15 days before a selection of Subordinated
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the Registrar for
registration of the transfer of this Subordinated Note, the Registrar, the
Paying Agent, the Defeasance Agent (collectively, the "Agents") and the
Authority may deem and treat the Person in whose name this Subordinated Note is
registered as the absolute owner thereof for the purpose of receiving payment of
principal of and premium, if any, and interest on this Subordinated Note and for
all other purposes whatsoever, whether or not this Subordinated Note is overdue,
and neither any Agent nor the Authority shall be affected by notice to the
contrary. The registered holder of a Subordinated Note shall be treated as its
owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Note Purchase Agreement and the Subordinated Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Subordinated Notes, and any existing default or
compliance with any provision of the Note Purchase Agreement or the Subordinated
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Subordinated Notes.
A-6
<PAGE>
12. DEFAULTS AND REMEDIES. Events of Default include (as more fully
described in, and subject to the terms and conditions of, the Note Purchase
Agreement as it may be amended from time to time): (i) default in payment of
interest when due and payable on any Note for 30 days, (ii) default in payment
of principal of or premium, if any, on any Subordinated Note when due, (iii)
failure by the Authority for 90 days after written notice to it to comply with
any of its other agreements in the Note Purchase Agreement or the Subordinated
Notes and (iv) certain events of bankruptcy or insolvency. If any Event of
Default occurs and is continuing, the Holders of at least 25% in principal
amount of the then outstanding Subordinated Notes may declare the principal of
and premium, if any, interest and any other monetary obligations on all of the
Subordinated Notes to be due and payable; provided, however, that no such
declaration may be made unless and until all Obligations under the Senior Notes
and the Senior Note Indenture have been paid in full and the same have been
discharged. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, if all Obligations
under the Senior Notes and the Senior Note Indenture have been paid in full and
the same have been discharged, all outstanding Subordinated Notes shall become
due and payable without further action or notice. The Holders of a majority in
aggregate principal amount of the Subordinated Notes then outstanding may on
behalf of the Holders of all of the Subordinated Notes waive any existing
Default or Event of Default and its consequences under the Note Purchase
Agreement and the Subordinated Notes except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Subordinated
Notes. The Authority is required to deliver to the Holders annually a statement
regarding compliance with the Note Purchase Agreement, and the Authority is
required, within five Business Days upon becoming aware of any Default or Event
of Default, to deliver to the Holders a statement specifying such Default or
Event of Default.
13. SUBORDINATION. The Subordinated Notes are subordinated in right of
payment to Senior Indebtedness pursuant to Article VIII of the Note Purchase
Agreement.
14. NO RECOURSE AGAINST OTHERS. Neither the Tribe nor any officer, office
holder, employee, agent, representative, member of the Authority or the Tribe,
as such, shall have any liability for any obligations of the Authority under the
Subordinated Notes or the Note Purchase Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Subordinated Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Subordinated
Notes.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder 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).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Authority has
caused CUSIP numbers to be printed on the Subordinated Notes and the Authority
may use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such
A-7
<PAGE>
numbers either as printed on the Subordinated Notes or as contained in any
notice or redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Authority shall furnish to any Holder upon written request and without
charge a copy of the Note Purchase Agreement. Request may be made to:
Mohegan Tribal Gaming Authority
c/o Mohegan Tribe of Indians of Connecticut
27 Church Lane
Uncasville, CT 06392
Attn: Ralph Sturgis, Chief
Carlisle Fowler and Roland Harris
Business Board Members
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Subordinated Note, fill in the form below: (I) or (we)
assign and transfer this Subordinated Note to:
________________________________________________________________________________
(Insert assigneee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________________________________________ to
transfer this Subordinated Note on the books of the Authority. The agent may
substitute another to act for him.
Date:
Your Signature:____________________________
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
A-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Authority pursuant
to a Change of Control, check the following box and specify the amount: |_|
$______________
Date: Your Signature:
(Sign exactly as your name appears on
the Note)
Tax Identification No.: ______________
Signature Guarantee:
A-10
<PAGE>
EXHIBIT 10.9
GAMING FACILITY
MANAGEMENT AGREEMENT
BETWEEN
MOHEGAN TRIBE OF INDIANS
OF CONNECTICUT
AND
TRADING COVE ASSOCIATES
July 1994
<PAGE>
TABLE OF CONTENTS
Page
----
1. Recitals and Conditions Precedent ..................................... 1
2. Definitions ........................................................... 2
Business Board .................................................. 2
Bureau of Indian Affairs ........................................ 2
Class II Gaming ................................................. 2
Class III Gaming ................................................ 3
Collateral Agreement ............................................ 3
Commencement Date ............................................... 3
Compact ......................................................... 3
Completion Date ................................................. 3
Development and Construction Agreement .......................... 3
Effective Date .................................................. 3
Enterprise Employee Policies .................................... 4
Furnishings and Equipment ....................................... 4
Gaming .......................................................... 4
Gaming Agency ................................................... 4
Gaming Enterprise ............................................... 4
Gaming Facility ................................................. 5
General Manager ................................................. 5
Generally Accepted Accounting Principles ........................ 5
Gross Gaming Revenue (Win) ...................................... 5
Gross Revenues .................................................. 5
Hard Count ...................................................... 5
IGRA ............................................................ 5
Legal Requirements .............................................. 6
Loan Agreement .................................................. 6
Manager's Representative ........................................ 6
Member of the Nation's Government ............................... 32
Minimum Balance ................................................. 6
Minimum Priority Payment ........................................ 6
Mohegan Nation Gaming Ordinance ................................. 6
Nation .......................................................... 6
Nation's Representative ......................................... 6
National Indian Gaming Commission (NIGC) ........................ 6
Net Revenues (gaming) ........................................... 6
Net Revenues (other) ............................................ 7
Note ............................................................ 7
Operating Expenses .............................................. 7
Promotional Allowances .......................................... 7
Property ........................................................ 7
<PAGE>
Qualified ....................................................... 18
Security Agreement .............................................. 7
Soft Count ...................................................... 7
Tribal Council .................................................. 8
3. Covenants ............................................................. 8
3.1 Engagement of Manager ........................................... 8
3.2 Term ............................................................ 8
3.3 Exclusivity of Operations ....................................... 8
3.4 Establishment and Operations of Business Board .................. 8
3.5 Manager's Compliance With Law; Licenses ......................... 9
3.6 Nation's Amendments to Nation's Gaming Ordinance ................ 9
3.7 Management Fee .................................................. 9
4. Business and Affairs in Connection with Enterprise .................... 9
4.1 Manager's Authority and Responsibility .......................... 9
4.1.1 Selection of General Manager .............................. 9
4.2 Duties of the Manager ........................................... 10
4.2.1 Management ................................................ 10
4.2.2 Compliance ................................................ 10
4.2.3 Required Filings .......................................... 10
4.2.4 Contracts in Nation's Name and at Arm's Length ............ 10
4.2.5. Financing ................................................ 11
4.3 Security and Surveillance ....................................... 11
4.4 Damage, Condemnation or Impossibility of the Enterprise ......... 11
4.4.1 Recommencement of Operations .............................. 11
4.4.2 Repair or Replacement ..................................... 11
4.4.3 Other Business Purposes ................................... 12
4.4.4 Termination Of Gaming ..................................... 12
4.4.5 Tolling Of the Agreement .................................. 12
4.5 Alcoholic Beverages and Tobacco Sales ........................... 13
4.6 Employees ....................................................... 13
4.6.1 Manager's Responsibility .................................. 13
4.6.2 Nation's Employees ........................................ 13
4.6.3 Off-Site Employees ........................................ 13
4.6.4 Nation's Inspector(s) ..................................... 13
4.6.5 Indian Employment Preference and Training ................. 14
4.6.6 Removal of Employees ...................................... 14
4.7 Marketing and Advertising ....................................... 14
4.8 Pre-Opening ..................................................... 14
4.9 Operating Budgets ............................................... 15
4.10 Capital Budgets ................................................. 16
4.11 Capital Replacements ............................................ 17
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4.12 Replacement Reserve Fund ........................................ 17
4.13 Periodic Contributions to Reserve Fund .......................... 17
4.14 Use and Allocation of Reserve Fund .............................. 18
4.15 Contracting ..................................................... 18
4.16 Determination of Qualifications and Compensation ................ 18
4.17 Litigation ...................................................... 18
4.18 Employee Background Investigations .............................. 19
4.19 Enterprise Employee Policy ...................................... 19
4.20 No Manager Wages or Salaries .................................... 19
4.21 Internal Control Systems ........................................ 20
4.22 Bank Accounts ................................................... 20
4.23 Daily Deposits to Depository Account ............................ 20
4.24 Disbursement Account ............................................ 20
4.25 No Cash Disbursements ........................................... 20
4.26 Cash Contingency Reserve Fund ................................... 21
4.27 Transfers Between Accounts ...................................... 21
4.28 Insurance ....................................................... 21
4.29 Accounting and Books of Account ................................. 22
4.29.1 Statements and Audits ................................... 22
4.29.2 Books of Account ........................................ 23
4.29.3 Accounting Standards .................................... 23
4.29.4 Depreciation Schedules .................................. 23
5. Liens ................................................................. 23
6. Management Fee, Reimbursement and Disbursement ........................ 23
6.1 Management Fee .................................................. 23
6.2 Disbursements ................................................... 23
6.3 Adjustment to Bank Account ...................................... 24
6.4 Payment of Fees and Nation Disbursement ......................... 24
6.5 Operatives Dates ................................................ 25
6.6 Payment of Net Revenues ......................................... 25
6.7 Conditional Loan Guarantee ...................................... 25
7. General Provisions .................................................... 25
7.1 Notice .......................................................... 25
7.2 Authorization ................................................... 26
7.3 Relationship .................................................... 26
7.4 Manager's Contractual Authority ................................. 26
7.5 Further Actions ................................................. 26
7.5.1 Fire and Safety .......................................... 26
7.5.2 Taxes .................................................... 27
7.5.3 Nation Taxes ............................................. 27
7.5.4 Governing Law ............................................ 27
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7.5.5 National Environmental Policy Act ............................... 27
7.6 Defense ......................................................... 28
7.7 Waivers ......................................................... 28
7.8 Captions ........................................................ 28
7.9 Severability .................................................... 28
7.10 Interest ........................................................ 28
7.11 Reimbursement ................................................... 29
7.12 Travel and Out-of-Pocket Expenses ............................... 29
7.13 Third Party Beneficiary ......................................... 29
7.14 Brokerage ....................................................... 29
7.15 Survival of Covenants ........................................... 29
7.16 Estoppel Certificate ............................................ 29
7.17 Periods of Time ................................................. 29
7.18 Preparation of Agreement ........................................ 30
7.19 Exhibits ........................................................ 30
7.20 Non-Assignability ............................................... 30
7.21 Confidential Information ........................................ 30
7.22 Employment Solicitation Restriction Upon Termination ............ 30
7.23 Patron Dispute Resolution ....................................... 30
7.24 Modification .................................................... 31
8. Warranties ............................................................ 31
8.1 Preservation of Agreement ....................................... 31
8.2 Non-Interference in Nation Affairs .............................. 31
8.3 Prohibition of Payments to Members of Nation Government ......... 31
8.4 Prohibition of Hiring Members of Nation's Government ............ 31
8.5 Prohibition of Financial Interest in Enterprise ................. 31
8.6 Member of the Nation's Government Defined ....................... 32
9. Grounds for Termination ............................................... 32
9.1 Voluntary Termination and Termination for Cause ................. 32
9.2 Voluntary Termination ........................................... 32
9.3 Termination for Cause ........................................... 32
9.4 Involuntary Termination Due to Changes in Legal Requirements .... 33
9.5 Manager's Right to Terminate Agreement .......................... 33
9.6 Consequences of Termination of Manager's Breach ................. 34
9.7 Consequences of Termination of Nation's Breach .................. 34
10. Conclusion Of the Management Term ..................................... 34
10.1 Transition ...................................................... 34
10.2 Undistributed Net Revenues ...................................... 35
11. Consents and Approvals ................................................ 35
11.1 Nation .......................................................... 35
11.2 Manager ......................................................... 35
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12. Disclosures ........................................................... 35
12.1 Partners and Affiliates ......................................... 35
12.2 Warranties ...................................................... 35
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12.3 Criminal and Credit Investigation ............................... 35
12.4 Disclosure Amendments ........................................... 36
12.5 Breach of Manager Warranties and Agreements ..................... 36
13. Recordation ........................................................... 37
14. Authority to Execute .................................................. 37
15. No Present Lien, Lease or Joint Venture ............................... 37
16. Dispute Resolution .................................................... 37
16.1 Nation's Consent to Suit ........................................ 37
16.1.1 Arbitration ............................................. 38
16.1.2 Choice of Law ........................................... 38
16.1.3 Place of Hearing ........................................ 38
16.1.4 Confidentiality ......................................... 38
16.2 Limitation of Actions ........................................... 38
16.2.1 Damages ................................................. 38
16.2.2 Consents and Approvals .................................. 39
16.2.3 Injunctive Relief and Specific Performance .............. 39
16.2.4 Action to Compel Arbitration ............................ 39
16.2.5 Action to Preserve the Status Quo During Disputes........ 39
16.3 Business Board Arbitration ...................................... 39
17. Time is of the Essence ................................................ 39
18. Nation Assets ......................................................... 39
19. Notice Provision ...................................................... 39
20. Performance During Disputes ........................................... 39
21. Marks ................................................................. 40
21.1 Nation's Marks .................................................. 40
21.2 Manager's Marks ................................................. 41
22. Confidential and Proprietary Information .............................. 42
23. Execution in Counterpart Originals .................................... 42
24. Enterprise Name ....................................................... 42
25. Intent to Negotiate New Agreement ..................................... 42
26. Entire Agreement ...................................................... 42
27. Government Savings Clause ............................................. 42
<PAGE>
GAMING FACILITY
MANAGEMENT AGREEMENT
THIS GAMING FACILITY MANAGEMENT AGREEMENT has been entered into July 28,
1994, by and between the MOHEGAN TRIBE OF INDIANS OF CONNECTICUT and its
permitted successors and assigns (the "Nation"), and TRADING COVE ASSOCIATES, a
Connecticut partnership, and its permitted successors and assigns ("the
Manager").
1. Recitals and Conditions Precedent.
1.1 The Mohegan Nation has occupied lands in the State of Connecticut for
time immemorial. The Nation existed long before the Declaration of Independence
and the adoption of the Constitution of the United States. Although the Nation
had entered into treaty relations with the Colony of Connecticut, it never had a
formal treaty relationship with the United States. In 1984 the Tribe submitted a
documented petition for federal recognition to the Secretary of the Interior and
received a proposed negative finding in 1989.
Trading Cove Associates, through its own resources and from other sources,
assisted the Nation in responding to the negative finding. The Nation's petition
was approved by the Secretary in 1994.
Trading Cove Associates assisted the Nation in economic development
planning, and in negotiations with the federal government and the State of
Connecticut and other governmental and non-governmental bodies as to the matters
which are essential to the successful implementation of those plans, including
Compact negotiations with the State of Connecticut, and identifying and
facilitating acquisition of a purchase option for land which is well suited for
development as a site for the Gaming Enterprise. Trading Cove Associates made
these commitments to the Mohegan Nation in partial consideration for the
commitment of the Nation, subject to federal approval, to enter into this
Agreement. Today the Nation is a federally recognized Indian tribe. When it is
acquired in trust by the United States, the Nation will exercise sovereign
governmental powers over the land described in Exhibit A hereto (the
"Property"), located in the State of Connecticut (the "State").
1.2 At the time of execution of this Agreement, the Property is owned by
UNC Incorporated, a Delaware corporation. The Nation holds a valid and binding
option to purchase the Property. The Nation will take all actions necessary and
proper to perfect an application for transfer of the Property to the United
States. Upon approval of that application by the Bureau of Indian Affairs, the
Nation will exercise the option, acquire the Property, and deed it to the United
States. The successful completion of this transfer of the Property to the United
States shall be a condition precedent to the obligations of the Manager. At all
times relevant to the
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duties and responsibilities of the Manager to operate Gaming on the Property,
the Property shall be owned by the United States of America in trust for the
Nation. The Nation desires to use the Property to improve the economic
conditions of its members, to enable it to serve the social, economic,
educational and health needs of the Nation, to increase Nation revenues and to
enhance the Nation's economic self-sufficiency and self-determination.
1.3 The Nation is seeking technical experience and expertise for the
operation of the Gaming Enterprise and instruction for members of the Nation in
the operation of the Gaming Enterprise. The Manager is willing and able to
provide such experience, expertise and instruction.
1.4 The Nation wants to grant the Manager the exclusive right and
obligation to develop, manage, operate and maintain the Gaming Enterprise and
any expansion thereof, whether on lands held by the United States of America in
trust for the Nation as described in Article 1.2 above, or on land hereafter
placed in trust, and to train Nation members and others in the operation and
maintenance of the Gaming Enterprise during the terms of the Development and
Construction Agreement and the Management Agreement and conforming with the
provisions of this Agreement. The Manager wishes to perform these functions
exclusively for the Nation as limited in Article 3.3 below.
1.5 This Agreement is entered into pursuant to the Indian Gaming
Regulatory Act of 1988, PL 100-497, 25 U.S.C. ss.ss. 2701, et seq. (herein the
"IGRA").
2. Definitions. As they are used in this Agreement, and in Collateral Agreements
(hereinafter defined), the terms listed below shall have the meaning assigned to
them in this Article:
"Business Board" is a committee which shall consist of an equal number of
representatives of the Nation and the Manager but in no event more than four
persons. Initially there shall be one Nation's Representative and a Manager's
Representative. Upon written agreement of the parties the Business Board may be
expanded to four members. Each member of the Business Board may designate
another person to exercise his or her authority by written notice signed by such
Business Board member and given in accordance with Article 7.1 of this
Agreement. The Business Board shall remain active during the entire term of this
Agreement.
"Bureau of Indian Affairs" or "B.I.A." is the Bureau of Indian Affairs of
the Department of the Interior of the United States of America.
"Class II Gaming" shall mean Class II Gaming as defined in the IGRA.
"Class III Gaming" shall mean Class III Gaming as defined in the IGRA.
"Collateral Agreement" shall mean other agreements between the parties as
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provided by 25 C.F.R ss.502.5.
"Commencement Date" shall mean the first date that the Gaming Facility is
substantially complete, open o the public and that Class II and Class III Gaming
is conducted in the Gaming Facility pursuant to the terms of this Agreement. The
Manager shall memorialize the Commencement Date in a writing signed by the
Manager and delivered to the Nation and to the Area Director, Eastern Area
Office, B.I.A.
"Compact" shall mean the tribal-state Compact entered into between the
Nation and the State of Connecticut pursuant to the IGRA as the same may, from
time to time, be amended, or such other Compact as may be substituted therefor.
"Completion Date" shall mean the date upon which Manager receives (i) an
architect's certificate from the Architect identified in the Gaming Facility
Development and Construction Agreement (hereinafter called the "Development and
Construction Agreement") as having responsibility for the design and supervision
of construction, equipping and furnishing of the Gaming Facility certifying that
the Gaming Facility has been constructed substantially in accordance with the
Plans and Specifications; (ii) certification from Manager (or the division,
department or designee of Manager having responsibility to assure compliance
with any operational standards) stating that the Gaming Facility is in
substantial compliance with any such standards; and (iii) certificates of such
professional designers, inspectors or consultants or opinions of counsel, as
Manager may determine to be appropriate, verifying construction and furnishing
of the Gaming Facility in substantial compliance with all Legal Requirements.
"Development and Construction Agreement" shall mean that certain Gaming
Facility Development and Construction Agreement of even date by and between
Manager and the Nation providing the terms under which Manager will develop the
Gaming Facility, including without limitation, design, construction and
furnishing and equipping same.
"Effective Date" shall mean the date five days following the date on which
all of the following listed conditions are satisfied:
(i) written approval of this Agreement, the Development and
Construction Agreement, the Loan Agreement, Note and Security Agreement is
granted by the Chairman of the NIGC;
(ii) written approval of a Nation Gaming Ordinance in form and
substance satisfactory to Manager is granted by Chairman of the NIGC;
(iii) written confirmation that the NIGC has approved the Nation's
background checks of the Manager;
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(iv) Manager has received a certified copy of the ratifying
Resolution which effectively confirms that it is the law of the Nation
that the Management Agreement, Development and Construction Agreement,
Loan Agreement, Note and Security Agreement and the exhibited documents
attached thereto are the legal and binding obligations of the Nation,
valid and enforceable in accordance with their terms;
(v) The Property is owned by the United States of America in trust
for the Nation, and Manager has satisfied itself as to the Nation's
control of the site and its suitability for construction of the
contemplated Gaming Facility;
(vi) The Compact is duly approved by the United States; and
(vii) Receipt by Manager of all applicable and required licenses.
The parties agree to cooperate and to use their best efforts to satisfy all of
the above conditions at the earliest possible date. Manager agrees to
memorialize the satisfaction of (v), (vi) and (vii) each as well as the
Effective Date in a writing signed by Manager and delivered to the NIGC.
"Enterprise Employee Policies" shall have the meaning given to it in
Article 4.19.
"Furnishings and Equipment" shall mean all furniture, furnishings and
equipment required or used in the operation of the Gaming Enterprise in
accordance with the plans and specifications of the Gaming Facility.
"Gaming" shall mean any and all activities defined as Class II or Class
III Gaming under the IGRA or authorized under the Compact.
"Gaming Agency" shall mean the Tribal Council or a subordinate body
created pursuant to the Nation's Gaming Ordinance to regulate Gaming in
accordance with the Compact, the IGRA and the Nation's Gaming Ordinance.
