UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: 9/30/98
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 333-17795
WATERFORD GAMING, L.L.C.
------------------------
(Exact name of Registrant as specified in its charter)
Delaware 06-1465402
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
914 Hartford Turnpike, P.O. Box 715
Waterford, CT 06385
------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860)442-4559
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months(or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
WATERFORD GAMING, L.L.C.
INDEX TO FORM 10-Q
Page
Number
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Report of Independent Accountants 1
Financial Information 2
Condensed Balance Sheets of Waterford Gaming, L.L.C. as of
September 30, 1998 (unaudited) and December 31, 1997 3
Condensed Statements of Operations of Waterford Gaming, L.L.C.
for the three months and nine months ended September 30, 1998
(unaudited) and September 30,1997 (unaudited) 4
Condensed Statements of Changes in Member's Deficiency of
Waterford Gaming, L.L.C. for the nine months ended
September 30, 1998 (unaudited) and September 30, 1997 (unaudited) 5
Condensed Statements of Cash Flows of Waterford Gaming, L.L.C.
for the nine months ended September 30, 1998 (unaudited) and
September 30, 1997 (unaudited) 6
Notes to Condensed Financial Statements for Waterford
Gaming, L.L.C. 7-11
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-24
Item 3 -- Quantitative and Qualitative Disclosures about
Market Risk 25
Part II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings 25
ITEM 2 -- Changes in Securities 25
ITEM 3 -- Defaults upon Senior Securities 25
ITEM 4 -- Submission of Matters to a Vote of Security Holders 25
ITEM 5 -- Other Information 25
ITEM 6 -- Exhibits and Reports on Form 8-K 26-28
Signatures - Waterford Gaming, L.L.C. 29
Report of Independent Accountants
---------------------------------
To the Members of Waterford Gaming, L.L.C.:
We have reviewed the condensed balance sheet of Waterford Gaming, L.L.C. ("the
Company") as of September 30, 1998, and the related condensed statements of
operations for the three months and nine months ended September 30, 1998 and
1997, and the related condensed statements of changes in members' deficiency
and cash flows for the nine months ended September 30, 1998 and 1997. These
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 condensed 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 balance sheet as of December 31, 1997, and the related
statements of operations, changes in member's equity (deficiency) and cash
flows for the year then ended (not presented herein); and in our report
dated March 6, 1998, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the condensed
balance sheet as of December 31, 1997, is fairly stated , in all material
respects, in relation to the balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
October 30, 1998
1
Part I -- FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
The unaudited condensed financial information as of September 30, 1998, and
for the three months and nine months ended September 30, 1998, included in
this report was reviewed by PricewaterhouseCoopers LLP, independent public
accountants, in accordance with the professional standards and procedures
established for such reviews by the American Institute of Certified Public
Accountants.
2
WATERFORD GAMING, L.L.C.
CONDENSED BALANCE SHEETS
September 30, 1998 (Unaudited) and December 31, 1997
----------
ASSETS
September 30, December 31,
1998 1997
------------ ------------
Current assets:
Cash $ 5,781,748 $ 232,759
Cash in escrow --- 5,000,000
Temporary investments 2,518,545 4,383,379
Due from Trading Cove Associates 1,792,945 293,923
Other assets 25,101 70,206
------------ ------------
Total current assets 10,118,339 9,980,267
------------ ------------
Trading Cove Associates -
equity investment 9,069,876 10,384,292
Beneficial interest - Leisure Resort
Technology, Inc. 4,413,042 ---
15% subordinated notes receivable 30,913,885 27,742,146
Completion guarantee subordinated
note receivable 2,598,958 2,548,162
Deferred financing costs, net of
accumulated amortization of $886,896
and $518,076 at September 30, 1998
and December 31, 1997, respectively 3,511,779 2,702,744
------------ ------------
Total assets $ 60,625,879 $ 53,357,611
============ ============
LIABILITIES AND MEMBERS' DEFICIENCY
Current liabilities:
Accrued expenses $ 21,375 $ 78,328
Accrued fee on senior notes payable 922,065 ---
Accrued interest on senior notes
payable 2,962,103 1,002,715
------------ ------------
Total current liabilities 3,905,543 1,081,043
12-3/4% senior notes payable 61,471,000 61,471,000
------------ ------------
Total liabilities 65,376,543 62,552,043
------------ ------------
Members' deficiency (4,750,664) (9,194,432)
------------ ------------
Total liabilities and
members' deficiency $ 60,625,879 $ 53,357,611
============ ============
The accompanying notes are an integral part of the financial statements.
3
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF OPERATIONS
for the three months and nine months ended September 30, 1998 and September 30, 1997
(Unaudited)
----------
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Interest and dividend income $ 1,222,709 $ 1,084,271 $ 3,552,817 $ 3,331,981
Subordinated notes fee income -
Trading Cove Associates --- --- 1,556,267 1,285,039
Completion guarantee note fee
income-Trading Cove Associates --- --- 233,750 ---
Management services income -
Trading Cove Associates 303,967 --- 3,140,530 ---
Organization and Administrative fee
income - Trading Cove Associates 3,064,263 --- 3,064,263 ---
----------- ----------- ----------- -----------
Total revenue 4,590,939 1,084,271 11,547,627 4,617,020
----------- ----------- ----------- -----------
Expenses:
Interest expense 1,959,388 2,071,875 5,878,164 6,222,125
General and administrative 75,968 45,242 191,515 90,176
Amortization on beneficial interest -
Leisure Resort Technology, Inc. 221,133 --- 644,169 ---
Amortization on deferred financing
costs 126,651 131,246 368,820 343,974
----------- ----------- ----------- -----------
Total expenses 2,383,140 2,248,363 7,082,668 6,656,275
----------- ----------- ----------- -----------
2,207,799 (1,164,092) 4,464,959 (2,039,255)
Equity in income (loss) of Trading
Cove Associates 802,868 2,084,514 (75,191) 1,224,549
----------- ----------- ----------- -----------
Net income (loss) $ 3,010,667 $ 920,422 $ 4,389,768 $ (814,706)
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF CHANGES IN MEMBERS' DEFICIENCY
for the nine months ended September 30, 1998 and September 30, 1997
(Unaudited)
-----------
For the nine months ended For the nine months ended
September 30, 1998 September 30, 1997
------------------------- --------------------------
Slavik LMW Slavik LMW
Suites Investments Total Suites Investments Total
Inc. Inc. Inc. Inc.
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1 $(6,154,626) $(3,039,806) $(9,194,432) $(5,412,165) $(2,687,138) $(8,099,303)
Contributions 36,610 17,390 54,000 --- --- ---
Net income (loss) 2,976,118 1,413,650 4,389,768 (552,344) (262,362) (814,706)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30 $(3,141,898) $(1,608,766) $(4,750,664) $(5,964,509) $(2,949,500) $(8,914,009)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<TABLE>
WATERFORD GAMING, L.L.C.
CONDENSED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1998 and September 30, 1997
(Unaudited)
-----------
For the nine For the nine
months ended months ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,389,768 $ (814,706)
------------ ------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Amortization 1,012,989 343,974
Equity in loss (income) of Trading Cove Associates 75,191 (1,224,549)
Changes in operating assets and liabilities:
Accrued interest on temporary investments --- 59,061
Accrued interest receivable - 15% subordinated
notes receivable (3,171,739) (2,742,556)
Accrued interest receivable - completion guarantee
subordinated note receivable (51,221) ---
Due from Trading Cove Associates (1,499,022) ---
Other assets 45,105 (7,717)
Accrued expenses (56,953) (12,600)
Accrued interest on senior notes payable 1,959,388 1,910,729
------------ ------------
Total adjustments (1,686,262) (1,673,658)
------------ ------------
Net cash provided by (used in)
operating activities 2,703,506 (2,488,364)
------------ ------------
Cash flows from investing activities:
Beneficial interest - Leisure Resort Technology, Inc. (5,057,211) ---
Release of cash in escrow 5,000,000 ---
Sales and purchases of temporary investments - net 1,864,834 15,836,843
Distributions from Trading Cove Associates 1,564,225 1,003,624
Contributions to Trading Cove Associates (325,000) ---
Return on investment in completion guarantee
subordinated note receivable 425 ---
Purchase of completion guarantee subordinated
note receivable --- (2,798,125)
Return on investment in 15% subordinated notes receivable --- 1,957,660
------------ ------------
Net cash provided by investing activities 3,047,273 16,000,002
------------ ------------
Cash flows from financing activities:
Deferred financing costs (255,790) (373,560)
Contributions by members 54,000 ---
------------ ------------
Net cash used in financing activities (201,790) (373,560)
------------ ------------
Net increase in cash 5,548,989 13,138,078
Cash and cash equivalents at beginning of period 232,759 841,512
------------ ------------
Cash and cash equivalents at end of period $ 5,781,748 $ 13,979,590
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,918,776 $ 4,311,396
============ ============
Supplemental disclosure of non-cash financing activities:
Deferred financing costs funded through accrued expenses $ 922,065 $ ---
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
6
WATERFORD GAMING, L.L.C.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
-----------
1. Basis of Presentation:
The unaudited condensed interim financial statements have been prepared in
accordance with the policies described in the Company's 1997 audited
financial statements and should be read in conjunction with the Company's
1997 audited financial statements within the Company's Annual Report for
the fiscal year ended December 31, 1997 on Form 10-K as filed with the
Securities and Exchange Commission (the "Commission") File No. 333-17795 on
March 30, 1998. The condensed Balance Sheet at December 31, 1997, contained
herein, was derived from audited financial statements, but does not include
all disclosures contained in the Form 10-K and required by generally
accepted accounting principles.
The unaudited condensed interim financial statements include normal and
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of September 30, 1998,
and, the results of operations, for the three months and nine months ended
September 30, 1998, the statements of members' deficiency and cash flows
for the nine months ended September 30, 1998. Results of operations for
the period are not necessarily indicative of the results to be expected for
the full year. The company together with its wholly-owned subsidiary,
Waterford Gaming Finance Corp. ("Finance") has issued 12-3/4% senior notes
payable which mature November 15, 2003 (the "Senior Notes").
2. Trading Cove Associates - Equity Investment:
As of September 30, 1998 and September 30, 1997, the following summary
information relates to Trading Cove Associates ("TCA"). Total revenues and
net income are for the nine months ended September 30, 1998 and September
30, 1997:
September 30, September 30,
1998 1997
------------ ------------
Total assets $ 9,521,118 $ 7,975,950
Total liabilities (4,763,254) (2,425,144)
------------ ------------
Partners' capital $ 4,757,864 $ 5,550,806
============ ============
Total revenue $ 40,114,950 $ 21,486,216
============ ============
Net income $ 2,148,416 $ 4,747,894
============ ============
Company's interest:
Trading Cove Associates - equity
investment, beginning of period $ 10,384,292 $ 12,682,469
Contributions 325,000 ---
Distributions (1,564,225) (2,908,140)
------------ ------------
9,145,067 9,774,329
------------ ------------
Income from Trading Cove Associates 1,074,208 2,373,947
Amortization of interests purchased (1,149,399) (1,149,398)
------------ ------------
Equity in income (loss) of Trading
Cove Associates (75,191) 1,224,549
------------ ------------
Trading Cove Associates - equity
investment $ 9,069,876 $ 10,998,878
============ ============
7
3. Beneficial Interest - Leisure Resort Technology, Inc.
On January 6, 1998, the Company paid $5,000,000 to Leisure Resort
Technology, Inc. ("Leisure") whereby Leisure gave up its beneficial
interest in 5% of certain fees and excess cash flows, as defined, of TCA
and any other claims it may have had against the Company, TCA and TCA's
partners and former partner. On August 6, 1997, Leisure, a former partner
of TCA, had filed a lawsuit against TCA, the Company and its owners, Sun
Cove Limited ("Sun Cove") and former partner of TCA, RJH Development Corp.,
claiming breach of contract, breach of fiduciary duties and other matters
in connection with the development of the Mohegan Sun Casino ("Mohegan
Sun") by TCA. The Company agreed to acquire Leisure's contractual rights
and settle all matters. The Company no longer has the obligation to pay to
Leisure 5% of the Organizational and Administrative Fee, as defined in the
Organizational and Administrative Services Agreement, and 5% of TCA's
Excess Cash as defined in TCA's partnership agreement. If, at any time,
TCA or any of its partners, affiliates, related entities, or any related
person enters into an agreement with the Mohegan Tribe of Indians of
Connecticut (the "Tribe"), or any of its affiliates or any other related
party, pursuant to which TCA's management or operation of, or any other
involvement of any kind with, the enterprises is amended, restated,
extended or renewed, or if a new agreement or related arrangement is
entered into between TCA and the Tribe, the Company shall pay an
additional $2,000,000 to Leisure on the earliest to occur of (i) the
retirement of the Senior Notes, (ii) any renewel, extension, refinancing
or refunding of, or amendment, modification or supplement to, the Senior
Notes, and (iii) November 30, 2003.
The $5,000,000 payment plus associated costs are amortized on a
straight-line basis over the remaining term of TCA's Management Agreement,
as defined. Accumulated amortization at September 30, 1998 amounts to
$644,169.
4. 15% Subordinated Notes Receivable:
On November 8, 1996, the Company purchased a 15% subordinated note
receivable from the Mohegan Tribal Gaming Authority (the "Authority") which
matures November 15, 2003, in the principal amount of $19,150,000 from Sun
International Hotels Limited ("Sun International"). The Company also
purchased the related accrued interest, deferred interest and subordinated
notes fee amounts, as of November 8, 1996, totaling $5,922,543. In
addition, on November 8, 1996, the Company received a distribution from TCA
of an additional 15% subordinated notes receivable from the Authority in
the principal amount of $850,000, together with accrued interest of
$148,406. As of December 31, 1997 and December 31, 1996, $0 and
$1,957,660, respectively, related to subordinated notes fee amounts that
were owed by TCA on the 15% subordinated notes. During the nine months
ended September 30, 1998, the Company received $1,556,267 in
subordinated notes fee payment from TCA. During the nine months ended
September 30, 1997, the Company received $3,242,699 in subordinated notes
fee payments from TCA. These subordinated notes fee payments were netted
against the $1,957,660, which resulted in recognition of $1,285,039 in
subordinated notes fee income during the nine months ended September
30, 1997.
At September 30, 1998 and December 31, 1997, the 15% subordinated notes
receivable included accrued interest receivable of $10,913,885 and
$7,742,146, respectively.
8
5. Completion Guarantee Subordinated Note Receivable:
On September 22, 1997, the Company purchased a completion guarantee
subordinated note receivable from the Authority which matures November 15,
2003, in the principal amount of $2,500,000 from Sun International. The
Company also purchased the related accrued interest and deferred interest
amounts which had not been paid by TCA totaling $106,875 and completion
guarantee note fee amounts totaling $191,250. As of December 31, 1997,
$425 related to completion guarantee note fee amounts owed by TCA on the
completion guarantee subordinated note. During the nine months ended
September 30, 1998, the Company received $234,175 in completion guarantee
note fee payments from TCA. These completion guarantee note fee payments
were netted against the $425, resulting in recognition of $233,750 in
completion guarantee note fee income during the nine months ended September
30, 1998.
At September 30, 1998 and December 31, 1997, the completion guarantee
subordinated note receivable includes accrued interest receivable of
$98,958 and $47,737, respectively, and completion guarantee note fee
amounts of $0 and $425, respectively.
On October 12, 1998, the Company purchased a completion guarantee
subordinated note receivable from the Authority which matures November 15,
2003, in the principal amount of $2,500,000 from Sun International. The
Company also purchased the related accrued interest and deferred interest
amounts which had not been paid by TCA totaling $106,875 and completion
guarantee note fee amounts totaling $191,250.
9
6. 12-3/4% Senior Notes Payable:
The Senior Notes payable at September 30, 1998 and December 31, 1997
consist of $61,471,000 aggregate principal amount of the Senior Notes
issued on November 8, 1996 by the Company and Finance which mature
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, which commenced on 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 Senior Notes totaled
$2,962,103 and $1,002,715 as of September 30, 1998 and December 31, 1997,
respectively. Accrued fee payable on the Senior Notes totaled $922,065 and
$0 as of September 30, 1998 and December 31, 1997, respectively.
The Senior Notes are secured by the Company's notes receivable (Notes 4 and
5), cash and temporary investments. The indenture, between the Company and
Waterford Gaming Finance Corp., the Issuers, and Fleet National Bank, as
Trustee, relating to $65,000,000 12-3/4% Senior Notes due November 15, 2003
(the "Indenture") prohibits the Company and Finance from incurring any
other indebtedness other than the Senior Notes.
The Company is required to make a mandatory redemption of Senior Notes on
November 15 and May 15 of each year, which commenced on November 15, 1997,
using 100% of Company Excess Cash (as defined in the Indenture) held by the
Company in excess of $10,000,000, as of the preceding September 30 and March
31. There was no Company Excess Cash as of September 30, 1998.
As a result of the proposed expansion project at the Mohegan Sun a Waiver
and Acknowledgment (the "Waiver") was delivered by the holders of the Senior
Notes and accepted by the Company, under the Indenture during April 1998.
The following is a summary of the material terms of the Waiver and is
qualified in its entirety by the actual terms of the Waiver, which has been
filed as an exhibit to the Registrant's Quarterly Report, for the quarter
ended March 31, 1998 on Form 10-Q, Commission File No. 333-17795, as
accepted by the Commission on May 14, 1998. In consideration of the receipt
of 1.5% (one hundred and fifty basis points) of the principal amount of
Senior Notes beneficially owned by the holders of the Senior Notes (the
"Fee") the holders acknowledged, declared and agreed as follows:
1. The holders of the Senior Notes are familiar with i) the Indenture, ii)
the Relinquishment Agreement, as defined, iii) the Letter, as defined,
iv) the Development Agreement, as defined, v) the Side Letter relating
to various waivers, dated February 7, 1998 between the Authority and TCA
(the "Waiver Side Letter"), and together with the Relinquishment
Agreement, as defined, the Letter, as defined, and the Development
Agreement, as defined, (the "Transaction Agreements") and vi) the
excerpt (the "Excerpt") from the Memorandum, as defined.
2. The Transaction Agreements and the Excerpt and the transactions
contemplated thereby do not terminate, amend or waive any provision of
an Operative Document in a manner adverse to the economic interest of
the Holders (as defined in the Indenture), or otherwise violate or
conflict with any provision of the Indenture.
3. The payment of the Fee ($922,065) does not violate or conflict with any
provisions of the Indenture.
4. The Company may pay up to $5,000,000 to fund certain development
expenses in connection with the proposed expansion project at the
Mohegan Sun.
5. Payment of the Fee is subject to receipt of regulatory approvals of the
Transaction Agreements. As of September 30, 1998 some of the regulatory
approvals had not been received, but were received during October 1998.
10
7. Related Party Agreements:
Pursuant to the Development Services Agreement between TCA and Sun
International Management Limited ("SIML"), TCA shall pay SIML a fee ("the
Development Services Fee") equal to $8,280,000 (3% of the total development
costs of the Mohegan Sun, exclusive of land acquisition costs) plus $25,000
for expense reimbursement. Pursuant to a subcontract, Wolman Construction,
L.L.C. ("Construction") will receive 20.83% of the Development Services Fee
plus $25,000 (total approximately $1.75 million). Construction is owned 50%
by Len Wolman (the Company's chief executive officer and chairman of the
board of directors) and 50% by Mark Wolman (a member of the Company's board
of directors). Pursuant to a subcontract, Construction will pay The Slavik
Company $250,000 of Construction's approximately $1.75 million. Del J.
Lauria (the Company's chief financial officer, secretary and a member of the
Company's board of directors) and Stephan F. Slavik, Sr. (a member of the
Company's board of directors) have a financial interest in The Slavik
Company. At September 30, 1998 and December 31, 1997 Construction received
$1,749,724 and $368,560, respectively, and The Slavik Company received
$250,000 and $61,440, respectively, of their share of the Development
Services Fee.
The Company paid accounting fees to an affiliate totaling $54,000 during the
quarter ended September 30, 1998 ($86,000 for the year ended December 31,
1997) which was funded by capital contributions of the members.
On September 28, 1998 the Company entered into an employment agreement,
which has been filed as an exhibit to this form 10-Q, with Len Wolman. The
employment agreement precludes the Company from making any payments to Len
Wolman until the Company's obligations to the Senior Note holders in terms
of the Indenture have been satisfied in full.
Slavik Suites, Inc. and the other principals of the Company have interests
and may acquire interests in hotels in southeastern Connecticut which have
or may have arrangements with the Mohegan Sun to reserve and provide hotel
rooms to patrons of the Mohegan Sun.
11
Item 2. 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 condensed financial statements and the notes
thereto included elsewhere herein.
Certain Forward Looking Statements
- ----------------------------------
Certain information included in this Form 10-Q and other materials filed or to
be filed by the Company with the Commission (as well as information included
in oral statements or other written statements made or to be made by the
Company) contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements include information relating
to the Mohegan Sun including plans for future expansion and other business
development activities, financing sources and the effects of regulation
(including gaming and tax regulation) and competition. Any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances. Forward-looking statements can be identified by, among other
things, the use of forward-looking terminology such as "believes", "expects",
"may", "will", "should", "seeks", "pro forma", "anticipates", "intends" or the
negative of any thereof or other variations thereon or comparable technology.
Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company.
Development and Operational Activities
- --------------------------------------
The operation of the Company or its predecessors in its role as a managing
general partner of TCA has been to assist the Tribe and the Authority, an
instrumentality of the Tribe, in obtaining federal recognition, negotiate the
tribal-state compact with the State of Connecticut, obtain financing for the
development of the Mohegan Sun located on certain Tribal land in Uncasville,
Connecticut, negotiate the Amended and Restated Gaming Facility Management
Agreement (the "Management Agreement") and participate in the design and
development of the Mohegan Sun which commenced operations on October 12, 1996.
Since the opening of the Mohegan Sun, TCA has overseen the Mohegan Sun's
day-to-day operations. On February 7, 1998, TCA, the Tribe and the Authority
finalized contract negotiations and, subject to receipt of regulatory approvals,
are prepared to move forward with a significant expansion project at the
Mohegan Sun.
Under the terms of the new agreement, TCA will continue to manage the Mohegan
Sun under the existing Management Agreement until December 31, 1999. On
January 1, 2000, the Management Agreement will terminate and the Tribe will
assume day-to-day management of the Mohegan Sun. As part of this
"Relinquishment Agreement" and to compensate TCA for giving up its rights under
the current agreements, the Tribe has agreed to pay to TCA 5% of gross revenues,
generated from the Mohegan Sun and from the planned expansion, beginning January
1, 2000 and ending December 31, 2014. The effective date under the
Relinquishment Agreement is the later of (a) the date the Authority receives
all required approvals or (b) the date the Authority's $175 million, 13-1/2%
senior secured notes due 2002 (the "Authority Senior Secured Notes") are
refinanced or repaid.
TCA has also negotiated a second agreement with the Tribe and the Authority
which will make TCA the exclusive developer of the planned expansion of the
property. Under this "Development Agreement", TCA will oversee the planning,
design, and construction of the expansion of the Mohegan Sun. TCA will be paid
a development fee of $14 million under the terms of the Development Agreement.
The effective date under the Development Agreement is the first day of the first
calendar month following the later of (a) the date the Authority receives all
required approvals or (b) closing of the anticipated refinancing of certain of
the Authority's existing indebtedness, together with construction financing.
All of the terms of the Relinquishment Agreement and the Development Agreement
are subject to the receipt of regulatory approvals. On February 27, 1998 the
Development Agreement was approved by the Bureau of Indian Affairs ("BIA"). On
October 23, 1998 the BIA determined that the Relinquishment Agreement is not
subject to the approval authority of the Secretary of the Interior (United
States Department of the Interior). The parties are awaiting receipt of a
stipulated declaratory judgement by the Gaming Disputes Court of the Tribe
upholding the validity and enforceability of the Relinquishment Agreement.
12
Certain Risk Factors
- --------------------
Lack of Operations; Dependance on the Mohegan Sun
- -------------------------------------------------
The Company does not conduct any business operations, and is prohibited by the
Indenture, from conducting any business operations, other than in connection
with its role as a managing general partner of TCA and activities incidental to
the ownership of the Subordinated Notes, as defined, and Completion Guarantee
Subordinated Notes, as defined, (collectively the "Notes") and the issuance of
the Senior Notes. The Company has no material business or assets other than its
interests in TCA, the Notes and temporary investments. The Company's primary
source of revenues is from payments from TCA and payments under the Notes that
it holds. Although the Authority has engaged the management services of TCA,
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 continue to generate sufficient revenues for the Authority to be profitable
or to service its debt obligations (including its obligations under the Notes)
or pay management fees so that the Company will be able to meet its obligations.
