-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D5cBQDelmEtU0Sh4C+R4YCZR39975zlo9KIrKBRLc3o1aizXL7+9O+f0VVt2zHcJ Jd9ECJA3waxJ4oYCuM8VRA== 0000927016-01-502334.txt : 20010813 0000927016-01-502334.hdr.sgml : 20010813 ACCESSION NUMBER: 0000927016-01-502334 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOHEGAN TRIBAL GAMING AUTHORITY CENTRAL INDEX KEY: 0001005276 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 061436334 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-80655 FILM NUMBER: 1704942 BUSINESS ADDRESS: STREET 1: 27 CHURCH LANE CITY: UNCASVILLE STATE: CT ZIP: 06382 BUSINESS PHONE: 2038480545 10-Q 1 d10q.txt FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 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: June 30, 2001 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 033-80655 ---------------- MOHEGAN TRIBAL GAMING AUTHORITY (Exact name of registrant as specified in its charter) Connecticut 06-1436334 (State or other jurisdiction of (IRS employer incorporation or organization) Identification No.) One Mohegan Sun Boulevard, 06382 Uncasville, CT (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (860) 862-8000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on which Registered ------------------- --------------------- None Securities registered pursuant to Section 12(g) of the Act: (Title of Class) None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [X] No [_] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MOHEGAN TRIBAL GAMING AUTHORITY INDEX TO FORM 10-Q
Page Number ------ PART I--FINANCIAL INFORMATION Item 1--Financial Statements Review Report of Independent Public Accountants....................... 1 Balance Sheets of Mohegan Tribal Gaming Authority as of June 30, 2001 (unaudited) and September 30, 2000................................... 2 Statements of Income of Mohegan Tribal Gaming Authority for the Three and Nine Months Ended June 30, 2001 and 2000 (unaudited)............. 3 Statements of Capital of Mohegan Tribal Gaming Authority for the Nine Months Ended June 30, 2001 and 2000 (unaudited)...................... 4 Statements of Cash Flows of Mohegan Tribal Gaming Authority for the Nine Months Ended June 30, 2001 and 2000 (unaudited)................. 5 Notes to Financial Statements of Mohegan Tribal Gaming Authority...... 6-13 Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 14-20 Item 3--Quantitative and Qualitative Disclosure of Market Risk.......... 21 PART II--OTHER INFORMATION Item 1--Legal Proceedings............................................... 22 Item 2--Changes in Securities........................................... 22 Item 3--Defaults upon Senior Securities................................. 22 Item 4--Submission of Matters to a Vote of Security Holders............. 22 Item 5--Other Information............................................... 22 Item 6--Exhibits and Reports on Form 8-K................................ 22 Signatures--Mohegan Tribal Gaming Authority............................. 23
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Mohegan Tribal Gaming Authority: We have reviewed the accompanying balance sheet of the Mohegan Tribal Gaming Authority (the "Authority") as of June 30, 2001 and the related statements of income for the three and nine month periods ended June 30, 2001 and 2000 and the statements of capital and cash flows for the nine months ended June 30, 2001 and 2000. These financial statements are the responsibility of the Authority'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 auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of the Mohegan Tribal Gaming Authority as of September 30, 2000, and the related statements of income, capital and cash flows for the three years then ended (not presented separately herein) and in our report dated December 1, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet of the Mohegan Tribal Gaming Authority as of September 30, 2000, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. Arthur Andersen LLP Hartford, Connecticut August 8, 2001 MOHEGAN TRIBAL GAMING AUTHORITY BALANCE SHEETS (in thousands)
June 30, September 30, 2001 2000 ----------- ------------- (unaudited) ASSETS ------ Current assets: Cash and cash equivalents........................... $ 76,239 $ 115,731 Receivables, net.................................... 7,891 7,161 Due from Tribe...................................... 27,637 824 Inventories......................................... 9,217 7,577 Other current assets................................ 5,904 4,478 ---------- ---------- Total current assets.............................. 126,888 135,771 Non-current assets: Property and equipment, net......................... 350,424 338,243 Construction in process............................. 640,554 264,999 Trademark, net...................................... 120,551 123,128 Other assets, net................................... 18,444 23,238 ---------- ---------- Total assets...................................... $1,256,861 $ 885,379 ========== ========== LIABILITIES AND CAPITAL ----------------------- Current liabilities: Current portion of capital lease obligations........ $ 1,739 $ 4,055 Current portion of relinquishment liability......... 46,897 56,646 Accounts payable and accrued expenses............... 79,986 57,601 Accrued interest payable............................ 21,540 10,625 ---------- ---------- Total current liabilities......................... 150,162 128,927 Non-current liabilities: Long-term debt...................................... 774,000 500,000 Relinquishment liability............................ 626,736 616,234 Capital lease obligations, net of current portion... 222 2,336 Other long-term liabilities......................... 45 -- ---------- ---------- Total liabilities................................. 1,551,165 1,247,497 ---------- ---------- Commitments and contingencies (Notes 5 and 7) Capital: Retained Earnings (Deficit)......................... (292,733) (362,118) Accumulated other comprehensive loss................ (1,571) -- ---------- ---------- (294,304) (362,118) ---------- ---------- Total liabilities and capital..................... $1,256,861 $ 885,379 ========== ==========
The accompanying accountants' review report and notes to the financial statements should be read in conjunction with the financial statements 2 MOHEGAN TRIBAL GAMING AUTHORITY STATEMENTS OF INCOME (in thousands)
For the For the For the For the Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000 ------------- ------------- ----------------- ----------------- (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Gaming................. $192,053 $177,993 $547,616 $518,512 Food and beverage...... 12,849 11,242 34,610 34,239 Retail and other....... 14,014 12,286 42,590 38,319 -------- -------- -------- -------- Gross revenues........ 218,916 201,521 624,816 591,070 Less--Promotional allowances............ (18,374) (16,712) (53,404) (50,741) -------- -------- -------- -------- Net revenues............ 200,542 184,809 571,412 540,329 -------- -------- -------- -------- Cost and expenses: Gaming................. 86,965 78,108 243,123 225,527 Food and beverage...... 6,442 5,565 18,462 17,429 Retail and other....... 7,002 3,771 22,476 15,896 General and administration........ 32,009 32,094 103,798 98,120 Pre-opening costs...... 3,724 1,381 7,040 3,398 Management fee......... -- -- -- 13,634 Depreciation and amortization.......... 8,503 7,500 22,025 22,786 -------- -------- -------- -------- Total costs and expenses............ 144,645 128,419 416,924 396,790 -------- -------- -------- -------- Income from operations.. 55,897 56,390 154,488 143,539 -------- -------- -------- -------- Other income (expense): Relinquishment liability reassessment (Note 7).............. (8,958) (5,763) (26,874) (17,290) Interest and other income................ 648 2,892 2,390 10,437 Interest expense....... (6,011) (8,132) (17,826) (31,291) Loss on disposition of assets................ (114) -- (114) -- Change in fair value of derivative instruments (Note 3).............. (810) -- (2,088) -- -------- -------- -------- -------- (15,245) (11,003) (44,512) (38,144) -------- -------- -------- -------- Income from continuing operations............. 40,652 45,387 109,976 105,395 Loss from discontinued operations............ (64) (159) (591) (465) -------- -------- -------- -------- Net income.............. $ 40,588 $ 45,228 $109,385 $104,930 ======== ======== ======== ========
The accompanying accountants' review report and notes to financial statements should be read in conjunction with the financial statements 3 MOHEGAN TRIBAL GAMING AUTHORITY STATEMENTS OF CAPITAL (in thousands)
For the Nine Months For the Nine Months Ended June 30, 2001 Ended June 30, 2000 ------------------- ------------------- (unaudited) (unaudited) Beginning balance...................... $(362,118) $(458,052) Net income............................. 109,385 104,930 Accumulated other comprehensive loss... (1,571) -- Distributions to Tribe................. (40,000) (32,245) --------- --------- Ending balance......................... $(294,304) $(385,367) ========= =========
The accompanying accountants' review report and notes to financial statements should be read in conjunction with the financial statements 4 MOHEGAN TRIBAL GAMING AUTHORITY STATEMENTS OF CASH FLOWS (in thousands)
For the Nine For the Nine Months Ended Months Ended June 30, 2001 June 30, 2000 ------------- ------------- (unaudited) (unaudited) Cash flows provided by operating activities: Net income....................................... $ 109,385 $ 104,930 Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation and amortization.................. 22,025 22,786 Loss on disposition of assets.................. 114 182 Provision for losses on receivables............ 288 542 Relinquishment liability reassessment.......... 26,874 17,290 Change in fair value of derivative instruments................................... 2,088 -- Changes in operating assets and liabilities: Increase in receivables and other assets....... (30,281) (32,210) Increase in accounts payable and accrued expenses...................................... 33,345 12,924 --------- --------- Net cash flows provided by operating activities.................................. 163,838 126,444 --------- --------- Cash flows used in investing activities: Purchase of property and equipment............... (28,524) (70,863) Increase in construction in process.............. (375,555) (79,834) Proceeds from asset sale......................... 89 -- --------- --------- Net cash flows used in investing activities.. (403,990) (150,697) --------- --------- Cash flows provided by (used in) financing activities: Distributions to Tribe........................... (40,000) (32,245) Relinquishment payments.......................... (26,121) (4,948) Payment on equipment financing................... (4,430) (9,076) Proceeds from issuance of long-term debt......... 274,000 -- Capitalized financing fees....................... (2,789) -- Defeasance trust asset........................... -- 135,507 Defeasance liability............................. -- (140,344) --------- --------- Net cash flows provided by (used in) financing activities........................ 200,660 (51,106) --------- --------- Net decrease in cash and cash equivalents.... (39,492) (75,359) Cash and cash equivalents at beginning of period... 115,731 276,598 --------- --------- Cash and cash equivalents at end of period......... $ 76,239 $ 201,239 ========= ========= Supplemental disclosures: Cash paid during the period for interest......... $ 25,078 $ 22,148 ========= =========
The accompanying accountants' review report and notes to financial statements should be read in conjunction with the financial statements 5 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS 1. Organization and Basis of Presentation: The Mohegan Tribal Gaming Authority (the "Authority"), established on July 15, 1995, is an instrumentality of the Mohegan Tribe of Indians of Connecticut (the "Tribe"). The Tribe established the Authority with the exclusive power to conduct and regulate gaming activities for the Tribe. Under the Indian Gaming Regulatory Act of 1988, federally recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal land, subject to, among other things, the negotiation of a tribal state compact with the affected state. The Tribe and the State of Connecticut have entered into such a compact (the "Mohegan Compact"), that was approved by the Secretary of the Interior. The Authority is governed by a Management Board, which consists of the nine members of the Tribal Council. The accompanying financial statements have been prepared in accordance with the accounting policies described in the Authority's 2000 Annual Report on Form 10-K and should be read in conjunction with the Notes to Financial Statements which appear in that report. The balance sheet at September 30, 2000, contained herein, was taken from audited financial statements, but does not include all disclosures contained in the Form 10-K and required by accounting principles generally accepted in the United States. Certain amounts in the 2000 financial statements have been reclassified. The reclassification has no effect on the Authority's net income. In the opinion of the Authority, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods have been included. The results reflected in the financial statements for the three and nine months ended June 30, 2001 are not necessarily indicative of expected results for the full year, as the casino industry in Connecticut is seasonal in nature. New Accounting Standard On June 30, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142 "Goodwill and Other Intangible Assets" to be effective for fiscal years beginning after December 15, 2001. Upon adoption of the Standard, the trademark will continue to be amortized on a straight-line basis over its estimated period of benefit, which was determined to be 37 years. However, under the new standard, the trademark will also be subject to at least an annual assessment for impairment. The Company believes no impairment of the trademark will be necessary upon adoption of this standard. 