"Gaming Enterprise" or "Enterprise" is any commercial enterprise of the
Nation authorized by the IGRA and/or the Compact and operated and managed by
Manager in accordance with the terms and conditions of this Agreement to engage
Gaming; and any other lawful commercial activity related to Gaming allowed in
the Gaming Facility including, but not limited to, Automatic Teller Machines
("ATM"), and the retail sale of food, beverages, tobacco, gifts and souvenirs.
The Gaming Enterprise includes any building or accommodation used for Class II
and Class III Gaming and related on-site retail sales owned by the Nation or any
instrumentality of the Nation related to Class II or Class III Gaming wherever
situated, but shall not include any hotel or resort properties adjacent to or
near the Gaming Facility or the Enterprise. The Nation shall have the sole
proprietary interest in and responsibility
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for the conduct of all Gaming conducted by the Gaming Enterprise, subject to the
rights and responsibilities of the Manager under this Agreement.
"Gaming Facility" shall mean the buildings, improvements, and fixtures,
now or hereafter located therein or thereon and associated and adjacent real
property owned by the Nation, or in which the Nation has an interest, within
which the Gaming Enterprise will be housed, all as located on the Property. Upon
the satisfaction of the conditions precedent, as set forth in Article 1.2, title
to the Property and the Gaming Facility shall merge and continue to be held by
the United States of America in trust for the Nation.
"General Manager" shall mean the person employed to direct the operation
of the Gaming Facility.
"Generally Accepted Accounting Principles" or "GAAP" shall mean those
principles defined by the Financial Accounting Standards Board, and the NIGC
pursuant to the IGRA.
"Gross Gaming Revenue" or "Win" shall mean the net win from gaming
activities which is the difference between gaming wins and losses before
deducting costs and expenses, determined in accordance with GAAP consistently
applied.
"Gross Revenues" shall mean all revenues of any nature derived directly or
indirectly from the Gaming Enterprise including, without limitation, Gross
Gaming Revenue (Win), interest earned on bank accounts established for the
deposit of Gaming receipts, food and beverage sales and other rental or other
receipts from lessees, sublessees, licensees and concessionaires (but not the
gross receipts of such lessees, sublessees, licensees or concessionaires), and
revenue recorded for Promotional Allowances, determined in accordance with GAAP
consistently applied.
"Hard Count" shall mean the count of the coin or tokens in a slot machine
drop bucket.
"IGRA" shall mean the Indian Gaming Regulatory Act of 1988, PL 100-497, 25
U.S.C. 2701 et seq. as same may, from time to time, be amended.
"Legal Requirements" shall mean singularly and collectively all applicable
laws including without limitation the Nation's Gaming Ordinance, all other laws
or regulations of the Nation, the IGRA, the Compact and applicable federal and
Connecticut statutes.
"Loan Agreement" shall mean the loan agreement between the Nation and a
third party lender the proceeds of which are to be used exclusively to develop,
design, construct, furnish, equip and provide start-up and working capital for
the Gaming Enterprise.
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"Manager's Representative" shall mean the person designated by the Manager
to sit on the Business Board. The Manager's Representative shall serve as the
liaison between the Manager and the Nation during the term of the Agreement.
"Minimum Balance" shall mean that sum of money agreed to by the Business
Board to be maintained in the Gaming Enterprise Bank Account(s) to serve as
working capital for Gaming Facility operations. The Minimum Balance may be
adjusted by the Business Board at any time after the Commencement Date.
"Minimum Priority Payment" shall mean the amount of FIFTY THOUSAND DOLLARS
AND 00/100 ($50,000.00) to be paid as provided in Article 6.4 of this Agreement.
"Nation Gaming Ordinance" or "Mohegan Nation Gaming Ordinance" is the
ordinance and any amendments thereto enacted by the Mohegan Tribe of Indians of
Connecticut, which authorizes and regulates gaming on the Mohegan Reservation.
"Nation" shall mean the Mohegan Tribe of Indians of Connecticut, a
federally recognized Indian tribe, its permitted successors and assigns,
including any subordinate body, agent, political subdivision, agency, or
committee thereof, or any corporation wholly owned thereby created pursuant to
any resolution or ordinance of the Mohegan Tribal Council.
"Nation's Representative" shall mean the person designated by the Nation
to sit on the Business Board. The Nation's Representative shall serve as the
liaison between the Nation and the Manager during the term of this Agreement.
"National Indian Gaming Commission" or "NIGC" is the commission
established pursuant to 25 U.S.C. ss. 2704.
"Net Revenues (gaming)" for the purposes of this Agreement shall mean
Gross Gaming Revenue (Win) from Class II or Class III gaming, less all gaming
related Operating Expenses, excluding the Management Fee, determined in
accordance with GAAP consistently applied.
"Net Revenues (other)" for the purposes of this Agreement shall mean Gross
Revenues, of the Gaming Enterprise from all other sources other than Gaming in
support of Class II or Class III gaming, such as food and beverage,
entertainment, and retail, less all related Operating Expenses, excluding the
Management Fee and less the retail value of Promotional Allowances, and less the
following revenues actually received by the Gaming Enterprise and included in
Gross Revenues: (i) any gratuities or service charges added to a customer's
bill; (ii) any credits or refunds made to customers, guests or patrons; (iii)
any sums and credits received by the Gaming Enterprise for lost or damaged
merchandise; (iv) any sales, excise, gross receipt, admission, entertainment,
tourist or other taxes or charges (or assessments
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equivalent thereto, or payments made in lieu thereof) which are received from
patrons and passed on to a governmental or quasi-governmental entity; (v) any
proceeds from the sale or other disposition of furnishings and equipment or
other capital assets; (vi) any fire and extended coverage insurance proceeds
other than for business interruption; (vii) any condemnation awards other than
for temporary condemnation; (viii) any proceeds of financing or refinancing; and
(ix) any interest on the Replacement Reserve Fund, determined in accordance with
GAAP consistently applied, and 25 U.S.C. ss. 2703 (9). The term "Net Revenues"
without reference to "(gaming)" or "(other)" shall mean the aggregate of Net
Revenue (gaming) and Net Revenue (other).
"Note" shall mean the promissory note executed by the Nation in favor of a
lender or lenders pursuant to the Loan Agreement.
"Operating Expenses" shall mean expenses of the operation of the Gaming
Enterprise determined in accordance with GAAP, consistently applied.
"Promotional Allowances" shall mean the retail value of transportation,
complimentary hotel accommodations, food, beverages, merchandise, chips, tokens,
shows, or services provided to patrons for promotional purposes.
"Property" shall mean the parcel of land described in Exhibit A, or such
other parcel, approved by Manager, to be held by the United States of America in
trust for the Nation.
"Security Agreement" shall mean that agreement to be entered into between
the Nation and the lender or lenders under the Loan Agreement, which sets out
the various rights and obligations of the parties related to the Nation's
borrowing to develop, construct, furnish, equip and open the Gaming Facility.
"Soft Count" shall mean the count of the contents in a drop box (Tables)
and all non-coin revenue and credits from slot machines.
"Tribal Council" shall mean the Mohegan Tribal Council created pursuant to
the Nation's Constitution or, at the option of the Nation, a designee agency,
committee, corporation or council created pursuant to any resolution or
ordinance of the Mohegan Tribal Council.
3. Covenants. In consideration of the mutual covenants contained in this
Agreement, the parties agree and covenant as follows:
3.1 Engagement of Manager. The Nation hereby retains and engages Manager
as an independent contractor for the purposes of managing the Gaming Enterprise
and training Nation members and others in the management of the Gaming
Enterprise. Nothing contained herein grants or is intended to grant
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Manager a titled interest to the Gaming Facility or to the Gaming Enterprise.
The Manager hereby accepts such retention and engagement and promises to use its
best efforts to promote and manage the Gaming Enterprise and to train Nation
members.
3.2 Term. This Agreement shall become effective on the Effective Date. The
term of this Agreement shall begin on the Commencement Date and continue for a
period of seven (7) years.
3.3 Exclusivity of Operations. Except as otherwise mutually agreed, the
Manager and the Nation agree that during the term of this Agreement neither the
Manager nor any affiliated or controlled entities will establish or operate any
other Gaming Facility in Connecticut or Rhode Island without the written consent
of the Nation, which consent shall not be unreasonably withheld. Nothing
contained herein shall impair Manager's right to develop, own and operate gaming
facilities outside Connecticut or Rhode Island. During the term of the
provisions of this Agreement relating to management of gaming (the "gaming
term"), the Nation shall not, without the prior written approval of the Manager,
which consent shall not be unreasonably withheld, conduct gaming at any location
other than the Property.
3.4 Establishment and Operation of Business Board. Within seven days of
the Effective Date: (1) the Manager shall designate the Manager's Representative
and notify the Nation pursuant to Article 7; (2) the Nation shall designate the
Nation's Representative and notify the Manager pursuant to Article 7. The
Business Board shall have the obligations, rights and powers described in this
Agreement. In order to be effective, any action of the Business Board must be
the result of mutual agreement by the Business Board members or their designees.
In the event mutual agreement cannot be reached, the appropriate action shall be
determined in the manner provided in Article 16.3.
3.5 Manager's Compliance With Law; Licenses. The Manager covenants that it
will at all times comply in all material respects with all Legal Requirements,
including the Nation's Gaming Ordinance, the IGRA, the Compact, applicable
Connecticut statutes and any licenses issued under any of the foregoing. The
Manager, Manager's executive officers, and all other persons required by
applicable law shall be licensed to operate the Gaming Enterprise pursuant to
the Nation's Gaming Ordinance. The Nation shall not unreasonably withhold,
withdraw, qualify or condition such licenses.
3.6 Nation's Amendments to Nation's Gaming Ordinance. The Nation covenants
that any amendments made to the Nation's Gaming Ordinance will be a legitimate
effort to ensure that Gaming is conducted in a manner that adequately protects
the environment, the public health and safety, or the integrity of the Gaming
Enterprise. The Nation further covenants that any amendments to the Nation's
Gaming Ordinance will comply with the foregoing standard. Except as
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required by State or federal law, the Nation will not adopt any amendments to
the Nation's Gaming Ordinance that would have a material adverse effect on the
Manager's rights under this Agreement, the Development and Construction
Agreement, the Loan Agreement, the Note, the Security Agreement, or any document
executed by the parties related thereto.
3.7 Management Fee. The Nation agrees to pay the Manager a Fee (the
"Management Fee") of forty percent (40%) of Net Revenues (gaming) and Net
Revenues (other), as defined in this Agreement, and pursuant to Article 6 of
this Agreement.
4. Business and Affairs in Connection with Gaming Enterprise.
4.1 Manager's Authority and Responsibility. All business and affairs in
connection with the day-to-day operation, management and maintenance of the
Gaming Enterprise and the Gaming Facility, including the establishment of
operating days and hours, shall be the responsibility of the Manager. The
Manager is hereby granted all power and authority which is necessary or
appropriate to act, through the General Manager, in order to fulfill its
responsibilities under this Agreement. Manager agrees to employ good management
practices, including competitive selection of goods and services, where
appropriate.
4.1.1 Selection of General Manager. The selection of the General Manager
shall be subject to approval by the Nation, by resolution of the Tribal Council,
and such officer shall be removed at the request of the Nation, by resolution of
the Tribal Council, with the consent of the Manager which consent shall not be
unreasonably withheld.
4.2 Duties of the Manager. In managing, operating, maintaining and
repairing the Gaming Enterprise and the Gaming Facility the Manager's duties
shall include, without limitation, the following:
4.2.1 Management. The Manager shall use reasonable measures for the
orderly administration, management, and operation of the Gaming Enterprise
and the Gaming Facility.
4.2.2 Compliance. The Manager shall comply in all material respects
with all present and future statutes, regulations and ordinances of the
Nation. The Nation shall take no action and adopt no statute or ordinance
that prejudices or adversely affects the Manager's rights under this
Agreement or that violates the Indian Civil Rights Act (25 U.S.C. ss.ss.
1301-1303). Prior to any changes in the Nation's land use or zoning
regulations or ordinances during the term of this Agreement, the Manager
and the Nation shall jointly determine whether the Property shall be
exempt from such changes.
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4.2.3 Required Filings. The Manager shall comply with all applicable
provisions of the Internal Revenue Code including, but not limited to, the
prompt filing of any cash transaction reports and W-2G reports that may be
required by the Internal Revenue Service of the United States or under the
Compact.
4.2.4 Contracts in Nation's Name and at Arm's Length. Contracts for
the operations of the Gaming Enterprise shall be entered into in the name
of the Nation and signed by the General Manager pursuant to annual budgets
approved by or with the written consent of the Nation. Contracts requiring
the expenditure in any fiscal year in excess of $25,000 shall require the
approval of the Business Board. No contracts for the supply of goods or
services to the Gaming Enterprise shall be entered into with parties
affiliated with the Manager or its officers or directors unless the
affiliation is disclosed to and approved by the Business Board, and the
contract terms are no less favorable for the Gaming Enterprise than could
be obtained from a non-affiliated contractor. Nothing in this Article
shall preclude the application of Article 4.15 to any contract.
Notwithstanding anything to the contrary contained herein, contracts for
the supply of any goods or services paid for entirely by the Manager may
be provided by parties affiliated with the Manager or its officers or
directors. Payments on such contracts, which shall be entered into in
Manager's name only, shall not constitute Operating Expenses and shall be
the sole responsibility of the Manager.
4.2.5. Financing. The Manager shall assist the Nation in obtaining
financing for the Enterprise. Any fees associated with this effort which
might otherwise be paid by the lender to Manager shall be applied to
reduce the principal amount.
4.3 Security and Surveillance. Subject to the law enforcement authority of
the Nation, the Manager shall provide for appropriate security and surveillance
for the operation of the Gaming Facility. All aspects of Gaming Facility
security and surveillance shall be the responsibility of the Manager. Any
security officer designated by the Nation shall be bonded and insured, either
individually or under blanket policies, in an amount commensurate with his or
her enforcement duties and obligations. The cost of any charge for fire,
ambulance or other emergency public safety services will be an Operating
Expense. The Nation shall have sole responsibility for security and surveillance
outside the Gaming Facility. The Nation shall have full 24 hour access to the
entire Gaming facility, including the surveillance room, and to all surveillance
tapes and records. All surveillance and security records of any kind, including
tapes, computer records and written files, shall be maintained at the Gaming
Facility.
4.4 Damage, Condemnation or Impossibility of the Gaming Enterprise. If,
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during the term of this Agreement, the Gaming Facility is damaged or destroyed
by fire, war, or other casualty, or by an Act of God, or is taken by
condemnation or sold under the threat of condemnation, or if Gaming on the
Property is prohibited as a result of a decision of a court of competent
jurisdiction or by operation of any applicable legislation, the Manager shall
have the following options:
4.4.1 Recommencement of Operations. The Manager shall have the
option to continue its interest in this Agreement and to commence or
recommence the operation of Gaming at the Gaming Facility if, at some
point during the term of this Agreement, such commencement or
recommencement shall be legally and commercially feasible in the sole
judgment of the Manager.
4.4.2 Repair or Replacement. If the Gaming Facility is damaged,
destroyed or condemned so that Gaming can no longer be conducted at the
Gaming Facility, the insurance or condemnation proceeds shall, at the
option of the Business Board, be utilized to restore or replace the Gaming
Facility and to reopen the Gaming Enterprise, and the Manager may within
60 days after the casualty, choose to reconstruct the Gaming Facility to a
condition at least comparable to that before the casualty occurred. If the
Business Board elects to reconstruct the Gaming Facility and if the
insurance proceeds or condemnation awards are insufficient to reconstruct
the Gaming Facility to such condition, the Manager may, in its sole
discretion, supply such additional funds as are necessary to reconstruct
the Gaming Facility to such condition and such funds shall, with the prior
consent of the Nation and the B.I.A. or NIGC, as appropriate, constitute a
loan to the Nation, secured by the revenues from the Gaming Enterprise and
repayable upon such terms as may be agreed upon by the Nation and the
Manager. The loan provided for herein shall not be subject to the ceiling
set forth in the Development and Construction Agreement. If the insurance
proceeds are not used to repair the Gaming Facility, the Nation shall have
the sole right to adjust and settle any and all claims for such insurance
proceeds or condemnation awards, and such proceeds or award shall be
applied first to the amounts due under the Loan Agreement, Note or
Security Agreement (including principal, interest and premium, if any);
second, any other loans; third, any undistributed Net Revenues pursuant to
Article 6 of this Agreement, and fourth, any surplus shall be distributed
to the Nation and/or to the Manager as their interests may appear.
Proceeds of property hazard insurance remaining after all financing
obligations are repaid shall belong to the Nation. Proceeds of business
interruption insurance shall be included in the Gross Revenues of the
Gaming Enterprise.
4.4.3 Other Business Purposes. The Manager shall have the option to
use the Gaming Facility for other purposes included in the Gaming
Enterprise and reasonably incidental to Class II and Class III Gaming,
provided the Business Board has approved such purposes (which approval
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shall not be unreasonably withheld). For any purpose other than Gaming,
the Manager and the Business Board shall obtain all approvals necessary
under applicable law.
4.4.4 Termination of Gaming. The Manager shall have the option at
any time following the cessation of Gaming on the Property to notify the
Nation in writing that it is terminating operations under this Agreement,
in which case the Manager shall retain any rights to undistributed Net
Revenues pursuant to Article 6 of this Agreement, and any rights pursuant
to Article 16 of this Agreement. If Manager does not elect to terminate
this Agreement, it may take whatever action may be necessary to reduce
expenses during such termination of Gaming.
4.4.5 Tolling Of the Agreement. If, after a period of cessation of
Gaming on the Property, the recommencement of Gaming is possible, and if
the Manager has not terminated this Agreement under the provisions of
Article 4.4.4, the period of such cessation shall not be deemed to have
been part of the term of the Management Agreement and the date of
expiration of the term of the Management Agreement shall be extended by
the number of days of such cessation period. Any reasonable payments made
to any third party to eliminate rights acquired in the Property, the
Gaming Facility or the Gaming Enterprise during the period of cessation
shall constitute Operating Expenses of the Gaming Enterprise.
4.5 Alcoholic Beverages and Tobacco Sales. During the term of this
Agreement alcoholic beverages may be served at retail at the Gaming Facility if
permissible in accordance with Section 14(b) of the Compact and applicable law
as provided therein. The parties acknowledge that no enabling legislation of the
Nation for the retail sale of alcoholic beverages is now in force, and that such
legislation will be necessary in order to serve alcoholic beverages at the
Gaming Facility. When such legislation is subsequently enacted, and all
requisite approvals are obtained and all Legal Requirements are met, the Nation
and the Manager may mutually agree to include service of such beverages within
the Gaming Enterprise. If such legislation is enacted, it shall provide for the
service of such beverages to the maximum extent permitted by the Compact.
Tobacco may be sold at retail at the Gaming Facility subject to and in
accordance with the Nation's licensing requirements and other applicable law.
4.6 Employees.
4.6.1 Manager's Responsibility. Manager shall have, subject to the
terms of this Agreement, the exclusive responsibility and authority to
direct the selection, retention, training, control and discharge of all
employees performing regular services for the Gaming Enterprise in
connection with the maintenance, operation, and management of the Gaming
Enterprise and
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the Gaming Facility and any activity upon the Property.
4.6.2 Nation's Employees. All employees of the Gaming Enterprise
will be employees of the Nation.
4.6.3 Off-Site Employees. Manager shall also have the right to use
employees of Manager, Manager's parent and subsidiary and affiliated
companies not located at the Facilities to provide services to the
Facilities ("Off-Site Employee") with the reasonable approval of the
Tribal Council. The provisions of Article 4.6.5 shall also apply to the
extent of any such work. All expenses, costs (including, but not limited
to, salaries, benefits and severance pay), liabilities and claims which
are related to employees working on-site and Off-Site Employees shall be,
subject to the Budget approved by the Business Board, start-up expenses or
Operating Expenses as appropriate.
4.6.4 Nation's Inspector(s). The Nation shall select the Nation
Inspector(s) who shall be employed by the Nation and shall have the full
access to inspect all aspects of the Gaming Enterprise, including the
daily operations of the Gaming Enterprise, and to verify daily Gross
Revenues and all income of the Gaming Enterprise, at any time without
notice, in a manner which does not hamper or impede the normal course of
business. The General Manager or his or her designee may accompany the
Nation's Inspector(s) upon any inspection. The salary and benefits, if
any, of the Nation's Inspector(s) and other terms of employment shall be
approved by the Business Board. The Nation's Inspector(s) shall report
directly to the Nation.
4.6.5 Indian Employment Preference and Training. In order to
maximize benefits of the Gaming Enterprise to the Nation, the Manager
shall, during the term of this Agreement, give preference in recruiting,
training and employment to qualified members of the Nation and their
spouses and children in all job categories of the Gaming Enterprise,
including management positions. Thereafter, preference shall be given to
qualified, enrolled members of other federally recognized Indian tribes.
The Manager shall provide training programs for Nation members and their
spouses and children. Such training programs shall be available to assist
Nation members in obtaining necessary skills and qualifications relating
to all job categories.
The Manager shall use its best efforts to recruit and train Nation
members, spouses and children, including without limitation: providing job
fairs for members of the Nation and clearly specifying in all job
advertisements the preference for Nation members.
4.6.6 Removal of Employees. The General Manager will act in
accordance with the Enterprise Employee Policies with respect to the
discharge, demotion or discipline of any Enterprise employee. The Nation
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shall have the right to remove the Nation's Inspector(s), subject to any
contractual rights of such persons. Before any such removal, the Manager
or the Nation, as the case may be, shall notify the Nation and the
Manager.