The future operating results of the Mohegan Sun will depend, in part, on matters
over which the Authority and TCA have no control including, without limitation,
general economic conditions, effects of competition, political and regulatory
factors and the actual number of gaming customers and the amount wagered.
While the Company expects its future operating cash flows will be sufficient
to cover its obligations and expenses, including interest costs, the Company
cannot give any assurance that it will be able to do so.
Overview of Current and Future Cash Flows
- -----------------------------------------
The Company expects to fund its operating, debt service and capital needs from
cash flows from the Company's share of payments from TCA, the Subordinated
Notes, as defined, (to the extent interest and Subordinated Notes Fee Amounts,
as defined, are payable in cash on the Subordinated Notes, as defined, and to
the extent of principal payments on the Subordinated Notes, as defined), Non-PIK
Completion Guarantee Notes, as defined, (to the extent interest and Completion
Guarantee Notes Fee Amounts, as defined, are payable in cash on the Non-PIK
Completion Guarantee Notes, as defined) and from amounts in the Company's cash
collateral account (the "Cash Collateral Account"). Based upon the Company's
anticipated future operations, management believes that available cash flow will
be sufficient to meet the Company's anticipated requirements for future
operating expenses and future scheduled payments of principal of and interest on
the Senior Notes. No assurance, however, can be given that the operating cash
flow will be sufficient for that purpose.
13
Sources of Revenues
- -------------------
The Company has two primary sources of revenues: payments from TCA and
payments under the Authority Subordinated Notes, as defined, that it holds.
Distributions on the Company's partnership interest in TCA
- ----------------------------------------------------------
TCA's primary source of revenue is management fees under the Management
Agreement (the "Management Fees"). The Management Fees are paid monthly and
are calculated in three tiers based upon Net Revenues, as defined, of the
Mohegan Sun set forth below (in thousands):
I II III
-------------- --------------- ---------------
40% of Net Net Revenues in Net Revenues in
Revenues up to Tier I plus Tiers I &
35% of Net II plus 30% of
Revenues Net Revenues
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
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 capital replacement reserve. Net
Revenues also include Net Gaming Revenues, which are equal to the amount of
the "net win" from Class III Gaming operations (i.e., the difference between
gaming wins and losses) less all gaming-related operational expenses (excluding
the Management Fees).
In addition, TCA 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 right of the Authority to buy-out the Management
Agreement after the fifth year.
Pursuant to the Amended and Restated Omnibus Financing Agreement, as agreed to
by TCA, the Company and Sun International, dated September 10, 1997 (effective
as of September 29, 1995) (the "Omnibus Financing Agreement"), upon receipt of
the Management Fees, TCA is required to make a number of different types of
payments to its subcontractors. The subcontracts are primarily with TCA's
partners or their affiliates. Some of these payments are one-time
non-recurring payments (the "Non-recurring 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 National Indian Gaming
Commission (the "NIGC") in determining whether or not to approve a management
contract is whether TCA is providing a portion of the capital required.
Accordingly, TCA agreed to provide or cause to be provided $40 million of
capital in the form of the Subordinated Notes, as defined. However, at the
time that the subordinated loan was made, the partners of TCA, including the
Company's predecessors-in-interest, did not participate in the loan in
accordance with their economic interests in TCA. Therefore, the partners of
TCA agreed that Sun International, who subscribed for almost all of the
Subordinated Notes, would be entitled to fees for agreeing to participate in
the Mohegan Sun project. Other fees payable are to compensate the recipients
for other subcontracted services provided by them to the Mohegan Sun.
14
As of September 30, 1998 the Authority had outstanding the following Authority
Subordinated Notes, as defined.
1. 15% subordinated notes principal amount $40,000,000 due November 2003 (the
"Subordinated Notes"). The rate of the interest payable by the Authority on
the Subordinated Notes is 15% per annum.
2. Completion guarantee subordinated notes principal amount $50,000,000 due
November 2003 (the "Completion Guarantee Subordinated Notes"). The rate of
interest payable by the Authority on the Completion Guarantee Subordinated
Notes is the prime rate per annum announced by Chemical Bank from "time to
time" plus 1% (the "Base Rate"). The Base Rate is set and revised at
intervals of six months. At September 30, 1998, the Base Rate was 9.50%
per annum.
For purposes of points (c), (d) and (e) below the Company, Sun
International and TCA have agreed that the Completion Guarantee Subordinated
Notes be split into two principal amounts of $32,500,000 Completion
Guarantee Subordinated Notes (the "Non-PIK Completion Guarantee Notes") and
$17,500,000 Completion Guarantee Subordinated Notes (the "PIK Completion
Guarantee Notes").
The following table sets forth the priority of the distribution from TCA of
the Management Fees to its partners:
(a) First, for the period ending on November 8, 1996, a maximum sum of
$938,000 will be paid from the Management Services Fee, as defined, for
expenses incurred with respect to the Mohegan Sun through such date, and
for the period commencing on November 9, 1996 and ending on September
30, 1997, and for each fiscal year of the Authority thereafter, up to
$2,000,000 per fiscal year of the Authority of the Management Services
Fee will be paid by TCA for expenses.
(b) Second, to return capital contributions made by the partners of TCA
after September 29, 1995. These capital contributions aggregate $2.85
million. $2.2 million were deemed returned at the consummation of the
offering of the Senior Notes upon the distribution by TCA of the $1.7
million in principal amount of Subordinated Notes together with accrued
interest and a cash distribution totaling $275,000, 50% to Sun Cove and
50% to the Company. From January 1, 1998 through September 30, 1998,
$650,000 has been distributed to the partners, 50% to Sun Cove and 50%
to the Company.
(c) Third, to pay Sun International fee amounts of $2,500,000 on April 30,
1996, $2,500,000 on October 31, 1996, $2,700,000 on April 30, 1997 and
every six months thereafter, beginning October 31, 1997 an amount equal
to the product of (1) $2,300,000 and (2) a fraction, the numerator of
which is the weighted average principal amount of Subordinated Notes
outstanding including all PIK Amounts (defined as interest that is not
paid in cash by the Authority on any interest payment date, May 15 and
November 15), during the applicable Semi-Annual Period (defined as the
six month periods ending, respectively, on April 30 and October 31) and
the denominator of which is $40,000,000 (the "Subordinated Notes Fee
Amounts"). On November 8, 1996 the Company purchased from Sun
International $19,150,000 principal amount of Subordinated Notes and
Sun International assigned to the Company its right to receive
$3,850,000 of the Subordinated Notes Fee Amounts payable on April 30,
1996, October 31, 1996 and April 30, 1997 and from May 1, 1997 and every
six months thereafter each of the Company and Sun International are
entitled to one half of the Subordinated Notes Fee Amounts payable
beginning October 31, 1997. At September 30, 1998 and September 30,
1997, $13,717,913 and $7,710,398, respectively, had been paid by TCA
(50% to the Company and 50% to Sun International) in terms of this third
priority.
15
(d) Fourth, i) to pay Sun International fee amounts of $525,000 on October
31, 1996, $2,600,000 on April 30, 1997 and every six months thereafter,
beginning October 31, 1997 an amount equal to the product of the number
arrived at by dividing the difference between (26 1/2% and the Base
Rate) by two (the "Multiplier") and the weighted average of principal
amount of Non-PIK Completion Guarantee Notes outstanding during the
applicable Semi-Annual Period (the "Completion Guarantee Note Fee
Amounts"), and ii) payment of an amount equal to the Base Rate on the
Non-PIK Completion Guarantee Notes to the extent the Authority is not
permitted to pay interest thereon (the "Deferred Interest Amounts").
This amount will be paid semi-annually pari passu with the amount under
paragraph (d)i)above. When the Authority can pay such interest, payment
under this paragraph (d) ii) shall be reduced accordingly.
In addition when the Authority pays Sun International any amounts
relating to the Non-PIK Completion Guarantee Notes (other than current
interest), such amounts that relate to the Deferred Interest Amounts
acquired by TCA shall be immediately paid over to TCA. Up until October
12, 1997 any amounts paid under paragraph (d) were paid to Sun
International. After October 12, 1997 portions of these amounts are
payable to the Company as it purchases its share of the Non-PIK
Completion Guarantee Notes. When the Authority pays the Company any
amounts relating to the Non-PIK Completion Guarantee Notes (other than
current interest), such amounts that relate to the Deferred Interest
Amounts acquired by TCA shall be immediately paid over to TCA.
During September 1997 and on October 12, 1998, the Company purchased
from Sun International $2.5 million principal amount of the outstanding
Non-PIK Completion Guarantee Notes and the Company is required to
purchase from Sun International on October 12, 1999 $2.5 million
principal amount of the outstanding Non-PIK Completion Guarantee Notes
owned by Sun International, at the purchase price equal to the
outstanding principal balance of the Non-PIK Completion Guarantee
Notes to be purchased, plus the related accrued interest and deferred
interest amounts which have not been paid by TCA and Completion
Guarantee Note Fee Amounts.
At September 30, 1998 and September 30, 1997, $13,439,002 ($662,500 to
the Company and $12,776,502 to Sun International) and $4,826,502 ($0 to
the Company and $4,826,502 to Sun International), respectively, had been
paid by TCA in terms of this fourth priority.
(e) Fifth, to pay Sun International fee amounts of $80,000 on October 31,
1996, $1,350,000 on April 30, 1997 and every six months thereafter,
beginning October 31, 1997 an amount equal to the product of the
Multiplier and the weighted average of principal amount of PIK
Completion Guarantee Notes (including the applicable PIK Amounts)
outstanding during the applicable Semi-Annual Period. At September 30,
1998 and September 30, 1997, $4,607,251 and $1,430,000, respectively,
had been paid by TCA in terms of this fifth priority.
*(f) Sixth, return of capital contributions made before September 29, 1995.
These capital contributions aggregated $6,715,000 (balance as of June
30, 1998 was $0 and as of December 31, 1997 was approximately $449,000
and has been repaid to the partners, 50% to the Company and 50% to Sun
Cove, from repayments by the Tribe to TCA of amounts due in terms of the
promissory note dated September 29, 1995 between TCA and the Tribe).
16
*(g) Seventh, payment of a Development Services Fee to SIML equal to
$8,280,000 constituting 3% of the total development costs (less land
acquisition costs) of the Mohegan Sun plus $25,000. SIML has
subcontracted with certain affiliates of the Company. The fees payable
by SIML to the affiliates of the Company are equal to 20.83% of the
Development Services Fee plus $25,000 (total $1,749,724). At September
30, 1998 and September 30, 1997, $8,305,000 and $2,041,000,
respectively, had been paid by TCA as Development Services Fee.
(h) Eighth, payment of a monthly Management Services Fee (less the amounts
paid pursuant to paragraph (a) above) equal to the lesser of i) 1% of
the gross revenues of the Mohegan Sun or ii) 25% of the sum of the
Excess Cash (as defined in the Amended and Restated Partnership
Agreement of TCA)of TCA plus 25% 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 (defined
as the Mohegan Sun's net income plus depreciation, amortization,
management fee expense, interest expense and other non-cash charges less
interest income) is $200.0 million or less, $3.0 million if the
Mohegan Sun's EBITDA is greater than $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 equal
amounts to SIML and the Company.
On September 28, 1998 the Company entered into an employment agreement,
which has been filed as an exhibit to this form 10-Q, with Len Wolman.
The employment agreement precludes the Company from making any payments
to Len Wolman until the Company's obligations to the Senior Note holders
in terms of the Indenture have been satisfied in full. The Company's
directors and officers are not compensated by the Company, but have
received and will receive compensation as part of the operating expenses
of TCA as detailed under points (a) and (h) above.
At September 30, 1998 and September 30, 1997, $7,323,653 ($3,661,826 to
SIML, $521,296 to affiliates of the Company and $3,140,530 to the
Company) and $0, respectively, had been paid by TCA in terms of this
eighth priority.
*(i) Ninth, payment of a fee to Sun International of $5,520,000 constituting
2% of the total development costs (less land acquisition costs) of the
Mohegan Sun. At September 30, 1998 and September 30, 1997, $5,520,000
and $0, respectively, had been paid by TCA in terms of this ninth
priority.
(j) Tenth, distribution of amount equal to the state and federal income tax
liability of TCA as if it were an individual paying federal income tax
and the higher of Michigan or Connecticut state income taxes. This
amount will be paid 50% to Sun Cove and 50% to the Company. At
September 30, 1998 and September 30, 1997, $2,029,090 and $0,
respectively, had been paid by TCA in terms of this tenth priority.
17
(k) Eleventh, payment on a pari passu basis of the Organizational and
Administrative Fee to the Company (equal to 1.5% of the gross revenues
of the Mohegan Sun if the Mohegan Sun's fiscal year ending September 30
gross revenues equal or exceed $300 millions and 2% of the gross
revenues of the Mohegan Sun if the Mohegan Sun's fiscal year ending
September 30 gross revenues equal or exceed $400 million) and the
Marketing and Casino Operations Fee to SIML (equal to 1.5% of the gross
revenues of the Mohegan Sun if the Mohegan Sun's fiscal year ending
September 30 gross revenues equal or exceed $300 millions and 2% of the
gross revenues of the Mohegan Sun if the Mohegan Sun's fiscal year
ending September 30 gross revenues equal or exceed $400 million). At
September 30, 1998 and September 30, 1997, $6,128,527 and $0,
respectively, 50% to the Company and 50% to SIML, had been paid by TCA
in terms of this eleventh priority.
(l) Twelfth, all Excess Cash distributed 50% to Sun Cove and 50% to the
Company.
On February 7, 1998, a Memorandum of Understanding (the "Memorandum") was
agreed to by the Company, Sun Cove, Sun International and TCA. The Memorandum
provides for the following:
(i) There will be no change in the existing relationship between Sun Cove
and the Company until January 1, 2000.
(ii) If the Relinquishment Agreement becomes effective, during the 7-year
period beginning January 1, 2000, the Company will not be entitled to
receive any fees or cash flows from TCA, with the exception of (a)
the existing agreement regarding annual operating expenses of TCA
which shall not exceed $2,000,000 and (b) the Company's right to
receive $2,000,000 to pay such amount to Leisure in any year until
TCA has first paid Sun Cove consideration in the amount of $5,000,000
in such year.
(iii) In terms of the Development Agreement TCA will be paid a development
fee of $14 million. TCA will subcontract with SIML who in turn will
subcontract with certain affiliates of the Company to provide certain
of the services pursuant to the Development Agreement.
For the nine months ended September 30, 1998, the Company received $7,672,698
from TCA and $1,792,945 was due from TCA, which represents the Company's share
in terms of the Omnibus Financing Agreement of approximately $40,038,000 in
net Management Fees earned by TCA from the Authority pursuant to the terms of
the Management Agreement for the same period. The actual amount of Management
Fees earned by TCA for any annual period of the Authority ending September 30,
are subject to year-end adjustment. For the nine month period ended September
30, 1997, the Company received $3,946,749 in cash distributions from TCA and
$1,904,516 was due from TCA, which represents the Company's share of
approximately $21,254,000 in net management fees earned by TCA from the
Authority pursuant to the terms of the Management Agreement for the same period.
For the nine months ended September 30, 1998 and September 30, 1997 the Company
also received $224,680 and $299,574, respectively, in cash distributions from
TCA which represents the Company's share of repayments by the Tribe to TCA of
amounts due in terms of the promissory note dated September 29, 1995 between TCA
and the Tribe.
18
The Company anticipates regular payments from TCA based on the results of the
Authority and Management Fees payment by the Authority.
Payments by the Authority on the Subordinated Notes, Non-PIK Completion
- -----------------------------------------------------------------------
Guarantee Notes and PIK Completion Guarantee Notes (collectively the
- --------------------------------------------------------------------
"Authority Subordinated Notes")
- -------------------------------
Interest is calculated semi-annually on the Authority Subordinated Notes.
Interest is deferred (and compounds semi-annually) until the Authority
purchases or offers to purchase at least 50% of its 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 (defined as an amount equal to the
cash flow of the Authority for any given period, less (a) 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
(as defined in the indenture for the Authority Senior Secured Notes) for such
period, (d) amounts for the payment of federal and state taxes for such period,
and (e)certain other amounts (not to exceed $6.8 million) for such period), (ii)
100% of the amount of Deferred Subordinated Interest (as defined in the
indenture for the Authority Senior Secured Notes) for such period and (iii)
accrued and unpaid interest, if any, to the date of closing of such Excess Cash
Purchase Offer (as defined in the indenture for the Authority Senior Secured
Notes). 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
Authority Subordinated Notes. In the event that the Company receives an offer
to purchase the Authority Subordinated Notes that is holds, the Indenture
requires the Company to accept such offer in the same proportion as Sun
International. For the nine months ended September 30, 1998 and September 30,
1997 the Company did not receive any cash payments on the Authority Subordinated
Notes that it holds from the Authority.
On February 7, 1998, the Company, Sun International, the Authority and the
Tribe agreed to a letter of understanding (the "Letter"), regarding the
repurchase of the Authority Subordinated Notes. The Letter provides that until
January 1, 2000, neither the Authority nor the Tribe shall exercise any option
it may have to redeem the Authority Subordinated Notes provided that nothing
contained in the Letter shall limit or amend the rights of the holders of the
Authority Subordinated Notes to require the Authority to redeem or repurchase
the Authority Subordinated Notes - pursuant to the Note Purchase Agreement
dated as of September 29, 1995 between the Authority and Sun International.
19
Results of Operations
- ---------------------
Comparison of operating results for the quarters ended September 30, 1998
- -------------------------------------------------------------------------
and September 30, 1997
- ----------------------
Total revenue for the quarter ended September 30, 1998 was $4,590,939 compared
with $1,084,271 for the quarter ended September 30, 1997. The increase was
attributable to an increase in interest and dividend income of $138,438, an
increase in management services income - Trading Cove Associates, as detailed
under point (h) of the table set forth above under "Overview of Current and
Future Cash Flows", of $303,967 and an increase in organization and
administrative fee income - Trading Cove Associates as detailed under point
(k) of the table set forth above under "Overview of Current and Future Cash
Flows", of $3,064,263. The payment of these fees is a result of the profitable
operations of the Mohegan Sun.
Total expenses for the three months ended September 30, 1998 were $2,383,140
compared with $2,248,363 for the three months ended September 30, 1997.
Interest expense decreased by $112,487, as a result of the redemption of
$3,529,000 principal amount of Senior Notes on November 15, 1997, general and
administrative costs increased by $30,726 primarily attributable to an increase
in accounting fees of approximately $53,500 (the Company paid accounting fees
to an affiliate totaling $54,000 during the quarter ended September 30, 1998,
which was funded by capital contributions of the members) an increase in
insurance expense of approximately $8,100 and by a decrease in legal fees of
approximately $31,600, amortization on beneficial interest - Leisure Resort
Technology, Inc. increased by $221,133 and amortization on deferred financing
costs decreased by $4,595.
Equity in income of Trading Cove Associates for the three months ended September
30, 1998 was $802,868 compared with $2,084,514 for the three months ended
September 30, 1997, as a result of the decrease in income from Trading Cove
Associates of $1,281,646 due to the timing of payments pursuant to the Omnibus
Financing Agreement.
As a result of the foregoing factors the Company experienced net income of
$3,010,667 for the quarter ended September 30, 1998 compared with net income
of $920,422 for the quarter ended September 30, 1997.
20
Comparison of operating results for the nine months ended September 30, 1998
- ----------------------------------------------------------------------------
and September 30, 1997
- ----------------------
Total revenue for the nine months ended September 30, 1998, was $11,547,627
compared with $4,617,020 for the nine months ended September 30, 1997. The
increase was attributable to an increase in interest and dividend income of
$220,836, an increase in subordinated notes fee income - Trading Cove
Associates, as detailed under point (c) of the table set forth above under
"Overview of Current and Future Cash Flows", of $271,228, an increase in
completion guarantee notes fee income - Trading Cove Associates, as detailed
under point (d) of the table set forth above under "Overview of Current and
Future Cash Flows", of $233,750, an increase in management services income -
Trading Cove Associates, as detailed under point (h) of the table set forth
above under "Overview of Current and Future Cash Flows", of $3,140,530 and an
increase in organization and administrative fee income - Trading Cove
Associates, as detailed under point (k) of the table set forth above under
"Overview of Current and Future Cash Flows", of $3,064,263. The payment of
these fees is a result of the profitable operations of the Mohegan Sun.
Total expenses for the nine months ended September 30, 1998 were $7,082,668
compared with $6,656,275 for the nine months ended September 30, 1997.
Interest expense decreased by $343,961, as a result of the redemption of
$3,529,000 principal amount of Senior Notes on November 15, 1997, general and
administrative costs increased by $101,339 primarily attributable to an increase
in accounting fees of approximately $59,900 (the Company paid accounting fees to
an affiliate totaling $54,000 during the nine months ended September 30, 1998,
which was funded by capital contributions of the members), an increase in legal
fees of approximately $27,600, an increase in insurance expense of approximately
$24,400 and to a reclassification during the nine months ended September 30,
1997, of certain charges that had previously been expensed to deferred financing
costs, amortization on beneficial interest - Leisure Resort Technology, Inc.
increased by $644,169 and amortization on deferred financing costs increased by
$24,846 due to additional deferred financing costs incurred.
Equity in income (loss) of Trading Cove Associates for the nine months ended
September 30, 1998 was $(75,191) compared with $1,224,549 for the nine months
ended September 30, 1997, as a result of the decrease in income from Trading
Cove Associates of $1,299,740 due to the timing of payments pursuant to the
Omnibus Financing Agreement.
As a result of the foregoing factors the Company experienced net income of
$4,389,768 for the nine months ended September 30, 1998 compared with a net loss
of $(814,706) for the nine months ended September 30, 1997.
21
Liquidity and Capital Resources
- -------------------------------
The initial capital of the Company consists of the partnership interests in TCA
contributed by Slavik Suites, Inc. and LMW Investments, Inc. in forming the
Company. In connection with the offering of the Senior Notes, the Company used
approximately $25.1 million to purchase from Sun International $19.2 million in
principal amount of Subordinated Notes plus accrued and unpaid interest and
Subordinated Notes Fee Amounts. In addition, TCA distributed approximately
$850,000 in principal amount of Subordinated Notes to the Company. During
September 1997 the Company purchased from Sun International $2.5 million
Non-PIK Completion Guarantee Notes plus accrued and unpaid interest and Non-PIK
Completion Guarantee Fee Amounts (total cost approximately $2.8 million). On
January 6, 1998 the Company paid $5,000,000 to Leisure whereby Leisure gave up
its beneficial interest in 5% of certain fees and excess cash flows, as defined,
of TCA and any other claims it may have had against the Company, TCA and TCA's
partners and former partner.
For the nine months ended September 30, 1998 and September 30, 1997 cash
provided by (used in) operating activities (as shown in the Condensed Statements
of Cash Flows) was $2,703,506 and $(2,488,364), respectively.
Current assets increased from $9,980,267 to $10,118,339 at September 30, 1998.
The increase was caused primarily by the payment of fees and distributions by
TCA as a result of the profitable operations of the Mohegan Sun, and partially
offset by the purchase of the beneficial interest - Leisure Resort Technology,
Inc. out of cash in escrow and the interest payment to the Senior Note holders
of $3,918,776 on May 15, 1998.
Current liabilities increased from $1,081,043 to $3,905,543 at September 30,
1998. The increase was attributable to the decrease in accrued expenses of
$56,953, an increase in accrued fee on Senior Notes payable of $922,065 and an
increase in accrued interest on Senior Notes payable of $1,959,388.
For the nine months ended September 30, 1998 and September 30, 1997 cash
provided by investing activities (as shown in the Condensed Statements of Cash
Flows) was $3,047,273 and $16,000,002, respectively. The decrease was caused
primarily by the sale of temporary investments during July, August and
September 1997, which were not reinvested until after September 30, 1997, the
purchase during September 1997 from Sun International of $2.5 million of the
outstanding principal amount of Non-Pik Completion Guarantee Notes owned by
Sun International and by the return on investment in 15% subordinated notes
receivable of $1,957,660 that the Company received during the nine months ended
September 30, 1997 that the Company did not receive during the nine months
ended September 30, 1998.
22
The Company did purchase utilizing existing cash reserves from Sun International
on October 12, 1998 and is required to purchase on October 12, 1999 $2.5 million
of the outstanding principal amount of Non-PIK Completion Guarantee Notes owned
by Sun International. The purchase price which was paid and is to be paid by
the Company to Sun International will be equal to the outstanding principal
balance of the Non-PIK Completion Guarantee Notes to be purchased plus any
amounts due thereon under points (d) (i) and (d) (ii) of the table set forth
above under "Overview of Current and Future Cash Flows". As of September
30, 1998, $32.5 million principal was outstanding as Non-PIK Completion
Guarantee Notes.