2. Discontinued Operations: On November 29, 2000 the Authority discontinued bingo operations in order to build a smoke-free slot area. Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB 30"), the financial statements of the Authority have been restated to reflect the disposition of bingo operations as discontinued operations. Accordingly, the revenues, costs and expenses have been excluded from the captions in the Statements of Income and have been reported as "Loss from discontinued operations." For the three and nine month periods ended June 30, 2001, $64,000 and $591,000 was recorded as loss from discontinued operations, respectively. The loss relates to severance pay and the disposal of bingo inventory. 6 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) 3. Financing Facilities: During 1999, the Authority issued $200 million in Senior Notes and $300 million in Senior Subordinated Notes and entered into a $500 million Bank Credit Facility. The proceeds from the financing were used to extinguish the existing Senior Secured Notes, defease the then existing Subordinated Notes, pay transaction costs for the financing and fund costs related to the expansion of Mohegan Sun ("Project Sunburst"). Senior Notes On March 3, 1999, the Authority issued the Senior Notes with fixed interest payable at a rate of 8.125 % per annum. Interest on the Senior Notes is payable semi-annually on January 1 and July 1. The notes mature on January 1, 2006. The Senior Notes are unsecured general obligations of the Authority and are subordinated to the syndicated $500.0 million reducing, revolving secured credit facility ("Bank Credit Facility") (see below). A total of 50% of the Relinquishment Agreement payment to Trading Cove Associates ("TCA") (see Note 7), a Connecticut general partnership, will rank equal in right of payment to the Senior Notes and the remaining 50% of this payment will rank junior in right of payment to the Senior Notes. As of June 30, 2001, accrued interest on the Senior Notes was $8.1 million. Senior Subordinated Notes On March 3, 1999, the Authority issued the Senior Subordinated Notes with fixed interest payable at a rate of 8.75% per annum. Interest on the Senior Subordinated Notes is payable semi-annually on January 1 and July 1. The notes mature on January 1, 2009. The Senior Subordinated Notes are unsecured general obligations of the Authority and are subordinated to the Bank Credit Facility (see below), to the Senior Notes and to 50% of the Relinquishment Agreement payment to TCA (see Note 7). The Senior Subordinated Notes rank equally to the remaining 50% of the Authority's Relinquishment Agreement payment obligations. As of June 30, 2001, accrued interest on the Senior Subordinated Notes was $13.1 million. Bank Credit Facility On March 3, 1999, the Authority entered into the $425.0 million Bank Credit Facility, which will mature in March of 2004. The Bank Credit Facility agreement provided the Authority the right to increase the Bank Credit Facility to an aggregate amount of $500.0 million within two years subsequent to the closing. In November 1999, the Bank Credit Facility was increased to $459.5 million. On November 30, 2000, the Authority exercised its right to increase the Bank Credit Facility to $500.0 million. The Bank Credit Facility is secured by a lien on substantially all of the Authority's assets, by a leasehold mortgage on the land on which Mohegan Sun is located, and by each of the Authority's cash operating accounts. At the Authority's option, interest will accrue on the basis of a 1-month, 3-month or 6-month London Inter-Bank Offer Rate ("LIBOR") based formula plus applicable spreads (based on the Authority's Total Leverage Ratio as defined in the Bank Credit Facility). One-month LIBOR as of June 30, 2001 was 3.86% and the applicable spread was 1.63%. Interest on each LIBOR loan, which is for a term of three months or less, shall be due and payable on the last day of the related interest period. Interest on each LIBOR loan, which is for a term of more than three months, is due and payable on the date which is three months after the date such LIBOR loan was made and every three months thereafter on the last day of the related interest period. The Bank Credit Facility will automatically reduce by 10% of the commitment as of the earlier of March 31, 2002 or the last full day of the first full fiscal quarter following the completion date of Project Sunburst. The Authority draws on the Bank Credit Facility primarily in connection with Project Sunburst. As of June 30, 2001, the Authority has borrowed $274.0 million under the Bank Credit Facility. Accrued interest on the Bank Credit Facility was $290,000 as of June 30, 2001. 7 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) The Authority's debt agreements require, among other restrictions, the maintenance of various financial covenants and terms including a fixed charge coverage ratio, and certain debt leverage ratios. As of June 30, 2001 and 2000, the Authority was in compliance with all financial covenant requirements. Derivative Instruments The Authority uses derivative instruments, including interest rate caps, collars and swaps in its strategy to manage interest rate risk associated with the variable interest rate on the Bank Credit Facility. The Authority's objective in managing interest rate risk is to ensure the Authority has appropriate income and sufficient liquidity to meet the Tribe and debt-holder obligations. The Authority does not believe that there is any material risk exposure with respect to derivative or other financial instruments. The Authority continually monitors these exposures and makes the appropriate adjustments to manage these risks within management's established limits. The Authority analyzes interest rate risk using various models that forecast cash flows of the liabilities and their supporting assets, including derivative instruments. The Authority is considered an "end user" of derivative instruments and engages in derivative transactions for risk management purposes only. On October 1, 2000, the Authority adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", designated all derivative instruments as cash flow hedging instruments and marked them to market. The Authority excludes the change in time value when assessing the effectiveness of the hedging relationships. All derivatives are evaluated quarterly and were deemed to be effective at June 30, 2001.
Notional Cost Market ----------- -------- ----------- Interest Rate Cap Strike Rate--8%.......................... $39,621,200 $410,000 $ 3,000 Interest Rate Collar Ceiling Strike Rate--8% Floor Strike Rate--6%.................... 25,704,800 295,000 (1,732,268) Interest Rate Swap Pay fixed--6.35% Receive Variable......................... 12,852,400 221,000 (1,003,760) ----------- -------- ----------- Total ................................. $78,178,400 $926,000 $(2,733,028) =========== ======== ===========
All derivative instruments are based on one-month LIBOR. One-month LIBOR was 3.86% on June 30, 2001. For the quarter ended June 30, 2001, the Authority recognized a net loss of $810,000 relating to the change in fair value of its derivative instruments, as reflected in the statements of income. The net loss is due to a decrease in the market value of the derivative instrument of approximately $90,000, offset by a reclassification of approximately $720,000 from accumulated other comprehensive loss. For the nine months ended June 30, 2001, the Authority recognized a net loss of $2.1 million relating to the change in the fair value of its derivative instruments, as reflected in the statements of income. Letters of Credit The Authority has available a $250,000 unsecured letter of credit that will expire on August 31, 2001 and a $550,000 letter of credit agreement that expires on April 16, 2002. The $550,000 letter of credit was reduced from $1.0 million on April 13, 2001. As of June 30, 2001, no amounts were drawn on the letters of credit. 8 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) 4. Leases: At June 30, 2001, the Authority was obligated under capital leases to make future minimum lease payments as follows:
For the fiscal year ending September 30, ---------------------------------------- (In Thousands) 2001.............................................................. $ 554 2002.............................................................. 1,493 2003.............................................................. -- ------- Total minimum lease payments...................................... 2,047 Amount representing interest...................................... (86) ------- Total obligation under capital leases............................. 1,961 Less: Amount due within one year.................................. (1,739) ------- Amount due after one year......................................... $ 222 =======
On April 18, 2001, the Authority paid $1.4 million to buy out two of its capital lease obligations. Operating lease expenses, excluding costs to obtain assets, were $1.8 million for the nine months ended June 30, 2000. No operating leases existed during the nine months ended June 30, 2001. 5. Commitments and Contingencies: Project Sunburst The Authority has received authorization from the Tribe to expend up to $960.0 million, excluding capitalized interest, on Project Sunburst. As of June 30, 2001, the Authority has spent $616.0 million, excluding capitalized interest on Project Sunburst. Project Sunburst expenditures for the remainder of fiscal 2001 are expected to total $158.5 million. The remaining $185.5 million is anticipated to be spent during fiscal 2002. The Mohegan Compact The Mohegan Compact stipulates that a portion of the revenues earned on slot machines must be paid to the State of Connecticut ("Slot Win Contribution"). For each 12-month period commencing July 1, 1995, the Slot Win Contribution shall be the lesser of (a) 30% of gross revenues from slot machines, or (b) the greater of (i) 25% of gross revenues from slot machines or (ii) $80 million. The Slot Win Contribution payments will not be required if the State of Connecticut legalizes any other gaming operations with slot machines or other commercial casino games within Connecticut (except those consented to by the Tribe and the Mashantucket Pequot Tribe). For the three months ended June 30, 2001 and 2000 the Authority incurred expenses associated with the Slot Win Contribution of $37.6 million and $34.2 million, respectively. The Authority incurred expenses associated with Slot Win Contribution totaling $104.4 million and $97.8 million, respectively for the nine months ended June 30, 2001 and 2000. Town of Montville Agreement On June 16, 1994, the Tribe and the Town of Montville (the "Town") entered into an agreement whereby the Tribe agreed to pay to the Town a recurring annual payment of $500,000 to minimize the impact to the Town resulting from decreased tax revenues on reservation land held in trust. Additionally, the Tribe agreed to 9 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) make a one-time payment of $3.0 million towards infrastructure improvements to the Town's water system. As of June 30, 2001, the Authority has fulfilled this obligation and paid $3.0 million to the Town of Montville for improvements to the municipal water system, which has been included in other assets in the accompanying balance sheets and is being amortized over 40 years. The Tribe has assigned its rights and obligations in this agreement to the Authority. Expansion Construction Management Agreement with Perini Building Company, Inc. The Authority has engaged Perini Building Company, Inc. ("Perini") as Construction Manager to provide construction management services for Project Sunburst. As Construction Manager, Perini will receive a fee of $20.5 million for services including, but not limited to, pre-construction review and construction phase contract administration. As of June 30, 2001, Perini has received $12.5 million of the $20.5 million fee which has been included in construction in process in the accompanying balance sheets. As a construction industry standard, the Authority retains a portion of the construction payments until satisfactory completion of individual contracts. As of June 30, 2001, construction retainage totaled $27.3 million, which has been included in accounts payable and accrued expenses in the accompanying balance sheets. The Construction Management Agreement contains a limited waiver of sovereign immunity to permit the commencement, maintenance and enforcement of any dispute, claim and/or cause of action arising under the Construction Management Agreement. In conjunction with the limited waiver of sovereign immunity, Perini may seek satisfaction of judgment against the undistributed and/or future revenues of Project Sunburst and/or the existing Mohegan Sun facility. Litigation The Authority is a defendant in certain litigation incurred in the normal course of business. In the opinion of management, based on the advice of counsel, the aggregate liability, if any, arising from such litigation will not have a material adverse effect on the Authority's financial position or results of operations. 6. Related Party Transactions: The Tribe provides governmental and administrative services to the Authority in conjunction with the operation of Mohegan Sun. For the quarters ended June 30, 2001 and 2000, the Authority incurred expenses of $2.7 million and $2.0 million, respectively for such services. The Authority incurred $8.2 million and $6.8 million for the nine months ended June 30, 2001 and 2000, respectively, for such services. Pursuant to the Priority Distribution Agreement between the Authority and the Tribe, Priority Distributions to the Tribe totaled $11.0 million and $1.0 million for the three months ended June 30, 2001 and 2000, respectively. Other Distributions to the Tribe for each of the three month periods ended June 30, 2001 and 2000 were $9.0 million. Priority Distributions to the Tribe for the nine months ended June 30, 2001 and 2000 were $13.0 million and $5.2 million, respectively. Other Distributions to the Tribe were $27.0 million for each of the nine month periods ended June 30, 2001 and 2000. 