4.7 Marketing and Advertising. The Manager shall have responsibility, in
consultation with the Nation, to advertise and promote the Gaming Enterprise.
Manager may participate in sales and promotional campaigns and activities
involving Promotional Allowances. Manager, in marketing and advertising the
Gaming Facility, shall, pursuant to Articles 4.2.4 and 4.6.3, have the right to
use marketing, transportation, advertising and other employees and services of
Manager, its partners, parent and affiliated companies not located at the Gaming
Facility.
4.8 Pre-Opening. Six (6) months prior to the scheduled Opening Date,
Manager shall commence implementation of a pre-opening program which shall
include all activities necessary to financially and operationally prepare the
Facilities for opening. To implement the pre-opening program, Manager shall
prepare a comprehensive pre-opening budget which shall be submitted to the
Business Board for its approval sixty (60) days after the Effective Date
("Pre-Opening Budget"). All costs and expenses of the pre-opening program shall
be paid from a special bank account(s) opened by Manager in the name of the
Nation upon which only Business Board's designees shall be authorized to draw
("Pre-Opening Bank Account(s)"). After all pre-opening expenses have been paid,
the balance in the Pre-Opening Bank Account(s) shall be transferred to the
Depository Account and the Pre-Opening Bank Account(s) closed.
4.9 Operating Budgets. Manager shall, prior to the scheduled Commencement
Date, submit to the Tribal Council, for its approval, a detailed proposed
budget, including compensation for all key employees and projected contracts
with third party vendors and consultants, for the remainder of the current
fiscal year ("Budget"). Thereafter, Manager shall, not less than sixty (60) days
prior to the commencement of each full or partial fiscal year, submit to the
Tribal Council, for its approval, a proposed Budget for the ensuing full or
partial fiscal year, as the case may be.
The Council's approval of the Budget shall not be unreasonably withheld or
delayed. Manager shall meet with the Tribal Council to discuss the proposed
Budget and the Council's approval shall be deemed given unless a specific
written objection thereto is delivered to Manager within thirty (30) days after
Manager and the Tribal Council have met to discuss the proposed Budget. If the
Tribal Council for any reason declines to meet with Manager to discuss a
proposed Budget, it shall be deemed to have given its consent unless a specific
written objection is delivered by it to Manager within fifteen (15) days after
the date the proposed Budget is submitted to the Tribal Council. The Tribal
Council shall review the Budget on a line-by-line basis. To be effective, any
notice which disapproves a proposed Budget must contain specific objections in
reasonable detail to individual line items.
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If the initial proposed Budget contains disputed budget item(s), the
Tribal Council and Manager agree to cooperate with each other in good faith to
resolve the disputed or objectionable proposed item(s). In the event the Tribal
Council and Manager are not able to reach mutual agreement concerning any
disputed or objectionable item(s) within a period of fifteen (15) days after the
date the Tribal Council provides written notice of its objection to Manager,
either party shall be entitled to submit the dispute to arbitration in
accordance with Article 16 of this Agreement. If the Tribal Council and Manager
are unable to resolve the disputed or objectionable item(s) prior to the
commencement of the applicable fiscal year, the undisputed portions of the
proposed Budget shall be deemed to be adopted and approved and the corresponding
line item(s) contained in the Budget for the preceding fiscal year shall be
adjusted as set forth herein and shall be substituted in lieu of the disputed
item(s) in the proposed Budget. Those line items which are in dispute shall be
determined by increasing the preceding fiscal year's actual expense for the
corresponding line items by an amount determined by Manager which does not
exceed the Consumer Price Index for All Urban Consumers published by the Bureau
of Labor Statistics of the United States Department of Labor, U.S. City Average,
all items (1982-1984=100) for the fiscal year prior to the fiscal year with
respect to which the adjustment to the line item(s) is being calculated or any
successor or replacement index thereto. The resulting Budget obtained in
accordance with the preceding sentence shall be deemed to be the Budget in
effect until such time as Manager and the Tribal Council have resolved the items
objected to by the Tribal Council.
Manager may, after notice to the Tribal Council, revise the Budget from
time-to-time, as necessary, to reflect any unpredicted significant changes,
variables or events or to include significant, additional, unanticipated items
of expense. Manager may, after notice to the Tribal Council reallocate part or
all of the amount budgeted with respect to any line item to another line item
and to make such other modifications to the Budget as Manager deems necessary,
provided that: (i) the individual or cumulative modifications of the Budget for
any profit center shall not exceed five percent (5%) of the approved Budget for
that profit center, and (ii) do not otherwise conflict with the terms of this
Agreement. Budget adjustments which exceed 5% shall require the approval of the
Business Board. Budget adjustments which otherwise vary from the terms of this
Agreement shall, upon the request of the Nation's Representative, require the
written approval of the Tribal Council. In addition, in the event actual Gross
Revenues for any fiscal period are greater than those provided for in the
Budget, the amounts approved in the Budget for guest services, food and
beverage, telephone, utilities, marketing Promotional Allowances and the repair
and maintenance of the Gaming Facility for any fiscal month shall be
automatically deemed to be increased to an amount that bears the same
relationship (ratio) to the amounts budgeted for such items as actual Gross
Revenue for such fiscal month bears to the projected Gross Revenue for such
fiscal month. The Nation acknowledges that the Budget is intended only to be a
reasonable estimate of the Gaming Enterprise revenue and expenses for the
ensuing fiscal year. Manager
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shall not be deemed to have made any guarantee, warranty or representation
whatsoever in connection with the Budget.
4.10 Capital Budgets. Manager shall, not less than forty-five (45) days
prior to the commencement of each fiscal year, submit to the Tribal Council a
recommended "Capital Budget" for the ensuing full or partial fiscal year, as the
case may be, for furnishings, equipment, and ordinary capital replacement items
("Capital Replacements") as shall be required to operate the Gaming Enterprise
in accordance with sound business practices. The Tribal Council and Manager
shall meet to discuss the proposed Capital Budget and the Tribal Council shall
be required to make specific written objections to a proposed Capital Budget in
the same manner and within the same time periods specified in Article 4.9 with
respect to a Budget. The Tribal Council shall not unreasonably withhold or delay
its consent. Unless the Tribal Council and Manager otherwise agree, Manager
shall be responsible for the design and installation of Capital Replacements,
subject to the Tribal Council's approval and right to inspect.
4.11 Capital Replacements. The Nation shall effect and expend such amounts
for any Capital Replacements as shall be required, in the course of the
operation of the Gaming Enterprise, to maintain the Gaming Enterprise in
compliance with any Legal Requirements and to comply with the Business Board's
recommended programs for renovation, modernization and improvement intended to
keep the Gaming Enterprise competitive in its market, maintain first class
standards for the Enterprise, or to correct any condition of an emergency
nature, including without limitation, maintenance, replacements or repairs which
are required to be effected by the Nation, which require immediate action to
preserve and protect the Gaming Facility, assure its continued operation, and/or
protect the comfort, health, safety and/or welfare of the Gaming Facility's
guests or employees. Manager is authorized, upon consultation with the Tribal
Council, to take all steps and to make all expenditures from the Disbursement
Account, described at Article 4.24, or Reserve Fund, described at Article 4.14
(in the case of expenditures for Capital Replacements), as it deems necessary to
repair and correct any such condition, regardless whether such provisions have
been made in the Budget for any such expenditures, and the cost thereof may be
advanced by Manager and reimbursed from future revenues. Design and installation
of Capital Replacements shall be effected in a time period and subject to such
conditions as the Business Board may establish to minimize interference with or
disruption of ongoing operations.
4.12 Replacement Reserve Fund. Manager shall establish an account (the
"Replacement Reserve Fund" or the "Reserve Fund") on the books of account of the
Gaming Enterprise, and the contributions by or on behalf of the Nation as
required by Article 4.13 shall be placed into an account established in the
Nation's name at a bank designated by the Business Board. These contributions
shall not be deemed to be Operating Expenses. Deposits by the Nation shall be
made as capital expenditures and shall not reduce Net Revenues. Deposits made on
behalf of Manager shall
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reduce the amount otherwise payable pursuant to Article 6.1. These payments
shall be made pursuant to Article 4.13 and to the priorities described at
Article 6.4 of this Agreement. The parties shall make deposits to the Reserve
Fund in the same proportion as the allocation of Net Revenues (60% from the
Nation and 40% from the Manager). All amounts in the Reserve Fund shall be
invested in interest bearing investments to the extent that availability of
funds, when required, is not thereby impaired.
4.13 Periodic Contributions to Reserve Fund. There shall be paid over into
the Reserve Fund each Fiscal Month an amount equal to one twelfth of the amount
required as provided by a schedule determined by the Business Board. The cash
amounts required to be so deposited shall be calculated and deposited into the
Reserve Fund, in arrears, no later than the twenty-first (21st) day of the
Fiscal Month immediately following the Fiscal Month with respect to which an
accrual is made. In addition, all proceeds from the sale of capital items no
longer needed for the operation of the Gaming Enterprise, and the proceeds of
any insurance received in reimbursement for any items previously paid for from
the Reserve Fund, shall be deposited into the Reserve Fund upon receipt.
4.14 Use and Allocation of Reserve Fund. Any expenditures which have been
approved by the Nation in a Budget may be paid from the Reserve Fund without
further additional approval from the Nation. Any amounts remaining in the
Reserve Fund at the close of any Fiscal Year shall be carried forward and
retained in the Reserve Fund until fully used. If amounts in the Reserve Fund at
the end of any Fiscal Year plus the anticipated contributions to the Reserve
Fund for the next ensuing Fiscal Year are not sufficient to pay for replacements
authorized by the Annual Plan for such ensuing Fiscal Year, then additional
funds, in the amount of the projected deficiency, may be advanced by the Manager
and reimbursed by the Nation from future revenues in accordance with Article
6.4.
4.15 Contracting. In entering into contracts for the supply of goods and
services for the Gaming Enterprise, the Manager shall give preference to
qualified members of the Nation, their spouses and children, and qualified
business entities certified by the Nation to be controlled by members of the
Nation.
"Qualified" shall mean a member of the Nation, a member's spouse or
children, or a business entity certified by the Nation to be controlled by
members of the Nation, who or which is able to provide services at competitive
prices, has demonstrated skills and abilities to perform the tasks to be
undertaken in an acceptable manner, in the Manager's opinion, and can meet the
reasonable bonding requirements of the Manager. The Manager shall provide
written notice to the Nation in advance of all such contracting, subcontracting
and construction opportunities in excess of $10,000 (TEN THOUSAND DOLLARS).
4.16 Determination of Qualifications and Compensation. Subject to Articles
4.3, 4.18 and 4.19, Manager shall have the sole responsibility for determining
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whether a prospective employee is qualified and the appropriate level of
compensation to be paid thereto.
4.17 Litigation. If the Nation, the Manager, the Business Board or any
employee of the Nation or Manager at the Gaming Facility or of the Gaming
Enterprise is sued by any person not a party to this Agreement, or is alleged by
any person not a party to this Agreement, to have engaged in unlawful or
discriminatory acts in connection with the operation of the Gaming Enterprise,
the Nation or the Manager, as appropriate, shall defend such action. Any cost of
such litigation shall constitute an Operating Expense, or, if incurred prior to
the Commencement Date, shall be a Start-up Expense. Nothing in this Article
shall be construed to waive or limit the Nation's sovereign immunity.
4.18 Employee Background Investigations. A background investigation shall
be conducted in compliance with all Legal Requirements, to the extent
applicable, on each applicant for employment as soon as reasonably practicable.
No individual whose prior activities, criminal record, if any, or reputation,
habits and associations pose a threat to the public interest, the effective
regulation of Gaming, or to the gaming licenses of the Manager or any of its
affiliates, or create or enhance the dangers of unsuitable, unfair or illegal
practices and methods and activities in the conduct of Gaming, shall be employed
by the Manager or the Nation. The background investigation procedures shall be
formulated in consultation with the Manager and shall satisfy all regulatory
requirements independently applicable to the Manager. Any cost associated with
obtaining such background investigations shall constitute an Operating Expense,
provided, however, the costs of background investigations relating to
shareholders, officers, directors or key employees of the Manager or of the
Tribal Council shall not constitute an Operating Expense. The Manager and the
Nation shall provide all information required by the NIGC with respect to
background investigations for Class II Gaming required by the IGRA.
4.19 Enterprise Employees Policy. The Manager shall prepare a draft of
personnel policies and procedures (the "Enterprise Employee Policy"), including
a job classification system with salary levels and scales, which policies and
procedures shall be approved by the Tribal Council, which approval shall not be
unreasonably withheld. The Enterprise Employee Policy shall include a grievance
procedure in order to establish fair and uniform standards for the employees of
the Nation engaged in the Enterprise. Any revisions to the Enterprise Employee
Policy shall not be effective unless they are approved in the same manner as was
the original Enterprise Employee Policy. All such actions shall comply with
applicable law of the Nation.
4.20 No Manager Wages or Salaries. Except for work performed for the
benefit of the Gaming Facility as provided in Article 4.6.3, with respect to
Manager's Off-Site Employees, neither the Manager nor any of its officers,
directors or shareholders or any employees, shall be compensated by wages from
or contract payments by the Gaming Enterprise for their efforts or for any work
which they
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perform under this Agreement, other than loan repayments, reimbursement pursuant
to the Security Agreement and the Management Fee paid to Manager under Article
6.4. Nothing in this subsection shall restrict the ability of an employee of the
Gaming Enterprise to purchase or hold stock in the Manager, its parents,
subsidiaries or affiliates where (i) such stock is publicly held, and (ii) such
employee acquires, on a cumulative basis, less than ten percent (10%) of the
outstanding stock in the corporation.
4.21 Internal Control Systems. The Manager shall install systems for
monitoring of all funds, which systems shall be submitted to the Business Board
for approval in advance of implementation, which approval shall not be
unreasonably withheld. The Nation shall retain the right to review all internal
control systems and any changes instituted to the internal control systems of
the Gaming Enterprise. The Nation shall have the right to retain an auditor to
review the adequacy of the internal control systems prior to the Commencement
Date. The cost of such review shall constitute a Start-up Expense. Any
significant changes in such systems after commencement of operation of the
Gaming Facility also shall be subject to review and approval by the Nation. The
Nation and the Manager shall have the right and duty to maintain and police its
internal control systems in order to prevent any loss of proceeds from the
Gaming Enterprise. The Nation shall have the right to inspect and oversee the
systems and to have the Nation's Inspector present to oversee the Hard Count and
Soft Count room procedures at all times. The Manager shall install a closed
circuit television system to be used for monitoring the Hard and Soft Count
rooms and the cage area. The Nation's Inspector shall have full access to the
closed circuit television system for use in monitoring the cash handling
activities of the Gaming Enterprise.
4.22 Bank Accounts. The Business Board shall select a State or Federally
chartered bank or banks for the deposit and maintenance of funds and shall
establish such bank accounts as the Manager deems appropriate and necessary in
the course of business and as consistent with this Agreement.
4.23 Daily Deposits to Depository Account. Subject to Article 4.26 of this
Agreement, the Manager shall establish for the benefit of the Nation in the
Nation's name a Depository Account. The Manager shall collect all gross revenues
and other proceeds connected with or arising from the operation of the Gaming
Enterprise, the sale of all products, food and beverage, and all other
activities of the Gaming Enterprise and deposit the related cash daily into the
Depository Account at least once during each business day. All money received by
the Gaming Enterprise on each day that it is open must be counted at the close
of operations for that day or at least once during each 24-hour period. The
parties hereto agree to obtain a bonded transportation service to effect the
safe transportation of the daily receipts to the bank, if such service is
available at a reasonable cost, which expense shall constitute an Operating
Expense.
4.24 Disbursement Account. The Manager shall establish for the benefit of
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the Nation in the Nation's name a Disbursement Account. The Manager shall,
consistent with and pursuant to the approved Budget, have responsibility and
authority for making all required payments for Operating Expenses, debt service,
management fees, and disbursements to the Nation from the Disbursement Account.
4.25 No Cash Disbursements. The Manager shall not make any cash
disbursements from the bank accounts except for the payment of cash prizes and
expenditures from the Cash Contingency Reserve Fund and Petty Cash Fund
described in Article 4.26, any and all payments or disbursements by the Manager
shall be made by check or wire transfer drawn against a bank account.
4.26 Cash Contingency Reserve fund. Manager shall establish and maintain
for the benefit of and in the name of the Nation a Cash Contingency Reserve Fund
and a Petty Cash Fund, the amounts in which shall be established by the Business
Board in conjunction with the establishment of the Budget, as an Operating
Expense, or more often as approved by the Business Board. The Cash Contingency
Reserve Fund shall be used to make transfers as necessary to the Disbursement
Account and the cash prize reserve fund. The Petty Cash Fund shall be used for
miscellaneous small expenditures of the Gaming Enterprise, and shall be
maintained at the Gaming Facility.
4.27 Transfers Between Accounts. The Manager has the authority to transfer
funds from the Depository Account to the Disbursement Account in order to pay
Operating Expenses and to pay debt service pursuant to the Loan Agreement and
Note, the Security Agreement, Development and Construction Agreement and the
fees payable to Manager pursuant to this Agreement.
4.28 Insurance. The Manager, on behalf of the Nation, shall maintain, or
cause its agents to maintain, with responsible insurance carriers licensed to do
business in the State of Connecticut, insurance reasonably satisfactory to
Nation covering the Gaming Facility and the operations of the Gaming Enterprise,
naming the Nation and the Manager as insured parties, as follows:
4.28.1 During the course of any new construction or remodeling,
builder's risk insurance on an "all risk" basis (including collapse) on a
non-reporting form for full replacement value covering the interest of the
Nation in all work incorporated in the Gaming Facility, all materials and
equipment on or about the Gaming Facility and any new construction or
remodeling of the Gaming Facility. All materials and equipment in any
off-site storage location intended for permanent use in the Gaming
Facility, or incident to the construction thereof, shall be insured on an
"all risk" basis as soon as the same have been acquired by the Nation.
4.28.2 Commercial general liability insurance in an amount not less
than One Hundred Million ($100,000,000) Dollars per occurrence for all
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activities on, about or in connection with the Gaming Facility. The
commercial general liability insurance shall include premises liability,
contractor's protective liability on the operations of all subcontractors,
completed operations and blanket contractual liability. The automobile
liability insurance shall cover owned, non-owned and hired vehicles.
4.28.3 On or before the Completion Date, "all risk" insurance on the
Gaming Facility against loss by fire, lightning, extended coverage perils,
collapse, water damage, vandalism, malicious mischief and all other risks
and contingencies, subject only to such exceptions as the Nation and the
Manager may approve in an amount equal to the actual replacement costs
thereof, without deduction for physical depreciation, with coverage for
demolition and increased costs of construction, and providing coverage in
an "agreed amount" or without provision for co-insurance.
4.28.4 Worker's Compensation and Employer's Liability Insurance
subject to the statutory limits of the State of Connecticut in respect of
any work or other operations on, about or in connection with the Gaming
Facility.
4.28.5 Such other insurance with respect to the Gaming Facility and
in such amounts as the Business Board from time-to-time may reasonably
request against such other insurable hazards which at the time are
commonly insured against in respect of property similar to the Gaming
Facility.
4.28.6 The insurance policies required under Articles 4.28.1, 4.28.3
and 4.28.5 above shall have a standard noncontributory endorsement naming
Manager as an additional loss payee. The insurance required under Article
4.28.2 above shall name the Manager as an additional insured. All
insurance required hereunder shall contain a provision requiring at least
60 days' prior written notice to the Manager and the Nation before any
cancellation, material changes or reduction shall be effective.
Appropriate deductibles, approved by Manager shall be included for all
types of insurance required under this Article 4.28. The Manager may
effect any insurance coverage required by this Agreement under blanket
insurance policies, provided that the Nation shall be furnished evidence
satisfactory that the protection afforded the Nation and the Manager under
such blanket insurance policy is not less than that which would have been
afforded under separate policies relating only to the Gaming Facility.
4.29 Accounting and Books of Account.
4.29.1 Statements and Audits. The Manager shall prepare and provide
to the Nation on a monthly, quarterly, and annual basis, operating
statements which after the full year of operation will include comparative
statements of all revenues, and all other amounts collected and received,
and all
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deductions and disbursements made therefrom in connection with the Gaming
Enterprise. A nationally recognized independent certified public
accounting firm with casino industry experience selected by the Manager,
subject to the reasonable approval of the Tribal Council, shall perform an
annual audit of the books and records of the Gaming Enterprise and of all
contracts for supplies, services or concessions reflecting Operating
Expenses. The Business Board shall have full access to the audit process
and all instructions to and reports from the auditor. The Nation, the
B.I.A. and the NIGC shall also have the right to perform special audits of
the Gaming Enterprise on any aspect of the Gaming Enterprise at any time
without restriction. The costs incurred for such audits shall constitute
an Operating Expense. Such audits shall be provided by the Nation to all
applicable federal and state agencies, as required by law, and may be used
by the Manager for reporting purposes under federal, foreign, and state
securities and gaming laws, if required.
4.29.2 Books of Account. The Manager shall maintain full and
accurate books of account at an office in the Gaming Facility and at such
other location as may be determined by the Manager, with the prior written
consent of the Nation, which consent shall not be unreasonably withheld.
The Nation and the Nation's Inspector shall have access to the daily
operations of the Gaming Enterprise and shall have the unlimited right to
inspect, examine, and copy all such books and supporting business records.
Such rights may be exercised through an agent, employee, attorney, or
independent accountant acting on behalf of the Nation. Nothing contained
herein is intended to restrict Manager's right to utilize centralized
accounting at an off-site location for the Gaming Enterprise, provided
that the Nation shall have full 24-hour access to such accounting, and all
related books and records at or from the gaming Facility.