The Company anticipates that up to $5,000,000 in additional investments in TCA
(as of September 30, 1998, $325,000 had been invested in TCA) may be required
by the Company in connection with the proposed expansion of the Mohegan Sun.
See point 4 of the Waiver, as described in Note 6 to the Condensed Financial
Statements included in Item 1.
For the nine months ended September 30, 1998 and September 30, 1997 cash used
in financing activities (as shown in the Condensed Statements of Cash Flows)
was $(201,790) and $(373,560), respectively, primarily for additional
disbursements that related to deferred financing costs. For the nine months
ended September 30, 1998 and September 30, 1997, contributions by members
totaled $54,000 and $0, respectively.
The Company is required to make a mandatory redemption on November 15 and May
15 of each year, which commenced on November 15, 1997, of Senior Notes using
100% of Company Excess Cash, as defined in the Indenture, held by the Company
in excess of $10 million, as of the preceding September 30 and March 31. There
was no Company Excess Cash as of September 30, 1998.
The Company has two primary sources of revenues: payments from TCA and payments
under the Authority Subordinated Notes that it holds. The Company anticipates
regular payments from TCA based on the results of the Authority and Management
Fees payment by the Authority.
23
Year 2000 Issues
- ----------------
The Company is negotiating with an independent Year 2000 issues consultant, to
address any Year 2000 compliance issues (the issue of computer programs and
encoded computer chips or processors that use only two digits to represent the
year, that may be unable to process transactions accurately and could produce
inaccurate or unpredictable results before, on and after January 1, 2000). The
Company's management at this time believes that any issues relating to the
Company's Year 2000 compliance will not materially interrupt the operation of
the Company. The Company estimates that it will be Year 2000 compliant by the
end of June 1999. The total cost associated with the required modifications,
if any, for the Company to become Year 2000 compliant is currently not expected
to materially impact the Company's overall financial position. The estimated
total cost to be incurred by the Company in order for it to become Year 2000
compliant, is approximately $20,000.
The failure to correct a material Year 2000 issue could result in an
interruption in, or a failure of, certain normal business activities or
operations. The Company has two primary sources of revenues: payments from
TCA and payments under the Authority Subordinated Notes that it holds. As
both of these sources of revenues are dependant on the level of revenues
generated by the Mohegan Sun, the Company believes, based on discussions with
the Mohegan Sun's management, that a Year 2000 compliance plan has been
implemented by the Mohegan Sun and that the Mohegan Sun is taking reasonable
steps to insure that all Mohegan Sun Year 2000 issues are being timely
addressed by:
(i) Conducting company-wide awareness and inventory programs,
with the assistance of outside consultants retained by the
Mohegan Sun.
(ii) Testing and, as appears to be necessary, upgrading and
replacing material systems, including hardware, software
and embedded chip equipment.
(iii) Contacing various business partners or suppliers in an effort
to ascertain the extent of each of their respective Year 2000
compliance efforts (The Mohegan Sun is in the process of
assembling and analyzing that data to determine its impact on
the Mohegan Sun's business in the Year 2000), and
(iv) Preparing to replace business partners or suppliers with
alternates in the event the Mohegan Sun has reason to believe
they will not be Year 2000 compliant.
Due to the general uncertainty inherent in the Year 2000 issues, resulting
mainly from uncertainty of the Year 2000 compliance of the Mohegan Sun, the
Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Mohegan Sun's management
believes that the Mohegan Sun is making every reasonable effort to minimize or
eliminate any material disruption that may result from Year 2000 issues.
24
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
NOT APPLICABLE.
Part II Other Information:
------------------
Item 1 -- Legal Proceedings:
------------------
As derived from publicly filed information, the Authority is a
defendant in certain litigations incurred in the normal course of
business. In the opinion of the Authority's management, based on the
advise of counsel, the aggregate liability, if any, arising from such
litigation will not have a material adverse effect on the Authority's
financial condition or results of operations.
Item 2 -- Changes in Securities:
----------------------
NONE
Item 3 -- Defaults Upon Senior Securities:
--------------------------------
NONE
Item 4 -- Submission of Matters to a Vote of Security Holders:
----------------------------------------------------
NONE
Item 5 -- Other Information:
------------------
NONE
25
Item 6 -- Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
--------
Exhibit No. Description
3.1 Certificate of Formation, as amended, of
Waterford Gaming, L.L.C. (i)
3.2 Certificate of Incorporation of Waterford
Gaming Finance Corp. (i)
3.3 Bylaws of Waterford Gaming Finance Corp. (i)
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. (i)
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. (i)
4.3 Note Pledge Agreement, dated as of November 8,
1996, between Waterford Gaming, L.L.C. and
Fleet National Bank, as trustee. (i)
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. (i)
4.5 Specimen Form of 12-3/4% Senior Notes due 2003
(the "Private Notes") (included in Exhibit
4.1). (i)
4.6 Specimen Form of 12-3/4% Senior Notes due 2003
(the "Exchange Note") (included in Exhibit
4.1). (i)
10.1 Omnibus Financing Agreement, dated as of
September 21, 1995, between Trading Cove
Associates and Sun International Hotels
Limited. (i)
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. (i)
10.2.1 Amended and Restated Omnibus Financing
Agreement dated September 10, 1997. (ii)
10.3 Amended and Restated Partnership Agreement of
Trading Cove Associates, dated as of September
21, 1994, among Sun Cove Limited, RJH
Development Corp., Leisure Resort Technology,
Inc., Slavik Suites, Inc., and LMW Investments,
Inc. (i)
10.4 First Amendment to Amended and Restated
Partnership Agreement of Trading Cove
Associates, dated as of October 22, 1996, among
Sun Cove Limited, Slavik Suites, Inc., RJH
Development Corp., LMW Investments, Inc. and
Waterford Gaming, L.L.C. (i)
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 and Smith
Incorporated. (i)
10.5.1 Agreement with Respect to Redemption or
Repurchase of Subordinated Notes, dated
September 10, 1997. (ii)
26
10.6 Limited Liability Company Agreement of
Waterford Gaming, L.L.C., dated as of
September 30, 1996, among Slavik Suites, Inc.,
LMW Investments, Inc. and Waterford Gaming,
L.L.C. (i)
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. (i)
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. (i)
10.9 Management Agreement, dated as of July 28,
1994, between the Mohegan Tribe of Indians of
Connecticut and Trading Cove Associates. (i)
10.10 Management Services Agreement, dated September
10, 1997. (ii)
10.11 Development Services Agreement, dated September
10, 1997. (ii)
10.12 Subdevelopment Services Agreement, dated
September 10, 1997. (ii)
10.13 Completion Guarantee and Investment Banking and
Financing Arrangement Fee Agreement, dated
September 10, 1997. (ii)
10.14 Settlement and Release Agreement, dated
January 6, 1998, by and among Leisure Resort
Technology, Inc., Lee R. Tyrol, Trading Cove
Associates, Slavik Suites, Inc., LMW
Investments, Inc., RJH Development Corp.,
Waterford Gaming, L.L.C. and Sun Cove
Limited. (iii)
10.15 Waiver and Acknowledgment of Noteholder. (iv)
10.16 Relinquishment Agreement, dated February 7,
1998, between the Mohegan Tribal Gaming
Authority and Trading Cove Associates. (v)
10.17 Development Services Agreement, dated February
7, 1998, between the Mohegan Tribal Gaming
Authority and Trading Cove Associates. (v)
10.18 Agreement, dated September 28, 1998, by and
among, Waterford Gaming, L.L.C., Slavik
Suites, Inc., LMW Investments, Inc., Len
Wolman, Mark Wolman, Stephan F. Slavik, Sr.
and Del J. Lauria (Len Wolman's Employment
Agreement). (v)
21.1 Subsidiaries of Waterford Gaming, L.L.C. (i)
21.2 Subsidiaries of Waterford Gaming Finance
Corp. (i)
27 Financial Data Schedule. (vi)
27
(i) Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 333-17795, declared
effective on May 15, 1997.
(ii) Incorporated by reference to the Registrant's quarterly report
on Form 10-Q for the period ended September 30, 1997, Commission
File No. 333-17795, as accepted by the Commission on November
14, 1997.
(iii) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997,
Commission File No. 333-17795, as accepted by the Commission on
March 30, 1998.
(iv) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the period ended March 31, 1998, Commission
File No. 333-17795, as accepted by the Commission on May 14,
1998.
(v) Filed herewith.
(vi) Included in Edgar filing only.
(b) Form 8-K filed on August 14, 1998.
Item 5.
The Mohegan Tribal Gaming Authority (the "Authority") has filed its
quarterly report on Form 10-Q for the quarter ended June 30, 1998, a
copy of which has been filed as an exhibit to this report and is
incorporated by reference to the Authority's electronic filing of
such report on Form 10-Q, Securities and Exchange Commission file
reference no. 033-80655.
Date of Report: August 13, 1998
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1998 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: November 13, 1998 By: /s/Del Lauria
Del Lauria, Chief Financial Officer
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Waterford Gaming, L.L.C.
All amounts are unaudited.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,781,748
<SECURITIES> 0
<RECEIVABLES> 1,792,945
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,118,339
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,625,879
<CURRENT-LIABILITIES> 3,905,543
<BONDS> 61,471,000
0
0
<COMMON> 0
<OTHER-SE> (4,750,664)
<TOTAL-LIABILITY-AND-EQUITY> 60,625,879
<SALES> 0
<TOTAL-REVENUES> 11,547,627
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,204,504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,878,164
<INCOME-PRETAX> 4,389,768
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,389,768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,389,768
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Execution Copy
RELINQUISHMENT AGREEMENT
THIS RELINQUISHMENT AGREEMENT (as further supplemented or amended from
time to time, the "Relinquishment Agreement") is entered into as of this 7th
day of February, 1998, between the Mohegan Tribal Gaming Authority (as further
defined below, the "Authority"), an instrumentality of The Mohegan Tribe of
Indians of Connecticut, a federally recognized Indian tribe (as further defined
below, the "Tribe"), and Trading Cove Associates, a Connecticut partnership
("TCA").
RECITALS
A. The Authority and TCA are parties to (i) that certain Amended and
Restated Gaming Facility Management Agreement dated August 30, 1995 and
approved by the National Indian Gaming Commission on September 29, 1995 (the
"Gaming Management Agreement"), which grants to TCA the exclusive right and
obligation, for a period of seven (7) years ending on October 11, 2003, to
manage certain gaming operations as described therein, and to train Tribe
members and others in the operation and maintenance of such operations and (ii)
that certain Hotel/Resort Management Agreement dated February 28, 1994 (the
"Hotel Management Agreement"), which grants to TCA the exclusive right and
obligation, for a period of fourteen (14) years, to manage, operate and maintain
certain hotel/resort operations as described therein.
B. The Authority now desires to assume the management, operation and
maintenance of its existing gaming operations, any related hotel/resort
operations and any expansion of the foregoing.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the Authority and
TCA agree as follows:
1. Definitions. Capitalized terms used in this Relinquishment
Agreement shall have the meanings set forth below:
"Affiliate" means, with respect to the Person in question, any Person
controlling, controlled by or under common control with, such Person. For the
purposes hereof, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of the
Person in question.
"Affiliate Transaction" has the meaning set forth in Section 7.2 below.
"Assignment Offer" has the meaning set forth in Section 16.7(a) below.
"Assignor" has the meaning set forth in Section 16.7(a) below.
"Authority" means the Mohegan Tribal Gaming Authority, acting by the
Management Board, or any other instrumentality of the Tribe with the authority
to exercise the regulatory and proprietary authority of the Tribe over the
Facilities in accordance with the Mohegan Tribal Constitution, the Tribe's
ordinance for gaming, the Tribe's ordinance establishing the Mohegan Tribal
Gaming Authority, the Compact, the IGRA or other applicable law, and any
successor and assignee thereto.
"Average Casino Revenues" means the average monthly Revenues of the Casinos
for the twelve (12) months ending with (and including) the month immediately
prior to the month in which a Casualty Event occurs.
"Bankruptcy Code" means the United States Bankruptcy Code, at 11 U.S.C.
SS101, et. seq., as amended from time to time.
"Bureau of Indian Affairs" is the Bureau of Indian Affairs of the
Department of the Interior of the United States of America.
"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 on a balance sheet prepared in
accordance with GAAP.
"Cash Contingency Reserve Fund" means the account previously established by
TCA in the Authority's name pursuant to the Gaming Management Agreement which
is used to make transfers as necessary to the Disbursement Account and the
cash prize reserve fund.
"Casinos" means, collectively, the Mohegan Sun Casino and the New Casino.
"Casualty Event" means any casualty, event or occurrence that destroys or
damages either or both Casinos.
"Class II Gaming Revenues" means any revenues collected from Class II
Gaming as that term is defined under the IGRA.
"Compact" means the tribal-state Compact entered into between the Tribe and
the State of Connecticut pursuant to the IGRA, as the same may be amended from
time to time, or such other Compact as may be substituted therefor.
"Construction Financing" means the financing to be obtained and/or
committed by the Authority sufficient, as determined by the Authority, for the
purposes of the design, construction, equipping and staffing of the New
Facilities.
"CPI" means the revised Consumer Price Index for All Urban Consumers
(revised CPI-U), All Items, MSA applicable to New London County, CT, Base
1982-84=100, issued by the Bureau of Labor Statistics of the U.S. Department of
Labor. If the CPI is changed so that a base period other than 1982-84 is used,
the CPI shall be converted in accordance with the conversion factor published by
the Bureau of Labor Statistics of the Department of Labor. If the CPI is
discontinued during the Term with no successor or comparable successor CPI,
the Authority shall appoint an independent nationally recognized accounting
firm to select another similar index.
"Depository Account" means the account previously established by TCA in the
Authority's name pursuant to the Gaming Management Agreement into which
account are deposited all gross revenues and other proceeds connected with or
arising from the operation of the current gaming operations, the sale of all
products, food and beverage and all other activities of the current operations.
"Designated Senior Indebtedness" means any Senior Indebtedness the original
principal amount or maximum commitment of which is $50,000,000 or more and
that has been designated at the time of issuance thereof by the Authority as
"Designated Senior Indebtedness."
"Designated Senior Secured Indebtedness" means any Senior Secured
Indebtedness the original principal amount or maximum commitment of which is
$50,000,000 or more and that has been designated at the time of issuance thereof
by the Authority as "Designated Senior Secured Indebtedness."
"Disbursement Account" means the account previously established by TCA in
the Authority's name pursuant to the Gaming Management Agreement which account
TCA uses to make all required payments for operating expenses and certain other
payments relating to the existing gaming and related operations.
"Effective Date" means the later of (a) the date the Authority receives
all Required Approvals, or (b) the date the existing Series B Senior Secured
Notes of the Authority in the original aggregate principal amount of
$175,000,000 are refinanced or repaid.
"Facilities" means collectively the Mohegan Sun Casino and the New
Facilities, as such may be replaced or reconstructed following a casualty loss
(in whole or in part). The Facilities shall not include any other facilities or
improvements hereafter developed (by TCA or others) on lands owned or controlled
by the Authority or the Tribe or any instrumentality thereof.
"Fiscal Year" means the fiscal year of the Authority which currently is
October 1-September 30.
"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 III Gaming under the
IGRA or authorized under the Compact, but shall not include Class II Gaming as
defined under the IGRA.
"Gaming Management Agreement" has the meaning set forth in Recital A
hereof.
"Gross Gaming Revenue" shall mean the net win from Gaming activities which
is the difference between Gaming wins and losses before deducting promotional
allowances, costs and expenses, determined in accordance with GAAP consistently
applied.
"Guarantee" means a guaranty, direct or indirect, in any manner, of all or
any part of any indebtedness of another Person.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Hotel Management Agreement" has the meaning set forth in Recital A hereof.
"IGRA" means the Indian Gaming Regulatory Act of 1988, 25 U.S.C. S 2701
et seq., as amended from time to time.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (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 consistently applied, as well as all
Indebtedness of others secured by a lien on any asset of such Person (whether
or not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall
be (a) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (b) the principal amount thereof, together with
any interest thereon that is more than thirty (30) days past due, in the case
of any other Indebtedness.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of Management Board of the Authority, (i) qualified to
perform the task for which it has been engaged and (ii) disinterested and
independent with respect to the Authority and each Affiliate of the Authority.
"Initial Junior Payment Period" means the period commencing on the
Relinquishment Date and ending on the earlier to occur of June 30 or December
31 following the Relinquishment Date.
"Initial Senior Payment Period" means the period commencing on the
Relinquishment Date and ending on the earlier to occur of March 31, June 30,
September 30 or December 31 following the Relinquishment Date.
"Junior Changeover Date" means the date immediately following the end of
the Initial Junior Payment Period.
"Junior Relinquishment Payment" has the meaning set forth in Section
6.1(b) below.
"MTC Court" means the Gaming Disputes Court of the Tribe.
"Marks" means any and all of the service marks, trademarks, copyrights,
trade names, patents or other similar rights or registrations, now or hereafter
held by the Tribe or the Authority or applied for in connection therewith;
including all marks which are unique to, and developed for, the Facilities.
"Minimum Priority Distribution" means an annual minimum payment to the
Tribe from the operation of the Facilities in the amount of Fourteen Million
Dollars ($14,000,000), which shall be adjusted annually, on each anniversary of
the Relinquishment Date, to reflect the cumulative increase in the CPI since the
Relinquishment Date. One twelfth (1/12th) of the Minimum Priority Distribution
shall be paid to the Tribe within twenty-five (25) days following the end of
each calendar month following the Relinquishment Date. Any underpayment of the
Minimum Priority Distribution in any calendar month shall be added to the
Minimum Priority Distribution due the following calendar month.
"Mohegan Sun Casino" means the existing Mohegan Sun casino and any other
lawful commercial activity operated in such casino, as used for Gaming.
"National Indian Gaming Commission" means the commission established
pursuant to 25 U.S.C. Section 2704.
"New Casino" means the new casino to the extent developed by TCA as part of
the New Facilities and any other lawful commercial activity operated in such
casino, as used for Gaming.
"New Facilities" means a new casino consisting of approximately 100,000
square feet of gaming space and related food and beverage and entertainment
facilities, a luxury hotel containing approximately 1,500 guest rooms and
related food and beverage facilities, a convention/events center with indoor
seating for approximately 10,000 patrons and 100,000 square feet of convention
space, related parking facilities and infrastructure, and including any
modifications of the foregoing elements agreed to by the parties, to the extent
such facilities are developed by TCA.
"NJ Gaming License" means Sun International's qualification as a holding
company pursuant to the New Jersey Casino Control Act.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer's 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.
"Payment Blockage Notice" has the meaning set forth in Section 6.2(d)(ii)
below.
"Permitted Assignee" means Sun International, any Affiliate of Sun
International, Sun Cove Ltd., Waterford Gaming, L.L.C., LMW Investments, Inc.
and Slavik Suites, Inc.
"Person" means any individual, sole proprietorship, corporation, general
partnership, limited partnership, limited liability company or partnership,
joint venture, association, joint stock company, unincorporated association,
instrumentality or other form of entity.
"Petty Cash Fund" means the account previously established by TCA in the
Authority's name pursuant to the Gaming Management Agreement which is used to
maintain funds for miscellaneous small expenditures relating to the existing
gaming and related operations.
"Principal Business" means the Class II and Class III casino gaming (as
such terms are defined in IGRA) and resort business and any activity or
business incidental, directly related or similar thereto, or any business or
activity that is a reasonable extension, development or expansion thereof or
ancillary thereto, including any hotel, retail, entertainment, recreation or
other activity or business designated to promote, market, support, develop,
construct or enhance the gaming and resort business operated by the Authority.
"Proposed Financing" means the anticipated refinancing of certain of the
Authority's existing indebtedness, together with the Construction Financing.
"Recommencement Month" means, following a Tolling Event, the earlier of
the month in which (i) the monthly Revenues of the Casinos equal or exceed
ninety percent (90%) of the Average Casino Revenues, (ii) the date upon which
the Authority has fully complied with the requirements set forth in Section 7.6
below occurs, or (iii) TCA delivers written notice (which shall be irrevocable
with respect to such Tolling Event) to the Authority stating that the current
month shall be deemed the "Recommencement Month."
"Relinquishment Agreement" has the meaning set forth in the introductory
paragraph hereof.
"Relinquishment Date" means the later of (a) January 1, 2000 or (b) the
Effective Date.
"Relinquishment Payment" has the meaning set forth in Section 6.1 below.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Indebtedness.
"Required Approvals" means the approval of this Relinquishment Agreement by
the Bureau of Indian Affairs, and/or the National Indian Gaming Commission, to
the extent those agencies determine such approval may be required by law, and
the entry of a stipulated declaratory judgment by the MTC Court upholding the
validity and enforceability of this Relinquishment Agreement.
"Revenues" means all revenues of any nature (but excluding any Class II
Gaming Revenues) derived directly or indirectly from the Facilities, including,
without limitation, Gross Gaming Revenue, hotel revenues, room service,
catering, food and beverage sales, parking revenues, ticket revenues or other
fees or receipts from the convention/events center, other rental or other
receipts from leases, subleases, licensees and concessionaires (but not the
gross receipts of such leasees, subleases, licensees or concessionaires) and
proceeds of business interruption insurance, but excluding (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 sales, excise, gross receipt,
admission, entertainment, tourist or other taxes or charges (or assessments
equivalent thereto, or payments made in lieu thereof) which are received from
patrons and passed on to governmental or quasi-governmental entities unrelated
to the Tribe, (iv) any federal taxes or impositions that relate to the operation
of the Facilities, which may be implemented from time to time, (v) any fire and
extended coverage insurance proceeds other than for business interruption, (vi)
any condemnation awards other than for temporary condemnation, (vii) any
proceeds of financings or refinancings, and (viii) any interest earned on any
accounts, all as determined in accordance with GAAP consistently applied.
"Senior Changeover Date" means the date immediately following the end of
the Initial Senior Payment Period.
"Senior Indebtedness" means (a) any Indebtedness of the Authority unless
the instrument under which such Indebtedness is incurred expressly provides
that it is on parity with, or subordinated in right of payment to, the Junior
Relinquishment Payment and (b) all Obligations with respect to any of the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness shall not include (x) any Indebtedness of the Authority to the
Tribe or any Affiliate or instrumentality thereof other than in respect of the
Minimum Priority Distribution and (y) any Indebtedness incurred for the purchase
of goods or materials or for services obtained in the ordinary course of the
business of the Facilities (other than with the proceeds of revolving credit
borrowings permitted hereby).
"Senior Obligations" means Senior Indebtedness, Senior Relinquishment
Payments and interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable with respect to the Senior Relinquishment
Payments.
"Senior Relinquishment Payment" has the meaning set forth in Section
6.1(a) below.
"Senior Secured Indebtedness" means any Senior Indebtedness secured by a
security interest, mortgage or other arrangement such that the holder of such
Senior Indebtedness would be recognized as a secured creditor under the
Bankruptcy Code if the obligor of such Senior Indebtedness were a debtor under
the Bankruptcy Code.
"Senior Secured Obligations" means any Obligations with respect to Senior
Secured Indebtedness to the extent that such Obligations would be recognized
as a secured claim (assuming no election has been made under §1111 of the
Bankruptcy Code) under the Bankruptcy Code if the obligor were a debtor under
the Bankruptcy Code.
"Sun International" means Sun International Hotels Limited.
"TCA" has the meaning set forth in the introductory paragraph hereof.
"Term" has the meaning set forth in Section 3 below.
"Termination Event" means the irrevocable revocation of the NJ Gaming
License.
"Tolling Event" means, following a Casualty Event, the failure of the
monthly Revenues of the Casinos to equal at least fifty percent (50%) of the
Average Casino Revenues for three (3) consecutive months.
"Tolling Period" has the meaning set forth in Section 16.14 below.
"Tribe" means the Mohegan Tribe of Indians of Connecticut, a federally
recognized Indian tribe and its permitted successors and assigns.
"Unsecured Senior Refinancing Indebtedness" means any Senior Indebtedness
other than Senior Secured Indebtedness that is issued as part of the Proposed
Financing and is underwritten or privately placed by an investment banking
firm.
"Year-End Statement" has the meaning set forth in Section 6.1(c) below.
2. Status of Management Agreements. (a) As of the Relinquishment
Date, the Authority and TCA terminate the Gaming Management Agreement and all
covenants, terms and provisions contained therein pursuant to Section 9.2
thereof, including, without limitation, the retention of TCA as an independent
contractor for the purposes of managing the Authority's gaming operations and
all rights and responsibilities of TCA in connection with such retention under
the Gaming Management Agreement. Notwithstanding the foregoing, following the
Relinquishment Date, to the extent any claims or obligations relating to the
period prior to the Relinquishment Date pursuant to Sections 4.2.3, 4.17 or 5
of the Gaming Management Agreement arise, such of TCA's and the Authority's
obligations under such sections shall survive the termination of the Gaming
Management Agreement.