7. TCA Agreements: Management Agreement Previously, the Tribe and TCA had entered into the Amended and Restated Gaming Facility Management Agreement (the "Management Agreement"), pursuant to which the Tribe retained and engaged TCA, on an independent contractor basis, to operate, manage and market Mohegan Sun. 10 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) The Tribe assigned its rights and obligations under the Management Agreement to the Authority. TCA had a responsibility to manage Mohegan Sun in exchange for payments ranging from 30% to 40% of net income, before management fees, as defined, depending upon profitability levels. Management fees totaled $13.6 million for the nine months ended June 30, 2000. There were no management fees for the quarters ended June 30, 2001 and 2000 and for the nine months ended June 30, 2001 due to the termination of the Management Agreement. (See discussion of Relinquishment Agreement below.) Relinquishment Agreement In February 1998, the Authority and TCA entered into an agreement (the "Relinquishment Agreement") which superseded the Management Agreement effective January 1, 2000 (the "Relinquishment Date"). The Relinquishment Agreement provides that the Authority will make certain payments to TCA out of, and determined as a percentage of, the revenues generated by Mohegan Sun over a 15- year period commencing on the Relinquishment Date. The payments ("Senior Relinquishment Payments" and "Junior Relinquishment Payments"), each of which are calculated as 2.5% of Revenues, as defined, have separate payment schedules and priority. Payment of Senior Relinquishment Payments commenced on April 25, 2000, twenty-five days subsequent to the end of the first three-month period following the Relinquishment Date, and continue at the end of each three-month period occurring thereafter until April 25, 2015. Junior Relinquishment Payments commenced on July 25, 2000, twenty-five days subsequent to the end of the first six-month period following the Relinquishment Date and continue at the end of each six-month period occurring thereafter until July 25, 2015. Each Senior Relinquishment Payment and Junior Relinquishment Payment is an amount equal to 2.5% of the Revenues generated by Mohegan Sun over the immediately preceding three-month or six-month payment period, as the case may be. "Revenues" are defined as gross gaming revenues (other than Class II gaming revenue) and all other facility revenues (including, without limitation, hotel revenues, room service, food and beverage sales, ticket revenues, fees or receipts from convention /events center in the expansion and all rental or other receipts from lessees and concessionaires operating in the facility, but not the gross receipts of such lessees, licenses and concessionaires). TCA has notified the Authority that it does not agree with the Authority's treatment of certain marketing transactions that, in TCA's opinion, has resulted in a reduction in revenues subject to the Relinquishment Agreement. The Authority believes TCA's claim is without merit in its dispute of the treatment of marketing transactions. The amount in dispute does not have a material effect on the Authority's financial statements as of June 30, 2001. The Authority, in accordance with Financial Accounting Standards Board Statement No. 5 ("SFAS No. 5"), "Accounting for Contingencies," has recorded a relinquishment liability of the estimated present value of its obligations under the Relinquishment Agreement. A relinquishment liability of $549.1 million was established at September 30, 1998 based on the present value of the estimated future Mohegan Sun revenues utilizing the Authority's risk free investment rate. At June 30, 2001, the relinquishment liability was reassessed to be $673.6 million from $672.9 million as of September 30, 2000. For the three and nine months ended June 30, 2001, the reassessment for the time value of money due to the passage of time was $9.0 million and $26.9 million, respectively. For the three months ended June 30, 2001, the Authority made Senior Relinquishment Payments of $5.1 million. For the nine months ended June 30, 2001, the Authority made Senior Relinquishment Payments of $15.6 million and Junior Relinquishment Payments of $10.5 million. At June 30, 2001, approximately $10.6 million and $5.5 million were included in the relinquishment liability resulting from junior relinquishment fees earned from January 1, 2001 through June 30, 2001 and senior relinquishment fees earned from April 1, 2001 through June 30, 2001, respectively. Development Agreement The Authority has negotiated an agreement with TCA (the "Development Agreement"), pursuant to which TCA has been made the exclusive developer of Project Sunburst. Under the Development Agreement, 11 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) TCA oversees the planning, design and construction of Project Sunburst and will receive compensation of $14.0 million for such services based on the incremental completed percentage of Project Sunburst. As of June 30, 2001, TCA had earned $9.3 million of the $14.0 million in development fees, of which $7.1 million has been paid. This fee is included in construction in process. 8. Employee Benefits Plans: The Authority maintains a retirement savings plan for its employees under Section 401(k) of the Internal Revenue Code ("401(k) Plan"). The plan allows employees of the Authority to defer up to the lesser of the maximum amount prescribed by the Internal Revenue Code or 15% of their income on a pre-tax basis, through contributions to the 401(k) Plan. The Authority matches 100% of eligible employees' contributions up to a maximum of 3% of their individual earnings. The Authority recorded matching contributions of approximately $801,000 and $724,000 respectively, to the 401(k) Plan for the quarters ended June 30, 2001 and 2000. Cumulative contributions have totaled $2.4 million and $2.1 million for the nine months ended June 30, 2001 and 2000, respectively The Authority, together with the Tribe, maintains a Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan"), for certain key employees. This plan allows participants to defer up to 100% of their pre-tax income to the plan. For the quarter ended June 30, 2001, contributions, net of withdrawals, by Authority employees totaled $447,000. For the nine months ended June 30, 2001 and 2000, contributions, net of withdrawals, by Authority employees totaled $677,000 and $641,000. Cumulative contributions by Authority employees to the Deferred Compensation Plan have totaled $1.5 million. On April 18, 2001, the Authority announced a Defined Retirement Plan (the "Retirement Plan") for all employees sponsored by the Authority. The Retirement Plan will go into effect on July 2, 2001 and contributions by the Authority will be based on hours worked. Employees become eligible after 90 days of employment and will be fully vested at the completion of seven years of employment. 9. Due from the Tribe: At June 30, 2001, amounts due from the Tribe of $27.6 million relate to payments made by the Authority on behalf of the Tribe for various operating expenses and the construction of the Utilities and the Public Safety Facility that will service the Mohegan Reservation. 10. Comprehensive Income: SFAS No. 130 "Reporting Comprehensive Income", requires that the Authority disclose comprehensive income and its components. The objective of SFAS No. 130 is to report a measure of all changes in the equity of a company that result from transactions and other economic events of the period other than transactions with stockholders. Comprehensive income is the total of net income and all other non-stockholder changes in equity ("Other Comprehensive Income"). The Authority has recorded the intrinsic value associated with its derivative instruments in accordance with SFAS No. 133 upon becoming effective as of January 1, 2001.
For the For the Nine Quarter Ended Months Ended June 30, 2001 June 30, 2001 ------------- ------------- Net Income....................................... $40,588 $109,385 Derivative Instruments adjustment................ 720 (1,571) ------- -------- Comprehensive Income............................. $41,308 $107,814 ======= ========
12 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO FINANCIAL STATEMENTS--(Continued) 11. Subsequent Events: On July 26, 2001, the Authority issued $150 million of Senior Subordinated Notes due 2011 with fixed interest payable at a rate of 8.375% per annum. The proceeds from this financing, net of fees, will be used in conjunction with Project Sunburst. On July 30, 2001, the Authority paid down $90.0 million on the Bank Credit Facility with the proceeds from the financing. On August 7, 2001 the Tribe obtained tax-exempt financing which, among other things, was used to repay the Authority in full. On August 8, 2001, the Tribe reimbursed the Authority $27.6 million. The reimbursement relates to construction that will service the Mohegan Reservation, initially funded by the Authority, and other various operating expenses. 13 Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of Operating Results for the Three Months Ended June 30, 2001 and 2000: Net revenues for the three months ended June 30, 2001 were $200.5 million compared to $184.8 million reported for the same period of the prior year. This 8.5% increase is primarily attributable to an increase in gaming revenues. Gaming revenues totaled $192.0 million for the three months ended June 30, 2001 compared to $178.0 million for the three months ended June 30, 2000. The 7.9% increase in gaming revenues is due to an 8.7% growth in slot machine revenues and a 6.2% increase in table game revenues. For the three months ended June 30, 2001, food and beverage revenues were $12.8 million compared to $11.2 million for the three months ended June 30, 2000. The 14.3% increase in food and beverage revenues is attributable to a 0.9% increase in food covers and a 9.3% increase in the average check for the three months ended June 30, 2001 as compared to the same period in the prior year. Retail and other revenues were $14.0 million and $12.3 million for the three months ended June 30, 2001 and 2000, respectively. This represents growth of $1.7 million, or 14.1%, over the same period in the prior year. Of the $1.7 million increase in retail and other revenues, $937,000 is attributable to the increased sales at the Mohegan Sun gasoline and convenience center and $811,000 is attributable to increased entertainment revenue as a result of the Uncas Pavilion, a temporary entertainment structure used for special events. Promotional allowances totaled $18.4 million for the three months ended June 30, 2001, representing a $1.7 million, or 9.9%, increase over the same period in the prior year. The growth is attributable to increased redemption of Mohegan Sun Player's Club points by patrons. Promotional allowances as a percentage of gaming revenues were 9.6% and 9.4% for the three months ended June 30, 2001 and 2000, respectively. Total costs and expenses were $144.6 million for the three months ended June 30, 2001, an increase of $16.2 million or 12.6% over the same period in the prior year. The increase is primarily the result of increases in gaming and retail expenses. Gaming costs and expenses were $87.0 million for the three months ended June 30, 2001, an increase of $8.9 million, or 11.3%, over the same period in the prior year. The slot win contribution totaled $37.6 million and $34.2 million for the three months ended June 30, 2001 and 2000, respectively. The Slot Win Contribution increase of $3.4 million, or 10.0%, over the same period in the prior year is attributable to the $11.8 million, or 8.7%, increase in slot revenues. Food and beverage costs were $6.4 million for the three months ended June 30, 2001, an increase of $877,000, or 15.8%, over the same period in the prior year. The increase is primarily attributable to higher labor and benefit costs. Retail and other costs were $7.0 million for the three months ended June 30, 2001, an increase of $3.2 million, or 85.7%, over the same period in the prior year. The increase is directly attributable to 14.1% growth in retail and other revenues, which is attributable to the shift of complimentary point redemption from food and beverage to retail outlets and the Mohegan Sun gasoline and convenience center. In addition, costs associated with the Uncas Pavilion, a temporary entertainment structure used for special events, increased $1.5 million over the same quarter in the prior year. General and administrative costs were $32.0 million for the three months ended June 30, 2001. The decrease of $85,000, or 0.3%, over the same period in the prior year is attributable to the Authority's effort to manage general and administrative costs. 