4.29.3 Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the Gaming Enterprise in accordance
with the accounting practices of Manager in conformity with GAAP, and
shall adopt and follow fiscal accounting periods as set by the Business
Board. The Gaming Facility level generated accounting records reflecting
detailed day-to-day transactions of the Gaming Facility's operations shall
be kept pursuant to Article 4.29.2 of this Agreement. The accounting
systems and procedures shall, at a minimum (i) include an adequate system
of internal accounting controls; (ii) permit the preparation of financial
statements in accordance with GAAP; (iii) be susceptible to audit; (iv)
allow the Class II gaming operation, the Nation and the NIGC to calculate
the annual fee payable pursuant to 25 Code of Federal Regulations Section
514.1; (v) permit the calculation and payment of the Management Fee
described in Section 3.7; and (vi) provide for the allocation of Operating
Expenses or overhead expenses among the Nation, the tribal gaming
operation, and any other user of shared facilities and services.
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4.29.4 Depreciation Schedules. Depreciation schedules for all
assets of the Enterprise shall be determined by the Business Board in
accordance with GAAP, consistently applied, and with consideration of
the Replacement Reserve Fund.
5. Liens. The Nation specifically warrants and represents to the Manager that
during the term of this Agreement the Nation shall not act in any way
whatsoever, either directly or indirectly, to cause any party to become an
encumbrancer or lienholder of the Property or the Gaming Facility, other than
Manager or the lender under the Loan Agreement, or to allow any party to obtain
any interest in this Agreement without the prior written consent of the Manager,
and, where applicable, consent from the United States. The Manager specifically
warrants and represents to the Nation that during the term of this Agreement the
Manager shall not act in any way, directly or indirectly, to cause any party to
become an encumbrancer or lienholder of the Property or the Gaming Facility, or
to obtain any interest in this Agreement without the prior written consent of
the Nation, and, where applicable, the United States. The Nation and the Manager
shall keep the Gaming Facility and Property free and clear of all mechanics' and
other liens resulting from the construction of the Gaming Facility and all other
liens which may attach to the Gaming Facility or the Property, which shall at
all times remain the property of the United States in trust for the Nation.
Manager shall have the right to contest any such liens on behalf of the Nation.
If any such lien is claimed or filed, it shall be the duty of the Nation and the
Manager to discharge the lien within 30 days after having been given written
notice of such claim, either by payment to the claimant, by the posting of a
bond and the payment into the court of the amount necessary to relieve and
discharge the Property from such claim, or in any other manner which will result
in the discharge of such claim.
Notwithstanding the foregoing, purchase money security interests in
personal property may be granted with the prior written consent of the Nation
and, when necessary, the B.I.A., United States Department of Interior or the
NIGC as appropriate.
6. Management Fee. Reimbursement and Disbursement.
6.1 Management Fee. Subject to the provisions of Articles 6.4 and 4.12, on
or before the twenty-fifth (25th) day of each fiscal month after the first full
month of operation, Manager is authorized by the Nation to pay itself from the
Bank Account(s) a fee which is forty percent (40%) of Net Revenues (gaming) and
Net Revenues (other).
6.2 Disbursements. As and when received by Manager, Revenues shall be
deposited in the Bank Account(s) created pursuant to Article 4.22 of this
Agreement There shall, in turn, be disbursed by Manager, on a monthly basis, for
and on behalf of the Nation, funds from the Bank Account(s) to pay to the extent
available
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Operating Expenses and required deposits into the Reserve Fund.
Manager will reserve funds (in excess of the Minimum Balance), on an
annualized basis, in the Bank Account each Fiscal Month for payment of any
Operating Costs or any of the above items which Manager has a duty to pay that
are not paid on a monthly basis (e.g., insurance premiums, etc.).
6.3 Adjustment to Bank Account. After the disbursements pursuant to
Article 6, and establishment of any reserves for future disbursements as the
Manager deems necessary, taking into account anticipated cash flow and Operating
Costs at the Gaming Facility, any excess funds remaining in the Bank Account
over the Minimum Balance (and such reserves) shall be disbursed monthly in
accordance with Article 6.4.
6.4 Payment of Fees and Nation Disbursement. Within 25 days after the end
of each calendar month of operations, the Manager shall calculate and report to
the Nation the Gross Revenues, Operating Expenses, and Net Revenues (gaming and
Net Revenues (other)) of the Gaming Enterprise for the previous month's
operations and the year's operations to date. Such Net Revenues, less any amount
reasonably needed to maintain a Cash Contingency Reserve Fund as previously
agreed upon by the Business Board, shall be disbursed from the Bank Account(s)
to the extent available to pay the scheduled items to the extent due and payable
and earned in the following order of priority:
First Minimum Priority Payment shall have first priority and
shall be paid monthly in the amount of FIFTY THOUSAND
DOLLARS AND 00/100 ($50,000.00). Minimum Priority Payments
shall be charged against the Nation's distribution of Net
Revenues and, where there is insufficient Net Revenues in a
given month, Manager shall advance the funds necessary to
compensate for the deficiency and shall be reimbursed by
the Nation in the next succeeding month or months in
accordance with the schedule of disbursements set forth in
Article 6.4, as Recoupment Payment. No Minimum Priority
Payment shall be owed for any months during which Gaming is
suspended or terminated at the Gaming Facility pursuant to
Article 4.4, with a diminution of Gross Revenues to a level
which is at or below 40% of the average monthly revenues
for the three month period immediately preceding the events
which lead to the reduction in revenues. The obligation
shall cease to accrue upon termination of this Agreement
for any reason.
Second Current principal, interest and other payments due on the
Loan.
Third Recoupment Payment and reimbursement of amounts.
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advanced by the Manager.
Fourth Replacement Reserve Payments by the Nation and the Manager.
Fifth Management Fee, after Replacement Reserve Payments.
All remaining Net Revenues shall be distributed to the Nation. The priority of
payments from available funds which is described in this Article 6.4 does not
control the calculation of the amount of each of these obligations. The
calculation of the amounts of these obligations shall be as otherwise provided
by this Agreement.
6.5 Operative Dates. For purposes of this Article 6, the first year of
operations shall begin on the Commencement Date and continue until the first day
of the month following the first anniversary of the Commencement Date, and each
subsequent year of operations shall be the 12-month period following the end of
the previous year. Notwithstanding the foregoing, subject to Article 4.4.5, the
term of this Agreement shall extend up to and through but not beyond seven (7)
years after the Commencement Date.
6.6 Payment of Net Revenues. The Manager is authorized to transfer funds
from the bank accounts of the Gaming Enterprise to the bank accounts of the
Manager and the Nation in order to distribute Net Revenues and any other amounts
due under this Article 6. The Net Revenues paid to the Nation pursuant to this
Article 6 shall be payable to the Nation official or bank account specified by
the Nation's Representative pursuant to Article 7.
6.7 Conditional Loan Guarantee. Manager agrees to guarantee to the Nation
payment of 40% of the amount of the outstanding balance of the loan as set forth
in the Loan Agreement; such guarantee shall be documented as an Exhibit to the
Security Agreement. This obligation to guarantee shall be deemed to be met to
the amount of any participation by Manager in the loan and shall remain to the
extent of any difference. If the Gaming Enterprise performs in a manner which
enables the Nation to make payments substantially in accordance with the loan
terms as set forth in the Loan Agreement and Security Agreement, this guarantee
shall terminate upon termination of Manager's rights pursuant to this Agreement.
7. General Provisions.
7.1 Notice. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given to the
applicable party (i) on the date of personal delivery or delivery by telecopier,
(ii) on the business day immediately following transmittal to a major overnight
commercial courier or (iii) five (5) days after deposit in the United States
mail, postage prepaid, in any case addressed to the address or telecopy number
of the applicable party set forth below, or such other address or number as such
party may hereafter specify by notice to the other.
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If to the Nation: Mohegan Tribe of Indians of Connecticut
27 Church Lane
Uncasville, CT 06382
Telecopy: (203) 848-9252
If to Manager: Trading Cove Associates
914 Hartford Turnpike
P.O. Box 60
Waterford, CT 06385
Telecopy: (203) 437-7752
or to such other different address(es) as the Manager or the Nation may specify
in writing using the notice procedure called for in this Article 7,
7.2 Authorization. The Nation and Manager represent and warrant to each
other that each has full power and authority to execute this Agreement and to be
bound by and perform the terms hereof. Each party shall furnish evidence of such
authority to the other, which shall be attached as Exhibits to this Agreement.
7.3 Relationship. Manager and the Nation shall not be construed as joint
venturers or partners of each other by reason of this Agreement and neither
shall have the power to bind or obligate the other except as set forth in this
Agreement.
7.4 Manager's Contractual Authority. Subject to Article 4.2.4, Manager is
authorized to make, enter into and perform in the name of and for the account of
the Nation any contracts in furtherance of its obligations under this Agreement,
including, without limitation, promotional or cross marketing agreements with
any third party which are intended to enhance Gaming revenues.
7.5 Further Actions. The Nation and Manager agree to execute all
contracts, agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof. The parties further
agree that:
7.5.1 Fire and Safety. The Gaming Facility shall be constructed and
maintained in substantial compliance with such fire and safety statutes,
Connecticut Building Code and related regulations which would be
applicable if the Gaming Facility were located outside of the jurisdiction
of the Nation although those requirements would not otherwise apply within
that jurisdiction. To the extent that the Nation adopts fire, safety, or
building code requirements which are more stringent than those otherwise
applicable pursuant to the Compact, the Gaming Facility shall comply with
such law. Nothing in this Article shall grant any jurisdiction (including
but not limited to jurisdiction regarding zoning or land use) to the State
of Connecticut or any political subdivision thereof over the Property or
the Gaming Facility.
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Fire protection services for the Gaming Facility will be provided by the
Nation, or third parties pursuant to agreement with the Nation.
7.5.2 Taxes. If any government attempts to impose any possessory
interest tax upon any party to this Agreement or upon the Gaming
Enterprise, the Gaming Facility or the Property, the Business Board, in
the name of the appropriate party or parties in interest, may, upon
unanimous vote, resist such attempt through legal action. The costs of
such action and the compensation of legal counsel shall be an Operating
Expense of the Gaming Enterprise. Any such tax or required payment shall
constitute an Operating Expense of the Gaming Enterprise. This Article
shall in no manner be construed to imply that any party to this Agreement
or the Gaming Enterprise is liable for any such tax.
7.5.3 Nation Taxes. The Nation agrees that neither it nor any agent,
agency, affiliate or representative of the Nation will impose any taxes,
fees, assessments, or other charges of any nature whatsoever on payments
of any debt service to Manager or to any lender furnishing financing for
the Gaming Facility or for the Gaming Enterprise, or on the Gaming
Enterprise, the Gaming Facility, the revenues therefrom or on the
Management Fee as described in Article 6.4 of this Agreement; provided,
however, the Nation may assess license fees reflecting reasonable
regulatory costs incurred by the Nation. The Nation further agrees that
neither it nor any agent, agency, affiliate or representative will impose
any taxes, fees, assessments or other charges of any nature whatsoever on
the salaries or benefits, or dividends paid to, any of the Manager's
partners, stockholders, officers, directors, or employees or affiliates,
or any of the employees of the Gaming Enterprise. If any such tax, fee,
assessment or other charge is in fact levied, imposed, or collected, the
Nation agrees that it shall reimburse Manager or the affected partners,
stockholders, officers, directors, employees or affiliates for the full
value, and dollar for dollar of such tax, fee, assessment or other charge.
Except as otherwise provided herein, if any taxes, fees or assessments are
levied by the Nation, such taxes and assessments shall constitute
Operating Expenses of the Gaming Enterprises.
7.5.4 Governing Law. The rights and obligations of the parties and
the interpretation and performance of this Agreement shall be governed by
the law of the State of Connecticut, excluding its conflict of law rules,
and shall be subject to all Legal Requirements of the Nation and federal
law as well as approval by the Secretary of the Interior and/or the
Chairman of the NIGC where required by 25 U.S.C. ss. 81 or the IGRA.
7.5.5 National Environmental Policy Act. The parties shall supply
the NIGC with all information necessary for the NIGC to comply with any
regulations of the Commission issued pursuant to the National
Environmental Policy Act (NEPA). The cost of any such compliance shall
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constitute an operating expense.
7.6 Defense. Except for disputes between the Nation and Manager, Manager
shall bring, defend, or settle any claim or legal action brought against Manager
or the Nation, individually, jointly or severally in connection with the
operation of the Gaming Enterprise. Subject to the approval of the Business
Board, Manager shall retain and supervise legal counsel, accountants and such
other professionals, consultants and specialists as Manager deems appropriate to
defend and/or settle any such claim or cause of action. Any action which poses a
substantial risk to the normal operation of the Gaming Facility shall be
supervised by the Business Board with notice to and appropriate consultation
with the Tribal Council. All liabilities, costs, and expenses, including
attorneys' fees and disbursements, incurred in defense or settlement of any such
claim or legal action which are not covered by insurance shall be an Operating
Expense. Nothing contained in this Article 7.6 is a grant to the Manager of the
right to waive tribal immunity.
7.7 Waivers. No failure or delay by Manager or the Nation to insist upon
the strict performance of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
7.8 Captions. The captions for each Article are intended for convenience
only.
7.9 Severability. If any of the terms and provisions hereof shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any of the other terms or provisions hereof. If, however, any material part of a
party's rights under this Agreement shall be declared invalid or unenforceable
(specifically including Manager's right to receive its Management Fees), the
party whose rights have been declared invalid or unenforceable shall have the
option to terminate this Agreement upon thirty (30) days written notice to the
other party, without liability on the part of the terminating party.
7.10 Interest. Any amount payable to Manager or the Nation by the other,
including without limitation, unpaid interest, which has not been paid when due
shall accrue interest at same rate as the Note, but in no event shall such
interest exceed the cost of such funds.
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7.11 Reimbursement. With the approval of the Tribal Council, Manager may,
according to the terms of this Agreement or at its option, advance funds or
contribute property, on behalf of the Nation, to satisfy obligations of the
Nation in connection with the Gaming Facility and this Agreement. Manager shall
keep appropriate records to document all reimbursable expenses paid by Manager,
which records shall be made available for inspection by the Nation or its agents
upon request. The Nation agrees to reimburse Manager with interest from future
Net Revenues for money paid or property contributed by Manager to satisfy
obligations of the Nation in connection with the Gaming Enterprise and this
Agreement. Interest shall be calculated at the rate and in the manner set forth
in Article 7.10 from the date the Nation was obligated to remit the funds or
contribute the property for the satisfaction of such obligation to the date
reimbursement is made; all such interest shall constitute an operating expense
pursuant to GAAP. The Manager's sole source of such Reimbursement shall be from
undistributed and future Revenues.
7.12 Travel and Out-of-Pocket Expenses. Subject to the Budget, all travel
and out-of-pocket expenses of Gaming Enterprise employees reasonably incurred in
the performance of their duties shall be an Operating Expense.
7.13 Third Party Beneficiary. This Agreement is exclusively for the
benefit of the parties hereto and it may not be enforced by any party other than
the parties to this Agreement and notwithstanding the provisions of Article
7.11, shall not give rise to liability to any third party other than the
authorized successors and assigns of the parties hereto.
7.14 Brokerage. Manager and the Nation each hereby agrees to indemnify and
hold the other harmless from and against any and all claims, loss, liability,
damage or expenses (including reasonable attorneys' fees) suffered or incurred
by the other party as a result of a claim brought by a person or entity engaged
or claiming to be engaged as a finder, broker or agent by the indemnifying
party.
7.15 Survival of Covenants. With the exception of the obligation to make
the Minimum Priority Payment described at Article 6.4, any covenant, term or
provision of this Agreement which, in order to be effective, must survive the
termination of this Agreement, shall survive any such termination.
7.16 Estoppel Certificate. Manager and the Nation agree to furnish to the
other party, from time to time upon request, an estoppel certificate in such
reasonable form as the requesting party may request stating whether there have
been any defaults under this Agreement known to the party furnishing the
estoppel certificate and such other information relating to the Gaming
Enterprise as may be reasonably requested.
7.17 Periods of Time. Whenever any determination is to be made or action
is to be taken on a date specified in this Agreement, if such date shall fall on
a
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Saturday, Sunday or legal holiday under the laws of the State of Connecticut or
of the Nation, then in such event said date shall be extended to the next day
which is not a Saturday, Sunday or legal holiday.
7.18 Preparation of Agreement. This Agreement shall not be construed more
strongly against either party regardless of who is responsible for its
preparation.
7.19 Exhibits. All exhibits attached hereto are incorporated herein by
reference and made a part hereof as if fully rewritten or reproduced herein.
7.20 Non-Assignability. This Agreement shall not be assigned by either
party, nor shall subcontracts be entered into between Manager and a third party
wherein the third party will have any responsibility for gaming or access to the
proceeds of the gaming operation, without the prior written consent of the other
party, which consent shall not be unreasonably withheld. No assignment involving
responsibility for Gaming or Gaming Operations shall be valid until approved by
the Chairman of the Commission. If an assignment is so approved, this Agreement
shall inure to the benefit of and be binding on the assignee.
7.21 Confidential Information. Each party agrees that any information
received concerning the other party during the performance of this Agreement,
regarding a parties' organization, financial matters, marketing plans, or other
information of a proprietary nature, will be treated by both parties in full
confidence and except in response to legal process or appropriate and necessary
governmental inquiry will not be revealed to any other persons, firms or
organizations. This provision shall survive the termination of this Agreement
for a period of two (2) years.
7.22 Employment Solicitation Restriction Upon Termination. The parties
recognize that the Manager will be offering employment at the Gaming Enterprise
to present employees of Manager and its affiliates who now have various accrued
benefits including seniority and retirement. In order to enable the Manager to
provide appropriate incentive to these persons, it will be necessary to assure
them that they will be able to be reinstated. Upon the expiration of the gaming
term, the Manager or an entity affiliated with Manager may offer other
employment to the General Manager and the department heads of the Gaming
Enterprise. For purposes of implementing the preceding sentence, the Manager
shall from time to time designate, subject to the concurrence of the Nation, who
shall be regarded as department heads for such purposes. Manager shall indemnify
the Nation and hold it harmless from liabilities, claims, losses and expenses
arising from any action or claim brought against the Nation for its failure to
employ any such person offered suitable employment by Manager or an entity
affiliated with Manager.
7.23 Patron Dispute Resolution. Manager shall attempt to resolve all
Patron disputes pursuant to the Policies and Procedures set forth in Exhibit D,
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subject to the Nation's Gaming Ordinance and the Compact.
7.24 Modification. Any change to or modification of this Agreement must be
in writing signed by both parties hereto and shall be effective only upon
approval by the Chairman of the NIGC, the date of signature of the parties
notwithstanding.
8. Warranties.
8.1 Preservation of Agreement. The Manager and the Nation each warrant and
represent that they shall not act in any way whatsoever, directly or indirectly,
to cause this Agreement to be amended, modified, canceled, or terminated, except
pursuant to Article 7.24. The Manager and the Nation warrant and represent that
they shall take all actions necessary to ensure that this Agreement shall remain
in full force and effect at all times.
8.2 Non-Interference in Nation Affairs. The Manager agrees not to unduly
interfere in or attempt to influence the internal affairs or government
decisions of Nation government by offering cash incentives, by making written or
oral threats to the personal or financial status of any person, or by any other
action, except for actions in the normal course of business of the Manager that
only affect the activities of the Gaming Enterprise. For the purposes of this
Article 8.2, if any such undue interference in Nation affairs is alleged by the
Nation the provisions of Article 9.3 shall apply.
8.3 Prohibition of Payments to Members of Nation Government. Manager
represents and warrants that no payments or gifts of services or other things of
value have been or will be made to any member of the Nation government, any
Nation official, any relative of a member of Nation government or Nation
official, or any Nation government employee for the purpose of obtaining any
special privilege, gain, advantage or consideration. The forgoing shall not
prohibit seasonal gifts, birthday gifts, and gifts for other special occasions,
provided that each such gift is for nominal value not to exceed $100 (ONE
HUNDRED) dollars, and the aggregate value of such gifts in any one calendar year
shall not exceed $500 (FIVE HUNDRED) dollars. Manager shall not offer any
Promotional Allowances to any tribal member, notwithstanding the fact that such
allowances might otherwise be made in the normal course of business.
8.4 Prohibition of Hiring Members of Nation's Government. No Member of the
Nation's Government, official of the Nation, relative of a Member of the
Nation's Government or of an official of the Nation or employee of the Nation's
Government may be employed at the Gaming Enterprise without a written waiver of
this Article 8.4 by the Nation, and where required by applicable law, the Area
Director, Eastern Area Office, B.I.A. or the NIGC or other appropriate federal
official.
8.5 Prohibition of Financial Interest in Enterprises. No member of
the Nation government or relative of a member of the Nation government shall
have a
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direct or indirect financial interest in the Gaming Enterprise greater than the
interest of any other member of the Nation; provided, however, nothing in this
subsection shall restrict the ability of a Nation member to purchase or hold
stock in the Manager, its partners, parents, subsidiaries or affiliates where
(i) such stock is publicly held, and (ii) the Nation member acquires less than
(10%) ten percent of the outstanding stock in the corporation, provided that if
a Nation member shall acquire more than (10%) ten percent such person shall
comply with all applicable law, including, without limitation, the Compact.
8.6 "Member of the Nation's Government" as used in this Article 8 means
any member of the Tribal Council, the Gaming Agency, members of the board of
directors of a tribal corporation with business responsibilities for gaming or
any independent board or body created to oversee any aspect of Gaming and any
Nation court official; the term "relative" means an individual residing in the
same household who is related as a spouse, father, mother, brother, sister, son
or daughter.