(b) As of the Effective Date, the Authority and TCA terminate all
rights and responsibilities of the Authority and TCA which may exist under the
Hotel Management Agreement.
3. Term. The "Term" of this Relinquishment Agreement shall commence
on the Effective Date and shall continue until all Relinquishment Payments
have been paid in accordance with Section 6.1 below; provided, however, that
if a Termination Event occurs on or prior to the Relinquishment Date, this
Relinquishment Agreement (and all obligations of the Authority under this
Relinquishment Agreement) shall automatically terminate and be of no further
force and effect; unless the partnership interest in TCA held by Sun Cove Ltd.
is assigned within thirty (30) days following such Termination Event to an
entity which (a) has been approved by the Authority, in the Authority's sole
and absolute discretion, and (b) otherwise satisfies the provisions of the
Gaming Management Agreement.
4. Distributions. Within forty-five (45) days of the Relinquishment
Date, TCA shall prepare and deliver to the Authority a final statement of
accounts covering the period since the most recent operating statement prepared
in accordance with Section 4.29 of the Gaming Management Agreement through the
Relinquishment Date. Based on such final statement and in accordance with
Section 10.2 of the Gaming Management Agreement, no later than fifteen (15)
business days following the release of the accounts to the Authority pursuant
to Section 5 below, the Authority shall pay TCA those amounts to which it is
entitled under the third and fifth clauses of Section 6.4 of the Gaming
Management Agreement that have accrued for the period prior to the
Relinquishment Date but which have not been distributed. In its sole
discretion, within ninety (90) days following receipt of such final statement,
the Authority may obtain an audit of such final statement as well as the other
books and records required to be maintained by TCA pursuant to the Gaming
Management Agreement for the period from the date of the last audited financial
statements delivered thereunder through the Relinquishment Date from a
nationally recognized independent certified public accounting firm with casino
industry experience selected by the Authority.
5. Release of Accounts. On the Relinquishment Date, TCA shall
release to the Authority and relinquish any and all rights it may have under
the Gaming Management Agreement with respect to any and all accounts
maintained by or on behalf of the Tribe or the Authority, including, without
limitation, the Depository Account, the Disbursement Account, the Cash
Contingency Reserve Fund and the Petty Cash Fund, and TCA shall no longer have
authority or the right or obligation to make payments into, disbursements
from, or transfers between or among such accounts. TCA shall execute any and
all instruments or documents necessary to release or transfer to the Authority
full control over all such accounts.
6. Payments.
6.1 Relinquishment Payments. The Authority shall make certain payments
to TCA (the "Relinquishment Payments"), without set-off, deduction or
counterclaim, in connection with the termination of TCA's rights under the
terms of the Gaming Management Agreement and the Hotel Management Agreement.
Subject to Section 6.2 below, the Relinquishment Payments shall be paid and
consist of those amounts computed in accordance with paragraphs (a) and (b) as
set forth below:
(a) Within twenty-five (25) days following the end of the Initial
Senior Payment Period and thereafter within twenty-five (25) days following
the end of each successive three (3) month period, commencing on the Senior
Changeover Date and ending on the day immediately preceding the fifteenth
(15th) annual anniversary of the Relinquishment Date (recognizing that the
last such period may be less than three (3) full months), the Authority shall
pay TCA an amount equal to two and one half percent (2.50%) of Revenues for
the Initial Senior Payment Period and for each successive three (3) month
period thereafter, as applicable (the "Senior Relinquishment Payments").
(b) Within twenty-five (25) days following the end of the Initial
Junior Payment Period and thereafter within twenty-five (25) days following
the end of each successive six (6) month period, commencing on the Junior
Changeover Date and ending on the day immediately preceding the fifteenth
(15th) annual anniversary of the Relinquishment Date (recognizing that the
last such period may be less than six (6) full months), the Authority shall
pay TCA an amount equal to two and one half percent (2.50%) of Revenues for
the Initial Junior Payment Period and for each successive six (6) month period
thereafter, as applicable (the "Junior Relinquishment Payments").
(c) Within ninety (90) days following the end of the Fiscal Year in
which the Relinquishment Date occurs and thereafter following the end of each
Fiscal Year (or portion thereof) during the Term, the Authority shall provide
to TCA operating statements derived from audited financials for the preceding
Fiscal Year which include, without limitation, all Revenues generated by the
Facilities and the amount of the Relinquishment Payments paid or payable to
TCA pursuant to Sections 6.1(a) and (b) (the "Year End Statements"). Such
statements shall be prepared in accordance with GAAP, consistently applied,
and shall be certified as true and complete by nationally recognized independent
auditors selected by the Authority. Upon reasonable notice and at reasonable
times, TCA or its duly authorized representatives shall have on-site access to,
and be entitled to photocopy, the books and records of the Authority relating
to the Facilities for the purpose of verifying the Year End Statements.
(d) To the extent that any Relinquishment Payment (or portion
thereof) is not paid when due, such amounts shall earn interest at a rate of
twelve percent (12%) per annum from the due date thereof until the date
payment is made (or if such rate of interest is not lawful, at the maximum
lawful rate of interest).
6.2 Subordination of Relinquishment Payments. (a) TCA and the
Authority agree that each of the Junior Relinquishment Payments and each of
the Senior Relinquishment Payments are subordinated in right of payment, to
the extent and in the manner provided in this Section 6.2, to the prior payment
of the Minimum Priority Distribution (to the extent then due) and to the prior
payment of all Senior Secured Obligations (whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed), and that the
subordination referred to in this sentence is for the benefit of the Tribe and
the holders of Senior Secured Indebtedness. TCA and the Authority agree that
each of the Junior Relinquishment Payments (but not the Senior Relinquishment
Payments) are subordinated in right of payment, to the extent and in the manner
provided in this Section 6.2, to the prior payment of all Senior Obligations
(whether outstanding on the date hereof or hereafter created, incurred, assumed
or guaranteed), and that the subordination referred to in this sentence is for
the benefit of the holders of Senior Obligations.
(b) Upon any distribution to creditors of the Authority in a
liquidation of the Authority, or of the business conducted in the Facilities,
or dissolution of the Authority, or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Authority or the business
conducted in the Facilities, or in an assignment for the benefit of creditors
or any marshaling of the Authority's assets and liabilities:
(i) (A) the Tribe shall be entitled to receive the Minimum
priority Distributions then due in cash before TCA shall be entitled
to receive any payment with respect to either the Senior
Relinquishment Payments or the Junior Relinquishment Payments then
due, (B) the holders of Senior Secured Indebtedness shall be
entitled to receive payment in full in cash of all Senior Secured
Obligations due in respect of such Senior Secured Indebtedness
(including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Secured Indebtedness)
before TCA shall be entitled to receive any payment with respect to
either the Senior Relinquishment Payments or the Junior
Relinquishment Payments, and (C) the holders of Senior Obligations
shall be entitled to receive payment in full in cash of such Senior
Obligations (including interest after the commencement of any such
proceeding at the rate specified in the document governing the
applicable Senior Obligation) before TCA shall be entitled to
receive any payment with respect to the Junior Relinquishment
Payments; and
(ii) (A) until all Minimum Priority Distributions then due are
paid in full in cash, any payment or distribution in respect of any
Relinquishment Payment to which TCA would be entitled but for the
operation of this Section 6.2 shall be made to the Tribe, (B) if all
Minimum Priority Distributions then due are paid in full in cash and
until all Senior Secured Obligations (as provided in subsection (i)
above) are paid in full in cash, any payment or distribution in
respect of any Relinquishment Payment to which TCA would be entitled
but for the operation of this Section 6.2 shall be made to holders
of Senior Secured Indebtedness, as their interests may appear, and
(C) if all Minimum Priority Distributions then due and Senior
Secured Obligations are paid in full in cash and until all Senior
Obligations (as provided in subsection (i) above) are paid in full
in cash, any payment or distribution in respect of any Junior
Relinquishment Payment to which TCA would be entitled but for the
operation of this Section 6.2 shall be made to holders of Senior
Obligations, as their interests may appear.
(c) The Authority may not make any payment or distribution to TCA in
respect of any Relinquishment Payment and may not acquire from TCA any right
to any Relinquishment Payment or any release, satisfaction, discharge or
relinquishment of any Relinquishment Payment for cash or property until all
Minimum Priority Distributions then due have been paid in full in cash if a
default in the payment of any Minimum Priority Distribution then due has
occurred.
(d) Provided that provisions substantially equivalent to this Section
6.2(d) prevent payments or distributions to or in respect of all Unsecured
Senior Refinancing Indebtedness, the Authority may not make any payment or
distribution to TCA in respect of any Relinquishment Payment and may not acquire
from TCA any right to any Relinquishment Payment or any release, satisfaction,
discharge or relinquishment of any Relinquishment Payment for cash or property
until all Senior Secured Obligations have been paid in full if:
(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Secured Indebtedness occurs and is
continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior
Secured Indebtedness; or
(ii) a default, other than a payment default, on Designated Senior
Secured Indebtedness occurs and is continuing that then permits
holders of the Designated Senior Secured Indebtedness to accelerate
its maturity and TCA receives a notice of the default (a "Payment
Blockage Notice") from a Representative. If TCA receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall
be effective for purposes of this Section 6.2(d)(ii), irrespective
of the number of defaults (other than defaults covered by clause
(i) above) with respect to Designated Senior Secured Indebtedness
during such period, unless and until at least three hundred sixty
(360) days shall have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice issued under this Section
6.2(d)(ii).
(e) The Authority may not make any payment or distribution to TCA in
respect of any Junior Relinquishment Payment and may not acquire from TCA any
right to any Junior Relinquishment Payment or any release, satisfaction,
discharge or relinquishment of any Junior Relinquishment Payment for cash or
property until all Senior Obligations have been paid in full if:
(i) a default in the payment of any amounts, principal or other
Obligations with respect to Designated Senior Indebtedness or Senior
Relinquishment Payments occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other
document governing such Designated Senior Indebtedness or Senior
Relinquishment Payments; or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of
the Designated Senior Indebtedness to accelerate its maturity and
TCA receives a Payment Blockage Notice from a Representative. If
TCA receives any such Payment Blockage Notice, no subsequent Payment
Blockage Notice shall be effective for purposes of this Section
6.2(e)(ii), irrespective of the number of defaults (other than
defaults covered by clause (i) above) with respect to Designated
Senior Indebtedness during such period, unless and until at least
three hundred sixty (360) days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice
issued under this Section 6.2(e)(ii).
(f) The Authority may and shall resume payments on, and distributions
in respect of, any Relinquishment Payment (or portion thereof) the payment of
which was not permitted hereby, and the Authority may take actions with respect
thereto that were not permitted hereby, upon the earlier of:
(i) the date upon which all applicable defaults that revent such
payment or distribution are cured or waived; or
(ii) in the case of a default referred to in Section 6.2(d)(ii) or
6.2(e)(ii) hereof, one hundred seventy nine (179) days following
receipt of the applicable Payment Blockage Notice if the maturity
of such Designated Senior Secured Indebtedness or Designated Senior
Indebtedness, as applicable, has not been accelerated, if this
Section otherwise permits the payment or distribution or such
action at the time of such payment or distribution.
(g) In the event that TCA receives any payment with respect to any
Relinquishment Payment at a time when TCA has actual knowledge that such
payment is prohibited by this Section 6.2, such payment shall be held by TCA,
in trust for the benefit of, and shall be paid over forthwith and delivered,
upon written request, to: (i) the Tribe (to the extent that any Minimum Priority
Distribution is then due and not paid), (ii) the holders of Senior Secured
Indebtedness (to the extent that any such payment held by TCA was in respect
of a Relinquishment Payment that was subordinated to such Senior Secured
Indebtedness), as their interests may appear, or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Secured
Indebtedness may have been issued, as their respective interests may appear,
and (iii) the holders of Senior Obligations (to the extent that any such
payment held by TCA was in respect of a Junior Relinquishment Payment that was
subordinated to such Senior Obligations), as their interests may appear, or
their Representative under the indenture or other agreement (if any) pursuant
to which Senior Obligations may have been issued or created, as their respective
interests may appear, for application to the payment, first to all Minimum
Priority Distributions then due and not paid, second, to all Senior Secured
Obligations remaining unpaid and then to all Senior Obligations remaining unpaid
to the extent necessary to pay such Senior Obligations in full in accordance
with their terms, after giving effect to any concurrent payment or distribution
to or for the Tribe, the holders of Senior Secured Indebtedness or the holders
of Senior Obligations or their Representatives, as the case may be.
(h) The Authority shall promptly notify TCA of any facts known to the
Authority that would cause a payment of any portion of the Relinquishment
Payments to violate this Section, but failure to give such notice shall not
affect the subordination of the Relinquishment Payments as provided in this
Section.
(i) After all Minimum Priority Distributions (to the extent then due)
and Senior Secured Obligations have been paid in full and until all Senior
Relinquishment Payments and all other Senior Indebtedness are current, TCA
shall be subrogated with respect to the Senior Relinquishment Payments (equally
and ratably with all other Senior Indebtedness pari passu with the Senior
Relinquishment Payments) to the rights of (i) the Tribe to receive distributions
applicable to Minimum Priority Distributions (to the extent then due) to the
extent that distributions otherwise payable with respect to the Senior
Relinquishment Payments have been applied to the payment of such Minimum
Priority Distributions, and (ii) holders of Senior Secured Indebtedness to
receive distributions applicable to Senior Secured Obligations to the extent
that distributions otherwise payable with respect to the Senior Relinquishment
Payments have been applied to the payment of Senior Secured Obligations. A
distribution made under this Section 6.2(i) to the Tribe or holders of Senior
Secured Indebtedness that otherwise would have been made in respect of Senior
Relinquishment Payments is not, as between the Authority and TCA, a payment by
the Authority in respect of Senior Relinquishment Payments.
(j) After all Minimum Priority Distributions (to the extent then due),
Senior Indebtedness and Senior Relinquishment Payments have been paid in full
and until all Junior Relinquishment Payments are current, TCA shall be
subrogated with respect to the Junior Relinquishment Payments (equally and
ratably with all other Indebtedness pari passu with the Junior Relinquishment
Payments) to the rights of (i) the Tribe to receive distributions applicable
to Minimum Priority Distributions (to the extent then due) to the extent that
distributions otherwise payable with respect to the Junior Relinquishment
Payments have been applied to the payment of such Minimum Priority
Distributions, (ii) holders of Senior Secured Indebtedness to receive
distributions applicable to Senior Secured Indebtedness to the extent that
distributions otherwise payable with respect to the Junior Relinquishment
Payments have been applied to the payment of Senior Secured Indebtedness, and
(iii) holders of any other Senior Indebtedness to receive distributions
applicable to any other Senior Indebtedness to the extent that distributions
otherwise payable with respect to the Junior Relinquishment Payments have been
applied to the payment of such Senior Indebtedness. A distribution made
under this Section 6.2(j) to the Tribe, holders of Senior Secured Indebtedness
or holders of other Senior Indebtedness that otherwise would have been made in
respect of Junior Relinquishment Payments is not, as between the Authority and
TCA, a payment by the Authority in respect of Junior Relinquishment Payments.
(k) This Section 6.2 defines the relative rights of TCA, the Tribe,
holders of Senior Secured Indebtedness and holders of Senior Obligations.
Nothing in this Section 6.2 shall:
(i) affect the relative rights of TCA and creditors of the
Authority other than their rights in relation to holders of Senior
Secured Indebtedness, holders of Senior Obligations and the Tribe
with respect to its rights to Minimum Priority Distributions;
(ii) impair, as between the Authority and TCA, the obligation of
the Authority, which is absolute and unconditional, to pay the
Relinquishment Payments in accordance with the terms hereof; or
(iii) prevent TCA from exercising its available remedies upon a
default under this Relinquishment Agreement, including the right to
obtain a judgment against the Authority for failure to pay any
Relinquishment Payments when due pursuant to the provisions of
Section 11 hereof, subject to the rights of holders of Senior
Secured Indebtedness, holders of Senior Indebtedness and the
Tribe to receive distributions and payments otherwise payable to TCA
as or in respect of Relinquishment Payments.
(l) No right of any holder of Senior Secured Indebtedness, any holder
of Senior Obligations or the Tribe to enforce the subordination provisions of
this Section 6.2 shall be impaired by any act or failure to act by the Authority
or TCA or by the failure of the Authority or TCA to comply with this Section
6.2.
(m) The Authority agrees and covenants that it will not, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for the payment of (collectively, "incur") any Indebtedness that by its terms
is expressly subordinated in right of payment to any obligation of the Authority
(other than any subordination in right of payment to the Minimum Priority
Distributions or to Senior Secured Indebtedness) unless (i) such Indebtedness
is subordinated at least to the same extent to the right of payment to the
Senior Relinquishment Payments and (ii) such Indebtedness is expressly not
Senior Indebtedness hereunder. The Authority shall not incur any Indebtedness
that by its terms is expressly subordinated in right of payment to any
obligations of the Authority (other than any subordination in right of payment
to the Minimum Priority Distributions or to Senior Secured Indebtedness) and
which subordination terms would permit any payment on the obligations due
thereunder at a time that obligations due with respect to the Junior
Relinquishment Payments would not be payable pursuant to the terms hereof,
unless such payment was pari passu or subordinated with the Junior
Relinquishment Payment (pro rata in accordance with the respective amounts
then due).
(n) For the purposes of this Section 6.2, any Minimum Priority
Distribution shall be deemed paid for all purposes of this Section 6.2 if the
Authority lawfully may pay such Minimum Priority Distribution to the Tribe and
has at any time the funds lawfully available to pay such Minimum Priority
Distribution.
(o) The provisions of this Section 6.2 shall not be amended or modified
to affect adversely (i) the holders of Senior Secured Indebtedness, with respect
to the provisions relating to Senior Secured Obligations, without the prior
written consent of the holders of all Designated Senior Secured Indebtedness;
provided, however, that a provision may be amended or modified with respect to
any class of Senior Secured Obligations to the extent such class has given its
prior written consent to such amendment or modification, (ii) the holders of
Senior Indebtedness, with respect to the provisions relating to Senior
Obligations, without the prior written consent of the holders of all Designated
Senior Indebtedness; provided, however, that a provision may be amended or
modified with respect to any class of Senior Obligations to the extent such
class has given its prior written consent to such amendment or modification,
and (ii) the Tribe, with respect to the provisions relating to the Minimum
Priority Distribution, without the prior written consent of the Tribe.
7. Certain Covenants of the Authority.
7.1 Payments to the Tribe. Except for the payment of (a) the Minimum
Priority Distributions, or (b) reasonable charges for utilities or other
governmental services supplied by the Tribe and used by the Authority (in an
amount not to exceed the reasonable costs of such services plus a reasonable
allowance for administrative costs), the Authority shall not make any payment
or distribution to or for the benefit of the Tribe or any Affiliate of the
Tribe or make any distribution to the members of the Tribe (i) prior to the
payment in full of Relinquishment Payments then due, or (ii) at any time if
any Relinquishment Payments are outstanding.
7.2 Affiliate Transactions. Except for the payment of (a) the
Minimum Priority Distributions, or (b) reasonable charges for utilities or
other governmental services supplied by the Tribe and used by the Authority
(in an amount not to exceed the reasonable costs of such services plus a
reasonable allowance for administrative costs), 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, an Affiliate of the Tribe or an Affiliate of the Authority
(each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Authority than those
that would have been obtained in a comparable transaction by the Authority
with an unrelated Person, and (ii) the Authority delivers to TCA (a) with
respect to any Affiliate Transaction involving aggregate payments in excess of
Two Million Dollars ($2,000,000), a resolution adopted by a majority of the
Management Board approving such Affiliate Transaction and set forth in an
Officer's Certificate certifying that such Affiliate Transaction complies with
clause (i) above and (b) with respect to any Affiliate Transaction involving
aggregate payments in excess of Ten Million Dollars ($10,000,000), a written
opinion as to the fairness to the Authority from a financial point of view
issued by an Independent Financial Advisor.
7.3 Subsidiaries. The Authority will not create, acquire or own any
instrumentality, subdivisions or subunits unless the actions and assets of
such instrumentalities, subdivisions or subunits are subject to or bound by
the terms of this Relinquishment Agreement.
7.4 Business Purpose. During the Term, the Authority (or any assignee
of the Authority permitted under this Relinquishment Agreement), directly or
indirectly, shall not engage in any business or activity other than the
Principal Business.
7.5 Operation of Casinos. During the Term, the Authority shall
continue to operate (i) the Mohegan Sun Casino for the primary purpose of
conducting Gaming, substantially in accordance with the standard and character
of the operations being conducted therein on the date hereof, and (ii) the New
Casino for the primary purpose of conducting Gaming, substantially in accordance
with the standard and character of the operations conducted therein one year
after the opening of the New Casino.
7.6 Replacement or Restoration Following Casualty. If all or a portion
of the Facilities are damaged by fire or other casualty, the Authority promptly
shall cause the Facilities to be replaced or restored to substantially the same
condition as immediately prior to the occurrence of such fire or other casualty;
provided, however, that in no event shall the Authority be obligated to
expend for any replacement or restoration an amount in excess of the insurance
proceeds recovered by the Authority and allocable to the damage to the
Facilities after deduction of any amounts required to be paid to any holder of
Indebtedness. If insurance proceeds are not available to the Authority for
such replacement or restoration, the Authority shall use reasonable efforts to
obtain financing on commercially reasonable terms to undertake such replacement
or restoration of the Facilities.
8. Marks. To the extent TCA has any rights to any of the Marks or the
"Mohegan Sun" name, TCA grants to the Authority an exclusive, irrevocable,
perpetual, world-wide, royalty free license to use the Marks and the "Mohegan
Sun" name in connection with the Facilities; provided, however, that the
Authority shall only use the word "Sun" in conjunction with the Facilities and
together with the word or words "Mohegan" or "the Mohegan Tribe" and that the
Authority will not use the word "Sun" separately as a trademark or servicemark
or engage in any activity that suggests it is affiliated with Sun International
or TCA after the Relinquishment Date. TCA acknowledges that all of the Marks
might not be used in connection with the Facilities, and the Authority shall
have sole discretion to determine which Marks shall be so used. Except as may
be required by law or to describe the historical relationship between the
parties, TCA shall not use the Authority's or the Tribe's name, or any
variation thereof, directly or indirectly, in any context without the prior
written approval of the Authority, which may be withheld in its sole and
absolute discretion.
9. Non-Impairment of Agreement. The Tribe, directly or indirectly,
shall not impose any tax, levy or other monetary payment obligation on the
Authority or on any activity at the Facilities, other than (a) Minimum
Priority Distributions and (b) reasonable charges for utilities or other
governmental services supplied by the Tribe and used by the Authority (in an
amount not to exceed the reasonable costs of such services plus a reasonable
allowance for administrative costs). The Tribe shall not, directly or
indirectly, take any action, enter into any agreement, amend its constitution
or enact any ordinance, law, rule or regulation that would prejudice or have a
material adverse affect on the rights of TCA under this Relinquishment
Agreement. Neither the Tribe nor any committee, agency, board or other
official body of the Tribe shall, by exercise of the police power, eminent
domain or otherwise, act to modify, amend or in any manner impair the
obligations of the parties under this Relinquishment Agreement without the
written consent of TCA. Any such action or attempted action shall be void ab
initio. The Tribe acknowledges that the MTC Court has the authority to provide
equitable relief to enforce this provision.
10. Confidential and Proprietary Information. Each party agrees to
treat as confidential all non public information received during the performance
of the Gaming Management Agreement or pursuant to this Relinquishment Agreement
regarding the other party, its organization, financial matters, marketing plans
or other affairs. Except as may be required by law, no such information will be
disclosed to any person, firm or organization without the prior written
approval of the other party. Notwithstanding the provisions of Section 22 of
the Gaming Management Agreement, the Authority may retain the confidential and
proprietary information developed by TCA and relating to the management of the
existing gaming and related operations pursuant to the Gaming Management
Agreement.
11. Authority's Consent to Suit. The Authority expressly waives its
immunity from unconsented suit for the purpose of permitting a suit by TCA in
any court of competent jurisdiction, including, without limitation, the MTC
Court, for any claims by TCA for the purpose of enforcing this Relinquishment
Agreement and any judgment arising out of this Relinquishment Agreement. The
Authority's waiver of immunity from suit is specifically limited to the
following actions and judicial remedies: (a) the enforcement of the Authority's
payment obligations under this Relinquishment Agreement with an award of actual
damages in connection with any breach of the provisions hereof; provided,
however, that the court shall have no authority or jurisdiction to order
execution against any assets or revenues of the Authority except cash of the
Authority (except to the extent the Authority can demonstrate such cash was
derived from a source other than the Facilities) and undistributed and future
Revenues; and (b) an action to prohibit the Authority from taking an action that
would prevent the operation of this Relinquishment Agreement pursuant to its
terms, or that requires the Authority to specifically perform any obligation
under this Relinquishment Agreement. In no instance shall any enforcement of
any kind whatsoever be allowed against any assets of the Authority other than
the limited assets of the Authority specified in the foregoing clause (a).