14 Pre-opening costs totaled $3.7 million for the three months ended June 30, 2001 and are primarily comprised of pre-opening labor and advertising costs associated with the Project Sunburst expansion. Mohegan Sun incurred pre- opening expansion costs of $1.4 million for the three months ended June 30, 2000. For the three months ended June 30, 2001, depreciation and amortization increased by $1.0 million or 13.4%, over the same period in the prior year. The increase is attributable to increased depreciation on furniture and equipment, versus the same period in the prior year due to a decrease in useful life of certain equipment and the capitalization of the 637-unit smoke free slot area ("Hall of the Lost Tribes"). Depreciation and amortization for the three months ended June 30, 2001 and 2000 were $8.5 million and $7.5 million, respectively. Income from operations for the three months ended June 30, 2001 totaled $55.9 million, compared to $56.4 million for the same period in the prior year. This represents a $493,000 or 0.9% decrease over the same period in the prior year. For the three months ended June 30, 2001, the relinquishment liability reassessment was $9.0 million compared to $5.8 million for the same period in the prior year. This increase of $3.2 million, or 55.4%, is due to the Authority's quarterly reassessment of the liability to reflect the impact of the time value of money due to the passage of time. Interest and other income were $648,000 for the three months ended June 30, 2001, a decrease of $2.2 million, or 77.6%, over the same period in the prior year. The decrease in interest income resulted from the liquidation of investments to fund Project Sunburst. The weighted average invested cash was $39.3 million and $173.5 million for the three months ended June 30, 2001 and 2000, respectively. The Authority invests its excess cash in investment-grade commercial paper having maturities of not more than six months from the date of acquisition. Interest expense of $6.0 million for the three months ended June 30, 2001 represented a decrease of $2.1 million, or 26.1%, over the same period in the prior year. This decrease was mainly attributable to a lower average interest rate and increased capitalization of interest related to Project Sunburst, partially offset by an increase in average debt outstanding. Capitalized interest was $7.5 million for the three months ended June 30, 2001 compared to $2.7 million for the same period in the prior year. The weighted average interest rate for the three months ended June 30, 2001 was 7.7 %, compared to 8.4% for the three months ended June 30, 2000. The weighted average outstanding debt was $730.7 million for the three months ended June 30, 2001, compared to $511.3 million for the three months ended June 30, 2000. The change in fair value of derivative instruments for the three months ended June 30, 2001 of $810,000 was attributable to a net decrease in the market value of the derivative instruments held at June 30, 2001 of $90,000. This was offset by a reclassification of $720,000 to accumulated other comprehensive loss. The Authority held no derivative instruments during the quarter ended June 30, 2000. Comparison of Operating Results for the Nine Months Ended June 30, 2001 and 2000: Net revenues for the nine months ended June 30, 2001 were $571.4 million compared to $540.3 million reported for the same period of the prior year. This 5.8% increase is primarily attributable to growth in gaming revenues. Gaming revenues totaled $547.6 million for the nine months ended June 30, 2001 compared to $518.5 million for the nine months ended June 30, 2000. The increase of $29.1 million or 5.6% in gaming revenues is due to a 5.6% growth in slot machine revenues and a 6.5% increase in table game revenues. For the nine months ended June 30, 2001, food and beverage revenues were $34.6 million compared to $34.2 million for the nine months ended June 30, 2000. The $371,000 or 1.1% increase in food and beverage revenues is attributable to a 7.2% increase in the average check partially offset by a 5.0% decrease in food covers for the nine months ended June 30, 2001 as compared to the same period in the prior year. 15 Retail and other revenues were $42.6 million and $38.3 million for the nine months ended June 30, 2001 and 2000, respectively. This represents growth of $4.3 million or 11.1%, over the same period in the prior year. Of the $4.3 million increase in retail and other revenues, $1.6 million is attributable to increased retail revenues and $2.4 million is attributable to the increased sales at the Mohegan Sun gasoline and convenience center. The increase is also attributable to entertainment revenue growth of $679,000 related to the Uncas Pavilion, a temporary entertainment structure used for special events. Promotional allowances totaled $53.4 million for the nine months ended June 30, 2001, representing a $2.7 million, or 5.2%, increase over the same period in the prior year. The growth is primarily attributable to increased redemption of Mohegan Sun Player's Club points by patrons. Promotional allowances as a percentage of gaming revenues were 9.8% for both the nine months ended June 30, 2001 and 2000. Total costs and expenses were $416.9 million for the nine months ended June 30, 2001, an increase of $20.1 million or 5.1% over the same period in the prior year. The increase is primarily the result of increases in gaming, retail and general administrative costs, partially offset by a reduction in management fees due to the termination of the Management Agreement. Gaming costs and expenses were $243.1 million for the nine months ended June 30, 2001, an increase of $17.6 million, or 7.8%, over the same period in the prior year. The Slot Win Contribution totaled $104.4 million and $97.8 million for the nine months ended June 30, 2001 and 2000, respectively. The Slot Win Contribution increase of $6.6 million, or 6.8%, over the same period in the prior year is attributable to the $21.6 million, or 5.6%, increase in slot revenues. Food and beverage costs were $18.5 million for the nine months ended June 30, 2001, an increase of $1.0 million, or 5.9%, over the same period in the prior year. The increase is primarily attributable to higher labor and benefit costs. Retail and other costs were $22.5 million for the nine months ended June 30, 2001, an increase of $6.6 million, or 41.4%, over the same period in the prior year. The increase is attributable to the 11.1% growth in retail and other revenues, which is attributable to the shift of complimentary point redemption from food and beverage to retail outlets and the Mohegan Sun gasoline and convenience center. In addition, costs associated with the Uncas Pavilion, a temporary entertainment structure used for special events, increased $5.6 million over the prior year. General and administrative costs were $103.8 million for the nine months ended June 30, 2001. The increase of $5.7 million, or 5.8%, over the same period in the prior year is attributable to continued marketing and advertising campaigns, combined with higher utility costs. Management believes marketing programs have increased patronage and have expanded Mohegan Sun brand awareness and market share. Pre-opening costs totaled $7.0 million for the nine months ended June 30, 2001 and are primarily comprised of pre-opening labor and advertising costs associated with the Project Sunburst expansion. Mohegan Sun incurred pre- opening expansion costs of $3.4 million for the nine months ended June 30, 2000. For the nine months ended June 30, 2001, depreciation and amortization decreased by $761,000, or 3.3%, over the same period in the prior year. The decrease is attributable to decreased depreciation on furniture and equipment versus the same period in the prior year, and the prior year acceleration of the amortization of the trademark and capitalized interest. Depreciation and amortization for the nine months ended June 30, 2001 and 2000 were $22.0 million and $22.8 million, respectively. Income from operations for the nine months ended June 30, 2001 totaled $154.5 million, compared to $143.5 million for the same period in the prior year. This represents a $10.9 million or 7.6% increase over the same period in the prior year. 16 For the nine months ended June 30, 2001, the relinquishment liability reassessment was $26.9 million compared to $17.3 million for the same period in the prior year. This increase of $9.6 million, or 55.4%, is due to the Authority's quarterly reassessment of the liability to reflect the impact of the time value of money due to the passage of time. Interest and other income were $2.4 million for the nine months ended June 30, 2001, a decrease of $8.0 million, or 77.1%, over the same period in the prior year. The decrease in interest income resulted from the liquidation of investments to fund Project Sunburst. The weighted average invested cash was $14.2 million and $73.5 million for the nine months ended June 30, 2001 and 2000, respectively. The Authority invests in investment-grade commercial paper having maturities of not more than six months from the date of acquisition. Interest expense of $17.8 million for the nine months ended June 30, 2001 represented a decrease of $13.5 million, or 43.0%, over the same period in the prior year. This decrease was mainly attributable to a lower average interest rate and increased capitalization of interest related to Project Sunburst, partially offset by an increase in average debt outstanding. Capitalized interest was $18.2 million for the nine months ended June 30, 2001 compared to $5.6 million for the same period in the prior year. The weighted average interest rate for the nine months ended June 30, 2001 was 8.0%, compared to 8.4% for the nine months ended June 30, 2000. The weighted average outstanding debt was $610.5 million for the nine months ended June 30, 2001, compared to $514.3 million for the nine months ended June 30, 2000. Other non-operating expense was $114,000 for the nine months ended June 30, 2001, representing the disposal of assets. There was no non-operating expense for the same period in the prior year. The change in fair value of derivative instruments of $2.1 million was attributable to the decrease in the market value of derivative instruments held at June 30, 2001 of $3.7 million. This was offset by a reclassification of $1.6 million to accumulated other comprehensive loss. The Authority held no derivative instruments during the nine months ended June 30, 2000. Liquidity, Capital Resources and Capital Spending As of June 30, 2001 and September 30, 2000, the Authority held cash and cash equivalents of $76.2 million and $115.7 million, respectively. Cash provided by operating activities was $163.8 million for the nine months ended June 30, 2001 compared to cash provided by operating activities of $126.4 million for the same period in the prior year. During fiscal 2001, the Authority has drawn $274.0 million from the Bank Credit Facility. During fiscal 2000, the Authority tendered $90.0 million of Subordinated Notes using the defeasance trust asset established in fiscal 1999, for the sum of $140.3 million, including all accrued and deferred interest on December 30, 1999. On March 3, 1999, the Authority entered into a syndicated $425.0 million Bank Credit Facility maturing in March 2004. In November 2000, the Authority exercised its right to arrange for increases in the Bank Credit Facility to an aggregate amount of $500.0 million. At the Authority's option, interest will accrue on the basis of a 1-month, 3-month or 6-month London Inter-bank Offer Rate ("LIBOR") based formula plus applicable spreads. Interest on each LIBOR loan, which is for a term of three months or less, shall be due and payable on the last day of the related interest period. Interest on each LIBOR loan which is for a term of more than three months is due and payable on the date which is three months after the date such LIBOR loan was made and every three months thereafter on the last day of the interest period. The Bank Credit Facility will automatically reduce by 10% of the commitment as of the earlier of March 31, 2002 or the last full day of the first full quarter following the completion date of Project Sunburst. As of June 30, 2001, there was $274.0 million outstanding on the Bank Credit Facility. The Authority draws on the Bank Credit Facility primarily in connection with Project Sunburst. On July 30, 2001 the Authority paid down $90.0 million on the Bank Credit Facility from a portion of the proceeds from the Authority's $150 million 8.375% Senior Subordinated Notes, due 2011, issued on July 26, 2001. The Authority anticipates net Bank Credit Facility amounts outstanding to total $285.2 million for the fiscal year ended September 2001. The Authority has entered into certain hedging 17 transactions effective October 1, 2000 and January 2, 2001, to mitigate against the exposure to interest rate fluctuations on the Bank Credit Facility. On October 13, 2000, the Mohegan Tribal Council approved a formal resolution increasing the expansion budget from $800.0 million to $960.0 million (excluding capitalized interest). The Authority, in conjunction with the Tribe, has increased the Project Sunburst budget to $960.0 million for three reasons: (1) enhancements to project scope such as an increase in the number of slot machines from 2,000 to 2,550; (2) quality improvements to the hotel and public areas; and (3) expected increases in Project Sunburst labor costs because of the extremely competitive nature of the Northeast construction labor market. As a result of the increase to the Project Sunburst budget, the Authority issued an additional $150.0 million of 8.375% Senior Subordinated Notes, due 2011, on July 26, 2001. The remainder of the increase will be funded through internally generated funds. In addition to the financing provided by the Senior Notes, Senior Subordinated Notes and the Bank Credit Facility, the Tribe has set aside, with a trustee, a $40.0 million, fully-funded construction reserve account that, in certain circumstances, may be used to pay costs in excess of the Project Sunburst budget. The Authority's capital spending has increased significantly with the commencement of the Project Sunburst expansion. Capital expenditures totaled $404.1 million, including capitalized interest, for the nine months ended June 30, 2001 versus $150.7 million for the same period in the prior year. Project Sunburst construction costs of $351.1 million, excluding $18.2 million of capitalized interest, were expended during the nine months ended June 30, 2001. The Casino of the Sky, Mohegan Sun Arena and the Shops at Mohegan Sun are expected to open in late September 2001. The 1,200-room hotel and the convention space are expected to open in April 2002. Property maintenance capital expenditures for furniture, fixtures and equipment totaled $14.8 million and $11.5 million for the nine months ended June 30, 2001 and 2000, respectively. Expenditures for the Eagleview employee parking center ("Employee Parking Center") totaled $24.9 million of which $1.2 million was spent during nine months ended June 30, 2001. Expenditures on the property's utility enhancements have totaled $23.7 