9. Grounds for Termination.
9.1 Voluntary Termination and Termination for Cause. This Agreement may be
terminated pursuant to the provisions of Articles 4.4.4, 8.2, 9.2, 9.3, 9.4,
9.5, and 12.5.
9.2 Voluntary Termination. This Agreement may be terminated upon the
mutual written consent and approval of the parties.
9.3 Termination for Cause. Either party may terminate this Agreement if
the other party commits or allows to be committed any material breach of this
Agreement. A material breach of this Agreement shall include, but not be limited
to, a failure of either party to perform any material duty or obligation on its
part for any thirty (30) consecutive days after notice. Neither party may
terminate this Agreement on grounds of material breach unless it has provided
written notice to the other party of its intention to declare a default and to
terminate this Agreement and the defaulting party thereafter fails to cure or
take steps to substantially cure the default within sixty (60) days following
receipt of such notice. If during the period specified in the notice to
terminate the party which has received the notice of breach is actively
proceeding in good faith to cure the breach, the other party shall agree to
extend the period for a reasonable time. During the period specified in the
notice to terminate, either party may submit the matter to arbitration under the
dispute resolution procedures of this Agreement. The period to cure the breach
shall be tolled during the pendency of such arbitration proceeding. The
discontinuance or correction of a material breach shall constitute a cure
thereof.
The Nation may also terminate this Agreement where the Manager has had its
license withdrawn because the Manager, or a director or officer of the Manager,
has been convicted of a criminal felony or misdemeanor offense directly related
to
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the performance of the Manager's duties hereunder; provided, however, the Nation
may not terminate this Agreement based on a director or officer's conviction
where the Manager terminates such individual within ten days after receiving
notice of the conviction.
In the event of any termination for cause, regardless of fault, the
parties shall retain all money previously paid to them pursuant to Article 6 of
this Agreement; and the Nation shall retain title to all Gaming Enterprise and
Gaming Facility fixtures, improvements, supplies, equipment, funds and accounts,
subject to the rights of Manager under any security agreement and to the rights
of the Manager to any accrued and unpaid Net Revenues due under Article 6 of
this Agreement. Subject to any adjudicated offsets, the Manager shall continue
to have the right to repayment of unpaid principal and interest and other
amounts due under the Security Agreement and any other agreements entered
pursuant hereto.
Subject to Article 16, an election to pursue damages or to pursue specific
performance of this Agreement or other equitable remedies while this Agreement
remains in effect pursuant to the provisions of Article 9.6 or 9.7 shall not
preclude the injured party from providing notice of termination pursuant to this
Article 9.3. Neither shall termination preclude a suit for damages.
9.4 Involuntary Termination Due to Changes in Legal Requirements. It is
the understanding and intention of the parties that the establishment and
operation of the Gaming Enterprise conforms to and complies with all Legal
Requirements. If during the term of this Agreement, the Gaming Enterprise, any
material aspect of Gaming or any material aspect of the Compact is determined by
the Congress of the United States, the Department of the Interior of the United
States of America, the NIGC, or the final judgment of a court of competent
jurisdiction to be unlawful under federal law, the obligations of the parties
hereto shall cease, and this Agreement shall be of no further force and effect;
provided that (i) the Manager shall have the rights in Article 4.4 of this
Agreement; (ii) the Manager and the Nation shall retain all money previously
paid to them pursuant to Article 6 of this Agreement; (iii) funds of the Gaming
Enterprise in any account shall be paid and distributed as provided in Article 6
of this Agreement; (iv) any money lent by or guaranteed by the Manager or its
affiliates to the Nation shall be repaid to the Manager to the extent provided
in Article 16.2.1; and (v) the Nation shall retain its interest in the lease and
title to all Gaming Enterprise furnishing, fixtures, supplies and equipment,
subject to the rights of the Manager under the Security Agreement and subject to
any requirements of financing arrangements.
9.5 Manager's Right to Terminate Agreement. Manager may terminate this
Agreement by written notice effective upon receipt if:
(i) Any Nation, State or Federal authority whose approval is
required fails to approve this Agreement or otherwise objects
to the performance by Manager of any obligation imposed on it
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under this Agreement.
(ii) Manager has been notified by any regulatory agency that the
performance by it of any material obligation imposed by this
Agreement will jeopardize the retention of any license, or
approvals granted thereunder, held by Manager or any of its
affiliates in any other jurisdiction, and the Nation refuses
to allow the Manager to immediately rectify any such
complaint.
(iii) Manager, after seven days prior notice to the Tribal Council,
has reason to believe that the performance by it or the Nation
of any material obligation imposed under this Agreement may
reasonably be expected to result in the breach of any
applicable Nation, State or Federal law.
9.6 Consequences of Termination for Manager's Breach. In the event of the
termination of this Agreement by the Nation for cause under Article 9.3, the
Manager shall not, prospectively from the date of termination, except as
provided in Article 9.3, have the right to its Management Fee from the Gaming
Enterprise, but such termination shall not affect the Manager's rights relating
to reimbursement under this Agreement or any other agreements entered pursuant
hereto. Manager shall indemnify and hold the Nation harmless against all
liabilities of any nature whatsoever relating to the Gaming Enterprise, but only
insofar as these liabilities result from acts within the control of the Manager
or its agents. Any Net Revenues accruing through the date of termination shall
be distributed in accordance with Article 6 of this Agreement.
9.7 Consequences of Termination for Nation's Breach. In the event of
termination of this Agreement by the Manager for cause under Article 9.3, the
Manager shall not be required to perform any further services under this
Agreement and the Nation shall indemnify and hold the Manager harmless against
all liabilities of any nature whatsoever relating to the Gaming Enterprise, but
only insofar as these liabilities result from acts within the control of the
Nation or its agents. Any Net Revenues accruing through the date of termination
shall be distributed in accordance with Article 6 of this Agreement.
10. Conclusion Of the Management Term. Upon the conclusion of the term of the
Management Agreement, or the termination of this Agreement under other of its
provisions, in addition to other rights under this Agreement, the Manager shall
have the following rights:
10.1 Transition. If termination occurs at any time other than upon the
conclusion of the Term, Manager shall be entitled to a reasonable period of not
more than thirty (30) days (such time as may be necessary to bring the
accounting period to the close of a calendar month) to transition management of
the Gaming
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Enterprise to the Nation or its designee. Manager and the Nation shall cooperate
to effect an orderly transition.
10.2 Undistributed Net Revenues. If the Gaming Enterprise has accrued Net
Revenues which have not been distributed under Article 6 of this Agreement, such
Net Revenues shall be distributed according to Article 6.4 of this Agreement.
11. Consents and Approvals.
11.1 Nation. Where approval or consent or other action of the Nation, or
any agent or political subdivision of the Nation is required, such approval
shall mean the written approval of the Tribal Council evidenced by a duly
enacted resolution thereof, or, if not provided by resolution of the Tribal
Council, the written approval of the Gaming Agency, the Business Board
Representative or such other person or entity designated by resolution of the
Tribal Council. Any such approval, consent or action shall not be unreasonably
withheld or delayed.
11.2 Manager. Where approval or consent or other action of the Manager is
required, such approval shall mean the written approval of the Manager's
Representative. Any such approval, consent or other action shall not be
unreasonably withheld or delayed.
12. Disclosures.
12.1 Partners and Affiliates. The Manager warrants that on the date of
this Agreement a complete list of its partners and their shareholders, directors
and officers is attached as Exhibit B.
12.2 Warranties. The Manager further warrants and represents as follows:
(i) no person or entity has any beneficial ownership interest in the Manager
other than as set forth herein; (ii) no officer, director or owner of (10%) ten
percent or more of the stock of the Manager has been arrested, indicted for,
convicted of, or pleaded nolo contendere to any felony or any gaming offense, or
had any association with individuals or entities known to be connected with
organized crime; and (iii) no person or entity listed in Article 12.1 of this
Agreement, including any officers and directors of the Manager, has been
arrested, indicted for, convicted of, or pleaded nolo contendere to any felony
or any gaming offense, or had any association with individuals or entities known
to be connected with organized crime.
12.3 Criminal and Credit Investigation. The Manager agrees that all of its
partners, directors and officers involved in the Gaming Enterprise shall:
(a) consent to background investigations to be conducted by the Nation,
the State of Connecticut, the Federal Bureau of Investigation (the 'FBI') or any
other law enforcement authority if requested by the Nation and to the extent
required by the IGRA and the Compact,
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(b) be subject to licensing requirements in accordance with the law of the
Nation,
(c) consent to a background, criminal and credit investigation to be
conducted by the NIGC or B.I.A.,
(d) consent to a financial and credit investigation to be conducted by a
credit reporting or investigation agency at the request of the Nation,
(e) cooperate fully with such investigations,
(f) disclose any information requested by the Nation which would
facilitate in the background and financial investigation, and
(g) pay the reasonable cost and expenses of investigation for licensing of
any person required by applicable law to hold licenses by the Gaming Agency, up
to $5,000 (FIVE THOUSAND DOLLARS) per individual, for all partners, directors,
officers, and ten percent shareholders, and up to $20,000 (TWENTY THOUSAND
DOLLARS) per domestic entity, with an additional $20,000 (TWENTY THOUSAND
DOLLARS) for each foreign country in which the foreign entity does business. The
Nation agrees that the forgoing are reasonable costs and will not seek or impose
any licensing costs or fees in excess of these amounts for any individual
license absent consent of the licensed party.
Any materially false or deceptive disclosures or failure to cooperate fully with
such investigations by an employee of the Manager or an employee of the Nation
shall result in the immediate dismissal of such employee. The results of any
such investigation may be disclosed by the Nation to federal officials as
required by law.
12.4 Disclosure Amendments. The Manager agrees that whenever there is any
material change in the information disclosed pursuant to this Article 12 it
shall immediately notify the Nation of such change not later than 30 days
following the change or within ten days after it becomes aware of such change,
whichever is later. The Nation shall, in turn, provide the Secretary of the
Interior and/or the NIGC (whichever is applicable) copies of any such
notifications. All of the warranties and agreements contained in this Article 12
shall apply to any person or entity who would be listed in this Article 12 as a
result of such changes.
12.5 Breach of Manager Warranties and Agreements. The material breach of
any warranty or agreement of the Manager contained in this Article 12 shall be
grounds for immediate termination of this Agreement; provided that (a) if a
breach of the warranty contained in clause (ii) of Article 12.2 is discovered,
and such breach was not disclosed by any background check conducted by the FBI
as part of the B.I.A. or other federal approval of this Agreement, or was
discovered by the FBI investigation but all other officers and directors of the
Manager sign sworn
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affidavits that they had no knowledge of such breach, then the Manager shall
have 30 days after notice from the Nation to terminate the interest of the
offending person or entity and, if such termination takes place, this Agreement
shall remain in full force and effect; and (b) if a breach relates to a failure
to update changes in financial position or additional gaming related activities,
then the Manager shall have 30 days after notice from the Nation to cure such
default prior to termination.
13. Recordation. At the option of the Manager or the Nation, any security
agreement related to the Loan Agreement may be recorded in any public records.
Where such recordation is desired in the public records of the B.I.A., the
Nation will accomplish such recordation upon the request of the Manager. The
Manager shall promptly reimburse the Nation for all expenses, including attorney
fees, incurred as a result of such request. No such recordation shall waive the
Nation's sovereign immunity.
14. Authority to Execute. Each party warrants to the other that it has full
authority to execute this Agreement.
15. No Present Lien, Lease or Joint Venture. The parties agree and expressly
warrant that neither the Management Agreement nor any exhibit thereto is a
mortgage or lease and, consequently, does not convey any present interest
whatsoever in the Gaming Facility or the Property, nor any proprietary interest
in the Gaming Enterprise itself. The parties further agree and acknowledge that
it is not their intent, and that this Agreement shall not be construed, to
create a joint venture between the Nation and the Manager; rather, the Manager
shall be deemed to be an independent contractor for all purposes hereunder.
16. Dispute Resolution.
16.1 Nation's Consent to Suit. Subject to Article 20 the Nation expressly
waives its immunity for the purpose of permitting or compelling arbitration as
provided in this Article, and to be sued in any court of competent jurisdiction
by the Manager for the purpose of compelling arbitration or enforcing any
arbitration award or judgment arising out of this Agreement, the Loan Agreement,
the Security Agreement, the Note and the Guaranty or any Collateral Agreements
other obligations between the parties, or of the Mohegan Nation Gaming
Ordinance, or any rules, actions, or decisions of the Gaming Agency pursuant
thereto, or the issuance, non-issuance, condition, suspension, denial or
revocation of any license. Without in any way limiting the generality of the
foregoing, the Nation expressly authorizes any governmental authorities who have
the right and duty under applicable law to take any action authorized or ordered
by any court, to take such action, including without limitation, entering the
Property and repossessing any furniture and equipment subject to a security
interest or otherwise giving effect to any judgment entered. In no instance
shall any enforcement of any kind whatsoever be allowed against any assets of
the Nation other than the limited assets of the Nation specified in Article
16.2.1.
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16.1.1 Arbitration. All disputes, controversies or claims arising
out of or relating to this Management Agreement, or the Notice of
Termination thereof, or of the Mohegan Nation Gaming Ordinance, or any
rules, actions, or decisions of the Gaming Agency pursuant thereto, or the
issuance, non-issuance, condition, suspension, denial or revocation of any
license required thereunder, shall be settled by binding arbitration in
accordance with the commercial arbitration rules of the American
Arbitration Association and the Federal Arbitration Act. The arbitrator(s)
shall have no authority to award punitive damages. The parties agree that
binding arbitration shall be the sole remedy as to all disputes arising
out of this Agreement, except for disputes requiring injunctive or
declaratory relief, which shall be pursued as provided in Articles 16.1
and 16.2 unless the parties mutually agree otherwise.
16.1.2 Choice of Law. In determining any matter the Arbitrator(s)
shall apply the terms of this Agreement, without adding to, modifying or
changing the terms in any respect, and shall apply Connecticut law, except
Connecticut choice of law rules, and applicable federal and tribal law.
16.1.3 Place of Hearing. All arbitration hearings shall be held at a
place designated by the arbitrator(s) in New London County, Connecticut.
16.1.4 Confidentiality. The parties and the arbitrator(s) shall
maintain strict confidentiality with respect to the arbitration.
16.2 Limitation of Action. The Nation's waiver of immunity from suit is
specifically limited to the following actions and judicial remedies:
16.2.1 Damages. The enforcement of an award of money damages by
arbitration; provided that the arbitrator(s) and/or the court shall have
no authority or jurisdiction to order execution against any assets or
revenues of the Nation except (i) undistributed or future Net Revenues of
the Gaming Enterprise; or (ii) if it has been specifically found by an
arbitrator that, by exercise of regulatory authority pursuant to the
Nation Gaming Ordinance or otherwise, or any rules, actions, or decisions
of the Gaming Agency pursuant thereto, or the issuance, non-issuance,
condition, suspension, denial or revocation of any license, the Nation has
prejudiced the Manager's rights under this Agreement or accompanying
agreements, or has in any material way caused the lack of business success
of the Gaming Enterprise, the future Net Revenues of any other gaming
operations conducted by the Nation. In no instance shall any enforcement
of any kind whatsoever be allowed against any assets of the Nation other
than the limited assets of the Nation specified in this Article 16.2.1.
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16.2.2 Consents and Approvals. The enforcement of a determination by
an arbitrator that the Nation's consent or approval has been unreasonably
withheld contrary to the terms of this Agreement.
16.2.3 Injunctive Relief and Specific Performance. The enforcement
of a determination by an arbitrator that prohibits the Nation from taking
any action that would prevent the Manager from operating the Gaming
Enterprise pursuant to the terms of this Agreement, or that requires the
Nation to specifically perform any obligation under this Agreement (other
than an obligation to pay money which is provided for in Article 16.2.1).
16.2.4 Action to Compel Arbitration. An action to compel arbitration
pursuant to this Article 16.
16.2.5 Action to Preserve the Status Quo During Disputes. An action
to preserve the status quo during disputes pursuant to Article 20.
16.3 Business Board Arbitration. The parties hereby agree to ensure that
their respective representatives to the Business Board shall cooperate fully and
shall try to reach agreement or compromise on all matters before the Business
Board. In the event that the Business Board is unable to reach agreement or
compromise on any matter that reasonably may be expected to have an adverse
material effect on the Enterprise, that matter shall be submitted to arbitration
as provided in this Article 16.3. Arbitration shall be before a single
arbitrator with relevant expertise, selected jointly by the parties; if the
parties are unable to agree on the selection of the arbitrator, the arbitrator
shall be selected by the American Arbitration Association. The arbitrator
hearing disputes arising out of the Business Board shall render a decision
within forty-eight hours of the submission of the dispute, and shall apply the
standard of a reasonable, prudent business person.
17. Time is of the Essence. Time is of the essence in the performance of this
Agreement.
18. Nation Assets. Nothing in this Agreement shall obligate or authorize the
payment or encumbrance of any funds or assets of the Nation other than the
revenues and assets of the Gaming Enterprise (excluding the Gaming Facility and
the realty on which it is located).
19. Notice Provision. The Nation will give the Manager notice of any alleged
violation of the Nation's Gaming Ordinance and thirty (30) days opportunity to
cure before the gaming agency may take any action based on such alleged
violation.
20. Performance During Disputes. It is mutually agreed that during any kind of
controversy, claim, disagreement or dispute, including a dispute as to the
validity of
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this Agreement, the issuance, non-issuance, condition, suspension, denial or
revocation of any license, or the Manager's ability to perform its duties and
collect its Management fee, Manager shall remain in possession of the Gaming
Facility as Manager; and the Nation and Manager shall continue their performance
of the provisions of this Agreement and its exhibits. Manager shall be entitled
to injunctive relief from a civil court or other competent authority to maintain
possession in the event of a threatened eviction during any dispute,
controversy, claim or disagreement arising out of this Agreement.
21. Marks. Prior to the Commencement Date and from time to time during the Term
hereof, Manager agrees to erect and install, in accordance with local codes and
regulations, all signs Manager deems necessary in, on or about the Gaming
Facility, including, but not limited to, signs bearing the Manager's and the
Tribe's Marks. The use of any such Marks shall require the prior approval of the
Tribal Council. The costs of purchasing, leasing, transporting, constructing,
maintaining and installing the required signs and systems shall be part of the
start-up costs and Operating Expenses, as the case may be.
21.1 Nation's Marks. The Manager agrees to recognize the exclusive right
of ownership of Nation to all Nation's service marks, trademarks, copyrights,
trade names, patents or other similar rights or registrations, now or hereafter
held or applied for in connection therewith; these marks shall include all marks
which are unique to and developed for the Gaming Facility (collectively, the
"Nation's Marks"). The Manager hereby disclaims any right or interest therein,
regardless of any legal protection afforded thereto. The Manager acknowledges
that all of Nation's Marks might not be used in connection with the Gaming
Enterprise, and the Nation shall have sole discretion to determine which
Nation's Marks shall be so used. The Manager shall not use the Nation's name, or
any variation thereof, directly or indirectly, in connection with (a) a private
placement or public sale of securities or other comparable means of financing or
(b) press releases and other public communications, without the prior written
approval of Nation.
The Nation and Manager hereby agree that in the event the Nation and/or
Manager is (are) the subject of any litigation or action brought by any party
seeking to restrain the use, for or with respect to the Gaming Enterprise, by
the Nation and/or Manager of any Nation's Mark used by Manager for or in
connection with the Gaming Enterprise, any such litigation or action shall be
defended entirely at the expense of Nation, notwithstanding that Nation may not
be named as a party thereto. In the event the Nation desires to bring suit
against any user of any Nation's Mark, seeking to restrain such user from using
any Nation's Mark, then such suit shall be brought only with the consent of
Nation and at the expense of the Nation notwithstanding that such user may be a
prior or subsequent user. In all cases the conduct of any suit whether brought
by the Nation and/or Manager or instituted against the Nation and/or Manager
shall be under the absolute control of the Nation notwithstanding that Nation
may not be a party to such suit. The Manager, at its sole cost, shall have the
right to engage its own legal counsel and the
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Manager's own counsel shall have the right to non-controlling participation in
any such litigation. The Manager shall have the right at any time during the
course of such litigation to withdraw from participation therein.
21.2. Manager's Marks. The Nation agrees to recognize the exclusive right
ownership of Manager to all Manager's service marks, trademarks, copyrights,
trade names, patents or other similar rights or registrations now or hereafter
held or applied for in connection therewith (collectively, the "Manager's
Marks"). The Nation hereby disclaims any right or interest therein, regardless
of any legal protection afforded thereto. The Nation acknowledges that all of
Manager's Marks might not be used in connection with the Gaming Enterprise, and
Manager shall have sole discretion to determine which Manager's Marks shall be
so used. The Nation covenants that in the event of termination, cancellation or
expiration of this Agreement, whether as a result of a default by Manager or
otherwise, the Nation shall not hold itself out as, or continue operation of the
Gaming Enterprise as Manager's casino nor will it utilize any of Manager's Marks
or any variant thereof in the operation of its Gaming Facility. The Nation
agrees that Manager or its representative may, at any reasonable time
thereafter, enter the Gaming Facility for the sole purpose of removing all
signs, furnishings, printed material, emblems, slogans or other distinguishing
characteristics which are now or hereafter may be connected or identified with
Manager's or which carry any Manager's Mark. Such removal shall be accomplished
in a manner which leaves the premises in a condition suitable for appropriate
commercial use. The Nation shall not use the Manager's name, or any variation
thereof, directly or indirectly, in connection with (a) a private placement or
public sale of securities or other comparable means of financing or (b) press
releases and other public communications, without the prior written approval of
Manager.