12. No Liability of the Tribe; Limited Consent To Suit. Neither the
Tribe nor any director, officer or office holder, employee, agent,
representative or member of the Authority or the Tribe, as such, shall have
any liability for any obligations of the Authority under this Relinquishment
Agreement or for any claim based upon, in respect of, or by reason of such
obligations or their creation. The only assets subject to payment or
encumbrances for the payment of obligations hereunder shall be cash of the
Authority (except to the extent the Authority can demonstrate such cash was
derived from a source other than the Facilities) and the undistributed and
future Revenues of the Authority. Notwithstanding the foregoing, the Tribe
expressly waives its immunity from unconsented suit for the limited purpose of
permitting a suit by TCA in any court of competent jurisdiction, including,
without limitation, the MTC Court, for the sole purpose of obtaining equitable
relief to enforce the provisions of Sections 9, 12 and 13 of this Relinquishment
Agreement. The Tribe's waiver of immunity from suit is specifically limited to
equitable relief to enforce the provisions of Sections 9, 12 and 13; provided,
however, that the court shall have no authority or jurisdiction to order
execution against any assets or revenues of the Tribe and in no instance shall
any enforcement of any kind whatsoever be allowed against any assets of the
Tribe.
13. Government Savings Clause. This Relinquishment Agreement shall
be submitted to (a) the Bureau of Indian Affairs, and the National Indian
Gaming Commission, to the extent required by law, for appropriate action, if
any, and (b) the MTC Court for a stipulated declaratory judgment upholding its
validity and enforceability, the form of which will be mutually agreed to by
the Authority and TCA. In addition, each party agrees to pursue such actions
or judgment and execute, deliver and, if necessary, record any and all
instruments, certifications, amendments, modifications and other documents as
may be required by the United States Department of the Interior, Bureau of
Indian Affairs, the office of the Field Solicitor, or any applicable statute,
rule or regulation or otherwise cooperate, as necessary, in order to effectuate,
complete, perfect, continue or preserve the respective rights, obligations and
interests of the parties to the fullest extent permitted by law; provided that
any such instrument, certification, amendment, modification or other document
shall not materially change the respective rights, remedies or obligations of
the parties under this Relinquishment Agreement or related agreements or
documents.
14. Coordination. During the period of time between the Effective
Date and the Relinquishment Date, TCA and the Authority shall cooperate with
each other (at no cost to the other) as necessary to effect an orderly
transition of the operation of the existing gaming operations to the Authority.
15. Employment Solicitation. From and after the date hereof until
five (5) years after the Relinquishment Date, neither TCA nor the Authority
nor any Affiliate of either party shall solicit, attempt to solicit or cause
the solicitation or attempted solicitation of any employee of TCA or the
Authority or any Affiliate of either party with whom TCA or the Authority or
any Affiliate of either party had contact, by virtue of their relationship
regarding the Facilities, to leave his or her employment and accept employment
with TCA or the Authority or any Affiliate of either party, as the case may
be.
16. Miscellaneous Provisions.
16.1 Authorization. The Authority and TCA represent and warrant to
each other that each has full power and authority to execute this Relinquishment
Agreement and to be bound by and perform the terms hereof. Each party shall
furnish evidence of such authority to the other. The Authority and TCA each
represent and warrant to the other that the execution, delivery and performance
of this Relinquishment Agreement shall not conflict with the terms of their
organizational documents, any agreement to which it is a party or by which it is
bound or any law, rule or regulation to which its subject.
16.2 Relationship. From and after the Relinquishment Date, TCA shall
not have any management authority or responsibilities with respect to the
Facilities. TCA and the Authority shall not be construed as joint venturers
or partners of each other by reason of this Relinquishment Agreement, and
neither shall have the power to bind or obligate the other.
16.3 Governing Law. The rights and obligations of the parties and
the interpretation and performance of this Relinquishment Agreement shall be
governed by the law of the Tribe, and, to the extent not addressed by the law
of the Tribe, by applicable federal law, and, to the extent not addressed by
the law of the Tribe or applicable federal law, the law of the State of
Connecticut without regards to its principles regarding conflicts of law.
16.4 Amendment. No modification or amendment to this Relinquishment
Agreement will be effective unless mutually agreed upon by both parties in
writing and unless such modification or amendment has received any required
regulatory approval.
16.5 Notices. All notices, demands, requests or other communications
which may be or are required to be given, served or sent to either party in
connection with the matters which are the subject of this Relinquishment
Agreement shall be in writing and shall be personally delivered to such party
or mailed first class, postage prepaid, or transmitted by a major overnight
commercial courier or by facsimile to the address for such party as set forth
below, or to such other address furnished by such parties for such purpose by
means of notice pursuant to this Section 16.5:
If to the Authority:
Mohegan Tribal Gaming Authority
One Mohegan Sun Boulevard
Uncasville, CT 06382
Attention: Chairman of the Management Board
Phone: (860) 848-6100
Facsimile: (860) 848-6162
with a copy to:
Mohegan Tribal Gaming Authority
One Mohegan Sun Boulevard
Uncasville, CT 06382
Attention: Mr. Thomas Acevedo
Phone: (860) 848-6126
Facsimile: (860) 848-6162
If to TCA:
Trading Cove Associates
914 Hartford Turnpike
P.O. Box 60
Waterford, CT 06385
Attention: Mr. Len Wolman
Phone: (860) 442-4559
Facsimile: (860) 437-7752
with a copy to:
Sun International Hotels Limited
Coral Towers
P.O. Box N-4777
Paradise Island
Nassau, The Bahamas
Attention: Mr. Charles Adamo
Phone: (242) 363-2509
Facsimile: (242) 363-4581
Notices delivered by mail shall be deemed given five (5) days after such
mailing. Notices given by hand delivery shall be deemed given on the date of
delivery. Notices given by overnight commercial courier shall be deemed given
on the business day immediately following transmittal, and notices delivered
by facsimile shall be deemed given on the date of transmission if the
transmission is confirmed.
16.6 Third Party Beneficiary. This Relinquishment 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 Relinquishment Agreement and shall
not give rise to liability to any third party other than the authorized
successors and assigns of the parties pursuant to Section 16.7.
16.7 Successors and Assigns. (a) The benefits and obligations of
this Relinquishment Agreement shall inure to and be binding upon the parties
hereto and their respective successors and assigns. Neither this Relinquishment
Agreement nor the rights hereunder may be assigned by TCA to any entity prior
to the Relinquishment Date. After the Relinquishment Date, neither this
Relinquishment Agreement nor the rights hereunder may be assigned by TCA to
an entity other than a Permitted Assignee, without the prior written consent
of the Authority (which may be withheld in its sole and absolute discretion)
and any required approvals by the Bureau of Indian Affairs or its authorized
representatives. Notwithstanding the foregoing, after the Relinquishment Date,
TCA or any Permitted Assignee may, without the consent of the Authority, pledge
its right to receive the Relinquishment Payments hereunder (but not this
Relinquishment Agreement itself) in connection with a bona fide commercial
financing from a financial institution, pension fund, insurance company, pooled
equity fund or other similar type of entity. In addition, on or after December
31, 2001, TCA or its Permitted Assignees, if applicable (the "Assignor"), may
assign this Relinquishment Agreement or the rights hereunder without the
Authority's consent upon compliance with the following requirements: (i) the
Assignor shall promptly give the Authority written notice of the terms and
conditions of any proposed assignment (the "Assignment Offer"), together with
information regarding the proposed assignee and such additional information
as the Authority may reasonably request and (ii) the Authority shall have
fifteen (15) days after receipt of the Assignment Offer to elect, by written
notice delivered to Assignor within such fifteen (15) day period to accept such
Assignment Offer. If the Authority timely elects to accept the Assignment
Offer, the Authority shall have a period of sixty (60) days following such
election to close thereunder. If the Authority does not timely elect to
accept the Assignment Offer or thereafter fails to close thereunder, then the
Assignor may assign this Relinquishment Agreement for a period of one hundred
eighty (180) days thereafter to such third party in accordance with the terms of
the Assignment Offer.
(b) The Authority may, without the consent of TCA, but subject to
applicable law, assign this Relinquishment Agreement to the Tribe, another
instrumentality of the Tribe or an entity wholly owned by the Tribe if such
assignee owns or conducts the business of the Facilities and is in compliance
with Section 7.4 on the date of such assignment. In the event of any such
permitted assignment, the assigning party shall be relieved of its obligations
under this Relinquishment Agreement which accrue from and after the date of
the assignment, provided that the assignee shall assume in writing the
obligations of the assignor under this Relinquishment Agreement and agree to
perform and be bound by the terms and provisions hereof effective from and
after the date of such assignment.
16.8 Severability. The invalidity of any one or more provisions hereof
or of any other agreement or instrument given pursuant to or in connection with
this Relinquishment Agreement shall not affect the remaining portions of this
Relinquishment Agreement or any such other agreement or instrument or any part
thereof, all of which are inserted conditionally on their being held valid in
law; and in the event that one or more of the provisions contained herein or
therein should be invalid, or should operate to render this Relinquishment
Agreement or any such other agreement or instrument invalid, this Relinquishment
Agreement and such other agreements and instruments shall be construed as if
such invalid provision had not been inserted. Notwithstanding the foregoing,
the invalidity of any of Sections 2(a), 3 or 6.1 hereof shall render the entire
Relinquishment Agreement invalid.
16.9 Entire Agreement. This Relinquishment Agreement (including any
exhibits referred to herein) represents the entire agreement between the
parties hereto with respect to the subject matter hereof. No other
representations, warranties, promises or agreements, express or implied, shall
exist between the parties unless such representations, warranties, promises or
agreements are in writing and bear a date subsequent to the date of this
Relinquishment Agreement.
16.10 Headings. The headings used in this Relinquishment Agreement are
for the convenience of the parties only and shall not modify nor restrict any
of the terms or provisions hereof.
16.11 Waivers. No failure or delay by TCA or the Authority to insist
upon the strict performance of any covenant, agreement, term or condition of
this Relinquishment 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 Relinquishment 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 Relinquishment Agreement, but
each and every covenant, agreement, term and condition of this Relinquishment
Agreement shall continue in full force and effect with respect to any other then
existing or subsequent breach thereof.
16.12 Periods of Time. Whenever any determination is to be made or action
is to be taken on a date specified in this Relinquishment Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
State of Connecticut or the Tribe, then in such event said date shall be
extended to the next day which is not a Saturday, Sunday or legal holiday.
16.13 Consents and Approvals. Where approval or consent or other action
of the Authority, or any agent or political subdivision of the Authority, is
required, such approval shall mean the written approval of the Management Board
evidenced by a duly enacted resolution thereof, or, if not provided by
resolution of the Management Board, the written approval of such other person
or entity designated by resolution of the Management Board.
16.14 Tolling of this Relinquishment Agreement. If any Tolling Event
occurs, the Authority shall give prompt notice thereof to TCA. If, within
thirty (30) days following receipt of such notice, TCA delivers written notice
to the Authority electing to implement this Section 16.14, then the Term shall
be tolled for such number of full calendar months commencing with the month
immediately following such Tolling Event and ending with (and including) the
calendar month immediately prior to the Recommencement Month (the "Tolling
Period"). The expiration of this Relinquishment Agreement (and the obligations
of the Authority to make payments of the Relinquishment Payments hereunder)
shall be extended for such number of full calendar months included in the
Tolling Period. During the Tolling Period, the Authority shall have no
obligation to make payments of any Relinquishment Payments.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Relinquishment
Agreement on and as of the date first written above.
THE AUTHORITY:
MOHEGAN TRIBAL GAMING AUTHORITY
By:___________________________
Name: Roland Harris
Its: Chairman of the Management Board
TCA:
TRADING COVE ASSOCIATES, a Connecticut partnership
By: WATERFORD GAMING, L.L.C.
Its: General Partner
By: LMW INVESTMENTS, INC., member
By:_______________________
Name: Len Wolman
Its: President
By: SLAVIK SUITES, INC., member
By:_______________________
Name: Len Wolman
Its: Vice President
By: SUN COVE LTD.
Its: General Partner
By:________________________
Name: Howard B. Kerzner
Its: President
JOINDER
The Mohegan Tribe of Indians of Connecticut hereby agrees to comply with
Sections 9, 12 and 13 of this Relinquishment Agreement.
Date: THE MOHEGAN TRIBE OF INDIANS OF CONNECTICUT
By:_________________________
Name: Roland Harris
Title: Chairman of the Management Board
Execution Copy
DEVELOPMENT SERVICES AGREEMENT
THIS DEVELOPMENT SERVICES AGREEMENT (as further supplemented or amended
from time to time, the "Development Agreement") is made this 7th day of
February, 1998 between the Mohegan Tribal Gaming Authority (as further defined
below, the "Authority"), an instrumentality of The Mohegan Tribe of Indians of
Connecticut, a federally recognized Indian tribe (as further defined below,
the "Tribe"), and Trading Cove Associates, a Connecticut partnership (the
"Developer").
RECITALS
A. The Tribe is the beneficial owner of land located in the State of
Connecticut which is owned by the United States of America in trust for the
benefit of the Tribe pursuant to the Tribe's recognized powers of
self-government, and the statutes and ordinances of the Tribe (the "Property").
B. On behalf of the Tribe, the Authority has constructed a casino known
as Mohegan Sun on the Property to improve the economic conditions of the Tribe's
members and is now seeking development and expertise from Developer for the
following "Project": the construction of a new casino consisting of
approximately 100,000 square feet of gaming and related commercial space within
such casino, a luxury hotel containing approximately 1,500 guest rooms and
customary amenities, a convention/events center with indoor seating for
approximately 10,000 patrons and 100,000 square feet of convention space and
related food and beverage and parking facilities and other related
infrastructure, and any modifications of the foregoing elements agreed to by
the parties.
C. The Authority, on its own behalf and on behalf of the Tribe, and
Developer desire to replace, supersede and terminate all existing and prior
agreements, arrangements and understandings with respect to the design,
construction, equipping and opening of any gaming or non gaming facilities
between the Tribe and/or the Authority and Developer, including, without
limitation, (i) that certain Amended and Restated Gaming Facility Development
and Construction Agreement dated September 1, 1995 and approved by the Bureau
of Indian Affairs on September 29, 1995 (the "Gaming Development Agreement"),
which grants to Developer the exclusive right to develop certain facilities as
described therein, and (ii) that certain Hotel/Resort Facility Development and
Construction Agreement dated July 12, 1994 (the "Hotel Development Agreement"),
which grants Developer the exclusive right to develop certain hotel/resort
facilities described therein.
D. The Authority desires to grant Developer the exclusive right and
obligation to provide development services in respect of the design,
construction, equipping and opening of the Project upon the terms and conditions
set forth herein.
NOW THEREFORE, in consideration of the mutual covenants, conditions and
promises herein contained, the receipt and sufficiency of which hereby are
acknowledged, the Authority and Developer agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Capitalized terms used in this Development Agreement shall have the
meanings set forth below:
"Affiliate" means, with respect to the Person in question, any Person
controlling, controlled by or under common control with, such Person. For the
purposes hereof, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
the Person in question.
"Architect" means, as applicable from time to time, the design architect
(if retained) and/or the architect of record for the Project employed pursuant
to Section 4.2 below.
"Authority" means the Mohegan Tribal Gaming Authority, acting by the
Management Board, or any other instrumentality of the Tribe with the authority
to exercise the regulatory and proprietary authority of the Tribe over the
gaming and/or non-gaming facilities located on the Property in accordance with
the Mohegan Tribal Constitution, the Tribe's Gaming Ordinance, the Tribe's
ordinance establishing the Mohegan Tribal Gaming Authority, the Compact, the
IGRA or other applicable law, and any successor and assignee thereto.
"Authority Representative" has the meaning set forth in Article 3 below.
"Bid Packages" has the meaning set forth in Section 5.1 below.
"Bureau of Indian Affairs" is the Bureau of Indian Affairs of the
Department of the Interior of the United States of America.
"Certified Entities" has the meaning set forth in Section 8.1 below.
"Compact" means the tribal-state Compact entered into between the Tribe
and the State of Connecticut pursuant to the IGRA, as the same may be amended
from time to time, or such other Compact as may be substituted therefor.
"Completion Date" means the date upon which the Authority receives, with
respect to the Project: (i) a certificate from the Architect, as required
pursuant to the terms of the Architect's agreement, certifying that the
Project has been constructed in accordance with the Plans and Specifications
therefor and all applicable building, life/safety, environmental and other
laws and regulations applicable to the design and construction of the Project;
(ii) a certificate from Developer stating that it has completed all of its
obligations hereunder; (iii) certificates of such professional designers,
inspectors or consultants or opinions of counsel as the Authority reasonably
may determine to be appropriate verifying completion of the Project in
compliance with all Legal Requirements; and (iv) the Project is fully stocked,
staffed (including, without limitation, compliance with Section 8.8 below) and
ready to open to the public.
"Contract Documents" has the meaning set forth in Section 5.2 below.
"Contractors" has the meaning set forth in Section 5.1 below.
"Construction Financing" means the financing to be obtained by, and/or
committed to, the Authority sufficient, as determined by the Authority, for
the purposes of the design, construction, equipping and staffing of the Project.
"Construction Manager" means the professional employed pursuant to
Section 4.3 below.
"Cost Estimator" has the meaning set forth in Section 2.3 below.
"Design Development Documents" has the meaning set forth in Section 4.5
below.
"Developer" has the meaning set forth in the introductory paragraph hereof.
"Development Agreement" has the meaning set forth in the introductory
paragraph hereof.
"Development Fee" has the meaning set forth in Article 9 below.
"Director of Regulation" means the director of gaming operations appointed
by the Authority pursuant to the Tribe's Gaming Ordinance.
"Effective Date" means, the first (1st) day of the first (1st) calendar
month following the later of (a) the date the Authority receives all Required
Approvals with respect to the Development Agreement, or (b) closing of the
Proposed Financing.
"Executive Project Committee" means the Authority Representative, the
Project Executive and senior executives of each of the Architect and the
Construction Manager.
"Final Budget" has the meaning set forth in Section 5.3 below.
"Force Majeure Causes" means causes beyond the reasonable control of a
party to this Development Agreement, including casualties, war, insurrection,
strikes, lockouts and governmental actions (but excluding causes which can be
controlled by the expenditure of money in accordance with good business
practices).
"Gaming Development Agreement" has the meaning set forth in Recital C
hereof.
"Hotel Development Agreement" has the meaning set forth in Recital C
hereof.
"IGRA" means the Indian Gaming Regulatory Act of 1988, 25 U.S.C. §
2701 et seq., as amended from time to time.
"Key Personnel" means collectively the general manager of operations for
each major element of the Project, and the director of sales for each major
element of the Project, (or the equivalent of either of the foregoing
positions).
"Legal Requirements" means singularly and collectively all applicable
laws, including, without limitation, the Tribe's Gaming Ordinance, the Tribal
Employment Rights Ordinance, all other laws or regulations of the Tribe, the
IGRA, the Compact and applicable federal and Connecticut statutes, laws and
regulations.
"MTC Court" means the Gaming Disputes Court of the Tribe.
"NIGC" means the commission established pursuant to 25 U.S.C. Section 2704.
"Person" means any individual, sole proprietorship, corporation, general
partnership, limited partnership, limited liability company or partnership,
joint venture, association, joint stock company, unincorporated association,
instrumentality or other form of entity.
"Plans and Specifications" means the detailed plans and specifications
for the construction of the Project prepared pursuant to Section 4.6 below.
"Preliminary Budget" has the meaning set forth in Section 2.3 below, as
such may be modified from time to time in the Authority's sole and absolute
discretion in accordance with this Development Agreement.
"Project" has the meaning set forth in Recital B hereof, as modified in
accordance with the terms of this Development Agreement.
"Project Executive" has the meaning set forth in Section 2.1 below.
"Project Program" has the meaning set forth in Section 2.2 below, as
modified in accordance with the terms of this Development Agreement.
"Project Schedule" has the meaning set forth in Section 2.3 below.
"Property" has the meaning set forth in Recital A hereof.
"Proposed Final Budget" has the meaning set forth in Section 5.3 below.
"Proposed Financing" means the anticipated refinancing of certain of the
Authority's existing indebtedness, together with the Construction Financing.
"Proposed Project Program" has the meaning set forth in Section 2.2 below.
"Required Approvals" means the approval by the Bureau of Indian Affairs,
and/or the NIGC, to the extent those agencies determine such approval may be
required by law.
"Retail Consultant" has the meaning set forth in Section 2.4 below.
"Retail Facilities" means, if the Authority elects to pursue construction
of such facilities pursuant to Section 2.4 below, additional facilities
consisting of approximately 200,000 square feet of retail and restaurant
facilities and related parking facilities and other related infrastructure.
"Retail Facilities Architect" means the meaning set forth in Section 4.2
below.
"Retail Facilities Costs" has the meaning set forth in Section 2.4 below.
"Schematic Design Documents" has the meaning set forth in Section 4.5
below.
"Staffing Plan" has the meaning set forth in Section 8.8 below.
"Sun" means Sun International Hotels Limited.
"Term" has the meaning set forth in Article 10 below.
"Total Project Costs" means all costs of programming, budgeting,
designing, constructing, equipping and staffing the Project, including costs
related to professional services, but excluding all financing fees and expenses,
and interest payments on the Construction Financing prior to the opening of the
Project, which costs shall not exceed Four Hundred Fifty Million Dollars
($450,000,000), without the prior written approval of the Authority, which may
be withheld in its sole and absolute discretion.
"Tribal Employment Rights Ordinance" means the Tribal Gaming Authority
Employment Rights Ordinance enacted by the Authority on or about September 25,
1995 and any replacements thereof or amendments thereto adopted from time to
time, and all related or implementing ordinances and policies of the Authority
to give preference in recruiting and hiring to employees and Certified Entities.
"Tribe" means the Mohegan Tribe of Indians of Connecticut, a federally
recognized Indian tribe and its permitted successors and assigns.
"Tribe's Gaming Ordinance" means the Mohegan Tribal Gaming Ordinance No.
94-1, and any replacements or amendments thereto adopted from time to time,
and all related or implementing ordinances, which are enacted by the Tribe to
authorize and regulate gaming on the Tribe's reservation pursuant to IGRA.
ARTICLE 2
DEVELOPER
2.1 Retention of Developer. The Authority hereby retains Developer,
as its exclusive developer for the Project, to perform all required development
services relating to the programming (including concept development), design,
construction, equipping and staffing (pursuant to Section 8.8 below) of the
Project, upon, and subject to, the terms and conditions, and in consideration of
the payments, hereinafter set forth. Developer shall provide promptly and
diligently the services as hereinafter set forth as necessary to facilitate
the development of the Project and shall furnish, at its cost, a sufficient
number of trained personnel, as mutually agreed upon by Developer and the
Authority, with experience on projects of a scope and magnitude similar to the
Project, at all times as necessary to accomplish the same. The organizational
and reporting chart which describes the broad relationships and areas of
responsibilities to be used in the development of the Project is attached
hereto as Exhibit A. Within thirty (30) days of the full execution of this
Development Agreement, Developer, at its own cost and expense, shall (a)
appoint a senior executive with sufficient development, construction and project
management experience in the gaming and resort industry to be in charge of
coordinating the development, design and construction of the Project (the
"Project Executive"), and (b) provide to the Authority an initial staff outline
for the Project. The appointment of the Project Executive shall be subject to
the prior written approval of the Authority, in its sole and absolute
discretion. As soon as required (but in no event later than completion of the
Schematic Design Drawings), the Project Executive shall maintain a full-time
office and staff at the Property. Any substitution by Developer of the Project
Executive shall be subject to the Authority's prior written approval, in its
sole and absolute discretion.
2.2 Project Program. At a time which is mutually agreeable to the
Authority and Developer (but not later than thirty (30) days following full
execution of this Development Agreement) , Developer and the Authority shall
meet to review and discuss an initial draft of a Project brief, budget program
and schedule which outlines the key tasks and objectives for the Project.
Within thirty (30) days after such initial meeting, the Authority and
Developer shall meet a second time to review and update such information.