million, of which $6.7 million was spent during the nine months ended June 30, 2001. Expenditures for the Hall of the Lost Tribes have totaled $12.1 million through June 30, 2001. Cumulative Project Sunburst construction costs totaled $616.0 million, excluding capitalized interest of $28.6 million, through June 30, 2001. For the remainder of fiscal 2001, based on TCA estimates, the Authority anticipates Project Sunburst spending to be $158.5 million, excluding capitalized interest. For fiscal 2001, the Authority expects capital expenditures to total approximately $25.0 million on facility improvements and maintenance capital expenditures, $509.6 million, excluding capitalized interest, on Project Sunburst construction, $1.0 million on an employee day care center and $8.0 million on an additional patron parking garage. The Authority anticipates spending $18.0 million on The Hall of the Lost Tribes, which opened on April 18, 2001, $2.0 million below the $20.0 million budget. The Authority commenced construction of an electrical and water system infrastructure ("Infrastructure Improvements"), estimated to cost $35.0 million, that will service Mohegan Sun and other facilities. The upgrades provide the most efficient manner of handling the increased utility demands of the expanded facility that are attributable to the Project Sunburst expansion. The construction was funded by the Authority, and is expected to be complete concurrent with the opening of Project Sunburst. As of June 30, 2001, approximately $23.7 million has been incurred. Infrastructure Improvement spending for the final three months of fiscal 2001 is anticipated to be $11.3 million. The Authority, in conjunction with the Project Sunburst expansion, commenced construction on the Employee Parking Center in March 1999. The Employee Parking Center includes 2,700 parking spaces and amenities such as a dry cleaning service, on-site banking, an employee computer/training center and a 15,000 square foot exercise facility. The Employee Parking Center opened in June 2000. The total cost of the Employee Parking Center was $24.9 million. The Employee Parking Center was completed in January 2001. 18 The Tribe commenced construction of a Public Safety Facility, within the Eagleview complex, that will service the Mohegan Reservation. Construction was initially funded by the Authority and subsequently reimbursed by the Tribe. The total cost of the Public Safety Facility is $6.8 million. The Authority has also initially funded other Tribal projects, including the construction of a temporary Tribal office, construction of roads and improvements made to the Town of Montville's wastewater collection and treatment facilities. The total amount incurred by the Authority for these projects, including the Public Safety spaces referred to above, is $42.2 million. To date $16.3 million has been reimbursed by the Tribe, and $25.9 million is reflected in amounts due from Tribe in the Authority's balance sheet as of June 30, 2001 for these projects. The due from Tribe amount on the balance sheet also includes $1.7 million of operational receivables. On August 8, 2001, the Tribe reimbursed the Authority $27.6 million. The reimbursement relates to construction that will service the Mohegan Reservation that was initially funded by the Authority and other various operating expenses. During fiscal year 1998, the Authority finalized contract negotiations with TCA for Project Sunburst ("Development Agreement"). Under the Development Agreement, TCA will oversee the planning, design and construction of the expansion at Mohegan Sun and will receive a development fee of $14.0 million for such services. As of June 30, 2001, TCA has earned $9.3 million of the development fee of which $7.1 million has been paid. Under the terms of the Relinquishment Agreement, TCA continued to manage the existing property under the Management Agreement through December 31, 1999. On January 1, 2000, the Management Agreement terminated, and the Authority assumed day-to-day management of Mohegan Sun. The Authority, as a result of the termination of the Management Agreement, has agreed to pay to TCA 5% of gross revenues (as defined in the Relinquishment Agreement) generated from Mohegan Sun beginning January 1, 2000 and ending December 31, 2014. The present value of this liability is estimated to be $673.6 million as of June 30, 2001. In October 2000, the Authority paid $5.5 million in Senior Relinquishment Payments. On January 25, 2001, the Authority paid $5.1 million in Senior Relinquishment payments and $10.5 million in Junior Relinquishment Payments. On April 25, 2001, the Authority paid $5.1 million in Senior Relinquishment Payments. On July 25, 2001, the Authority paid $5.5 million in Senior Relinquishment payments and $10.6 million in Junior Relinquishment Payments. During the nine months ended June 30, 2001 and 2000, the Authority distributed $40.0 million and $32.2 million, respectively, to the Tribe. Management believes that existing cash balances, financing arrangements and operating cash flow will provide the Authority with sufficient resources to meet its existing debt obligations, relinquishment payments, tribal distributions, and foreseeable capital expenditure requirements with respect to current operations and Project Sunburst for at least the next 12 months. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q and the other materials filed or to be filed by the Authority with the Securities and Exchange Commission contain statements about future events, including, without limitation, information relating to plans for future expansion and other business development activities as well as other capital spending, financing sources and the effect of regulation (including gaming and tax regulation) and competition. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act and section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "will" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. 19 The following important factors could affect future results, causing these results to differ materially from those expressed in our forward-looking statements: . the expansion and construction activities for the new casino, the new hotel and the convention center and related upgrades and amenities; . the financial performance of the existing casino; . its dependence on existing management; . its level of leverage and ability to meet its debt service obligations; . increased competition from new or existing gaming operations; . general domestic and global economic conditions; . changes in gaming laws or regulations (including potential legalization of gaming in certain jurisdictions; . maintenance of licenses required under gaming laws and regulations and construction permits and approvals required under applicable laws and regulations. These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. We do not have and we do not undertake any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. We cannot assure you that projected results or events will be achieved. 20 Item 3--Quantitative and Qualitative Disclosure of Market Risk The Authority is exposed to inherent market risk on the following: At the Authority's option, Bank Credit Facility interest will accrue on the basis of a base rate formula or a LIBOR-based formula, plus applicable spreads. As of June 30, 2001, the Authority has drawn $274.0 million on the Bank Credit Facility. On July 30, 2001, the Authority paid down $90.0 million on the Bank Credit Facility. The Authority uses derivative instruments, including interest rate caps, collars and swaps in its strategy to manage interest rate risk associated with the variable interest rate on the Bank Credit Facility. The Authority's objective in managing interest rate risk is to ensure the Authority has appropriate income and sufficient liquidity to meet the Tribe and debt-holder obligations. The Authority does not believe that there is any material risk exposure with respect to derivative or other financial instruments. The Authority continually monitors these exposures and makes the appropriate adjustments to manage these risks within management's established limits. The Authority analyzes interest rate risk using various models that forecast cash flows of the liabilities and their supporting assets, including derivative instruments. The Authority is considered an "end user" of derivative instruments and engages in derivative transactions for risk management purposes only. On October 1, 2000 the Authority adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," designated all derivative instruments as cash flow hedging instruments and marked them to market. The impact of the adoption of SFAS No. 133 was not material to the financial position of the Authority taken as a whole. The Authority excludes the change in time value when assessing the effectiveness of the hedging relationships. All derivatives are evaluated quarterly and were deemed to be effective at June 30, 2001. Derivative instruments held by the Authority at June 30, 2001 are as follows:
Effective Date Maturity Date Notional Cost Market --------------- --------------- ----------- -------- ----------- Interest Rate Cap Strike Rate--8%....... October 1, 2000 October 1, 2003 $39,621,200 $410,000 $ 3,000 Interest Rate Collar Ceiling Strike Rate-- 8% Floor Strike Rate-- 6%................... January 2, 2001 March 1, 2004 25,704,800 295,000 (1,732,268) Interest Rate Swap Pay fixed--6.35% Receive Variable...... January 2, 2001 March 1, 2004 12,852,400 221,000 (1,003,760) ----------- -------- ----------- Total .............. $78,178,400 $926,000 $(2,733,028) =========== ======== ===========
All derivative instruments are based upon one-month LIBOR, which was 3.86% on June 30, 2001. 21 PART II--OTHER INFORMATION: Item 1--Legal Proceedings The Authority is a defendant in certain litigation incurred in the normal course of business. In the opinion of management, based on the advice 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 Item 6--Exhibits and Reports on Form 8-K A(1). Exhibits
Exhibit No. Description ----------- ----------- 10.1 Priority Distribution Agreement between Mohegan Tribal Gaming Authority and Mohegan Tribe of Indians dated August 1, 2001 10.2 Administrative Services Agreement between Mohegan Tribal Gaming Authority and Fleet Retirement Plan Services dated July 30, 2001
A(2). Reports on Form 8-K On July 18, 2001 the Authority a Form 8-K to disclose to the SEC a press release issued on that date. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Mohegan Tribal Gaming Authority
Signature Title Date --------- ----- ---- /s/ Mark F. Brown Chairman, Management Board August 10, 2001 ______________________________________ Mark F. Brown /s/ William J. Velrado President and General August 10, 2001 ______________________________________ Manager William J. Velrado /s/ Jeffrey E. Hartmann Executive Vice President August 10, 2001 ______________________________________ Finance/Chief Financial Jeffrey E. Hartmann Officer (Principal Financial and Accounting Officer)
23 EX-10.1 3 dex101.txt PRIORITY DISTRIBUTION AGREEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRIORITY DISTRIBUTION AGREEMENT between Mohegan Tribal Gaming Authority and Mohegan Tribe of Indians of Connecticut - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- 1. TERM; DEFINITIONS .................................... 2 2. PRIORITY DISTRIBUTION PAYMENTS ....................... 2 3. DAMAGES LIMITATION ................................... 3 4. AMENDMENT AND VALIDITY ............................... 3 5. NOTICES .............................................. 4 6. INTEGRATION .......................................... 4 7. NON-WAIVER ........................................... 5 8. ASSIGNMENT OR TRANSFER OF INTEREST ................... 5 9. NO THIRD PARTY BENEFICIARIES ......................... 5 10. EFFECT OF SECTION HEADINGS ........................... 6 11. GOVERNING LAW ........................................ 6 12. REMEDIES ............................................. 6 13. REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY....... 6 14. REPRESENTATIONS AND WARRANTIES OF THE TRIBE .......... 8 15. JURISDICTION; DISPUTE RESOLUTION ..................... 9 16. LIMITED WAIVER OF SOVEREIGN IMMUNITY ................. 10 17. SPECIAL COVENANTS .................................... 10 18. DUPLICATE ORIGINALS .................................. 10