The Nation and Manager hereby agree that in the event the Nation and/or
Manager is (are) the subject of any litigation or action brought by an party
seeking to restrain the use, for or with respect to the Gaming Enterprise, by
the Nation and/or Manager of any Manager's Mark used by Manager for or in
connection with the Gaming Enterprise, any such litigation or action shall be
defended entirely at the expense of Manager, notwithstanding that Manager may
not be named as a party thereto. In the event the Nation desires to bring suit
against any user of any Manager's Mark, seeking to restrain such user from using
any Manager's Mark, then such suit shall be brought only with the consent of
Manager and at the expense of the Nation notwithstanding that such user may be a
prior or subsequent user. In all cases the conduct of any suit whether brought
by the Nation and/or Manager or instituted against the Nation and/or Manager
shall be under the absolute control of the Manager notwithstanding that Manager
may not be a party to such suit. The Nation, at its sole cost, shall have the
right to engage its own legal counsel and the Nation's own counsel shall have
the right to non-controlling participation in any such litigation. The Nation
shall have the right at any time during the course of such litigation to
withdraw from participation therein.
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22. Confidential and Proprietary Information. The Nation agrees that Manager has
the sole and exclusive right, title and ownership to (i) certain proprietary
information, techniques and methods of operating gaming businesses; (ii) certain
proprietary information, techniques and methods of designing games used in
gaming businesses; (iii) certain proprietary information, techniques and methods
of training employees in the gaming business; and (iv) certain proprietary
business plans, projections and marketing, advertising and promotion plans,
strategies, and systems all of which have been developed and/or acquired over
many years through the expenditure of time, money and effort and which Manager
and its affiliates maintain as confidential and as a trade secret(s)
(collectively, the "Confidential and Proprietary Information").
The Nation further agrees to maintain the confidentiality of such
Confidential and Proprietary Information, and upon the termination of this
Agreement, return same to Manager, including but not limited to, documents,
notes, memoranda, lists, computer programs and any summaries of such
Confidential and Proprietary Information. Confidential information must be
clearly identified in writing as such in order to be subject to this Article 22.
23. Execution in Counterpart Originals. This Agreement is being executed in four
counterparts, two to be retained by each party. Each of the four originals is
equally valid. This Agreement shall be deemed "executed" and shall be binding
upon both parties when properly executed and approved by the Area Director,
Eastern Area Office, B.I.A., or the Chairman of the NIGC.
24. Enterprise Name. The Gaming Enterprise shall be operated under the business
name of the Nation, the Manager or such other name as the parties may agree.
25. Intent to Negotiate New Agreement. On or before thirty (30) days after the
end of the sixth (6th) year of this Agreement, the Nation shall give Manager
notice of its intent regarding its willingness to enter into negotiations for a
new Management Agreement to be effective upon the conclusion of this Agreement.
26. Entire Agreement. This Agreement, including the Schedules and Exhibits
referred to herein and any documents executed by the parties simultaneously
herewith, constitutes the entire understanding and agreement of the parties
hereto and supersedes all other prior agreements and understandings, written or
oral, between the parties.
27. Government Savings Clause. Each of the parties agrees to execute, deliver
and, if necessary, record any and all additional instruments, certifications,
amendments, modifications and other documents as may be required by the United
States Department of the Interior, B.I.A., the NIGC, the office of the Field
Solicitor,
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<PAGE>
or any applicable statute, rule or regulation in order to effectuate, complete,
perfect, continue or preserve the respective rights, obligations, liens and
interests of the parties hereto to the fullest extent permitted by law;
provided, that any such additional instrument, certification, amendment,
modification or other document shall not materially change the respective
rights, remedies or obligations of the Nation or the Manager under this
Agreement or any other agreement or document related hereto, without the consent
of the affected party.
Remainder of this page is intentionally blank. Signatures appear on the
following pages.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MOHEGAN TRIBE OF INDIANS OF TRADING COVE ASSOCIATES:
CONNECTICUT
LMW INVESTMENTS, INC.,
Partner
By /s/ Ralph W. Sturges By /s/ Len Wolman
---------------------------------- -----------------------------
Ralph Sturges, Life Time Chief Len Wolman, President
Date: 2/28/94 Date: 7/28/94
Place: Waterford, CT Place: Waterford, CT
RJH DEVELOPMENT CORP., Partner
By /s/ Richard Hertz
-----------------------------
Richard Hertz, President
Date: 7/28/94
Place: Waterford, CT
LEISURE RESORT TECHNOLOGY,
INC., Partner
By /s/ Lee R. Tyrol
-----------------------------
Lee R. Tyrol, President
Date: 7/28/94
Place: Waterford, CT
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SLAVIK SUITES, INC., Partner
By /s/ Stephan F. Slavik, Sr.
---------------------------------
Stephan F. Slavik, Sr., President
Date: 7/28/94
Place: Farmington Hills, MI
SUN COVE, LTD., Partner
By__________________________________
Howard Kerzner, President
Date:_______________________________
Place:______________________________
APPROVED:______________________ Date:_________________________
Chairman
National Indian Gaming Commission
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SLAVIK SUITES, INC., Partner
By
---------------------------------
Stephan F. Slavik, Sr., President
Date:_______________________________
Place:______________________________
SUN COVE, LTD., Partner
By /s/ Howard Kerzner
---------------------------------
Howard Kerzner, President
Date: 7/30/94
Place: London
APPROVED:______________________ Date:_________________________
Chairman
National Indian Gaming Commission
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EXHIBIT A
Legal Description of the Property
That portion of the following described property, owned by the United
States of America in trust for the MOHEGAN NATION OF CONNECTICUT, legally
described as follows:
SEE ATTACHED
to be used for the Gaming Facility.
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"No Conveyance Tax collected "No Conveyance Tax collected
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ------------------------------ ------------------------------
Asst. Town Clerk of Montville" Asst. Town Clerk of Montville"
Parcel 1
UNC Tract
VOL 160 PAGE 552
QUIT CLAIM DEED
KNOW ALL MEN BY THESE PRESENTS that UNITED NUCLEAR CORPORATION, a
Delaware corporation acting herein by an officer, duly authorized, for divers
good causes and considerations thereunto [ILLEGIBLE], especially for valuable
considerations received to its full satisfaction of UNC RESOURCES, INC., A
Virginia corporation with a mailing address at c/o UNC Naval Products Division,
67 Sandy Desert Road, Uncasville, Connecticut 06382, has devised, released,
and forever quit claimed, and does by these Presents, for itself and its
successors and assigns, justly and absolutely devise, release and forever
QUIT CLAIM unto the said Releasor, UNC RESOURCES, INC., its successors and
assigns forever, all such right and title as it, the said Releasor, has or ought
to have in or to a certain tract or parcel of land with buildings thereon
situated in the Town of Montville, County of New London and State of Connecticut
and more particularly described as follows:
Commencing at a point situated in the northeasterly corner of Sandy Desert
Road and being in the southeasterly corner of land now or formerly of
[ILLEGIBLE]; thence S. 22(degrees) 35' W. across Sandy Desert Road 35.17
feet to a point; thence N. 75(degrees) 58' W. 246.94 feet to land now or
formerly of [ILLEGIBLE]; thence S. 11(degrees) 21' W. [ILLEGIBLE] feet to
a monument; thence N. 63(degrees) 37' W. 52.15 feet to a point thence
[ILLEGIBLE] to a monument; thence S. 9(degrees) 10' W. 126.0 feet to a
point; thence S. 19(degrees) 3' W. 100 feet to a monument; thence N.
[ILLEGIBLE] 52' W. [ILLEGIBLE] feet to a point; thence S. 17(degrees) 9'
W. 100 feet to a monument; thence S. 22(degrees) 55' W. [ILLEGIBLE] feet
to a monument; thence S. [ILLEGIBLE] 25' W. [ILLEGIBLE] feet to a
monument, thence N. 63(degrees) 1' E. [ILLEGIBLE] feet to a monument;
thence S. [ILLEGIBLE] [ILLEGIBLE]' E. 216.5 feet to a [ILLEGIBLE] within a
[ILLEGIBLE] post; thence S. 72(degrees) 10' E. [ILLEGIBLE] feet to a
monument; thence S. 17(degrees) 27' W. 202.4 feet to a monument; thence S.
72(degrees) [ILLEGIBLE]' E. [ILLEGIBLE] feet to a point; thence
[ILLEGIBLE] 17(degrees) 27' E. 35.0 feet to a point; thence S. [ILLEGIBLE]
E. [ILLEGIBLE] feet to a monument; thence S. [ILLEGIBLE] W. [ILLEGIBLE]
feet to a monument on the northerly side of Broad View Avenue; thence in a
general easterly direction along the northerly side of Broad View Avenue
415.71 feet to a monument and land of [ILLEGIBLE]; thence N. 14(degrees)
17' feet to an iron; thence [ILLEGIBLE]feet to an [ILLEGIBLE]; thence
[ILLEGIBLE] feet to a monument; thence S. [ILLEGIBLE] 0' E. [ILLEGIBLE]
feet to a monument; thence S. [ILLEGIBLE] feet to a monument; thence S.
[ILLEGIBLE] feet to a [ILLEGIBLE] hole in a stone wall; thence in a
general [ILLEGIBLE] direction along a stone wall [ILLEGIBLE] feet to a
[ILLEGIBLE] wire fence and land formerly of [ILLEGIBLE]; thence S.
0(degrees) 32'
<PAGE>
VOL 160 PAGE 553
7" W. [ILLEGIBLE] feet; thence S. [ILLEGIBLE] W. [ILLEGIBLE] feet; thence
S. [ILLEGIBLE] E. [ILLEGIBLE] feet; thence S. 3(degrees) 28' [ILLEGIBLE]
E. [ILLEGIBLE] feet; thence S. 0(degrees) 33' [ILLEGIBLE] W. [ILLEGIBLE]
feet; thence S. 2(degrees) 37' [ILLEGIBLE] E. [ILLEGIBLE] feet; thence S.
0(degrees) [ILLEGIBLE] W. [ILLEGIBLE] feet; thence S. [ILLEGIBLE] W. 29.28
feet; thence S. 3(degrees) 14' [ILLEGIBLE] W. [ILLEGIBLE] feet; thence S.
[ILLEGIBLE] W. [ILLEGIBLE] feet to an iron pipe in a stone wall; thence N.
61(degrees) [ILLEGIBLE] W. [ILLEGIBLE] feet to a point; thence N.
[ILLEGIBLE] 13' 49" W. 161.15 feet; thence N. [ILLEGIBLE] W. [ILLEGIBLE]
feet to a drill hole; thence S. 6(degrees) 50' [ILLEGIBLE] W. 255.37 feet;
thence S. 15(degrees) 14' 43" W. [ILLEGIBLE] feet to a point; thence S.
[ILLEGIBLE] 56' [ILLEGIBLE] E. 47.92 feet; thence S. 7(degrees) 7'
[ILLEGIBLE] W. 29.36 feet; thence S. 64(degrees) 9' [ILLEGIBLE] W.
[ILLEGIBLE] feet; thence S. [ILLEGIBLE] 48' 39" E. [ILLEGIBLE] feet to a
stone wall; thence S. 11(degrees) [ILLEGIBLE] W. [ILLEGIBLE] feet to an
iron pipe; thence S. [ILLEGIBLE] 19' 37" W. [ILLEGIBLE] feet to a iron
pipe; thence S. [ILLEGIBLE] E. [ILLEGIBLE] feet to a drill hole; thence S.
[ILLEGIBLE] W. [ILLEGIBLE] feet to an iron pipe set in the northerly side
of [ILLEGIBLE] Road; thence S. 20(degrees) 10' 51" E. [ILLEGIBLE] feet to
a point, thence N. 1(degree) 52' [ILLEGIBLE] E. [ILLEGIBLE] feet to a
drill hole; thence N. 2(degrees) 51' [ILLEGIBLE] E. 56.41 feet to an iron
pipe; thence N. 1(degree) 48' 29" E. [ILLEGIBLE] feet to a point; thence
[ILLEGIBLE] 0(degrees) 48' 42" E. [ILLEGIBLE] feet to a stone [ILLEGIBLE];
thence N. 0(degrees) 25' [ILLEGIBLE] E. 148.43 feet to a stone
[ILLEGIBLE]; thence [ILLEGIBLE] 1(degree) 42' [ILLEGIBLE] E. [ILLEGIBLE]
feet to a tree; thence [ILLEGIBLE] W. [ILLEGIBLE] feet to a tree; thence
[ILLEGIBLE] E. [ILLEGIBLE] feet to a tree; thence N. 1(degree) [ILLEGIBLE]
feet to a fence post; thence N. [ILLEGIBLE] E. [ILLEGIBLE] feet to a tree;
thence [ILLEGIBLE] feet to an iron pipe; the last seven [ILLEGIBLE] being
along the remains of a fence; thence N. 89(degrees) [ILLEGIBLE] E.
[ILLEGIBLE] feet to a monument; thence S. 88(degrees) 12' E. [ILLEGIBLE]
feet to land of the Central Vermont Railway; thence in a general
[ILLEGIBLE], northerly and [ILLEGIBLE] direction along the westerly side
of the Central Vermont Railway [ILLEGIBLE] feet, more or less, to a
monument; thence [ILLEGIBLE] W. [ILLEGIBLE] feet to a point, thence
[ILLEGIBLE] E. [ILLEGIBLE] feet to a point; thence S. [ILLEGIBLE] feet to
a point; thence [ILLEGIBLE] 47(degrees) 17' W. [ILLEGIBLE] feet; thence
[ILLEGIBLE] W. [ILLEGIBLE] feet; thence [ILLEGIBLE] W. [ILLEGIBLE] feet;
thence [ILLEGIBLE] W. 199.63 feet; thence N. [ILLEGIBLE] 0' W. [ILLEGIBLE]
feet; thence N. [ILLEGIBLE] W. 131.12 feet; thence [ILLEGIBLE] W. 116.90
feet; thence N. [ILLEGIBLE] W. 112.39 feet; thence [ILLEGIBLE] 23' W.
[ILLEGIBLE] feet; thence N. [ILLEGIBLE] W. [ILLEGIBLE] feet; thence N.
64(degrees) 35' W. [ILLEGIBLE] feet; thence N. 63(degrees) 17' W. 76.90
feet to an iron; thence N. [ILLEGIBLE] 43' W. [ILLEGIBLE] feet; thence
[ILLEGIBLE] 61(degrees) 15' W. 152.18 feet; thence S. 76(degrees)
[ILLEGIBLE] W. 27.22 feet to a monument and land of [ILLEGIBLE]; the last
twenty-one courses being bounded northerly by Trading Cove; thence S.
[ILLEGIBLE] 25' W. 914.22 feet to a monument on the northerly side of
Sandy Desert Road and place of beginning.
The above-described premises being conveyed together with all rights,
easements, hereditaments and appurtenances thereto appertaining and all
right, title and interest, if any, in and to strips and gores adjoining
said premises and in and to the land lying in the bed of any street or
streets adjoining said premises.
Being and intending by this deed to convey all of the premises of the
Releasor situated in Montville, Connecticut, to the Releasee.
-1-
<PAGE>
VOL [ILLEGIBLE] PAGE [ILLEGIBLE]
Trading Cove
FIRST PIECE: 98 Lucas Park Road
A certain tract or parcel of land situated on the easterly side of Lucas Park
Road in the Town of Norwich, County of New London and State of Connecticut,
being bounded and described as follows:
Beginning at a point on the east side of Lucas Park Road at the [ILLEGIBLE]
corner of land now or formerly of Harmon and Gertrude [ILLEGIBLE], thence on an
arc deflecting to the left with a radius of 40.00' and running 12.99' to a
monument; thence N 86(degrees) - 24' [ILLEGIBLE] 70.78' to a monument; thence on
an arc deflecting to the left with a radius of 125.00' and running 86.72' to a
monument; thence running N 53(degrees) - 51' E 73' to a point; thence S
78(degrees) - 39' E 645' more or less to a point on the westerly boundry of land
now or formerly of the Central Vermont Railroad, the last 5 courses bounded on
the north by land now or formerly of the said [ILLEGIBLE]; thence running in a
general southerly direction along land of the said Railroad and the Thames River
1101' more or less to the southeast corner of the herein described tract and the
northeast corner of other lands of Vincent and Peter Wawrzynowicz; thence
running general westerly direction 230' more or less to a point, said point
being the northwest corner of other lands of the said Vincent and Peter
Wawrzynowicz; thence southwesterly along other lands of the said Wawrzynowicz
and lands now or formerly of Alfred L. [ILLEGIBLE] Jr. 210.4' more or less to a
point; thence turning to the right and having an interior angle of 72(degrees)
40' and running northwesterly 333.8' more or less to the northwest corner of the
Soloman Lucas Memorial Woods; thence turning to the left and running in a
general southwesterly direction 670' more or less to the high water mark of
Trading Cove, the last 2 courses bounded southerly and easterly by the said
Soloman Lucas Memorial Woods; [ILLEGIBLE] in a general northwesterly direction
along the high water mark of Trading Cove [ILLEGIBLE] more or less to a point,
said point being the southeast corner of lot 16 on a plan entitled "Final Plan
showing Highland Terrace owned by Vincent, Gabriel and Peter [ILLEGIBLE], Lucas
Park Road, Norwich, Conn., Scale [ILLEGIBLE], dated May 1963 and recorded in the
Norwich Land Records, map volume [ILLEGIBLE], [ILLEGIBLE]; thence running
[ILLEGIBLE] to a point on the southeast corner of lot [ILLEGIBLE] on said plan,
the last course bounded westerly by lots 16, 5 and 4; thence turning to the left
and running [ILLEGIBLE] W 175' to the easterly line of Lucas Park Road; thence
on an arc and deflecting to the left with a radius of 485' and running 100' to
the southwest corner of lot 12 on said plan; thence turning to the right and
running [ILLEGIBLE] E. [ILLEGIBLE] to the southeast corner of lot 12 on said
plan; thence turning to the left and running 11 10(degrees) - 28' W 217.93' to a
point on the northeast corner of lot #1, the last course being bounded on the
west by lots 12 and 1; thence turning to the left on an arc deflecting to the
right with a radius of 175' and turning 121.41' to a point; thence running N
86(degrees) - 24' W 51.66 to a point; thence on an arc deflecting to the left
with a radius of 10' and running 18.38' to a monument on the east side of Lucas
Park Road; thence in a general northerly direction along the east side of Lucas
Park Road 80' more or less to the point and place of beginning.
Being the premises conveyed to Grantor by Warranty Deed from Vincent
Wawrzynowicz, Peter Wawrzynowicz, Gabriel Wawrzynowicz and Paul Wawrzynowicz
dated December 22, 1987 and recorded in the Norwich Land Records in Volume 827,
Page 5, and said premises are subject to taxes to the Town or Norwich on the
Lists of October 1, 1991 and October 1, 1992, which taxes the Grantee assumes
and agrees to pay.
<PAGE>
VOL 1094 PAGE 291
FOURTH PIECE: 112 Lucas Park Road
That certain tract or parcel of land, located on Lucas Park Road, in the Town of
Norwich, County of New London and State of Connecticut, being bounded and
described as follows:
Beginning at the northeast corner of the within described tract being also the
northwest corner of Lot 16; thence running S 42(degrees) 32' E. 154.08 feet
along Lot 16 to a point; thence running S 67(degrees) 28' W. about 152 feet to
Trading Cove, so-called; thence running westerly about 75 feet along Trading
Cove to a point; thence running N [ILLEGIBLE] about 122 feet along the Lot
Owners beach area to Lucas Park Road; thence running 63.45 feet on an arc
deflecting to the left with a radius of 60 feet to the point and place of
beginning.
The above described tract being Lot 17 on a plan entitled "Highland Terrace,
Scale 1(degree) - 40', Dated May 1963, Surveyed by Joseph Gernhard, Jr."
Said premises are conveyed together with certain rights of way and are subject
to certain conditions and restrictions as set forth in a deed from Vincent
Wawrzynowicz, et al dated June 19, 1968 and recorded in the Norwich Land Records
in Volume 349 at Pages 103-105.
Said premises are also subject to building, building line, zoning, subdivision
and wetlands ordinances and regulations of the Town of Norwich.
Being the premises conveyed to Grantor by Warranty Deed from A.D. Tripp Company
dated October 25, 1988 and recorded in the Norwich Land Records in Volume 887,
Page 20, and said premises are subject to taxes to the Town of Norwich on the
Lists of October 1, 1991 and October 1, 1992, which taxes the Grantee assumes
and agrees to pay.
FIFTH PIECE: 120 Lucas Park Road
A tract of land (sometimes called Perch Rock) on the Thames River off Lucas Park
Road, described as follows:
Beginning at a bound on a large rock on the shore of the river Thames, north of
the mouth of Trading Cove and near to the place in said River called Deep Water;
thence by said River 4 1/4 rods; thence north 81(degrees) west 18 rods and 21
links; thence north 9(degrees) east 4 1/4 rods abutting on lands formerly of
Henry M. Leach; thence south 81(degrees) east 18 rods and 20 links abutting on
said Leach land to the point of beginning.
Said premises are subject to a lease to the United States of America for
maintaining the Perch Rock river light.
Said premises are subject to the rights of the Central Vermont Railroad, Inc.
across said premises.
Being the premises conveyed to Grantor by Warranty Deed from Vincent G.
Wawrzynowicz and Peter T. Wawrzynowicz dated December 22, 1987 and recorded in
the Norwich Land Records in Volume 827, Page 10, and said premises are subject
to taxes to the Town of Norwich on the Lists of October 1, 1991 and October 1,
1992, which taxes the Grantee assumes and agrees to pay.