Within ninety (90) days following the full execution of this Development
Agreement (provided that the Authority and Developer may agree to extend such
period for an additional thirty (30) days), Developer shall provide to the
Authority a detailed program outline of the requirements for the Project, that
includes a conceptual program, design and construction objectives and
criteria, preliminary time schedules, amenities, preliminary space
requirements, infrastructure and support, preliminary cost estimates (based on
estimates prepared by the Cost Estimator) for each major element of the
Project and Developer's initial recommendations regarding the appropriateness
of proceeding with the design, construction and completion of the Project in a
series of independent stages (taking into account the desire of the Authority
to minimize disruptions to the operation of the existing facilities on the
Property) (the "Proposed Project Program"). The Project's theme shall reflect
the culture, history and art of the Tribe. The Authority shall either
approve, (in its sole and absolute discretion) or return with comments
consistent with the elements described in Recital B hereof and reasonable
construction practices and consideration of the limit on Total Project Costs,
on the Proposed Project Program within fifteen (15) days of delivery by
Developer. Developer shall modify the Proposed Project Program as required by
the Authority's comments and shall resubmit it for final approval within
fifteen (15) days (or such additional time as the extent of the comments
reasonably require). The final, approved proposal is hereinafter referred to
as the "Project Program".
2.3 Initial Cost Estimate and Submission of Project Schedule. (a)
Within thirty (30) days following full execution of this Development Agreement,
subject to compliance with the requirement set forth in Section 8.1 below,
during the period that the Project Program is being developed, Developer shall
recommend the selection and terms of employment by the Authority of a
professional cost estimator for the Project or portions thereof (the "Cost
Estimator"), which recommendation shall be subject to the approval of the
Authority, in its sole and absolute discretion. The Cost Estimator shall be
retained on terms recommended by Developer and approved by the Authority.
Within thirty (30) days after approval of the Project Program, the Cost
Estimator, under the direction of Developer, shall prepare more detailed cost
estimates, based upon the preliminary estimates contained in the Project
Program, for each major element of the Project and including pre-opening costs
relating to Section 8.8 (the "Preliminary Budget"), which shall be subject to
the approval of the Authority (which may be withheld in its sole and absolute
discretion). If such Preliminary Budget exceeds the ceiling on Total Project
Costs, Developer and the Authority shall work together either to revise the
Project Program as agreed, or to revise the ceiling on Total Project Costs, as
determined in the Authority's sole and absolute discretion.
(b) Within thirty (30) days following the approval by the Authority of
the Project Program, based upon the Project Program, Developer shall submit to
the Authority, for its approval, a more detailed schedule, which schedule shall
include, without limitation, target dates for the selection of all professionals
and consultants, completion of design and construction plans as described in
Article 4 below and initial conceptual budgets for the Project (the "Project
Schedule"). The Authority and Developer shall mutually agree upon target
commencement and completion dates for the design, construction, equipping and
opening of the Project (including stages thereof, if applicable).
2.4 Retail Facilities. Within thirty (30) days following full
execution of this Development Agreement, the Authority may elect, by written
notice to Developer, to pursue the development of the Retail Facilities with
Developer and in consultation with a retail development firm selected by the
Authority (the "Retail Consultant"). If the Authority so elects to pursue the
development of the Retail Facilities, the definition of "Project" in this
Development Agreement shall be deemed to include the Retail Facilities and all
terms and conditions set forth in this Development Agreement shall apply to
the Retail Facilities, except as expressly set forth herein, and except that
the ceiling for Total Project Costs shall be revised to incorporate the total
costs of designing, constructing, equipping and opening the Retail Facilities
(the "Retail Facilities Costs"). Developer and the Authority shall work with
the Retail Consultant to develop a program and a schedule for the Retail
Facilities in the manner described in Sections 2.2 and 2.3 above for the
Project and to determine the Retail Facilities Costs. Developer shall integrate
the construction of the Retail Facilities with the balance of the Project in
a manner agreed upon by the Authority, Developer and the Retail Consultant.
ARTICLE 3
APPOINTMENT OF AUTHORITY REPRESENTATIVE
The Authority, at its own expense, shall appoint a representative (the
"Authority Representative"), that is qualified to act as the principal liaison
with Developer in connection with the Project. The Authority Representative
may, at the Authority's option, have an office within Developer's on-site
office, shall participate in progress meetings pursuant to Section 8.4,
inspect work pursuant to Section 5.4 and coordinate all matters that require
the approval of the Authority. Unless otherwise indicated by the Authority,
any provisions in this Development Agreement requiring notice to the Authority
may be complied with by the giving of notice to the Authority Representative.
Unless otherwise provided in this Development Agreement or pursuant to the
written authorization of the Authority, however, the Authority Representative
shall have no right or authority to make decisions or take actions which bind
or require the consent of the Authority.
ARTICLE 4
DESIGN OF THE PROJECT
4.1 General Supervision. Developer shall represent the Authority and
act as the Authority's liaison with respect to the selection, direction and
management of the Architect selected pursuant to Section 4.2 and the
Construction Manager selected pursuant to Section 4.3, and any other
professionals engaged, in accordance with the terms of the Project Program, to
perform services in connection with the design and construction of any portion
of the Project. Subject to the limitations described herein, the Authority
shall delegate to Developer its responsibilities under any construction
management, architectural and other agreements with development professionals
in order to allow Developer to supervise, direct and administer the duties,
activities and functions of the Architect and the Construction Manager. Both
the Architect and Construction Manager shall review and advise the Authority
and Developer with respect to the Project Program.
4.2 Employment of the Architect. Within thirty (30) days of the
approval of the Project Program by the Authority, Developer shall prequalify
and interview architects with substantial and satisfactory experience in the
design and construction of hotel, resort, convention and gaming facilities.
The Architect shall be duly licensed to practice architecture in the State of
Connecticut, as required by applicable law, and (with respect to the architect
of record for the Project) shall be qualified to provide and/or secure and
supervise all necessary engineering and related consulting services in
connection with the design of the Project. The Authority shall advise
Developer in writing if it requires a design competition. The Authority shall
review and approve, in advance, the prequalification and design competition
(if required) criteria (which shall include, without limitation, a standard
form agreement prepared by Developer and all necessary specifications
developed by Developer). Developer shall advise the Authority Representative
concerning the status of, and the Authority may, at its option, participate
in, the prequalification, interview and design competition processes. Based
on the results of the design competition, subject to compliance with the
requirement set forth in Section 8.1 that preference be given to Certified
Entities, Developer shall recommend the selection and employment by the
Authority of the Architect to provide design services for the Project, which
recommendation shall be subject to the approval of the Authority, in its sole
and absolute discretion. Subject to the Authority's final approval and right
to participate in negotiations, Developer shall be responsible for preparing
and negotiating a contract with the Architect, which contract shall contain
such provisions for the protection of the Authority that are deemed
appropriate and are requested by the Authority. In the event the Authority
pursues the development of the Retail Facilities pursuant to Section 2.4
hereof, upon the mutual agreement of the Authority, Developer and the Retail
Consultant, an architect other than the Architect may be selected, as
described above in this Section 4.2, to perform the Retail Facilities design
services (the "Retail Facilities Architect"), in which event all provisions
regarding the Architect's role under this Development Agreement with respect
to the Retail Facilities shall apply solely to the Retail Facilities Architect.
4.3 Employment of Construction Manager. Within thirty (30) days of
the approval of the Project Schedule by the Authority, subject to compliance
with the requirement set forth in Section 8.1 that preference be given to
Certified Entities, Developer shall prequalify, interview and recommend the
selection and employment by the Authority of a construction manager with
sufficient experience in the construction of hotel, resort, convention and
gaming facilities, as necessary to complete the Project in the region where it
is located. The Construction Manager shall be properly licensed in the State
of Connecticut, as required by applicable law, and shall maintain a full-time
staff dedicated to a continuous presence at the Project. The Authority shall
review and approve, in advance, the prequalification and selection criteria
(which shall include, without limitation, a standard form agreement (consistent
with industry standards for owner/construction manager agreements) prepared by
Developer and all necessary specifications developed by Developer). Subject to
the Authority's final approval and right to participate in negotiations,
Developer shall be responsible for preparing and negotiating a contract with
the Construction Manager, which contract shall contain such provisions for
the protection of the Authority that are deemed appropriate and are requested
by the Authority.
4.4 Design, Construction and Furnishings Budgets. From time to time,
Developer, with the advice and assistance of the Architect and the Construction
Manager, shall update in writing the Preliminary Budget, consistent, in all
respects, with the Project Program and the Project Schedule, for the management,
supervision, design, construction, equipping and opening of the Project, which
update shall be subject to the approval of the Authority (which may be
withheld in its sole and absolute discretion). If such updated Preliminary
Budget exceeds the ceiling on Total Project Costs, Developer and the Authority
shall work together either to revise the Project Program and/or the Project
Schedule as agreed, or to revise the ceiling on Total Project Costs, as
determined in the Authority's sole and absolute discretion.
4.5 Design Development. Based upon, and consistent with, the
Preliminary Budget, Project Program and Project Schedule, the Architect, under
the direction of Developer, and in consultation with the Construction Manager
and/or the Cost Estimator, shall prepare "Schematic Design Documents"
consistent with industry standards which shall include, without limitation,
drawings and other documents illustrating the scale and relationship of the
proposed Project and the major divisions of each major element of the Project,
as well as a preliminary estimate of construction costs based upon the
proposed area, size and scope of each major element of the Project. The
Schematic Design Documents shall be submitted to the Authority for its review
and comment (consistent with the Project Program, the Project Schedule and the
Preliminary Budget) or approval, which approval shall not be withheld
unreasonably so long as such documents are consistent with the Project Program,
Project Schedule and Preliminary Budget.
Upon final approval of the Schematic Design Drawings for the Project by
the Authority (but not before receipt of the Required Approvals and closing of
the Construction Financing), the Architect, under the direction of Developer
and in consultation with the Construction Manager, shall prepare "Design
Development Documents" for the Project consistent with industry standards
which shall include, without limitation, drawings and other documents to fix
and describe the size and character of each major element of the Project as to
architectural, structural, mechanical and electrical systems, materials and
such other elements as may be appropriate. Further, the Architect,
Construction Manager and/or the Cost Estimator shall advise Developer and,
subject to the requirements of Section 4.4 above, update the Preliminary
Budget to the extent necessary. Following completion of any revisions which
Developer deems necessary to the Design Development Documents, Developer shall
submit copies thereof to the Authority, together with any necessary updates to
the Preliminary Budget (subject to the requirement of Section 4.4 above), for
the Authority's review and comment (consistent with the Project Program, the
Project Schedule, the Project Budget and the Schematic Design Documents) or
approval, which approval shall not be withheld unreasonably so long as the
Design Development Documents are consistent with the Project Program, Project
Schedule and approved Schematic Design Documents.
4.6 Construction Documents. Based upon, and consistent with, the
Project Schedule, approved Design Development Documents and Preliminary
Budget, the Architect shall prepare for Developer's approval, full construction
documents (the "Plans and Specifications") prepared so as to conform to all
Legal Requirements and to allow bids to be obtained on the work described
therein. The Plans and Specifications shall be consistent with industry
standards and shall include, without limitation, all architectural, mechanical,
electrical and plumbing drawings and specifications necessary to complete the
construction of the Project. In addition, subject to the requirements of
Section 4.4 above, the Architect and Construction Manager shall advise
Developer and update the Preliminary Budget to the extent necessary based upon
the Plans and Specifications. Following completion of any revisions which
Developer deems necessary to the Plans and Specifications, Developer shall
submit the Plans and Specifications, together with any necessary updates to
the Preliminary Budget, to the Authority for its review and approval, which
approval shall not be withheld unreasonably so long as the Plans and
Specifications are consistent with the Project Program, Project Schedule and
approved Design Development Documents.
4.7 Compliance with Construction Standards, Environmental Laws and
Regulations. The Project shall be designed and constructed so as to protect
the environment and the public heath and safety, as agreed upon by Developer
and the Authority. The design, construction and maintenance of the Project
shall, except to the extent waived in writing by the Authority, meet or exceed
all established standards pertaining to the Tribe or all building codes, fire
codes and safety and traffic requirements (but excluding planning, zoning and
land use laws, ordinances, regulations and requirements) which would be imposed
on the Project by existing local, state or federal laws or regulations which
would be applicable if the Project were located outside of the jurisdictional
boundaries of the Tribe, even though those requirements may not apply within
the Tribe's jurisdictional boundaries. Nothing in this Development Agreement
shall grant to the State of Connecticut or any political subdivision thereof
any jurisdiction (including but not limited to jurisdiction regarding zoning
or land use) over the Property or the design, construction, equipping and
opening of the Project.
4.8 Suspension of Obligations. On the earlier of (a) the date on which
the NIGC or the Bureau of Indian Affairs gives notice to Developer, the Tribe
or the Authority that the Required Approvals with respect to the Relinquishment
Agreement dated February 7, 1998 between the Authority and Trading Cove
Associates (the "Relinquishment Agreement") or this Development Agreement in
their current forms (including any changes mutually acceptable to the parties)
will not be granted or (b) the earlier of (i) six (6) months after the date of
execution of this Development Agreement or (ii) the date that the Schematic
Design Drawings are approved, if no response has been received from the NIGC
or the Bureau of Indian Affairs with respect to the Required Approvals of the
Relinquishment Agreement or this Development Agreement in their current forms
(including any changes mutually acceptable to the parties), Developer shall
not be authorized or required to provide any further services under this
Development Agreement, and all work relating to the development of the Project
shall cease, and shall not recommence until forms of the Relinquishment
Agreement and this Development Agreement agreeable to the Authority and
Developer have received the Required Approvals.
ARTICLE 5
CONSTRUCTION OF THE PROJECT
5.1 Employment of Contractors. Within thirty (30) days of the
Authority's approval of the Design Development Documents, the Construction
Manager, under the direction of Developer, shall begin to prequalify (in
accordance with criteria approved by the Authority) and interview contractors
with significant experience in the construction of comparable hotel, resort,
convention and gaming facilities in the region where the Property is located
based upon the need for such contractors as provided in the Project Schedule.
Thereafter, as may be required by the Project Schedule, the Construction
Manager, under the direction of Developer, shall prepare detailed bid packages
based upon the Plans and Specifications, which shall include, without
limitation, the Construction Manager's standard form agreement prepared under
the direction of Developer and approved by the Authority, and all necessary
performance specifications developed by or for Developer, with the assistance
of the Construction Manager (the "Bid Packages"). The Bid Packages shall be
subject to the Authority's prior written approval, in its sole and absolute
discretion. The Bid Packages shall be sent to at least three (3) pre-approved
contractors. Any bids not returned within the bidding period set forth in the
Bid Packages shall be disregarded unless the Authority elects to extend the
bidding period. Developer shall advise the Authority Representative
concerning the status of, and the Authority may, at its option, participate
in, the bidding processes. Based on the results of the bidding process and
subject to compliance with the requirement set forth in Section 8.1 that
preference be given to Certified Entities, Developer shall recommend the
selection and employment by the Authority of the contractors to construct and
equip the Project, which recommendation shall be subject to the approval of
the Authority, in its sole and absolute discretion. The approved contractors
shall be referred to herein as the "Contractors." Each of the Contractors
shall be properly licensed as required by applicable law and, if required by
the Authority, shall furnish a payment and performance bond or other guaranty
of performance reasonably satisfactory to the Authority, to cover the
construction and equipping of the Project. Neither Developer nor any Affiliate
of Developer shall be eligible to serve or be employed as a Contractor.
5.2 Contract Documents. Subject to the Authority's final approval
and its right to participate in negotiations, Construction Manager, under the
direction of Developer, shall be responsible for preparing and negotiating a
contract and other contract documents with the Contractors. The contract and
other contract documents with the Contractors (the "Contract Documents") shall
require the Contractors to construct and equip the Project in accordance with
the directives of the Construction Manager, the approved Plans and
Specifications and their approved bids and to be responsible for providing all
surety, administrative and other services, materials, equipment and labor
defined in the Contract Documents. The Contract Documents shall contain such
provisions for the protection of the Authority that are reasonably deemed
appropriate and are requested by the Authority and provide for insurance,
appropriate lien waivers and for construction schedules which include progress
payments and may include liquidated damages for delayed performance.
5.3 Final Budget. Within thirty (30) days following approval of the
Design Development Documents and commencement of preparation of the Plans and
Specifications, Developer, in consultation with the Architect, Construction
Manager and/or Cost Estimator shall prepare a proposed final budget for the
Project, which shall contain all costs related to the design, construction and
equipping of the Project, plus a contingency of ten percent (10%) of the hard
construction costs (the "Proposed Final Budget"). If the Proposed Final
Budget exceeds Total Project Costs, then Developer and the Authority shall
work together to either revise the Design Development Documents and/or the
Plans and Specifications as agreed, or revise the ceiling on Total Project
Costs, as determined in the Authority's sole and absolute discretion. Within
fifteen (15) days of submission thereof, the Authority shall either approve or
comment upon the Proposed Final Budget, which approval may be withheld in the
Authority's sole and absolute discretion. Developer shall modify the Proposed
Final Budget as required to conform to the Authority's comments and shall
resubmit it for final approval within fifteen (15) days (or such additional
time as the extent of the comments reasonably require) following receipt of
the Authority's comments. The approved budget shall be the "Final Budget."
Subject to the approval requirements set forth below, Developer may, after at
least fifteen (15) days prior written notice to the Authority (which shall
include an explanation): (i) revise the line items in the Final Budget from
time-to-time as necessary to reflect any unforeseen changes, variables or
events or to include additional, unanticipated items of expense, (ii)
reallocate part or all of the amount budgeted with respect to any line item to
another line item, and (iii) to make such other modifications to the Final
Budget, as Developer deems necessary. Any allocation of the contingency
contained in the Final Budget shall require the approval of the Authority. In
addition, the Authority shall receive written notices of all change orders,
and any change orders in excess of (x) Seven Hundred Fifty Thousand Dollars
($750,000) in any single instance, (y) Three Million Dollars ($3,000,000) in
the aggregate in any one month or, (z) Twelve Million Dollars ($12,000,000) in
the aggregate over the duration of the Project, shall, at the Authority's
option, require the prior written approval of the Authority (which may be
withheld in its sole and absolute discretion).
5.4 Supervision of the Contractor and Construction. The Construction
Manager, under the direction of Developer, shall supervise the Contractors
engaged to perform services in connection with the construction of the Project.
All Contractors shall be selected and employed in compliance with Section 8.1
of this Development Agreement. The Construction Manager, under the direction
of Developer, shall be responsible for the supervision, review and
administration of any and all Contract Documents or invoices during the
construction and close-out of the Project. Unless otherwise provided in this
Development Agreement, Developer shall have full power and authority to act on
behalf of the Authority in connection with any Contract Documents which have
been approved by the Authority; provided, however, that Developer shall not
have any authority to declare a default or exercise remedies under any Contract
Documents without the Authority's prior written approval, which may be withheld
in its sole and absolute discretion.
Developer and/or the Construction Manager, shall have control of and
charge and responsibility for, supervision of any Persons performing work on
the Property in connection with the Project. The Construction Manager, under
the direction of Developer and subject to review by the Architect, shall cause
the Contractors to construct the Project in accordance with the Plans or
Specifications and other requirements of the Contract Documents, including,
without limitation, any changes or modifications thereto approved by the
Authority, and shall not authorize the Contractors to pay or incur any
obligations not approved by the Authority (to the extent such approval is
required hereunder). Developer, in consultation with the Architect, the
Construction Manager and the Authority's Representative, shall review
applications for payment for submission to the Authority and review and
certify the amounts due. In addition, Developer, in consultation with the
Authority's Representative, shall supervise and assist the Architect and the
Construction Manager in: (a) interpreting and deciding matters concerning the
performance of any Contractor and the requirements of the Contract Documents;
(b) observing and evaluating the work performed and rejecting work which does
not conform to construction contracts and related documents; (c) using
reasonable efforts to cause the Contractors to pay punctually all sums due for
labor, materials, fixtures or equipment used or purchased in connection with
the construction of the Project; and (d) inspecting the work to determine the
dates of temporary occupancy, partial, substantial and final Completion of the
Project (which must be agreed to by the Architect and the Authority).
5.5 Late Payment Fees; Bonus; Delay Claims. The Authority and
Developer agree that time is of the essence in completing the Project and,
together with the Construction Manager, they may seek to include in certain
material Contract Documents, certain provisions that if a Contractor fails to
meet project schedules, the Contract Documents shall provide that such
Contractor shall pay to the Authority an amount to be determined by Developer
and the Authority for each calendar day that it fails to meet such project
schedules, as liquidated damages and not a penalty. In addition, subject to
the approval of the Authority (which may not be unreasonably withheld), the
Contract Documents may include a bonus payment if a Contractor completes its
work on the Project prior to the deadline therefor.
ARTICLE 6
SELECTION OF EQUIPMENT, FURNITURE AND FURNISHINGS
Subject to the Final Budget for the Project, Developer shall, through
itself or a purchasing agent retained by the Authority, arrange for the
selection of vendors and suppliers for purchase by the Authority of equipment,
furniture and furnishings required to operate the Project. Alternatively, at
the Authority's option, Developer shall arrange for the procurement of
equipment, furniture and furnishings on lease terms approved by the Authority.
All vendors and suppliers shall be selected and employed in compliance with
Section 8.1 below. Developer shall be responsible for the negotiation,
preparation, supervision, review and administration of any and all contracts,
agreements or invoices with vendors and suppliers, and, unless otherwise
provided in this Development Agreement, Developer, consistent with the terms
of the Final Budget, shall have full power and authority to act on behalf of
the Authority in connection with any contracts which have been approved by the
Authority with vendors and suppliers. Notwithstanding the foregoing, with
respect to any such contract in excess of Seven Hundred Fifty Thousand Dollars
($750,000), Developer shall not terminate such contract or exercise other
remedies with respect thereto without the Authority's prior written consent,
which may be withheld in its sole and absolute discretion.
ARTICLE 7
FUNDING REQUIREMENTS OF THE PROJECT
7.1 Tribe's Funding Obligations. Developer agrees to cooperate fully
with the Authority in the Authority's efforts to arrange the Construction
Financing. The Authority shall, prior to commencement of construction of the
Project, make available or otherwise cause to be established a development
fund into which shall be deposited all of the proceeds of the Construction
Financing. Said funds shall be designated exclusively for performing the
Authority's obligations under any agreements entered into with respect to the
management, supervision, design, construction, equipping and opening of the
Project. The funds procured under the Construction Financing shall be used to
discharge the Authority's obligations under any and all agreements entered
into for the management, supervision, design, construction, equipping and
opening of the Project, including, without limitation, consulting fees,
professional fees, on-site and off-site improvements, architectural,
engineering, contractors' fees and costs, furniture, signs, trade fixtures and
equipment necessary for implementing the operation of the Project, closing and
financing related costs, and interest as provided under the Construction
Financing.
7.2 Deadline for Construction Financing. Notwithstanding any contrary
provision contained herein, if the Authority fails to obtain Construction
Financing on or before December 1, 1998, the Authority shall provide Developer
with written notice that the Construction Financing has not been obtained,
together with written notice either, at its sole option that (a) the Authority
has elected to proceed with the design, construction, equipping and opening
of the Project based upon alternative financing arrangements or (b) the
Project has been suspended. Upon any such election to suspend the Project,
the Authority shall pay all amounts due to the Architect, the Construction
Manager or other Contractors for the period prior to the date of such
suspension and shall pay to Developer its reasonable out of pocket expenses
directly related to the Project Executive and the services provided in
connection with the performance of its duties hereunder prior to the date of
such suspension. If the Authority elects to proceed with the Project, the
Authority shall provide Developer with proof of alternative financing,
whereupon Developer shall proceed with its obligations pursuant to this
Development Agreement. If the Authority elects to suspend the Project,
Developer shall suspend its services under this Development Agreement pending
receipt from the Authority of a notice to proceed. If the Authority
subsequently obtains financing for the Project, the parties' obligations under
this Development Agreement shall be reinstated.
ARTICLE 8
ADDITIONAL DUTIES, OBLIGATIONS AND AUTHORITY OF DEVELOPER
8.1 Approval of Contractors, Vendors and Suppliers. Upon notice to the
Authority, Developer shall be responsible for determining the acceptability of
Contractors, vendors and suppliers proposed by the Architect and the
Construction Manager; provided, however, that if any Contractor, vendor or
supplier is to perform work with respect to the Project, including, without
limitation, performing labor or other services or delivering or installing any
materials, goods, equipment, furniture or furnishings, for an amount greater
than Seven Hundred Fifty Thousand Dollars ($750,000), the selection of such
Contractor, vendor or supplier must be approved in writing by the Authority.
In order to maximize the benefits of the Project to the Tribe and the
Authority, Developer shall implement procedures described in the Tribal
Employment Rights Ordinance or otherwise developed by the Authority so that
preference be given in the recruiting, prequalification, negotiation and
selection of the Architect and the Construction Manager and all Contractors,
vendors and suppliers to business entities or persons which have been approved
by the Authority (the "Certified Entities") in all employment categories
relating to the design, construction, equipping and opening of the Project.