-i- PRIORITY DISTRIBUTION AGREEMENT THIS PRIORITY DISTRIBUTION AGREEMENT (the "Agreement") is made as of this 1/st/ day of August 2001 by and between MOHEGAN TRIBAL GAMING AUTHORITY (the "Authority"), and MOHEGAN TRIBE OF INDIANS OF CONNECTICUT (the "Tribe") (each a "Party", and collectively the "Parties"). RECITALS: The Authority is an instrumentality of the Tribe, with exclusive power to conduct and regulate gaming activities for the Tribe. The Authority owns and operates a multi-amenity gaming and entertainment resort located in Uncasville, Connecticut (the "Resort"), as more fully described herein, which includes the convention center, retail facilities, arena, hotel and improvements to be constructed adjacent thereto. The Tribe provides certain governmental services and will construct or cause to be constructed certain governmental improvements that will be of general benefit to tribal members, including the Authority. The Tribe intends to finance the acquisition of certain of these governmental improvements through the issuance of its revenue bonds and notes (together or separately, the "Bonds") under an Indenture of Trust dated as of August 1, 2001, between the Tribe and First Union National Bank, as trustee thereunder (the "Trustee"). The Authority and the Tribe are parties to that certain Loan Agreement, dated as of March 3, 1999, with Bank of America National Trust and Savings Association, as Administrative Agent, and the other parties named therein, as amended by Amendment No. 1 to Loan Agreement, dated as of November 30, 2000 (such Loan Agreement, together with the Loan Documents (as defined therein), as the same may be amended from time to time, the "Authority Loan Documents"), and the Authority and Trading Cove Associates are parties to that certain Relinquishment Agreement, dated February 7, 1998 (the "Relinquishment Agreement"). The Authority has the right to make certain distributions to the Tribe pursuant to and in accordance with the provisions of the Authority Loan Documents and the Relinquishment Agreement, and one category of such distributions is defined in the Authority Loan Documents as the Priority Distributions. The Tribe has the right to receive the Priority Distribution Payments under this Agreement. -1- The Authority has been making such Priority Distributions to the Tribe pursuant to and in accordance with the provisions of the Authority Loan Documents, the Authority intends to continue making such Priority Distributions to the Tribe in accordance therewith, and the Authority wishes to memorialize such intention herein for the reason, among others, of enabling the Tribe to engage in the financing referred to above. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 1. TERM; DEFINITIONS (a) This Agreement shall be effective upon the date of this Agreement (the "Effective Date") and thereafter shall remain in full force and effect in accordance with its terms. (b) Capitalized terms used in this Agreement have the meanings given in Schedule A hereto, unless a different meaning clearly appears from the context. 2. PRIORITY DISTRIBUTION PAYMENTS. (a) On or before the fifth Business Day of each month of each Calendar Year (each, a "Payment Date"), the Authority shall pay to the Tribe as a distribution and not as a payment for services an amount equal to the lesser of (1) the Scheduled Priority Distribution for the prior month plus the Cumulative Priority Distribution Deficiency for the prior month and (2) the Net Cash Flow of the Authority for the prior month; provided, however, that the total Priority Distribution Payments for any Calendar Year shall not exceed the Annual Priority Distribution Amount for such Calendar Year. Each payment made pursuant to this paragraph is a "Priority Distribution Payment." Nothing in this Agreement shall permit the Authority to make any Priority Distribution Payment that is in excess of the amount permitted by the Authority Loan Documents. (b) Payments pursuant to this Agreement shall not reduce the Authority's obligations to make payments pursuant to invoices for governmental services provided by the Tribe or any payments under any other agreements with the Tribe (including the Lease) to the extent that the -2- agreements are permitted by the Authority Loan Documents. Priority Distribution Payments are limited obligations of the Authority payable only to the extent of its Net Cash Flow and are not secured by any lien or encumbrance on any assets or property of the Authority or its Subsidiaries. Neither the Tribe nor any assignee thereof nor any third party shall have any interest in any assets or property of the Authority by virtue of this Agreement. (c) The obligations of the Authority hereunder are unconditional except that such obligations are subject to and limited by the applicable provisions of the Authority Loan Documents. All Priority Distribution Payments shall be paid promptly when due, without demand, counterclaim, setoff, deduction or defense. With respect to the obligations of the Authority to pay Priority Distribution Payments, the Authority waives all rights now or hereafter conferred by statute or otherwise with respect to any such demand, counterclaim, setoff, deduction or defense ("Waiver of Setoff Rights"). The Tribe hereby acknowledges that notwithstanding the Authority's Waiver of Setoff Rights, such waiver (1) constitutes a waiver only of a remedy the Authority would otherwise have against the Tribe and not a waiver of the underlying claim or claims the Authority may have against the Tribe, any Affiliates of the Tribe, or any other person, and (2) does not impair the Authority's right to exercise other remedies it may have against any assets of the Tribe, other than the amounts payable by the Authority to the Tribe hereunder. 3. DAMAGES LIMITATION. Neither the Tribe nor the Authority shall be liable to the other for any indirect, consequential, incidental, punitive or exemplary damages. Without limiting the foregoing, the Authority shall not be liable for any damages of any description or nature whatsoever, penalties or other remedies to the Tribe, the Trustee, the Bondholders or any other person or entity by reason of a default under the Indenture. 4. AMENDMENT AND VALIDITY. (a) This Agreement may be amended, modified or supplemented only by written agreement signed by both Parties. (b) The Authority covenants and agrees that it shall not amend the Authority Loan Documents (or the formula for calculating the amounts that may be distributed to the Tribe by the Authority) so as to reduce the amount of Priority Distribution Payments that is permitted to be paid hereunder. -3- 5. NOTICES. Except as otherwise specifically provided herein, any notice from one Party to the other shall be given in writing and shall be deemed to be given (1) as of three days after the date the same is enclosed in a sealed envelope, addressed to the other by certified first class mail, postage prepaid, and deposited in the United States Mail or (2) as of the date transmitted by telecopier and received in full prior to the close of normal business hours of the recipient, (3) the day after the date sent by overnight courier or other means of next day personal delivery, or (4) the date of delivery by hand. For the purposes of this Section 5, such notices shall be mailed to the following respective addresses or the following respective telecopier numbers or to such others as may be hereafter designated by either Party: If to the Authority: Mohegan Tribal Gaming Authority 1 Mohegan Sun Boulevard Uncasville, CT 06382 Attention: Management Board Chairman Telecopier No.: (860) 204-6153 If to the Tribe: The Mohegan Tribe of Indians of Connecticut 67 Sandy Desert Road Uncasville, CT 06382 Attention: Chairman Telecopier No.: (860) 204-6153 with a copy to: Rome McGuigan Sabanosh, P.C. One State Street Hartford, CT 06103-3103 Attention: Lewis B. Rome, Esq. Telecopier No.: (203) 724-3921 6. INTEGRATION. (a) This Agreement contains the entire agreement and understanding between the Parties, their agents, employees and affiliates as to the subject matter contained herein and therein. -4- (b) No Party shall be bound to any other obligations, conditions, or representations with respect to the subject matter of this Agreement other than as provided in this Agreement. (c) Neither the Tribe nor the Authority nor any affiliate of either Party, nor any representatives of any of the foregoing parties has made, nor shall either Party be liable to the other for, any representation, warranty, promise, inducement or statement of intention that is not embodied in this Agreement. 7. NON-WAIVER. No failure by either Party or any of its agents to exercise, no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, and, in addition, no provision of this Agreement shall be considered waived by either Party except when such waiver is given in writing. The failure of either Party to insist in any one or more instances upon strict performance of any of the provisions of this Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights for the future, but the same shall continue and remain in full force and effect. 8. ASSIGNMENT OR TRANSFER OF INTEREST. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties hereto; provided, however, that neither Party may assign, sell, transfer or in any other way convey or encumber its rights, duties or obligations under this Agreement, either in whole or in part, without the prior written consent of the other Party, which may be granted or withheld by such other Party at its sole discretion. 9. NO THIRD PARTY BENEFICIARIES. The Parties do not intend to, and this Agreement does not, create rights in, or grant remedies to, any third party as a beneficiary of this Agreement or of any duty, covenant, obligation or understanding established under this Agreement. -5- 10. EFFECT OF SECTION HEADINGS. Section headings appearing in this Agreement are inserted for convenience only, and shall not be construed as interpretations of text. 11. GOVERNING LAW. The Authority and the Tribe hereby agree, in accordance with Section 5-1401 of the New York General Obligation Law, that this Agreement shall be construed in accordance with and governed by the laws of the State of New York. 12. REMEDIES. If the Authority fails to make any payment hereunder when due or timely to perform any other obligation hereunder, the Tribe may protect its rights to and pursue any remedies available to it at law or in equity or otherwise; provided that the Tribe acknowledges that it shall not be entitled, under any circumstances, to accelerate the Payment Dates of the Priority Distribution Payments. 13. REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY. The Authority represents and warrants to the Tribe as of the date hereof as follows: (a) The Authority is a governmental instrumentality of the Tribe and to the extent required by law is qualified to do business and is in good standing under the laws of the jurisdiction in which it conducts its business. The Authority has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of, and the performance by the Authority of its obligations under, this Agreement have been duly and validly authorized by all necessary action of the Authority. This Agreement has been duly and validly executed and delivered by the Authority and constitutes its valid, legal and binding obligation, enforceable against the Authority in accordance with its terms. (b) The execution and delivery of this Agreement by the Authority, the fulfillment of and the compliance by the Authority with the terms and provisions hereof (including the obligations of the Authority to make Priority Distribution Payments hereunder), and the consummation by the -6- Authority of the transactions described herein, do not and will not (i) violate or conflict with any provisions of the Constitution of the Tribe, the laws of the Tribe, or any other governing document, (ii) violate, conflict with or result in the breach or termination of any agreement or instrument to which the Authority is a party, including the Authority Loan Documents and the Relinquishment Agreement or (iii) violate or conflict with any law, rule, ordinance, regulation, judgment, order, injunction, decree or award that applies to or binds the Authority or any of its assets. (c) There is no action, suit, claim, arbitration, proceeding, investigation or litigation pending against the Authority or, to the best of the Authority's knowledge, threatened against or involving either the Authority, its property, or the Authority Loan Documents or the Relinquishment Agreement, this Agreement or any of the transactions contemplated herein, at law or in equity, before or by any court, arbitrator or governmental authority which could have an adverse effect on the performance by the Authority of its obligation to make Priority Distribution Payments or on the validity and enforceability of such obligations. No governmental agency or authority has at any time given notice of intention to commence or, to the best of the Authority's knowledge, commenced any investigation relating to the legal right of the Authority to perform its obligations under this Agreement, the Authority Loan Documents or the Relinquishment Agreement. (d) The Authority Loan Documents and the Relinquishment Agreement are in full force and effect, and constitute a valid and binding obligation of, and are legally enforceable in accordance with their respective terms against the Authority. The Authority has complied with all of the provisions of the Authority Loan Documents and the Relinquishment Agreement in all material respects and is not in default thereunder, and there has not occurred any event which (whether with or without notice, lapse of time or both) would constitute such a default under the Authority Loan Documents or the Relinquishment Agreement. (e) No authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any governmental agency is required to authorize or permit under applicable laws the execution, delivery and performance by the Authority of this Agreement. (f) No finder, broker or agent has been employed, appointed or authorized to act on the Authority's behalf in connection with the transactions contemplated by this Agreement. -7- 14. REPRESENTATIONS AND WARRANTIES OF THE TRIBE. The Tribe represents and warrants to the Authority as of the date hereof as follows: (a) The Tribe is a federally recognized Indian Tribe pursuant to a determination of the Assistant Secretary - Indian Affairs, dated March 7, 1994, published in the Federal Register on March 15, 1994, as amended by a correction dated July 1, 1994, published in the Federal Register on July 20, 1994, and as an Indian Tribal government pursuant to Sections 7701(a)(40)(A) and 7871(a) of the Internal Revenue Code, Title 26 U.S.C., and to the extent required by law is qualified to do business and is in good standing under the laws of the jurisdiction in which they conduct their business. The Tribe has all power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of, and the performance by the Tribe of its obligations under this Agreement have been duly and validly authorized by all necessary actions of the Tribe. This Agreement has been duly and validly executed and delivered by the Tribe and constitutes its valid and binding obligation, enforceable against the Tribe in accordance with its terms. (b) The execution and delivery of this Agreement by the Tribe, the fulfillment of and the compliance by the Tribe with the terms and provisions hereof, and the consummation by the Tribe of the transactions described herein, do not (1) violate or conflict with any provisions of the Tribe's Constitution or laws, (2) violate, conflict with or result in the breach or termination of any agreement or instrument to which the Tribe is a party, or (3) violate or conflict with any law, rule, ordinance, regulation, judgment, order, injunction, decree or award that applies to or binds the Tribe or any of its assets. (c) (i) This Agreement is in full force and effect, and (ii) the Tribe has not assigned or otherwise transferred to any third party any of its rights, duties, liabilities or obligations under this Agreement. (d) There is no action, suit, claim, arbitration, proceeding, investigation or litigation pending against the Tribe or, to the best of the Tribe's knowledge, threatened against or involving either the Tribe, its property, or this Agreement or any of the transactions contemplated herein, at law or in equity, before or by any court, arbitrator or governmental authority, which could have an adverse effect on the consummation and/or performance by the Tribe of the transactions contemplated by this Agreement. To the best of the Tribe's knowledge, no governmental agency or authority has at any time commenced -8- or given notice of intention to commence any investigation relating to the legal right of the Tribe to perform its obligations under this Agreement. (e) No authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any governmental agency is required to authorize or permit under applicable laws the execution, delivery and performance by the Tribe of this Agreement. 