RECEIVED FOR RECORD AT NORWICH, CONN
ON 12-30-92 AT 12:05 PM
[ILLEGIBLE]
<PAGE>
VOL 1094 PAGE 290
SECOND PIECE: 109 Lucas Park Road
A certain tract or parcel of land located on the westerly side of Lucas Park
Road in the Town of Norwich, County of New London and State of Connecticut, more
particularly bounded and described as follows:
Commencing at a point on the arc of a curve at the intersection of the westerly
line of Lucas Park Road and the southerly line of Ledgewood Court at the
northeasterly corner of the within described premises; thence running
southeasterly along the arc of said curve of Lucas Park Road, 13.69 feet; thence
running S 7 degrees 53' W. 80.37 feet to a point; thence along the arc of a
curve running southeasterly 37.05 feet to a point. The last three courses being
the westerly line of Lucas Park Road. Thence S 52 degrees 58' W about 131 feet
to Trading Cove; thence turning to the right end running in a general
northwesterly direction along said Trading Cove about 102 feet; thence N 52
degrees 29' E about 208 feet to the point of beginning.
Said premises are shown as Lot No. 8 on a Plan entitled "Final Plan Showing
Highland Terrace owned by Vincent, Gabriel and Peter Wawrzynowicz, Lucas Park
Road, Norwich, Connecticut, Scale: 1" - 40', May, 1963", on file in the Norwich
Land Records.
Being the premises conveyed to Grantor by Warranty Deed from Vincent
Wawrzynowicz dated December 22, 1987 and recorded in the Norwich Land Records in
Volume 827, Page 8, and said premises are subject to building restrictions as
set forth in deeds for "Highland Terrace" as appear as of record and to taxes to
the Town of Norwich on the Lists of October 1, 1991 and October 1, 1992, which
taxes the Grantee assumes and agrees to pay.
THIRD PIECE: 111 Lucas Park Road
A certain tract or parcel of land located on the southerly side of the cul de
sac of Lucas Park Road in the Town of Norwich, County of New London and State of
Connecticut and bounded and described as follows:
Beginning at the point on the southerly side of the cul de sac of Lucas Park
Road and being the northeast corner of the herein described parcel and thence
running S 18(degrees) 04' W, 122' to the high water mark of Trading Cove,
abutting easterly on lot 17 of the hereinafter described plan; thence turning
and running westerly along the high water mark of Trading Cove 110' more or less
to a point on the southeasterly corner of a 10' drainage easement; thence
turning and running N 52(degrees) 58' E. 129' more or less along said drainage
easement to the southerly side of said cul de sac; thence turning and running
easterly along the southerly side of said cul de sac 36.55' to the point and
place of beginning.
The above described parcel of land being designated as "Beach Area" on a plan
entitled "Final Plan showing Highland Terrace Owned by Vincent - Gabriel & Peter
Wawrzynowicz, Lucas Park Road, Norwich, Connecticut, Scale 1' - 40' date May
1963."
The above described parcel of land is subject to the rights of others as
described in each lot owner's deed of Highland Terrace.
Being the premises conveyed to Grantor by Warranty Deed from Vincent
Wawrzynowicz, Peter Wawrzynowicz and Gabriel Wawrzynowicz dated January 28, 1989
and recorded in the Norwich Land Records in Volume 904, Page 88, and said
premises are subject to taxes to the Town of Norwich on the Lists of October 1,
1991 and October 1, 1992, which taxes the Grantee assumes and agrees to pay.
<PAGE>
Parcel 3
Mohegan Church
Legal Description
All that certain piece or parcel of land, .400 acre, more or less, together with
buildings and improvements thereon, situated in the Town of Montville, County of
New London and State of Connecticut and being more particularly described in
that certain deed, dated March 30, 1831, wherein Lucy Teecomwas and Cynthia
Hoscott were the grantors and the Mohegan Tribe was the grantee, recorded in
volume 14, page 271 of the land records at the Montvi1le Town Clerk's Office.
<PAGE>
EXHIBIT B
LIST OF PARTNERS OF
TRADING COVE ASSOCIATES
Sun Cove Limited - 50.0%
Slavik Suites, Inc. - 22.5%
LMW Investments, Inc. - 11.25%
RJH Development Corp. - 11.25%
Leisure Resort Technology Inc. - 5.0%
SEE ATTACHED INFORMATION
<PAGE>
SUN COVE, LTD.
Directors:
Howard Kerzner
John Allison
Patrick Cowell
Officers:
President: Howard Kerzner
Vice President: Ian Wheatley
Vice President &
Secretary: John Allison
Vice President: Patrick Cowell
Vice President: David Wright
Sun Cove, Ltd. is an indirect subsidiary of Sun International Investments
Limited.
<PAGE>
CONFIRMATION OF FILING STATE OF CONNECTICUT
AND RECEIPT OF FEES Office Of The Secretary Of The State
61-304 Rev. 2/89 Commercial Recording Division
30 TRINITY STREET, HARTFORD, CONNECTICUT 06106
================================================================================
NAME OF CORPORATION
SUN COVE, LTD.
- --------------------------------------------------------------------------------
DOCUMENT FILED FILING DATE TOTAL FEES PAID
- --------------------------------------------------------------------------------
CERTIFICATE OF INCORPORATION 30/JUN/1994 $225.00
- --------------------------------------------------------------------------------
The information shown above pertains to documents filed in this office on
account of the corporation indicated. The filing date is the date endorsed on
the document pursuant to Section 33-285 or 33-422 of the Connecticut General
Statutes. Any questions regarding this filing should be addressed to: THE ABOVE
ADDRESS
CT CORPORATION SYSTEM
ONE COMMERCIAL PLAZA
HARTFORD CT 06103
<PAGE>
CERTIFICATE OF INCORPORATION
STOCK CORPORATION
61-27 REV. [ILLEGIBLE]
STATE OF CONNECTICUT
SECRETARY OF THE STATE
30 Trinity Street, Hartford, CT 06106
The undersigned incorporator(s) hereby form(s) a corporation under the Stock
Corporation Act of the State of Connecticut:
1. The name of the corporation is Sun Cove, Ltd.
2. The nature of the business to be transacted, or the purposes to be
promoted or carried out by the corporation, as follows:
To engage in any lawful act or activity for which corporations may be
formed under the Connecticut Stock Corporation Act.
<PAGE>
(Continued)
3. The designation of each class of shares, the authorized number of shares
of each such class, and the par value any) of each share thereof are as
follows:
Common 10,000 no par value
4. The terms, limitations and relative rights and preferences of each class
of shares and series thereof (if any), or express grant of authority to
the board of directors pursuant to Section 33-341, as amended, are as
follows:
N/A
5. The minimum amount of stated capital with which the corporation shall
commence business is $1,000.00 dollars. (Not less than one thousand dollars).
6. (7) Other provisions:
See attachment A
Dated this 29th day of June, 1994
I/We hereby declare, under the penalties of false statement, that the statements
made in the foregoing certificate are true.
This certificate of incorporation must be signed by each incorporator.
- --------------------------------------------------------------------------------
NAME OF INCORPORATOR NAME OF INCORPORATOR NAME OF INCORPORATOR
(Print/Type) (Print/Type) (Print/Type)
1. 2. 3.
Tara M. Coyle
SIGNED (Incorporator) SIGNED (Incorporator) SIGNED (Incorporator)
1. /s/ Tara M. Coyle 2. __________________ 3._______________________
-----------------
- --------------------------------------------------------------------------------
FOR OFFICE USE ONLY Rec; CC; G.S:
Tara M. Coyle
----------------------------------------------
Neal Gerber & Eisenberg
----------------------------------------------
2 North LaSalle Street, Suite 2200
----------------------------------------------
Chicago, Illinois 60602
----------------------------------------------
(Please provide filer's name and complete
address for mailing receipt [illegible]
<PAGE>
ATTACHMENT A
To the fullest extent permitted by the Connecticut Stock Corporation Act, as
amended from time to time, a director of the corporation shall not be liable to
the corporation or its stockholders for monetary damages for breach of duty as a
director.
<PAGE>
DOMESTIC CORPORATION
61-6 Rev. 6/88
Secretary of the State
30 Trinity Street
Hartford, CT 06106
Name of Corporation: Sun Cove, Ltd. Complete All (Illegible)
- --------------------------------------------------------------------------------
The above corporation appoints as its statutory agent for service, one of the
following:
- --------------------------------------------------------------------------------
Name of Natural Person Who is Business Address Zip Code
Resident of Connecticut
Residence Address Zip Code
- --------------------------------------------------------------------------------
Name of Connecticut Corporation Address of Principal Office in Conn. (If
none enter address of appointee's
statutory's agent for service)
- --------------------------------------------------------------------------------
Name of Corporation Address of Principal Office in Conn.
(Not organized under the Laws (If none, enter "Secretary of the State of
of Conn.*) Conn.")
CT CORPORATION SYSTEM ONE COMMERCIAL PLAZA
HARTFORD, CONNECTICUT 06103
- --------------------------------------------------------------------------------
* Which has procured a Certificate of Authority to transact business
or conduct affairs in this state.
- --------------------------------------------------------------------------------
AUTHORIZATION
- --------------------------------------------------------------------------------
Original Appointment Name of Incorporator Signed (Incorporator) Date
(Must be Signed (Print or Type)
by a majority of Tara M. Coyle /s/ Tara M. Coyle
Incorporators) ------------------------------------------
Name of Incorporator Signed (Incorporator)
(Print or Type)
------------------------------------------
Name of Incorporator Signed (Incorporator)
(Print or Type)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Subsequent Appointment Name of President, Vice President or Secretary Date
--------------------------------------------------------
Signed (President, or Vice President or Secretary)
--------------------------------------------------------
- --------------------------------------------------------------------------------
Acceptance: Name of Statutory Agent Signed (Statutory Agent for Service)
for Service (Print or Type)
CT CORPORATION SYSTEM /s/ [ILLEGIBLE]
- --------------------------------------------------------------------------------
ASST. SECY
For Official Use Only Rec; CC:
Tara M. Coyle
-------------------------------------------------
2 North LaSalle Street, Suite 2200
-------------------------------------------------
Chicago, Illinois 60602
-------------------------------------------------
Please provide filer's name and complete
address for mailing receipt.
<PAGE>
* * * * *
BY-LAWS
OF
SUN COVE, LTD.
* * * * *
ARTICLE I
OFFICES
Section 1. The principal office shall be located in Waterford,
Connecticut.
Section 2. The corporation may also have offices at such other places both
within and without the State of Connecticut as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in the State of Connecticut, at such place as may be fixed from
time to time by the board of directors.
Section 2. Annual meetings of shareholders, shall be held on the first
monday of July if not a legal holiday, and if a legal holiday, then on the next
secular day following, at 10:00 A.M., at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be delivered not less than seven nor
more than fifty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, or the secretary, or the officer
or persons calling the meeting, to each shareholder of record entitled to vote
at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than the
election of directors may be held at such time and place within or without the
State of Connecticut as shall be stated
<PAGE>
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Special meetings of shareholders may be called at any time, for
any purpose or purposes, by the board of directors or by such other persons as
may be authorized by law.
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than seven nor more than fifty
days before the date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to 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.
Section 2. If a quorum is present, the affirmative vote of a majority of
the shares of stock represented at the meeting shall be the act of the
shareholders unless the vote of a greater number of shares of stock is required
by law or the certificate of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all
-2-
<PAGE>
of the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be three (3). Directors need not
be residents of the State of Connecticut nor shareholders of the corporation.
The directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first annual meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors may be filled
by the affirmative vote of a majority of the remaining directors though less
than a quorum of the board of directors. A director elected to fill a vacancy
shall be elected for the unexpired portion of the term of his predecessor in
office.
Any vacancy created by an increase in the number of directorships shall be
filled for the unexpired term by action of shareholders.
Any other vacancy may be filled for the unexpired term by action of the
sole remaining director in office or by unanimous written consent of all the
directors without a meeting or at a meeting of the board of directors by the
concurring vote of a majority of the remaining directors in office, though such
remaining directors are less than a quorum, though the number of directors at
the meeting is less than a quorum and though such majority is less than a
quorum. A director elected to fill a newly created directorship shall serve
until the next succeeding annual meeting of shareholders and until his successor
shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be managed by its
board of directors which may exercise all 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 shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Connecticut, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of
-3-
<PAGE>
any personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the corporation as
directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be
held either within or without the State of Connecticut.
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by the
president on five (5) days' notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. Two (2) of the directors shall constitute a quorum for the
transaction of business unless a greater number is required by law or by the
certificate of incorporation. The act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the board of
directors, unless the act of a greater number is required by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting 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.
Section 7. Any action required or permitted to be taken at a meeting of
the directors may be taken without a meeting if a
-4-
<PAGE>
consent in writing, setting forth the action so taken, shall be signed by all of
the directors entitled to vote with respect to the subject matter thereof.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The board of directors, by resolution adopted by a majority of
the number of directors fixed by the by-laws or otherwise, may designate two or
more directors to constitute an executive committee, which committee, to the
extent provided in such resolution, shall have and exercise all of the authority
of the board of directors in the management of the corporation, except as
otherwise required by law. Vacancies in the membership of the committee shall be
filled by the board of directors at a regular or special meeting of the board of
directors. The executive committee shall keep regular minutes of its proceedings
and report the same to the board when required.
ARTICLE VIII
NOTICES
Section 1. 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 director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, 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 2. Whenever any notice whatever is required to be given under the
provisions of the statutes or under the provisions of the certificate of
incorporation or these by-laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after
-5-
<PAGE>
each annual meeting of shareholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer, none of whom need be a member of
the board.
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 of directors.
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. 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. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He
-6-
<PAGE>
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the board of directors, and shall perform such other duties
as may be prescribed by the board of directors or president, under whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such 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. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined 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.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer 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.
Section 12. 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 president and 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.
Section 13. 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, 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 14. The assistant treasurer, or, if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
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<PAGE>
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the president or a vice-president and the secretary or an
assistant secretary or the treasurer or an assistant treasurer of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof.
When the corporation is authorized to issue shares of more than one class
there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full or summary statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series so far as the same
have been fixed and determined and the authority of the board of directors to
fix and determine the relative rights and preferences of subsequent series.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be
-8-
<PAGE>
issued to the person entitled thereto, and the old certificate cancelled and the
transaction recorded upon the books of the corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten days,
immediately preceding such meeting. In lieu of closing the stock transfer books,
the board of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed, the determination of shareholders entitled to notice of or
to vote at a meeting, or to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the board
of directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Connecticut.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least five days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each,
-9-
<PAGE>
which list, for a period of five days prior to such meeting, shall be kept on
file at the principal office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate thereof,
shall be prima facie evidence as to who are the shareholders entitled to examine
such list or share ledger or transfer book or to vote at any meeting of the
shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the certificate of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividend-Q may be paid in cash,
in property or in shares of the capital stock, subject to any 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 interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Connecticut". The seal may be used by
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<PAGE>
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted (a) at any regular or special meeting of shareholders at
which a quorum is present or represented, by the affirmative vote of a majority
of the stock entitled to vote, provided notice of the proposed alteration,
amendment or repeal be contained in the notice of such meeting, or (b) by the
affirmative vote of a majority of the board of directors at any regular or
special meeting of the board.
ARTICLE XIII
INDEMNIFICATION
Section 1. The corporation shall to the fullest extent permitted by the
Connecticut Stock Corporation Act (the "Act") indemnify all officers and
directors of the corporation and advance expenses reasonably incurred by all
officers and directors of the corporation.
Section 2. To the fullest extent permitted by the Act, a director of the
corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
-11-
<PAGE>
SLAVIK SUITES, INC.
SHAREHOLDERS OF SLAVIK SUITES, INC.
1. Stephan F. Slavik, Sr., Trust u/t/a/ dtd. May 26, 1987, 50% of issued and
outstanding shares.
2. Joseph F. Slavik, Trust u/t/a dtd. June 4, 1987, 50% of issued and
outstanding shares.
DIRECTORS OF SLAVIK SUITES, INC.
1. J. Ronald Slavik
2. Stephan F. Slavik, Sr.
OFFICERS OF SLAVIK SUTIES, INC.
Del J. Lauria - Executive Vice President
Stephan F. Slavik, Sr., - President
J. Ronald Slavik, Secretary/Treasurer
INDIRECT FINANCIAL INTEREST
Del J. Lauria - shares 10% of profits and cash flow
<PAGE>
United States of America
The State of Michigan
Michigan Department of Commerce
Lansing, Michigan
This is to Certify That Articles of Incorporation of
SLAVIK SUITES, INC.
were duly filed in this office on the 28th day of SEPTEMBER, 1988, in conformity
with Act 284, Public Acts of 1972, as amended.
In testimony whereof, I have hereunto set my hand and
affixed the Seal of the Department, in the City of
Lansing, this 28th day of SEPTEMBER, 1988.
/s/ [ILLEGIBLE], Director
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) FILED Date Received
SEP 28 1988 SEP 23 1988 FOC
---------------
Administrator
MICHIGAN DEPARTMENT OF COMMERCE ---------------
Corporation & Securities Bureau
EFFECTIVE DATE:
- --------------------------------------------------------------------------------
CORPORATION IDENTIFICATION NUMBER 407-603
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
Article I
- --------------------------------------------------------------------------------
The name of the corporation is: Slavik Suites, Inc.
- --------------------------------------------------------------------------------
Article II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is organized is to buy sell,
and deal in real property and to engage in any activity within the purposes for
which corporations may be organized under the Business Corporation Act of
Michigan.
- --------------------------------------------------------------------------------
Article III
- --------------------------------------------------------------------------------
The total authorized capital stock is:
1. Common Shares 50,000 Par Value Per Share $1.00
Preferred Shares _____________________ Par Value Per Share $___________
and/or shares without par value as follows:
2. Common Shares _________________________ Stated Value Per Share $_________
Preferred Shares ______________________ Stated Value Per Share $________
3. A statement of all or any of the relative rights, preferences and limitations
of the shares of each class is as follows:
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No.
2 to Form S-4 (File No. 333-17795) 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 balance sheets of
the Companies. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 28, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated November 27, 1996 included herein and to all references to our firm
included in this registration statement on Amendment No. 2 to Form S-4 (File No.
333-17795).
ARTHUR ANDERSEN LLP
Hartford, Connecticut
April 24, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,537
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 819
<CURRENT-ASSETS> 21,391
<PP&E> 264,918
<DEPRECIATION> 0
<TOTAL-ASSETS> 307,481
<CURRENT-LIABILITIES> 64,481
<BONDS> 243,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 307,481
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
12 3/4% Senior Notes due 2003
of
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
Pursuant to the Prospectus dated __________, 1997
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _________, 1997 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE OFFER IS
EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION, IN WHICH CASE THE TERM
"EXPIRATION DATE" SHALL MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE
OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
================================================================================
The Exchange Agent is:
Fleet National Bank
By Registered or Certified Mail, by Overnight
Delivery or by Hand:
Fleet National Bank
CT OP TO6D
Attn: Patricia Williams
150 Windsor Street
Hartford, CT 06120
By Facsimile (for Eligible Institutions only):
Fleet National Bank
Attn: Patricia Williams
(860) 986-7920
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated
_____________, 1997 (the "Prospectus"), of 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"),
and this Letter of Transmittal (the "Letter of Transmittal"), which together
with the Prospectus constitutes the Issuers' offer (the "Exchange Offer") to
exchange $1,000 principal amount of its 12 3/4% Senior Notes due 2003 (the
"Exchange Notes") for each $1,000 principal amount of its outstanding 12 3/4%
Senior Notes due 2003 (the "Private Notes"). Recipients of the Prospectus should
read the requirements described in such Prospectus with respect to eligibility
to participate in the Exchange Offer. Capitalized terms used but not defined
herein have the meaning given to them in the Prospectus.
The undersigned hereby tenders the Private Notes described in the
box entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Private Notes, and the
undersigned represents that it has received from each beneficial owner of
Private Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action described
in this Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Private
Notes (i) if certificates representing Private Notes are to be forwarded
herewith, (ii) if delivery of Private Notes is to be made by book-entry transfer
into the Exchange Agent's account at The Depository Trust Company ("DTC"),
pursuant to the procedures set forth in the section of the Prospectus entitled
"The Exchange Offer -- Procedures for Tendering," or (iii) if a tender is made
pursuant to the guaranteed delivery procedures in the section of the Prospectus
entitled "The Exchange Offer -- Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the
information received from the beneficial owners is accurately reflected in the
boxes entitled "Beneficial Owner(s) - Purchaser Status" and "Beneficial Owner(s)
- - Residence."
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 should contact such registered holder of Private Notes
promptly and instruct such registered holder of Private Notes to tender on
behalf of the beneficial owner. If such beneficial owner wishes to tender on its
own behalf, such beneficial owner must, prior to completing and executing this
Letter of Transmittal and delivering its Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a
holder of Private Notes must (i) complete the box entitled "Description of
Private Notes," (ii) complete the boxes entitled "Beneficial Owner(s) -
Purchaser Status" and "Beneficial Owner(s) - Residence", (iii) if appropriate,
check and complete the boxes relating to book-entry transfer, guaranteed
delivery, Special Issuance Instructions and Special Delivery Instructions, (iv)
sign the Letter of Transmittal by completing the box entitled "Sign Here" and
(v) complete the Substitute Form W-9. Each holder of Private Notes should
carefully read the detailed instructions below prior to completing the Letter of
Transmittal.