If there are Certified Entities that are experienced in the relevant
employment category, the opportunity to compete for employment in such
employment category shall be made available to such Certified Entities. Only
in the event that the bids by such Certified Entities are unreasonable based
on commercially competitive standards or that the Certified Entities lack the
capability to complete the contract, shall the bidding with respect to such
employment category be reopened to entities or persons that are not Certified
Entities. If Developer or the Construction Manager determines that a Certified
Entity lacks the capability to complete a contract, Developer shall so notify
the Authority at least five (5) days before bidding therefor is opened to
entities or persons that are not Certified Entities, and Developer and the
Construction Manager shall require that the Certified Entities be considered
as a subcontractor with respect to portions of such contract for which they
are qualified.
8.2 Employment of Other Professionals. The Authority, in
consultation with Developer, shall select and employ other professionals,
including, without limitation, surveyors, attorneys, accountants and public
relations or advertising firms, to perform services required for the
Project.
8.3 Expenditures. Subject to variances and change orders
specifically permitted hereunder, Developer shall not authorize any
expenditure of funds other than expenditures authorized by the Authority as
set forth in the Preliminary Budget (as modified from time to time in
accordance with the terms hereof) or the Final Budget for the Project (as
modified from time to time in accordance with the terms hereof).
8.4 Progress Reports and Meetings. The Authority, the Project
Executive and the Construction Manager shall have weekly meetings (and other
meetings as may be needed) to discuss the progress of the Project. In
addition, on a monthly basis, the Executive Project Committee shall meet to
discuss all issues with respect to the Project, including, without limitation,
updates to the Project Schedule and Preliminary or Final Budget (as applicable),
any claims or disputes, the status of the work and all other relevant items.
Prior to such monthly meetings, Developer shall submit to the Authority monthly
progress reports showing the then present status of design and/or construction
of the Project. If the progress reports reflect a substantial deviation from
the budget or design or construction progress schedules approved by the
Authority, Developer shall submit to the Authority with Developer's design or
construction report an explanation thereof and proposed corrective steps, as
applicable.
8.5 Submission of Contracts. Developer agrees promptly to submit to
the Authority copies of all contracts and subcontracts relating to the Project
from time to time received by Developer and all other documents related to the
Project. Developer, with the assistance of the Construction Manager, shall
assist the Authority in complying with the terms of and maintain in full force
all contracts for design or construction of the Project and any surety bonds
issued in connection therewith. Developer shall give the Authority immediate
notice of any known failure of any party to comply with the terms of any such
contract or bonds and shall submit to the Authority copies of any correspondence
regarding an alleged default by any person in relation to any contract or
agreement relating to the Project, together with an explanation thereof and
proposed corrective steps.
8.6 Permits and Licenses. Except for permitting and licensing
requirements of the Tribe, Developer shall advise the Authority as to all
permitting and licensing requirements for the Project, and the Authority, in
consultation with Developer, shall obtain or cause to be obtained all permits
and licenses required for the design, construction equipping and opening of
the Project.
8.7 Maintenance of Records. Developer, the Construction Manager and
the Architect, shall maintain on the Property all books and records in
connection with the design, construction, equipping and opening of the Project,
together with all documents and papers pertaining to the Project, including,
without limitation, general maintenance of such full and detailed accounts as
may be necessary for proper financial management of the Project. All such
documents shall at all times be open to the inspection of the Authority. Copies
of such documents shall be provided to the Authority or the Authority's
Representative, and Developer shall cooperate with any audit of such books and
records. After the expiration or termination of this Development Agreement,
Developer shall deliver all such books and records together with all such
related documents and papers to the Authority, and Developer shall be entitled
to retain a copy.
8.8 Staffing of Project. (a) Developer shall have the responsibility
and authority to direct the selection, retention and training of all initial
employees performing regular services in connection with the management,
operation and maintenance of the Project on the Completion Date. No later than
sixty (60) days prior to the anticipated Completion Date of the Project (or
any portion thereof that will be opened for business), Developer shall submit
to the Authority, for its approval, a detailed staffing plan for all personnel
necessary to operate the Project (or portion thereof) in a first class manner,
which staffing plan shall include, without limitation, organizational charts,
a job classification system with job descriptions, salary levels and wage scales
(the "Staffing Plan"). The Staffing Plan shall be subject to the Authority's
review and approval (which approval may be withheld in its sole and absolute
discretion) and to compliance with the Tribal Employment Rights Ordinance.
(b) All prospective employees shall be subject to the Authority's
approval, which approval, with respect to Key Personnel, may be withheld in
the Authority's sole and absolute discretion. All Key Personnel and any and
all other employees as required by the Director of Regulation of the Authority
shall be subject to background checks to be performed by the Authority (and
the Authority shall have the right to reject any candidate for any position
based on the results thereof). In order to maximize the benefits of the
Project to the Tribe and the Authority, in accordance with the Tribal
Employment Rights Ordinance, Developer shall give preference in employment and
training for Key Personnel positions to qualified candidates recommended by
the Authority. In addition, in accordance with the Tribal Employment Rights
Ordinance, Developer shall give preference in recruiting, training and
employment by the Authority for all positions to qualified members of the
Tribe and their spouses and children in all job categories of the Project,
including, without limitation, management positions. Only if no tribal
members, spouses or children are qualified for a particular job opening may
other candidates be considered. Thereafter, preference shall be given to
qualified, enrolled members of other federally recognized Indian tribes.
Developer shall supervise all activities determined necessary by the Authority
to recruit and train Tribe members, spouses and children, including, without
limitation, providing job fairs for members of the Tribe and clearly specifying
in all job advertisements the preference for Tribe members.
(c) Notwithstanding anything contained herein to the contrary, from
and after the Completion Date of the Project (or any portion thereof which is
sooner opened for business), all decisions with respect to the management,
operation and maintenance of the Project (or portion thereof) shall be made
exclusively by the Authority.
8.9 Force Majeure Events. Notwithstanding anything in this
Development Agreement to the contrary, the parties hereto shall be excused
from their obligations hereunder to the extent and for so long as such party
shall be prevented from compliance by reason of "Force Majeure Causes",
provided notice of such inability to comply is given to the other party to
this Development Agreement within ten (10) days after the occurrence of the
applicable Force Majeure Cause.
ARTICLE 9
COMPENSATION TO DEVELOPER
The Authority shall pay to Developer as compensation forthe services set forth
herein, a fee in the amount of Fourteen Million Dollars ($14,000,000) (the
"Development Fee"). The Development Fee shall be paid as follows: on January
15, 2000 and thereafter within fifteen (15) days following the end of each
calendar quarter until the Completion Date, the Authority shall pay to
Developer a percentage of the Development Fee equal to the completion
percentage of the Project certified by Developer as of December 31, 1999 and
the end of each successive calendar quarter. The Authority shall make
payments of the Development Fee to Developer upon receipt of an application
for payment from Developer, which statement shall include evidence of
satisfaction of the foregoing conditions to payment.
ARTICLE 10
TERM
The "Term" of this Development Agreement shall commence on the Effective
Date and shall expire upon the earlier of (i) the Completion Date of the
Project in the event construction has commenced or (ii) ten (10) years from
the Effective Date of this Development Agreement.
ARTICLE 11
TERMINATION
Subject to Section 12.5 below, this Development Agreement may only be
terminated by the Authority or Developer if the other party commits any
material breach or fails to perform any material duty or obligation of this
Development Agreement. Upon learning of a material breach or default, the
non-breaching party shall send written notice of such material breach or
default to the breaching party. Subject to Section 12.5 below, if the
breaching party fails to cure the material breach or default within thirty
(30) days of receipt of such written notice from the non-breaching party, the
non-breaching party may terminate this Development Agreement by providing the
defaulting party with a notice of termination (which shall be immediately
effective).
ARTICLE 12
DISPUTE RESOLUTION
12.1 Authority's Consent to Suit. Subject to Section 12.5 below, the
Authority expressly waives its immunity from unconsented suit for the purpose
of permitting or compelling arbitration as provided in this Article 12, and to
be sued in any court of competent jurisdiction for any claims by Developer for
the purpose of compelling arbitration or enforcing any arbitration award or
judgment arising out of this Development Agreement. In no instance shall any
enforcement of any kind whatsoever be allowed against any assets of the
Authority other than the limited assets of the Authority specified in Section
12.4.
12.2 Arbitration. All disputes controversies or claims arising out
of or relating to this Development Agreement, or the termination of this
Development Agreement, shall be settled by binding arbitration in accordance
with the commercial arbitration rules of the American Arbitration Association
and the Federal Arbitration Act. The parties agree that binding arbitration
shall be the sole remedy as to all disputes arising out this Development
Agreement, unless the parties mutually agree otherwise. The arbitrator(s)
shall have no authority to award punitive damages and the parties and the
arbitrator(s) shall maintain strict confidentiality with respect to the
arbitration. In determining any matter, the arbitrator(s) shall apply the
terms of this Development Agreement, including, without limitation, Section
12.5, without adding to, modifying or changing the terms in any respect, and
shall apply the laws of the Tribe. All arbitration hearings shall be held at
a place designated by the arbitrator(s) in New London County, Connecticut.
12.3 Limitation of Actions. The Authority's waiver of immunity from
unconsented suit is specifically limited to the following actions and judicial
remedies: (i) the enforcement of an award of actual damages by arbitration
subject to Section 12.4; provided, however, that the arbitrator(s) and/or the
court shall have no authority or jurisdiction to order execution against any
assets or revenues of the Authority except undistributed or future revenues of
the Project and the existing Mohegan Sun casino; (ii) the enforcement of a
determination by an arbitrator that prohibits the Authority from taking an
action that would prevent Developer from performing this Development Agreement
pursuant to its terms, or that requires the Authority to specifically perform
any obligation under this Development Agreement; (iii) an action to compel
arbitration pursuant to Section 12.2; and (iv) an action to preserve the status
quo during disputes pursuant to Section 12.5.
12.4 Authority's or Tribe's Assets. Nothing in this Development
Agreement shall obligate or authorize the payment or encumbrance of any assets
or revenues of the Authority or the Tribe other than undistributed or future
revenues of the Project or the existing Mohegan Sun casino. Neither the Tribe
nor any director, officer or office holder, employee, agent, representative or
member of the Authority or the Tribe, as such, shall have any liability for
any obligations of the Authority under this Development Agreement or for any
claim based upon, in respect of, or by reason of such obligations or their
creation.
12.5 Limit of Damages Payable by Developer. Notwithstanding anything
in this Development Agreement to the contrary, Developer shall not be liable
hereunder for the payment of damages to the Authority in excess of the amount
of the Development Fee paid hereunder.
12.6 Performance During Disputes. The parties mutually agree that during
any kind of controversy, claim, disagreement or dispute, including, without
limitation, a dispute as to the validity of this Development Agreement, the
Authority and Developer shall continue their performance of the provisions of
this Development Agreement for a period of forty-five (45) days, provided
funds necessary to pay Project costs which continue to be incurred (other than
amounts in dispute) continue to be available.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 Authorization. The Authority and Developer represent and
warrant to each other that each has full power and authority to execute this
Development Agreement and to be bound by and perform the terms hereof. Each
party shall furnish evidence of such authority to the other. The Authority and
Developer each represent and warrant to the other that the execution, delivery
and performance of this Development Agreement shall not conflict with the
terms of their organizational documents, any agreement to which it is a party
or by which it is bound or any law, rule or regulation to which its subject.
13.2 Relationship. Developer and the Authority shall not be
construed as joint venturers or partners of each other by reason of this
Development Agreement, and neither shall have the power to bind or obligate
the other except as set forth in this Development Agreement. Developer is
retained by the Authority only for the purposes and to the extent set forth in
this Development Agreement, and Developer's relationship to the Authority
shall be that of an independent contractor.
13.3 Governing Law. The rights and obligations of the parties and
the interpretation and performance of this Development Agreement shall be
governed by the law of the Tribe, and, to the extent not addressed by the law
of the Tribe, by applicable federal law, and, to the extent not addressed by
the law of the Tribe or applicable federal law, the law of the State of
Connecticut, without regard to its principles regarding conflicts of law.
13.4 Amendment. No modification or amendment to this Development
Agreement shall be effective unless mutually agreed upon by both parties in
writing and unless such modification or amendment has received any required
regulatory approval.
13.5 Notices. All notices, demands, requests or other communications
which may be or are required to be given, served or sent to either party in
connection with the matters which are the subject of this Development
Agreement shall be in writing and shall be personally delivered to such party
or mailed first class, postage prepaid, or transmitted by a major overnight
commercial courier or by facsimile to the address for such party as set forth
below, or to such other address furnished by such parties for such purpose by
means of notice pursuant to this Section 13.5:
If to the Authority:
The Mohegan Tribal Gaming Authority
One Mohegan Sun Boulevard
Uncasville, CT 06382
Attention: Chairman of the Management Board
Phone: (860) 848-6100
Facsimile: (860) 848-6162
with a copy to:
Mohegan Tribal Gaming Authority
One Mohegan Sun Boulevard
Uncasville, CT 06382
Attention: Mr. Thomas Acevedo
Phone: (860) 848-6126
Facsimile: (860) 848-6162
If to Developer:
Trading Cove Associates
914 Hartford Turnpike
P.O. Box 60
Waterford, CT 06385
Attention: Mr. Len Wolman
Phone: (860) 442-4559
Facsimile: (860) 437-7752
with a copy to:
Sun International Hotels Limited
Coral Towers
P.O. Box N-4777
Paradise Island
Nassau, The Bahamas
Attention: Mr. Charles Adamo
Phone: (242) 363-2509
Facsimile: (242) 363-4581
Notices delivered by mail shall be deemed given five (5) days after such
mailing. Notices given by hand delivery shall be deemed given on the date of
delivery. Notices given by overnight commercial courier shall be deemed given
on the business day immediately following transmittal, and notices delivered
by facsimile shall be deemed given on the date of transmission if the
transmission is confirmed.
13.6 Third Party Beneficiary. This Development 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 Development Agreement and shall
not give rise to liability to any third party other than the authorized
successors and assigns of the parties pursuant to Section 13.7.
13.7 Successors and Assigns. The benefits and obligations of this
Development Agreement shall inure to and be binding upon the parties hereto
and their respective successors and assigns. This Development Agreement shall
not be assigned by Developer to an entity other than Sun or an Affiliate of
Sun without the prior written consent of the Authority (which may be withheld
in its sole and absolute discretion) and any required approvals by the Bureau
of Indian Affairs or its authorized representatives. At all times during the
term of this Development Agreement, Sun, or a wholly-owned subsidiary of Sun
must own at least fifty percent (50%) of the partnership interests in
Developer. The Authority may, without the consent of Developer, but subject
to any required approvals of the Bureau of Indian Affairs or its authorized
representative, assign this Development Agreement to the Tribe, another
instrumentality of the Tribe or an entity wholly owned by the Tribe organized
to conduct the Authority's gaming enterprise and the business of the Project.
In the event of any such permitted assignment by the Authority or its
authorized assignee, the assigning party shall be relieved of its obligations
under this Development Agreement which accrue from and after the date of the
assignment, provided that the assignee shall assume in writing the obligations
of the assignor under this Development Agreement and agree to perform and be
bound by the terms and provisions hereof effective from and after the date of
such assignment.
13.8 Severability. The invalidity of any one or more provisions
hereof or of any other agreement or instrument given pursuant to or in
connection with this Development Agreement shall not affect the remaining
portions of this Development Agreement or any such other agreement or
instrument or any part thereof, all of which are inserted conditionally on
their being held valid in law; and in the event that one or more of the
provisions contained herein or therein should be invalid, or should operate to
render this Development Agreement or any such other agreement or instrument
invalid, the parties agree to negotiate, in good faith, to modify or amend
such invalid provision to obtain for the parties the intended benefits of such
provision (or this Development Agreement and such other agreements and
instruments shall be construed as if such invalid provision had not been
inserted).
13.9 Entire Agreement. This Development Agreement (including any
exhibits referred to herein) represents the entire agreement between the
parties hereto with respect to the subject matter hereof. No other
representations, warranties, promises or agreements, express or implied, shall
exist between the parties unless such representations, warranties, promises or
agreements are in writing and bear a date subsequent to the date of this
Development Agreement.
13.10 Headings. The headings used in this Development Agreement are for
the convenience of the parties only and shall not modify nor restrict any of
the terms or provisions hereof.
13.11 Waivers. No failure or delay by Developer or the Authority to
insist upon the strict performance of any covenant, agreement, term or
condition of this Development 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 Development
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
Development Agreement, but each and every covenant, agreement, term and
condition of this Development Agreement shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof.
13.12 Periods of Time. Unless otherwise specified herein, all
references to "days" shall mean calendar days. Whenever any determination is
to be made or action is to be taken on a date specified in this Development
Agreement, if such date shall fall on a Saturday, Sunday or legal holiday
under the laws of the State of Connecticut or the Tribe, then in such event
said date shall be extended to the next day which is not a Saturday, Sunday or
legal holiday.
13.13 Consents and Approvals. Where approval or consent or other
action of the Authority, or any agent or political subdivision of the
Authority, is required, such approval shall mean the written approval of the
Management Board evidenced by a duly enacted resolution thereof, or, if not
provided by resolution of the Management Board, the written approval of the
Authority Representative (to the extent authorized by the Management Board) or
such other person or entity designated by resolution of the Management Board.
If the approval of Developer or the Authority is required hereunder, Developer
or the Authority, as the case may be, shall request such approval in writing,
which request shall specify the matter as to which such approval is requested
and provide reasonable detail regarding such matter. If Developer or the
Authority, as the case may be, does not receive a negative response or a
notice that more time and/or information is necessary to make a decision
(which notice shall specify the amount of time and/or the information
necessary), in writing, from such other party within fifteen (15) days
thereafter, such other party shall be deemed to have approved the matter
referred to in such request.
13.14 Government Savings Clause. This Development Agreement shall be
submitted to the Bureau of Indian Affairs for its approval pursuant to its
authority under 25 U.S.C. § 81 and the NIGC, to the extent required by
law. In addition, each party agrees to pursue such approval and 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, Bureau of Indian
Affairs, the office of the Field Solicitor, or any applicable statute, rule or
regulation in order to effectuate, complete, perfect, continue or preserve the
respective rights, obligations and interest of the parties to the fullest
extent permitted by law; provided that any such instrument, certification,
amendment, modification or other document shall not materially change the
respective rights, remedies or obligations of the parties under this
Development Agreement or related agreements or documents.
13.15 Termination of Prior Agreements. As of the Effective Date, the
Authority and Developer terminate all prior agreements, arrangements or
understandings and all covenants, terms and provisions contained therein with
respect to development and construction of facilities on the Property,
including, without limitation, the Gaming Development Agreement and the Hotel
Development Agreement.
13.16 Representation before Public Bodies. Without the prior written
consent of the Authority, Developer shall have no right or authority to
represent the Authority before public and governmental bodies in connection
with any zoning, environmental, site, easement, title, design, construction or
other matter related to the Project.
13.17 Non-Impairment of Agreement. The Tribe shall not take any action,
enter into any agreement, amend its constitution or enact any ordinance, law,
rule or regulation that would prejudice or have a material adverse affect on
the rights of Developer under this Development Agreement. Neither the Tribe
nor any committee, agency, board or other official body of the Tribe shall, by
exercise of the police power, eminent domain or otherwise, act to modify,
amend or in any manner impair the obligations of the parties under this
Development Agreement without the written consent of Developer. Any such
action or attempted action shall be void ab initio. The Tribe acknowledges
that the MTC Court has the authority to provide equitable relief to enforce
this provision.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Development
Agreement on and as of the date first written above.
THE AUTHORITY:
MOHEGAN TRIBAL GAMING AUTHORITY
By:____________________________
Name: Roland Harris
Its: Chairman of the Management Board
DEVELOPER:
By: WATERFORD GAMING, L.L.C.
Its: General Partner
By: LMW INVESTMENTS, INC., member
By:_______________________
Name: Len Wolman
Its: President
By: SLAVIK SUITES, INC., member
By:_______________________
Name: Len Wolman
Its: Vice President
By: SUN COVE LTD.
Its: General Partner
By:_______________________
Name: Howard B. Kerzner
Its: President
Date: Approved Pursuant to 25 U.S.C. § 81
United States Department of Interior
Bureau of Indian Affairs:
By:____________________________
Name:__________________________
Title:_________________________
JOINDER
The Mohegan Tribe of Indians of Connecticut hereby agrees to comply with
Section 13.17 of this Development Agreement.
Date: THE MOHEGAN TRIBE OF INDIANS OF CONNECTICUT
By:________________________
Name: Roland Harris
Title: Chairman of the Management Board
AGREEMENT
AGREEMENT made this ___ day of _________________ , 1998 by and among
WATERFORD GAMING, LLC, a Delaware limited liability company ("Waterford"),
SLAVIK SUITES, INC. a Michigan corporation, ("Suites"), LMW INVESTMENTS, INC.,
a Connecticut corporation ("LMW"), LEN WOLMAN ("Len"), MARK WOLMAN ("Mark"),
STEPHAN F. SLAVIK, SR., ("Slavik") and DEL J. LAURIA, ("Lauria"). For
convenience, Slavik, Lauria, Len and Mark are sometimes referred to as
"Contractors."
RECITALS
A. Waterford, Suites, LMW, among others, are parties to a Management
Services Agreement with TRADING COVE ASSOCIATES, a Connecticut partnership
("TCA"), dated as of September 29, 1995 and executed on September 10, 1997,
pursuant to which TCA pays Waterford, Suites, LMW and another party a
Management Services Fee (as defined therein) in exchange for providing certain
management services in connection with the Mohegan Sun Casino facility in
Montville, Connecticut ("Casino").
B. On November 8, 1996, Waterford, LMW, Slavik, Suites, Lauria, Len
and Mark entered into an agreement (the "November 8th Agreement") pursuant to
which Slavik, Lauria, Len and Mark were to be paid certain incentive
compensation for minimizing costs and maximizing earnings, all as therein
described.
C. On February 7, 1998 TCA, the Mohegan Tribe of Indians of
Connecticut and the Mohegan Tribal Gaming Authority entered into a
"Relinquishment Agreement" under which TCA agreed to relinquish (a) the
exclusive authority and responsibility of TCA to manage certain gaming
operations of the Casino and to train Mohegan Tribe members and others as set
forth in the Amended and Restated Gaming Facility Management Agreement (the
"Management Agreement") dated August 30, 1995 and approved by the National
Indian Gaming Commission on September 29, 1995, and (b) its exclusive right
and obligation to manage, operate and maintain certain hotel/resort operations
as described in a certain Hotel/Resort Management Agreement dated February 28,
1994, in return for the considerations (including certain relinquishment
payments over a period of 15 years) as set forth in said Relinquishment
Agreement, such relinquishment to take effect on the later of January 1, 2000
or the Effective Date as described in said Relinquishment Agreement.
D. Len has been employed by TCA at an annual salary of $250,000 and
in addition, is entitled to an incentive fee annually equal to .05% of the
gross revenues of the Casino, all as originally set forth in a letter from Sun
International dated November 27, 1995 (the "Sun Letter Agreement").
E. Suites' capital contributions to TCA were $1,955,871.
F. The parties hereto wish to set forth the terms and conditions of
Len's employment and compensation from Waterford whether or not the
Relinquishment Agreement takes effect.
NOW THEREFORE, the parties agree as follows:
PART A. EXECUTIVE SALARY
1. Employment and Salary. Commencing on the date hereof and
continuing through the End Date (as hereinafter defined), Waterford shall pay
to Len on a monthly, W-2 basis, $250,000 annually, reduced by amounts Len
receives as salary from TCA pursuant to the Sun Letter Agreement during the
applicable period. Len shall continue to perform management services for TCA
in respect of the Casino until such time as he ceases receiving any such
salary amounts from TCA pursuant to the Sun Letter Agreement.
2. Employment by Waterford Gaming, LLC
2.1 Term. The term ("Term") of Len's employment with Waterford shall
begin on the date on which Len ceases receiving the full amount of such
annual salary from TCA pursuant to the Sun Letter Agreement and shall continue
until the earliest to occur of (a) the date on which the Management Agreement
(referred to in Recital C hereof) terminates or ceases to be in full force and
effect, unless the Relinquishment Agreement takes effect by January 1, 2004
and, in such event, the last date on which TCA receives Relinquishment
Payments (as herein defined in the Relinquishment Agreement) (whichever of
such dates is applicable being the "End Date"), (b) Len's death, (c) Len's
Permanent Disability (as defined), and (d) Termination of this Agreement
pursuant to Section 8 below.