15. JURISDICTION; DISPUTE RESOLUTION. (a) Except to the extent specifically provided to the contrary in this Section 15, nothing in this Agreement shall be construed: (i) to impair, limit, waive or reduce in any way the sovereignty or sovereign immunity of the Authority, the Tribe or any Affiliate over their respective affairs, including the matters addressed in this Agreement; or (ii) to create any general submission to the jurisdiction of the State of Connecticut or governance by the State of Connecticut. (b) This Agreement shall be enforceable in the State of Connecticut by the Tribe, and any action, claim, counterclaim, dispute or matter in question arising out of or in connection with this Agreement shall be submitted to binding arbitration in the State of Connecticut for resolution and final determination. (c) The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9 of the United States Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association. The American Arbitration Association shall select an arbitrator from its list of neutral arbitrators, provided that any arbitrator selected shall have at least ten years' experience as a lawyer and/or judge. Such arbitrator shall be deemed to be, and shall act as, a neutral, and not a party, arbitrator. The arbitrator shall give effect to State of Connecticut statutes of limitation in determining any claim. The arbitrator shall not be permitted to entertain or rule on summary or dispositive motions with respect to any claim, counterclaim, or any portion thereof, regardless of any applicable arbitration rule so permitting to the contrary. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator. The institution and maintenance of an action in pursuit of a provisional or ancillary remedy shall not constitute a breach of this provision. -9- (d) Judgment upon an arbitration award may be entered in any court having jurisdiction. For purposes of the foregoing sentence, the parties hereby consent to the jurisdiction of the following courts, in descending order of preference: (i) the federal courts sitting in Hartford, Connecticut, or (ii) if such jurisdiction is not available, the Connecticut state courts sitting in Hartford, Connecticut or (iii) if such jurisdiction is not available, in any court of competent jurisdiction, including any tribal court. 16. LIMITED WAIVER OF SOVEREIGN IMMUNITY. The Authority hereby waives its sovereign immunity and that of any Subsidiary of the Authority solely to the extent necessary to allow the Tribe and no others to enforce only the Tribe's rights and the Authority's obligations under this Agreement. 17. SPECIAL COVENANTS. The Authority shall not enter into any agreement, contract or covenant (including amendments to the Authority Loan Documents or the Relinquishment Agreement) which would impose restrictions on the Authority's right to make Priority Distributions to the Tribe that are more stringent than the restrictions contained in the Authority Loan Documents or the Relinquishment Agreement as in effect on the Effective Date. 18. DUPLICATE ORIGINALS. This Agreement may be executed in two counterparts, each of which shall be deemed an original. The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the Party for whom they sign. This Agreement is hereby executed as of the date first above written. -10- IN WITNESS WHEREOF, the undersigned have consented and caused this Priority Distribution Agreement to be executed as of the date first indicated above. MOHEGAN TRIBAL GAMING AUTHORITY By: /s/ Jeffrey E. Hartmann ------------------------------------ Jeffrey E. Hartmann Executive Vice President of Finance and Chief Financial officer MOHEGAN TRIBE OF INDIANS OF CONNECTICUT By: /s/ Mark F. Brown ------------------------------------ Mark F. Brown Chairman SCHEDULE A Definitions ----------- "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "Annual Priority Distribution Amount" for a Calendar Year equals $14,000,000 multiplied by the ratio of the CPI for such Calendar Year divided by the CPI for the Year 2000, such amount being the amount the Authority is permitted to distribute to the Tribe as Priority Distributions under the Authority Loan Documents. "Asset Sale" means: (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business consistent with past practices; and (ii) the issuance by the Authority or any of its Subsidiaries of equity interests of any of the Authority's or its Subsidiaries' Subsidiaries or the sale by the Authority or any of its Subsidiaries of any equity interests in any of their respective Subsidiaries. "Authority Loan Documents" has the meaning given in "Recitals". "Bonds" has the meaning given in "Recitals." "Calendar Year" means the twelve month period ending on December 31. "Capital Lease Obligations" 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 in accordance with GAAP. "Capital Stock" means: (i) in the case of a corporation, corporate stock; (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of A-1 corporate stock; (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (iv) any other interest of participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding any interest under the Relinquishment Agreement. "Consumer Price Index" means the Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average for All Items, 1982-1984=100, as compiled and released by the Bureau of Labor Statistics. "Cumulative Priority Distribution Deficiency" for a month in a Calendar Year is an amount equal to the excess (if any) of (A) the sum of the Scheduled Priority Distributions for all prior months during such Calendar Year over (B) the aggregate amount of Priority Distribution Payments previously paid by the Authority to the Tribe during such Calendar Year. "Effective Date" has the meaning given in Section 11(a). "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "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 ("FASB") or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Agreement. "Hedging Obligations" means, with respect to any Person: (i) the obligations of such Person under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (ii) the obligations of such Person under other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Indenture" has the meaning given in the Recitals and includes all amendments, modifications or supplements thereto. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), A-2 advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Authority or any Subsidiary of the Authority sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Authority such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Authority, the Authority shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined by resolution of the Management Board of the Authority. "Net Cash Flow" for any period equals the Net Income of the Authority for the period plus: (i) an amount equal to any extraordinary loss (including, without limitation, any non-cash charges or losses arising from adjustments relating to the Relinquishment Agreement) plus any net loss realized in connection with an Asset Sale, to the extent such losses were deducted in computing such Net Income; plus (ii) provision for taxes based on the income or profits of the Authority and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Net Income; plus (iii) consolidated interest expense of the Authority and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments if any, pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Net Income; plus A-3 (iv) depreciation, amortization (including amortization of goodwill and other intangibles, not excluding amortization of prepaid cash expenses that were paid in a prior period), non-cash charges associated with equity option plans and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of the Authority and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Net Income; plus (v) payments to Trading Cove Associates by the Authority pursuant to the Relinquishment Agreement; minus (vi) non-cash items increasing such Net Income for such period (including, without limitation, any non-cash items arising from adjustments relating to the Relinquishment Agreement); minus (vii) to the extent not included in computing such Net Income, any revenues received or accrued by the Authority or any of its Subsidiaries from any Person (other than the Authority or any of its Subsidiaries) in respect of any Investment for such period, all determined on a consolidated basis and in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the Authority shall be added to Net Income to compute Net Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Net Income of the Authority and only if a corresponding amount would be permitted at the date of determination to be dividended to the Authority by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charger and all agreements instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Net Income" means, with respect to any Person for any period, the net income (loss) of such Person for such period, determined in accordance A-4 with GAAP and before any reduction in respect of dividends on preferred interests, excluding, however: (i) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with (A) any Asset Sale (including, without limitation, dispositions pursuant to sale leaseback transactions) or (B) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any indebtedness of such Person or any of its Subsidiaries; and (ii) any extraordinary or nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or nonrecurring gain or loss, less (iii) in the case of any person that is a partnership or a limited liability company, the amount of withholding for tax purposes of such Person for such period. "Payment Date" has the meaning given in Section 2(a). "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Person" includes the Tribe and the Authority. "Priority Distributions" has the meaning given in the Authority Loan Documents. "Relinquishment Agreement" means the Relinquishment Agreement dated February 7, 1998 between the Authority and Trading Cove Associates. "Resort" means the multi-amenity gaming and entertainment resort located in Uncasville, Connecticut and the convention center, retail facilities, arena, hotel and improvements proposed to be constructed adjacent thereto, as described in Appendix A to the Offering Statement of the Tribe for the Bonds but excluding (i) any obsolete personal property or real property improvement determined by the Authority to be no longer useful or necessary A-5 to the operations or support of the Resort and (ii) any equipment leased from a third party in the ordinary course of business. The "Scheduled Priority Distribution" for each month during a Calendar Year shall equal one twelfth (1/12) of the Annual Priority Distribution Amount for such Calendar Year. "Senior Notes" means, collectively, the Initial Senior Notes and the Senior Exchange Notes, treated as a single class of securities as amended or supplemented from time to time in accordance with the terms hereof, in each case as issued pursuant to this Indenture "Subsidiary" means: (i) any instrumentality or subdivision or subunit of the Authority that has a separate legal existence or status or whose property and assets would not otherwise be bound to the terms of this Agreement; or (ii) with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of the shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. The Tribe and any other instrumentality of the Tribe that is not also an instrumentality of the Authority shall not be a Subsidiary of the Authority. "Trustee" has the meaning given in "Recitals." "Waiver of Setoff Rights" has the meaning given in Section 2(c). A-6 EX-10.2 4 dex102.txt ADMINISTRATIVE SERVICES AGREEMENT [LOGO] Fleet Retirement Plan Services ADMINISTRATIVE SERVICES AGREEMENT for Mohegan Retirement Plan ----------------------- FLEET RETIREMENT PLAN SERVICES ASA.doc July 30, 2001 TABLE OF CONTENTS I. Appointment.................................................................................................... 1 II. PARTIES........................................................................................................ 1 A. Fleet Retirement Plan Services.............................................................................. 1 B. Employer.................................................................................................... 1 C. Plan Administrator.......................................................................................... 1 III. Document Services............................................................................................. 1 A. Roles and Responsibilities.................................................................................. 