Holders of Private Notes who desire to tender their Private Notes
for exchange and (i) whose Private Notes are not immediately available or (ii)
who cannot deliver their Private Notes, this Letter of Transmittal and any other
documents required hereby to the Exchange Agent prior to the Expiration Date,
must tender the Private Notes pursuant to the guaranteed delivery procedures set
forth in the section of the Prospectus entitled "The Exchange Offer --
Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes
for exchange must complete columns (1) through (3) in the box below entitled
"Description of Private Notes" and sign the box below entitled "Sign Here." If
only those columns are completed, such holder of Private Notes will have
tendered for exchange
<PAGE>
all Private Notes listed in column (3) below. If the holder of Private Notes
wishes to tender for exchange less than all of such Private Notes, column (4)
must be completed in full. In such case, such holder of Private Notes should
refer to Instruction 5.
<TABLE>
<CAPTION>
=====================================================================================================
DESCRIPTION OF PRIVATE NOTES
=====================================================================================================
<S> <C> <C> <C> <C>
(1) (2) (3) (4)
Principal
Amount
Tendered
Private For
Note Aggregate Exchange
Number(s) Principal (must
Name(s) and Address(es) of Registered (Attach Amount be in
Holder(s) of Private Note(s), exactly as name(s) signed List Represented integral
appear(s) on Private Note Certificate(s) if by multiples
(Please fill in, if blank) necessary) Certificate(s)1 of $1,000)2
- -----------------------------------------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
=====================================================================================================
</TABLE>
1. Unless indicated in the column "Principal Amount Tendered For Exchange,"
any tendering Holder of 12 3/4% Senior Notes due 2003 will be deemed to
have tendered the entire aggregate principal amount represented by the
column labelled "Aggregate Principal Amount Represented by
Certificate(s)."
2. The minimum permitted tender is $1,000 in principal amount of 12 3/4%
Senior Notes due 2003. All other tenders must be in integral multiples
of $1,000.
<PAGE>
|_| CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
|_| CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS
HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution:__________________________________________
Account Number: __________________________________________
Transaction Code Number: __________________________________________
|_| CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s): __________________
Date of Execution of Notice of Guaranteed Delivery: __________________
Window Ticket Number (if available): __________________
Name of Institution which Guaranteed Delivery: __________________
Account Number (if delivered by book-entry transfer): __________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _____________________________________________________________
Address: _____________________________________________________________
_____________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
=============================================== =================================================
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8) (See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if the Exchange To be completed ONLY if the Exchange
Notes issued in exchange for Private Notes, Notes issued in exchange for Private Notes,
certificates for Private Notes in a principal certificates for Private Notes in a principal
amount not exchanged for Exchange Notes, or amount not exchanged for Exchange Notes, or
Private Notes (if any) not tendered for exchange, Private Notes (if any) not tendered for
are to be issued in the name of someone other exchange, are to be mailed or delivered (i) to
than the undersigned or (ii) if Private Notes someone other than the undersigned or (ii) to
tendered by book-entry transfer which are not the undersigned at an address other than the
exchanged are to be returned by credit to an address shown below the undersigned's
account maintained at DTC. signature.
Issue to: Mail or delivered to:
Name_______________________________________ Name_______________________________________
(Please Print) (Please Print)
Address____________________________________ Address____________________________________
___________________________________________ ___________________________________________
___________________________________________ ___________________________________________
(Include Zip Code) (Include Zip Code)
___________________________________________ ___________________________________________
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
Credit Private Notes not exchanged and
delivered by book-entry transfer to DTC
account set forth below:
___________________________________________
(Account Number)
=============================================== =================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
BENEFICIAL OWNER(S) - RESIDENCE
- --------------------------------------------------------------------------------------------------
<S> <C>
State of Domicile/Principal Place of Business of Principal Amount of Private Notes
Each Beneficial Owner of Private Notes Held for Account of Beneficial Owner(s)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
==================================================================================================
</TABLE>
================================================================================
BENEFICIAL OWNER(S) - PURCHASER STATUS
- --------------------------------------------------------------------------------
The beneficial owner of each of the Private Notes described herein is (check the
box that applies):
|_| A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
|_| An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act)
|_| A non "U.S. person" (as defined in Regulation S of the Securities Act)
that purchased the Private Notes outside the United States in accordance
with Rule 904 of the Securities Act
|_| Other (describe)________________________________________________________
________________________________________________________________________
================================================================================
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by 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"),
upon the terms and subject to the conditions set forth in the Prospectus dated ,
1997 (the "Prospectus") and this Letter of Transmittal (the "Letter of
Transmittal"), which together with the Prospectus constitutes the Company's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 12 3/4%
Senior Notes due 2003 (the "Exchange Notes") for each $1,000 principal amount of
its outstanding 12 3/4% Senior Notes due 2003 (the "Private Notes"), the
undersigned hereby tenders to the Issuers for exchange the Private Notes
indicated above.
By executing this Letter of Transmittal and subject to and
effective upon acceptance for exchange of the Private Notes tendered for
exchange herewith, the undersigned will have irrevocably sold, assigned,
transferred and exchanged, to the Issuers, all right, title and interest in, to
and under all of the Private Notes tendered for exchange hereby, and hereby will
have appointed the Exchange Agent as the true and lawful agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as agent
of the Issuers) of such holder of Private Notes with respect to such Private
Notes, with full power of substitution to (i) deliver certificates representing
such Private Notes, or transfer ownership of such Private Notes on the account
books maintained by DTC (together, in any such case, with all accompanying
evidences of transfer and authenticity), to the Issuers, (ii) present and
deliver such Private Notes for transfer on the books of the Company and (iii)
receive all benefits and otherwise exercise all rights and incidents of
beneficial ownership with respect to such Private Notes, all in accordance with
the terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that, among other
things, (i) the undersigned is the owner; (ii) the undersigned has a net long
position within the meaning of Rule 14e-4 under the Securities Exchange Act as
amended ("Rule 14e-4") equal to or greater than the principal amount of Private
Notes tendered hereby; (iii) the tender of such Private Notes complies with Rule
14e-4 (to the extent that Rule 14e-4 is applicable to such exchange); (iv) the
undersigned has full power and authority to tender, exchange, assign and
transfer the Private Notes and (v) when such Private Notes are accepted for
exchange by the Issuers, the Issuers will acquire good and marketable title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims. The undersigned will, upon receipt, execute
and deliver any additional documents deemed by the Exchange Agent or the Issuers
to be necessary or desirable to complete the exchange, assignment and transfer
of the Private Notes tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the
Issuers that (i) the Exchange Notes to be acquired by the undersigned in
exchange for the Private Notes tendered hereby and any beneficial owner(s) of
such Private Notes in connection with the Exchange Offer will be acquired by the
undersigned and such beneficial owner(s) in the ordinary course of business of
the undersigned, (ii) the undersigned have no arrangement or understanding with
any person to participate in the distribution of the Exchange Notes, (iii) the
undersigned and each beneficial owner acknowledge and agree that any person who
is a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose 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) the undersigned and each beneficial
owner understand that a secondary resale transaction described in clause (iii)
above and any resales of Exchange Notes obtained by the undersigned in exchange
for the Private Notes acquired by the undersigned 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) neither the undersigned nor any
beneficial owner is an "affiliate," as defined under Rule 405 under the
Securities Act, of the Issuers. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own
<PAGE>
account in exchange for Private Notes that were acquired as a result of
market-making activities or other trading activities, the undersigned
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes; however, by
so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For purposes of the Exchange Offer, the Issuers will be deemed to
have accepted for exchange, and to have exchanged, validly tendered Private
Notes, if, as and when the Issuers give oral or written notice thereof to the
Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders" in the Prospectus. Any Private Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in the
box above entitled "Special Delivery Instructions" as promptly as practicable
after the Expiration Date.
The undersigned acknowledges that the Issuers' acceptance of
Private Notes validly tendered for exchange pursuant to any one of the
procedures described in the section of the Prospectus entitled "The Exchange
Offer" and in the instructions hereto will constitute a binding agreement
between the undersigned and the Issuers in accordance with the terms and subject
to the conditions of the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Issuers have no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Private Notes from the name of the holder of Private Note(s) thereof if the
Issuers do not accept for exchange any of the Private Notes so tendered for
exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Private Note(s).
In order to validly tender Private Notes for exchange, holders of
Private Notes must complete, execute, and deliver this Letter of Transmittal.
Except as stated in the Prospectus, all authority herein
conferred or agreed to be conferred shall survive the death, incapacity, or
dissolution of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Except as otherwise stated in the Prospectus, this
tender for exchange of Private Notes is irrevocable.
<PAGE>
===============================================================================
SIGN HERE
________________________________________________________________________________
(Signature(s) of Owner(s))
Date: _____________, 1997
Must be signed by the registered holder(s) of Private Notes exactly as
name(s) appear(s) on certificate(s) representing the Private Notes or on a
security position listing or by person(s) authorized to become registered
Private Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
Name(s):________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title):__________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Principal place of business (if different from address listed above):___________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: (_____)___________________________________________
Tax Identification or Social Security Nos.:_____________________________________
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature:___________________________________________________________
Dated:__________________________________________________________________________
Name and Title:_________________________________________________________________
(Please Print)
Name of Firm:___________________________________________________________________
================================================================================
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the Unites States, or (3) an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Private Notes
tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Private Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. Delivery of this Letter of Transmittal and Private Notes; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be completed by holders of
Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered Private
Notes or any timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date. Holders of Private Notes who elect
to tender Private Notes and (i) whose Private Notes are not immediately
available or (ii) who cannot deliver the Private Notes, this Letter of
Transmittal or other required documents to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date, must tender their Private
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Holders may have such tender effected if: (a) such tender is made
through an Eligible Institution; (b) prior to 5:00 p.m., New York City time, on
the Expiration Date, the Exchange Agent has received 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 of such Private Notes, the certificate numbers(s) of such Private Notes
and the principal amount of Private Notes tendered for exchange, stating that
tender is being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal (or
a facsimile thereof), together with the certificate(s) representing such Private
Notes (or a Book-Entry Confirmation), in proper form for transfer, and any other
documents required by this Letter of Transmittal, will be deposited by such
Eligible Institution with the Exchange Agent; and (c) a properly executed Letter
of Transmittal (or a facsimile hereof), as well as the certificate(s)
representing all tendered Private Notes in proper form for transfer or a
Book-Entry Confirmation, together with all other documents required by this
Letter of Transmittal, are received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
<PAGE>
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. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY
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.
No alternative, conditional or contingent tenders will be
accepted. All tendering holders of Private Notes, by execution of this Letter of
Transmittal (or facsimile hereof, if applicable), waive any right to receive
notice of the acceptance of their Private Notes for exchange.
3. Inadequate Space. If the space provided in the box entitled
"Description of Private Notes" above is inadequate, the certificate numbers and
principal amounts of the Private Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. Withdrawals. A tender of Private Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a notice
of withdrawal of Private Notes must (i) specify the name of the person who
tendered 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 of
Private Notes 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 in the section of the Prospectus entitled "The
Exchange Offer -- Procedures for Tendering" at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
5. Partial Tenders. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to be
made with respect to less than the entire principal amount of any Private Notes,
fill in the principal amount of Private Notes which are tendered for exchange in
column (4) of the box entitled "Description of Private Notes," as more fully
described in the footnotes thereto. In case of a partial tender for exchange, a
new certificate, in fully registered form, for the remainder of the principal
amount of the Private Notes, will be sent to the holders of Private Notes unless
otherwise indicated in the appropriate box on this Letter of Transmittal as
promptly as practicable after the expiration or termination of the Exchange
Offer.
6. Signatures on this Letter of Transmittal, Assignment and
Endorsements.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the
Private Notes listed and transmitted hereby, no endorsements of Private Notes or
bond powers are required. If, however, Private Notes not tendered
<PAGE>
or not accepted, are to be issued or returned in the name of a person other than
the holder of Private Notes, then the Private Notes transmitted hereby must be
endorsed or accompanied by a properly completed bond power, in a form
satisfactory to the Issuers, in either case signed exactly as the name(s) of the
holder of Private Notes appear(s) on the Private Notes. Signatures on such
Private Notes or bond powers must be guaranteed by an Eligible Institution
(unless signed by an Eligible Institution).
(e) If this 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 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 this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of any Private Notes listed, such Private Notes must be
endorsed or accompanied by a properly completed bond power, in either case
signed by such registered holder exactly as the name(s) of such registered
holder appear(s) on the Private Notes. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
7. Transfer Taxes. Except as set forth in this Instruction 7, 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 therefrom
is not submitted with this Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
8. Special Issuance and Delivery Instructions. If the Exchange Notes are
to be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address other
than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Holders of Private Notes tendering Private Notes by
book-entry transfer may request that Private Notes not accepted be credited to
such account maintained at DTC as such holder of Private Notes may designate.
9. Irregularities. 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 reserve the absolute right to reject any
and all Private Notes not properly tendered or any Private Notes the Issuers'
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Issuer also reserve the right to waive any defects, irregularities
or conditions of tender as to particular Private Notes. The Issuers'
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 intend 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. Any Private
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, amend or modify certain of the specified conditions as described under
"The Exchange Offer -- Conditions" in the Prospectus in the case of any Private
Notes tendered (except as otherwise provided in the Prospectus).
<PAGE>
11. Mutilated, Lost, Stolen or Destroyed Private Notes. Any tendering
Holder whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further instructions:
Fleet National Bank
CT OP TO6D
Attn: Patricia Williams
150 Windsor Street
Hartford, CT 06120
12. Requests for Information or Additional Copies. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof, if applicable)
together with certificates, confirmation of book-entry or the Notice of
Guaranteed Delivery, and all other required documents, must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Issuers (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private Notes
is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Private Notes that he or
she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Private Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Private Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Private Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Private Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an ex empt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the holder of Private Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Private Notes is required to give the Exchange Agent the
TIN (e.g., social security number or employer identification number) of the
record owner of the Private Notes. If the Private Notes are held in more than
one name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
12 3/4% SENIOR NOTES DUE 2003 OF WATERFORD GAMING, L.L.C.
AND WATERFORD GAMING FINANCE CORP.
The undersigned hereby acknowledges receipt of the Prospectus dated
______________, 1997 (the "Prospectus") of 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"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the 12 3/4% Senior
Notes due 2003 (the "Private Notes") held by you for the account of the
undersigned.
The aggregate face amount of the Private Notes held by you for the
account of the undersigned is (fill in amount):
$__________ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you (check
appropriate box):
|_| To TENDER the following Private Notes held by you for the account of
the undersigned (insert principal amount of Private Notes to be tendered, if
any):
$__________ of the Private Notes.
|_| NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) ____________________, (ii) the undersigned is acquiring the
Exchange Notes in the ordinary course of business of the undersigned, (iii) the
undersigned has no arrangement or understanding with any person to participate
in the distribution of Exchange Notes, (iv) the undersigned acknowledges that
any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended, 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 Securities and Exchange Commission set forth in
certain no-action letters (See the section of the Prospectus entitled "The
Exchange Offer -- Resale of the Exchange Notes"), (v) the undersigned
understands that a secondary resale transaction described in clause (iv) above
and any resales of Exchange Notes obtained by the undersigned in exchange for
the Private Notes acquired by the undersigned directly from the Company should
be covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, if applicable, of
Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company, and (vii) if the
undersigned is a broker-dealer that will receive Exchange Notes for its own
<PAGE>
account in exchange for Private Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act; (b) to agree,
on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of Private Notes.
The purchaser status of the undersigned is (check the box that applies):
|_| A "Qualified Institutional Buyer" (as defined in Rule 144A under
the Securities Act)
|_| An "Institutional Accredited Investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act)
|_| A non "U.S. person" (as defined in Regulation S of the Securities
Act) that purchased the Private Notes outside the United States in accordance
with Rule 904 of the Securities Act
|_| Other (describe)__________________________________________________
_______________________________________________________________________________
SIGN HERE
Name of Beneficial Owner(s):___________________________________________________
_______________________________________________________________________________
Signature(s):__________________________________________________________________
_______________________________________________________________________________
Name(s) (please print):________________________________________________________
_______________________________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
Principal place of business (if different from address listed above):__________
_______________________________________________________________________________
_______________________________________________________________________________
Telephone Number(s):___________________________________________________________
_______________________________________________________________________________
Taxpayer Identification or Social Security Number(s):__________________________
_______________________________________________________________________________
Date:__________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================
PAYER'S NAME:_________________________
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE
FORM W-9 YOUR TIN IN THE BOX AT __________________________________
RIGHT AND CERTIFY BY Social Security Number
SIGNING AND DATING BELOW
Department of the Treasury OR
Internal Revenue Service
----------------------------------
Payer's Request for Taxpayer Employer Identification Number
Identification Number (TIN)
---------------------------------------------------------------------------
Part 2 - Part 3 -
Certification Under Penalties of Perjury, I certify
that: Awaiting
TIN |_|
(1) The number shown on this form is my
current taxpayer identification number
(or I am waiting for a number to be
issued to me) and
(2) I am not subject to backup withholding
either because I have not been notified
by the Internal Revenue Service (the
"IRS") that I am subject to backup
withholding as a result of a failure to
report all interest or dividends, or the
IRS has notified me that I am no
longer subject to backup withholding.
---------------------------------------------------------------------------
Certificate instructions - You must cross out item
(2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified
by the IRS that you are subject to backup
withholding you receive another notification from
the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE___________________________________________ DATE ______________
NAME____________________________________________________________________
ADDRESS_________________________________________________________________
CITY ________________________ STATE_______________ ZIP CODE ____________
=======================================================================================================
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
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PAYOR'S NAME: FLEET NATIONAL BANK
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver such an application in the near future. I understand
that if I do not provide a taxpayer identification number with sixty (60) days,
31% of all reportable payments made to me thereafter will be withheld until I
provide such a number.
__________________________________________________ __________________________
Signature Date
================================================================================
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
12 3/4% SENIOR NOTES DUE 2003
- -------------------------------------------------------------------------------
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY
HOLDER OF 12 3/4% SENIOR NOTES DUE 2003 (THE "PRIVATE NOTES") OF 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"), WHO WISHES TO TENDER PRIVATE NOTES
PURSUANT TO THE ISSUERS' EXCHANGE OFFER, AS DEFINED IN THE PROSPECTUS DATED
____________, 1997 (THE "PROSPECTUS") AND (i) WHOSE PRIVATE NOTES ARE NOT
IMMEDIATELY AVAILABLE OR (ii) WHO CANNOT DELIVER SUCH PRIVATE NOTES OR ANY
OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL ON OR BEFORE THE
EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (iii) WHO CANNOT COMPLY WITH
THE BOOK-ENTRY TRANSFER PROCEDURE ON A TIMELY BASIS. SUCH FORM MAY BE
DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY TO THE EXCHANGE
AGENT. SEE "THE EXCHANGE OFFER--GUARANTEED DELIVERY PROCEDURES" IN THE
PROSPECTUS.
- -------------------------------------------------------------------------------
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE
CORP.
NOTICE OF GUARANTEED DELIVERY
To: Fleet National Bank
By Registered or Certified Mail,
by Overnight Delivery or by Hand:
Fleet National Bank
CT OP TO6D
Attn: Patricia Williams
150 Windsor Street
Hartford, CT 06120
By Facsimile (for Eligible Institutions only):
Fleet National Bank
Attn: Patricia Williams
(860) 986-7920
Delivery of this Notice of Guaranteed Delivery to an address other than as set
forth above or transmission via a facsimile number other than as set forth above
will not constitute a valid delivery.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Private Notes specified below pursuant to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus. By so tendering, the undersigned does hereby make, at and as of
the date hereof, the representations and warranties of a tendering Holder of
Private Notes set forth in the Letter or Transmittal. The undersigned hereby
tenders the Private Notes listed below:
- --------------------------------------------------------------------------------
Certificate Numbers
(if Available) Principal Amount Tendered
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned, and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
If Private Notes will be tendered SIGN HERE
by book-entry transfer:
Signature(s)
Name of Tendering Institution:
_______________________________________
_______________________________________
_______________________________________
Name(s) (Please Print)
The Depository Trust Company
Account No.: ________________ ___________________________________
_______________________________________
Address
_______________________________________
Zip Code
_______________________________________
Area Code and Telephone No.
Date: _________________________________
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Private Notes tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Private Notes into the Exchange
Agent's account at the Depository Trust Company, pursuant to the procedure for
book-entry transfer set forth in the Prospectus, and any other required
documents, all by 5:00 p.m., New York City time, on the fifth New York Stock
Exchange trading day following the Expiration Date (as defined in the
Prospectus).
SIGN HERE
_______________________________________
Name of Firm
_______________________________________
Authorized Signature
_______________________________________
Name (Please print)
_______________________________________
_______________________________________
Address
_______________________________________
Zip Code
_______________________________________
Area Code and Telephone No.
Date: _________________________________
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
INSTRUCTIONS
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service, properly insured. If such delivery is by mail, it is
recommended that the Holder use properly insured, registered mail with return
receipt requested. For a full description of the guaranteed delivery procedures,
see the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures." In all cases, sufficient time should be allowed to assure timely
delivery. No Notice of Guaranteed Delivery should be sent to the Issuers.
2. Signature on this Notice of Guaranteed Delivery; Guarantee of
Signatures. If this Notice of Guaranteed Delivery is signed by the registered
Holder(s) of the Private Notes referred to herein, then the signature must
correspond with the name(s) as written on the face of the Private Notes without
alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered Holder(s) of any Private Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered Holder(s) appear(s) on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Issuers, evidence satisfactory
to the Issuers of their authority so to act must be submitted with this Notice
of Guaranteed Delivery.
3. Requests for Assistance or Additional Copies. Questions relating to the
Exchange Offer or the procedure for consenting and tendering as well as requests
for assistance or for additional copies of the Prospectus, the Letter of
Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