2.2 Duties. On and after the date on which Len's employment with
Waterford commences, as set forth in Section 2.1, Waterford will, during the
Term, employ Len to manage and supervise Waterford's management operations and
activities in a manner consistent with the policies and procedures established
by the Directors of Waterford. Len will devote such time and effort to the
business of Waterford as is necessary to enable him properly to perform his
duties hereunder. Nothing herein shall prevent Len from performing
independent contractor services on behalf of Waterford or employment services
or independent contractor services for related or unrelated third parties
provided that such services do not substantially interfere with services
performed by Len on behalf of Waterford.
2.2.1 Permanent Disability. Len's disability shall be permanent in the
event of his inability due to physical or mental illness or injury, to perform
his duties substantially in the same manner as prior to said injury or the
onset of illness, for a period of six (6) consecutive months, or nine (9)
months in any twelve (12) month period.
2.2.2 Compliance with Policies and Procedures. Len will comply with
Waterford's employment policies and procedures from time to time in effect, to
the extent not inconsistent with this Agreement.
2.3 Expense Reimbursement. In addition to the salary payable under
Section 1 above, Waterford will pay or reimburse Len, for reasonable and
necessary direct, out-of-pocket business expenses incurred by Len in the
performance of his duties under this Agreement during the Term, in accordance
with Waterford's policies and procedures for such reimbursements.
Reimbursement of the expenses contemplated by this Section 2.3 will be paid
within thirty (30) days of receipt of an invoice and documentation acceptable
to Waterford substantiating such expenses.
PART B INCENTIVE COMPENSATION
3. Temporary Deferral of Incentive Compensation.
3.1 Return of Investment Payments. Until such time as Suites has
received a return of investment payment ("ROI Payment") in the aggregate
amount of $1,858,077 plus an amount equal to ninety-five (95%) percent of
capital contributions and loans, if any, made by Suites to Waterford
subsequent to December 1, 1997, the parties hereto will instruct TCA:
(a) to promptly remit to Suites on a 1099 basis the full amount
other than salary payable by TCA to Len pursuant to the Sun
Letter Agreement and accrued since April 1, 1998, and
(b) to remit to Suites monthly on a 1099 basis the amount other
than salary otherwise payable to Len under the Sun Letter
Agreement until such time as the ROI Payment has been paid
in full.
(c) after satisfaction of the ROI Payment, to remit to Len
directly, on a monthly, W-2 basis the amount other than
salary due Len pursuant to the Sun Letter Agreement.
3.1.1 Payment to Contractors. Suites will pay to each of the
Contractors from April 1, 1998, until the ROI Payment has been paid and
satisfied in full, twenty-five (25%) percent of five one-hundredths of one
percent (.05%) of the Revenues (as defined in the Relinquishment Agreement
referred to in Recital C) accrued with regard to such period, but only to the
extent that Suites has sufficient funds to make such payments from funds
received from TCA pursuant to instructions contemplated by Sections 3.1(a) and
(b) hereof. Such payments will be made monthly on a 1099 basis as payment for
consulting services provided by the Contractors to Suites to enable Suites to
perform services for the benefit of TCA under the Management Services
Agreement referred to in Recital A, which services are being provided by TCA
for the benefit of the Mohegan Tribe of Indians of Connecticut and the Mohegan
Tribal Gaming Authority under the Management Agreement referred to in Recital
C. Such payments shall be adjusted and prorated on a quarterly basis. Any
adjustments for overpayment or underpayment due to the Contractors shall be
made no later than the date of final payment to the Contractors.
3.1.2 Additional Loans and Capital Contributions. Until the ROI Payment
is paid in full in the ordinary course, no loans or capital contributions
shall be made by Slavik or Suites to Waterford subsequent to the date hereof,
without the prior unanimous consent of the members of Waterford.
3.2 Satisfaction of ROI. The ROI Payment due Suites as described in
Section 3.1 and the satisfaction thereof shall be calculated as follows:
(a) Ninety-five percent (95%) of the capital contributions
(which totaled $1,955,871 as of November 8, 1996) made by
Suites to TCA; plus
(b) Ninety-five percent (95%) of all capital contributions and
loans made by Suites to Waterford whether on, prior to or
after the date of this agreement; less
(c) Forty-five percent (45%) of Suites cash balance of $635,447
as of November 8, 1996; less
(d) One-hundred percent (100%) of the Management Services Fee
paid to Suites and LMW by TCA pursuant to Letter Agreement of
October 19, 1996 from Suites, approved by Sun Cove Limited
and LMW and amended by the Management Services Agreement
referred to in Recital A and subsequently paid to Lauria,
Slavik, Mark and Len ("TCA Consulting Income"); less
(e) One hundred percent (100%) of the amounts paid to Suites by
TCA as described in Part B, Section 3.l hereof; less
(f) Forty-five percent (45%) of the aggregate distributions paid
to Suites and repayments of Suites loans in connection with
its equity or debt investments in any one or more of the
following:
(i) IRNM Hotel Investors, L.L.C., Wellington Associates
("Wellington"), Norman Hotel Venture I, Nutmeg Partnership, Southington
Associates, Wislac Investors and Pensacola Hotel, L.P. collectively ("IRNM")
(ii) Mystic Partnership ("Days Inn Mystic")
(iii) Whitehall Mansion Partners, LLC ("Whitehall")
(iv) Slavik Remote Entity, Inc. ("Slavik Remote")
(v) Mystic Venture II
(vi) Logan/Revere Liquor License; less
(g) Forty-five percent (45%) of Suites share of distributions
from Napert Bankruptcy; less
(h) Forty-five percent (45%) of Suites share of payments from
Lou Bosco; less
(i) Ninety-five percent (95%) of Suites share of distributions
from TCA or Waterford.
ROI Payments to date are reflected on Exhibit C. Notwithstanding anything in
this agreement to the contrary, the parties acknowledge and agree that the ROI
payments have been made and satisfied in full effective September 28, 1998.
4. Payment of Incentive Compensation by Waterford.
4.1 Obligations Through December 31, 2003. Commencing on the date
Suites has received the full amount of the ROI Payment and through December
31, 2003, Waterford, once all obligations to Senior Note Holders (as
identified in the Indenture between Waterford Gaming, LLC and Waterford Gaming
Finance Corp. Issuers and Fleet National Bank, Trustee dated as of November 8,
1996 12¾% Senior Notes due 2003) have been met shall, in connection
with Len's employment, pay Len an amount equal to 0.05% (five hundredths of
one percent) of the Revenues (as defined in the Relinquishment Agreement)
accrued with regard to such period, to the extent that Len has not received
such amount from TCA pursuant to the Sun Letter Agreement. Len acknowledges
that through the date of this Agreement, he has received such amounts from TCA
aggregating $402,680.
4.2 Waterford's Obligations On and After January 1, 2004. On and
after January 1, 2004, if the Relinquishment Agreement has become effective by
such date, and until the End Date, Waterford will pay to Len Incentive
Compensation on a W-2 basis based on the Revenues (as defined in the
Relinquishment Agreement) as a percentage of the projected revenues
("Projected Revenues") as set forth in Exhibit A and calculated as follows:
STEP ONE: Divide the Revenues by the Projected Revenues as set forth
on Exhibit A.
STEP TWO: Determine the Multiplier applicable to the ratio resulting
from STEP ONE by reference to Exhibit B.
STEP THREE: Multiply the Revenues with respect to the period in question
by the applicable Multiplier. The product is the Incentive
Compensation due to Len for the period in question,
pursuant to Section 4.2 which, together with the Incentive
Compensation payable pursuant to Section 4.1, is the
Incentive Compensation payable hereunder.
By way of illustration only: Assume actual Revenues for 2005 are
$1,500,000,000. The ratio is 1.19217 ($1,500,000,000 ÷
1,258,200,000). The ratio per schedule B is 0.08%. The Incentive
Compensation payable to Len is $1,200,000.
4.3 Timing and Manner of Payments. Payments to be made to Len under
Sections 4.1 and 4.2 shall be made on a monthly W-2 basis with the applicable
figures adjusted and prorated on a quarterly basis. Any adjustments for
overpayment or underpayment in the amount due to Len on an annual basis shall
be made as of the date of payment for the final month of the year.
4.4 Deferral of Cost Minimization Incentive Payments. In order to
reward Len for his greater contributions to the success of the Casino, and as
consideration for the payments to be made to the Contractors under Section
3.1.1 above and for the direct and indirect benefits that each of them
receives as a result of the success of the Casino, beginning after Suites has
received the full amount of the ROI Payment, each of the Contractors hereby
agrees to defer receipt of amounts payable to him by Suites at any given time
(the "Determination Date") under the November 8th Agreement (the "Cost
Minimization Incentive Payments"), until such time as Len has received the
payments he would be entitled to receive under Sections 1, 4.1 and 4.2 above
through the Determination Date.
4.5 Priority of Compensation. Payments of Incentive Compensation (or
deferred compensation in the event of termination by Waterford) by Waterford
shall be made to Len prior to any distributions by Waterford to its members;
provided that, if Permitted Quarterly Tax Distributions are withheld by the
Trustee for the Senior Note Holders identified in Section 4.1 above because of
an alleged default or violation under the Indenture referred to in Section 4.1
above or otherwise relating to the Notes to such Senior Note Holders, Len's
Incentive Compensation shall be subordinated to distributions to Waterford's
members in such amounts necessary to enable them to pay their taxes with
regard to income of Waterford.
PART C ITEMS OF GENERAL APPLICATION
5. Restrictive Covenants.
5.1 Competitive Activity. During the period in which Len is employed
pursuant to this Agreement and for one (1) year thereafter, Len will not
directly or indirectly including through or for any other person or entity
(including as joint venturer, owner, member, officer, director, employee,
independent contractor, shareholder, lender, partner, principal, consultant,
agent, operator, investor or trustee), within the State of Connecticut or the
State of Rhode Island engage in, conduct, or participate in the management or
operation of a casino. Nothing herein shall prevent or prohibit Len from
owning, directly or indirectly, as an investment, securities or other equity
interest in any entity or entities which conduct or engage in any business or
activity competitive with Waterford if such securities or equity interests are
listed for trading on a national or regional stock exchange or traded on the
over-the-counter market, provided that Len does not own in the aggregate more
than 1% of the outstanding securities and/or equity interests and has no other
affiliation or relationship with such corporation or other entity.
5.2 Corporate Opportunity. During the period in which Len is
employed and for thirty (30) days thereafter he will not, directly or
indirectly, including through or for any other person or entity (including as
joint venturer, owner, member, officer, director, employee, independent
contractor, shareholder, lender, partner, principal, consultant, agent,
operator, investor or trustee), conduct, participate or engage in, affiliate
or seek to affiliate with, or engage or receive any remuneration from, any
person or entity which engages in, conducts or participates in business or
activity that any of the other parties hereto, on or prior to the End Date,
evaluated or received for possible future involvement in any geographic area
where any of such other parties have been engaged in such business activity on
or prior to the End Date. Len shall advise Waterford in writing of the
opportunity, making full and fair disclosure of all material facts. Unless
Waterford notifies Len within the thirty (30) day period of its election to
pursue the opportunity and such election is by a vote of not less than 50% of
Waterford's directors, Waterford shall be deemed to have declined the
opportunity. The provisions of this Section 5.2 are in addition to and are
not intended to limit or modify the provisions of Section 5.1 above.
6. Unfunded Obligations.
6.1 Unfunded Obligations. It is understood that Waterford's
obligations to pay salary and Incentive Compensation to Len under this
Agreement are not funded, and it is agreed that Waterford will not be required
to set aside or escrow any monies in advance of any due dates of the payment
of monies to Len. All payments to be made to Len will be made from any cash
available after Waterford satisfies any of its debt obligations that are then
due and payable in accordance with their terms and after Waterford has funded
reserves determined reasonably appropriate by Waterford, such debts,
distributions and reserves are collectively referred to in this Agreement as
the "Senior Obligations". If Waterford is unable at any time to make the
payments to be made to Len under this Agreement, then such amounts will accrue
and be paid by Waterford if, to the extent and when Waterford reasonably
determines that it has cash available to make such payments and subject, in
all future periods, to Waterford's obligation to pay first the Senior
Obligations. In no event will the Members of Waterford be required to
contribute additional capital to Waterford or will Waterford be required to
borrow money in order to fund the payments to be made to Len under this
Agreement. Notwithstanding anything herein to the contrary, it will not
constitute a default under this Agreement if Waterford fails to make the
payments to Len contemplated by this Agreement due to a good faith
determination by Waterford that it has insufficient funds to make such
payments. This Section 6.1 does not and shall not in any way impair or
diminish the obligations of Suites as set forth in Section 7 hereof.
7. Guaranty by Suites. Because Suites is a member of Waterford, it
will be materially benefited by the services to be provided by Len under this
Agreement and, in order to derive such benefit, Suites hereby agrees that, to
the extent that Waterford does not have sufficient funds to make payments to
Len required by Sections 1, 4.1 or 4.2 above, Suites will make such payments
to Len on a 1099 basis, subject to the remainder of this Section 7. Any such
payments that Suites is to make pursuant to this Section 7 will be required
only to the extent that Suites has available cash from the sources identified
in subsection (d), (f) or (i) of Section 3.2. If and to the extent that
Waterford subsequently obtains funds that would be sufficient to pay amounts
previously paid by Suites to Len pursuant to this Section 7, after Waterford
has satisfied the Senior Obligations (as defined in Section 4.1) and the then
current monthly obligations to Len pursuant to Sections 1, 4.1 and 4.2, then
(a) Waterford will pay to Suites on a 1099 basis any amounts paid by Suites
pursuant to this Section 7, and (b) Suites will pay to each of the Contractors
on a 1099 basis twenty-five percent (25%) of any such refunded amounts but
only to the extent that any of them has not received the full amount of the
Cost Minimization Incentive Payments to which he would be entitled through the
time of the refund pursuant to the November 8th Agreement.
8. Termination.
8.1 Len will have the right to terminate this Agreement by written
notice to all other parties hereto at any time, with or without cause or
reason. Unless otherwise specified in any such notice of termination, this
Agreement will automatically terminate upon receipt of such notice. This
Agreement shall also automatically terminate upon Len's death or Permanent
Disability.
8.2 Waterford shall have the right to terminate Len's employment and
this Agreement for just cause by written notice to Len at any time upon the
affirmative vote of 50% of the directors of Waterford. Waterford shall also
have the right to terminate Len's employment under this Agreement other than
for just cause by written notice to Len at any time upon the affirmative vote
of a majority of the directors of Waterford. Unless otherwise specified in
any such notice of termination, this Agreement shall terminate upon Len's
receipt of such notice. As used herein, the term "just cause" shall mean
Len's conviction of a felony, theft of corporate assets by Len, his repeated
failure to comply with policies and procedures of Waterford after notice of
such non-compliance, Len's loss of his gaming license or Waterford's loss of
its gaming license as a result of Len's actions or inactions. Waterford's
right to terminate shall not empower it to terminate the rights and
obligations of Len and TCA in effect prior to termination.
8.3 Upon such termination, Len shall be entitled to salary and
reimbursement of expenses accrued to the date of termination pursuant to
Sections 8.1 or 8.2 or upon Len's death or Permanent Disability. If Len is
terminated by Waterford other than for "just cause," he will, however, also
continue to receive his salary through the End Date in addition to his
Incentive Compensation. In addition, no termination of this Agreement shall
terminate nor operate to terminate Waterford's obligation to pay Len Incentive
Compensation until the End Date as herein set forth in Part B, which
obligation shall survive such termination and shall continue as a deferred
compensation obligation to Len until satisfied in full. Len's rights upon
termination, death or Permanent Disability as herein expressed in this Section
8 shall constitute and comprise Len's sole rights upon termination, death or
Permanent Disability. Len's rights under this Section 8 are subject to the
provisions regarding the ROI Payment as described in Sections 3.1 and 3.2
hereof.
9. Remedies.
9.1 Equitable Relief. The covenants and undertakings contained in
Section 5 above relate to matters which are of a special, unique and
extraordinary character. A violation of any of the terms of any of such
Sections will cause irreparable injury to the other parties, the amount of
which will be extremely difficult, if not impossible, to estimate or determine
and cannot be adequately compensated by monetary damages alone. Therefore,
the other parties will be entitled, as a matter of course to seek an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of
any such terms by Len and such other persons as the court orders.
9.2 Modification. If for any reason a court determines that any part
of this Agreement is unreasonable in scope or otherwise unenforceable, such
provision will be deemed modified and fully enforceable, as so modified, to
the extent the court determines what would be reasonable and enforceable under
the circumstances.
10. Miscellaneous.
10.1 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be sufficient if it is in
writing and delivered personally, telecopied or mailed (by certified,
registered or first-class mail or by recognized overnight courier), postage
prepaid, and will be deemed given when so delivered personally or telecopied,
or if mailed by certified, registered or first-class mail, two days after the
date of mailing, or if mailed by recognized overnight courier, one day after
the date of mailing, as follows (or to any other address provided by a party
in accordance with this Section, provided that change of address notices will
be effective only upon receipt):
If to Len Wolman,
Mark Wolman or
LMW, or Waterford: 914 Hartford Turnpike
P.O. Box 715
Waterford, CT 06385
Telecopy: (860) 437-7752
with copy to: Lawrence J. Greenberg, Esq.
Suisman, Shapiro, Wool, Brennan, Gray & Greenberg, P.C.
2 Union Plaza, Suite 200
P.O. Box 1591
New London, CT 06320
Telecopy: (860) 443-8131
If to Waterford,
Suites, Slavik
or Lauria: c/o Slavik Suites, Inc.
32605 West Twelve Mile Road
Suite 350
Farmington Hills, MI 48334
Telecopy: (248) 488-5543
Attention: Del J. Lauria
(in addition a copy to 914 Hartford Turnpike, Waterford, CT as to Waterford)
With a copy in the
case of Waterford,
Suites, Slavik
or Lauria to: Sheldon P. Winkelman, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit , MI 48226
Telecopy: (313) 465-8000
10.2 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties with respect to the issues
encompassed herein regarding services to be provided by Len to Waterford and
payments to be paid to Len therefor by Waterford and supersedes any prior and
contemporaneous agreements, correspondence, term sheets, negotiations,
understandings, documents or commitments, written or oral, with regard to such
subject matter as contemplated by this Agreement. The provisions hereof will
not reduce, restrict, limit or modify payments, if any, due to Len by any
party hereto other than Waterford.
10.3 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and conditions of
this Agreement may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, the party granting the waiver. No delay
on the part of any party in exercising any right, power or privilege under
this Agreement will operate as a waiver of such right, power or privilege, nor
will any waiver on the part of any party of any right, power or privilege
under this Agreement, nor any single or partial exercise of any right, power
or privilege under this Agreement, preclude any other or future exercise of
such right, power or privilege or the exercise of any other right, power or
privilege under this Agreement.
10.4 Governing Law. This Agreement, and the rights, duties and
remedies of the parties relating to this Agreement and the subject matter of
this Agreement, will be governed by and construed in accordance with the laws
of the State of Connecticut, without regard to principles of conflicts of
laws.
10.5 Jurisdiction; Venue; Arbitration. If there is a dispute between
any of the parties hereto with regard to any of the matters set forth in this
Agreement or its subject matter, the parties will first use their best efforts
to resolve such dispute among themselves. If the parties are unable to
resolve such dispute within thirty (30) calendar days of the initiation of
such efforts, such dispute will be settled by arbitration in Philadelphia,
Pennsylvania or other place agreed to by Waterford and Len, which will be the
sole and exclusive procedure for resolution of any such dispute. Within ten
(10) calendar days of receipt of written notice from one party that it is
submitting the matter to arbitration, Len, on the one hand and either
Waterford or Suites on the other, will each designate in writing an arbitrator
to resolve the dispute who will, in turn, jointly select a third arbitrator
within twenty (20) calendar days of their designation, with the third
arbitrator to be selected in accordance with procedures established by the
American Arbitration Association. The arbitrators so designated will each be
a person experienced in commercial and business affairs who is not a
representative of any party and who has not received any compensation,
directly or indirectly, from any party or any affiliate of any party at any
time after the date of this Agreement or during the two (2) year period
preceding the date of this Agreement. The arbitration will be governed by the
Commercial Arbitration Rules of the American Arbitration Association in effect
at the time of initiation of such arbitration. The determination of the
arbitrators as to the resolution of any such dispute will be binding and
conclusive upon the parties. Each party will pay the fees and expenses of its
respective designated arbitrator and its own costs and expenses of the
arbitration. The fees and expenses of the third arbitrator will be paid
equally by Len and Waterford or Suites as the case may be. Any arbitration
award may be entered in and enforced by any court having jurisdiction thereof,
and the parties consent and commit themselves to the jurisdiction of the state
and federal courts of the State of Connecticut for purposes of the enforcement
of any arbitration award.
10.6 Interpretation and Certain Rules of Construction. This
Agreement is being entered into by competent persons who are experienced in
business and have had an opportunity to be represented by counsel. Therefore,
any ambiguous language in this Agreement will not necessarily be construed
against any particular party as the drafter of such language. The headings of
this Agreement are for convenience of reference only and will not limit or
otherwise affect the meaning or interpretation of any of the provisions of
this Agreement.
10.7 Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original but all of which together will
constitute one and the same Agreement.
10.8 Remedies; Attorneys' Fees.
(a) Except as otherwise provided in Section 8 above, the rights
and remedies provided for in this Agreement are cumulative with all other
rights and remedies available to either party at law, in equity, under any
other document or otherwise.
(b) If any party takes action against any other party to enforce
any of the terms, covenants, conditions or provisions of this Agreement or
because of a default by the other party under this Agreement, regardless of
whether litigation is commenced, the party entitled to prevail under this
Agreement will be entitled to recover from the other party its costs and
expenses (including reasonable attorneys' fees) incurred in connection with
such action.
10.9 No Assignment; Binding Effect.
(a) This Agreement may not be assigned, pledged or otherwise
transferred by Waterford, LMW, Suites, Slavik or Del Lauria with regard to Len
without Len's prior written consent, which will not be unreasonably withheld
except (1) to any person or entity succeeding to substantially all of the
assets of Waterford or Suites, including as a result of a consolidation,
merger, or similar transactions and (2) to any person or entity to which all
or substantially all of the assets or stock of Waterford or Suites has been
sold or assigned.
(b) This Agreement may not be assigned, pledged or otherwise
transferred by Len without the written consent of Waterford, which consent
will not be unreasonably withheld.
(c) Subject to the foregoing, this Agreement will be binding
upon and inure to the benefit of the parties to this Agreement and their
respective heirs, successors and permitted assigns.
10.10 Severability. If any provision of this Agreement is determined to
be illegal or invalid, such illegality or invalidity will have no effect on
the other provisions of this Agreement, which will remain valid, operative and
enforceable.
10.11 Parties in Interest. With the exception of the parties to this
Agreement, there will exist no right of any person or entity to claim a
beneficial interest in this Agreement or any rights occurring by virtue of
this Agreement, except that in the event of Len's death, his right to payments
under this Agreement shall pass to his designated beneficiary and if none, to
his estate. In addition, the parties acknowledge that none of LMW, Mark,
Lauria or Slavik will be entitled to enforce or receive the benefit of any of
the provisions of Sections 1, 2, 4.1, 4.2, 4.3, 4.5, 5, 6, 7 (other than
clause (b) of the last sentence of such Section), 8 or 9.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
WATERFORD GAMING, L.L.C., a Delaware Limited
Liability Company,
By: Slavik Suites, Inc., Member
By:________________________
its;____________________
By: LMW Investments, Inc., Member
By:________________________
its;____________________
LMW INVESTMENTS, INC.
By:________________________
its;____________________
SLAVIK SUITES, INC., a Michigan corporation
By:________________________
its;____________________
___________________________
Len Wolman
___________________________
Mark Wolman
___________________________
Stephan F. Slavik, Sr.
___________________________
Del J. Lauria
EXHIBIT A
PROJECTED REVENUES
------------------
Calender Year Projected Revenues
------------- ------------------
2004 $1,209,800,000
2005 1,258,200,000
2006 1,308,500,000
2007 1,360,800,000
2008 1,415,300,000
2009 1,471,900,000
2010 1,530,700,000
2011 1,592,000,000
2012 1,655,700,000
2013 1,721,900,000
2014 1,790,800,000
EXHIBIT B
RATIO MULTIPLIER
----- ----------
125% or greater .10% (one-tenth of one percent)
120% to 124.99% .09% (nine one-hundredths of one percent)
115% to 119.99% .08% (eight one-hundredths of one percent)
110% to 114.99% .07% (seven one-hundredths of one percent)
105% to 109.99% .06% (six one-hundredths of one percent)
95% to 104.99% .05% (five one-hundredths of one percent)
90% to 94.99% .04% (four one-hundredths of one percent)
85% to 89.99% .03% (three one-hundredths of one percent)
80% to 84.99% .02% (two one-hundredths of one percent)
75% to 79.99% .01% (one one-hundredths of one percent)
Less than 75% 0% (zero percent)