1 B. Determination Letter Filing (for Fleet Prototype Plans Only)................................................ 2 IV. Installation Services.......................................................................................... 2 V. Administrative Services......................................................................................... 3 A. Employee Education/Enrollment Services...................................................................... 3 B. Recordkeeping Services...................................................................................... 3 C. Loan Services............................................................................................... 4 D. Disbursement Services....................................................................................... 4 E. Compliance Testing and Related Services..................................................................... 4 F. Automated Services.......................................................................................... 6 G. IRS Annual Form 5500 Reporting Services..................................................................... 7 H. Proxy Services (for Plans with Employer Stock Funds)........................................................ 7 I. Brokerage Services.......................................................................................... 7 VI. additional instructions........................................................................................ 8 A. Initial Funding (not applicable, start up plan)............................................................ 8 ------------------------------- B. Ongoing Funding............................................................................................. 8 1. Asset Fees............................................................................................... 9 2. Administrative & Other Fees.............................................................................. 9 3. Loan Fees................................................................................................ 9 4. Distribution Fees........................................................................................ 9 D. Trust Accounting Statements................................................................................. 10 E. Signing Authority........................................................................................... 10 F. Administrative Committee Appointment........................................................................ 10 G. Authorized Signers Appointment.............................................................................. 11 H. Acknowledgment/Consent to Invest............................................................................ 12 1. Mutual Funds (Columbia and Galaxy)....................................................................... 13 2. The Fleet Easy Investment Option......................................................................... 14 3. Third-Party Funds........................................................................................ 14 a. Fidelity Advisor Funds (Class T Shares)............................................................... 14 b. INVESCO Funds......................................................................................... 14 c. The Janus Fund........................................................................................ 15 d. Neuberger Berman Funds................................................................................ 15 e. Putnam Funds (Class M Shares)......................................................................... 15 4. CIF...................................................................................................... 16 VII. terms of agreement............................................................................................ 16 A. Entire Agreement............................................................................................ 16 B. Scope of Services........................................................................................... 17
1. Limitation of Responsibilities........................................................................... 17 2. Investment Responsibility................................................................................ 17 C. Services and Expenses....................................................................................... 17 D. Supplying Information....................................................................................... 18 E. Indemnification............................................................................................. 18 F. Duration of Agreement....................................................................................... 18 G. Termination/Amendment of Agreement.......................................................................... 19 H. Plan Information............................................................................................ 19 I. Execution of Agreement/Signatures........................................................................... 19 exhibit B: AMENDMENT............................................................................................... 21
[LOGO] Fleet I. APPOINTMENT The Mohegan Tribe ("The Employer") hereby retains Fleet Retirement Plan Services ("Fleet RPS") to provide the administrative services set forth in this Administrative Services Agreement ("ASA") to the Mohegan Retirement Plan ("The Plan"). This ASA will be effective upon execution and shall remain in effect unless amended or terminated. II. PARTIES A. Fleet Retirement Plan Services Fleet RPS acts in various capacities for prototype and individually designed Employee Benefit Plans and is responsible for performing certain services with respect to such Plans. B. Employer The Employer is defined as the Plan Sponsor. C. Plan Administrator The Plan Administrator is defined by the Internal Revenue Service ("IRS") as the individual or entity responsible for controlling, managing, and disposing of the Plan assets and taking any and all action necessary to bring the Plan into compliance with the applicable provisions of the Internal Revenue Code ("The Code") and other relevant law. The Plan Administrator is the Employer or an entity appointed by the Employer to serve in that capacity. Fleet RPS is not the Plan Administrator. III. DOCUMENT SERVICES A. Roles and Responsibilities Fleet RPS will provide: [_] The Fleet Prototype Plan Document, which includes the Adoption Agreement, Basic Plan Document and Summary Plan Description. Adoption Agreement preparation assistance is provided by Fleet RPS for review by the Employer's legal counsel. The Employer has selected the following prototype document: [_] Standardized 401(k) Profit-Sharing Plan [_] Standardized Profit-Sharing Plan [_] Standardized Money Purchase Pension Plan [_] Nonstandardized 401(k) Profit-Sharing Plan [LOGO] Fleet [_] Nonstandardized Profit-Sharing Plan [_] Nonstandardized Money Purchase Pension Plan [X] The Employer will provide and maintain an individually designed, volume submitter or non-Fleet prototype plan. If the Employer adopts an individually designed, volume submitter or non-Fleet prototype plan, the Employer is solely responsible for the interpretation, submission, and continued qualified status of the plan. B. Determination Letter Filing (for Fleet Prototype Plans Only) Fleet RPS will provide applicable forms and schedules for review by the Employer and its legal counsel for the Nonstandardized Prototype Document or Standardized Prototype Document where the Employer has or has had other qualified plans. [X] The Employer will assume responsibility for submitting the Plan to the IRS for a favorable determination letter since the Plan is not using a Prototype document. [_] Fleet RPS, through its prototype vendor, will submit the Plan on behalf of the Employer to the IRS for a favorable determination letter. The cost for this service is $500, exclusive of IRS Filing Fees IV. INSTALLATION SERVICES Fleet RPS will develop a timeline that will set forth the duties and responsibilities associated with the Plan installation. The Plan will be installed on the Fleet RPS participant recordkeeping system for valuation on the following basis: [X] Daily [_] Quarterly [_] Semi-Annually [_] Annually [LOGO] Fleet V. ADMINISTRATIVE SERVICES A. Employee Education/Enrollment Services Fleet RPS will: [X] Provide Communication Materials [_] Standard [X] Custom [X] Conduct Enrollment Meetings [X] Initial [X] Ongoing [X] Conduct post-enrollment workshops (topics and schedule to be determined by Fleet RPS and the Employer) Fleet will provide prospectuses upon request for funds that are required to have such documentation. General fund information is available upon request for all investments and is provided automatically each quarter with participant statements. Fees for Employee Education and Enrollment Services will be charged pursuant to the fee schedule attached as Exhibit A. B. Recordkeeping Services Fleet RPS will: . Maintain participant and plan level records; . Allocate Employer contributions based upon information provided by the Employer; . Post employee contribution amounts among available investment options pursuant to participant or Employer direction, whichever is applicable; . Transfer funds among available investment options pursuant to direction; . Reinvest and allocate dividends among participants' accounts; . Maintain the vested percentages of participants' account balances consistent with the Plan's vesting provisions; . Determine and reallocate or credit forfeitures consistent with the Plan's provisions; [LOGO] Fleet . Process distributions, withdrawals, and other debits/credits to each participant's account(s) based on information supplied by the Employer; . Prepare Employer administrative reports; . Prepare participant statements [X] quarterly [_] semi-annually [_] annually; . Mail participant statements to [X] participants [_] the Employer; and . Post contributions to each participant's accounts(s) on a Monthly basis. C. Loan Services [X] Not applicable [_] Fleet RPS will: . Prepare required loan documentation; . Disburse loan proceeds; . Credit loan payments; . Report loan activity. Loan repayments must be made via payroll deduction. The Employer is responsible for establishing and administering all Loan Policies. D. Disbursement Services Fleet RPS will: . Process periodic and non-periodic participant distributions; . Withhold and remit applicable taxes as directed by law, the participant, and the Employer; . Prepare and file required tax forms; . Process other Employer directed disbursements; . Process in-kind distributions of Employer Stock (where applicable) Fleet RPS accepts information provided by the Employer as complete and accurate and is not accountable for service or report errors as well as any applicable taxes, penalties, or judgments if such information is incorrect or inaccurate. E. Compliance Testing and Related Services [X] Fleet RPS will not provide compliance testing. If Fleet RPS provides recordkeeping services for all qualified plans of the Employer, Fleet RPS agrees to provide the following compliance testing: [LOGO] Fleet [_] Section 401(k) actual deferral percentage test (including corrective action, if any, as instructed by the Employer); [_] Section 401 (m) actual contribution percentage test (including corrective action, if any, as instructed by the Employer); [_] Section 415 annual additions limitations. In addition, if the Employer has never maintained a defined benefit plan that covered any currently eligible employees or, alternatively, if the Employer provides all necessary information, Fleet RPS will provide: [_] Section 416(g) top-heavy test If Fleet RPS will not be providing Section 416(g) compliance testing, the Employer will be responsible for reporting the results to Fleet RPS. For an additional fee specified in the attached Fee Schedule: If Fleet RPS provides recordkeeping services for all qualified plans of the Employer, Fleet RPS agrees to provide the following compliance testing: [_] Section 410(b) coverage testing The eligibility of an employee for initial and ongoing Plan participation will be determined by the Employer. Fleet RPS will only review the Employer's determination of eligibility at the end of each Plan Year if Fleet RPS will provide the Section 410(b) coverage testing as selected above. Fleet RPS [_] will [X] will not calculate the annual allocation of Employer contributions: [_] Fleet RPS will calculate the annual allocation of the Plan contribution based on a pro rata formula (based on the ratio of individual Compensation to total Compensation, as described in the Plan document). For an additional fee specified in the attached Fee Schedule: [_] Fleet RPS will calculate the annual allocation of the Plan contribution based on an integrated formula, as described in the Plan document. [_] Fleet RPS will calculate the annual Employer matching contribution. Fleet RPS will rely solely on the information provided by the Employer regarding employee census and the ownership of the Employer, and will not be responsible for any errors that result from inaccurate or incomplete information. [LOGO] Fleet The Employer will be responsible for the Plan's compliance with the following Code Sections: . Section 401(a)(4) general nondiscrimination; . Section 402(g) limitation on elective deferrals; . Section 404(a) annual deductibility; . Section 412 minimum funding; . Section 414(b), (c), (m), or (o) controlled or affiliated service group determinations; . Section 414(n) coverage of leased employees; . Section 414(p) qualified domestic relations order determination; . Section 414(r) separate line of business determination; . Section 414(s) compensation definition. . Section 410(b) coverage testing, unless otherwise indicated above F. Automated Services [_] Not applicable [X] Fleet RPS agrees to provide Interactive Voice Response Unit ("IVR") services, including scripting and issuing personal identification numbers ("PINs"). The IVR is available 24 hours / day, 7 days / week. Transactions available through the IVR will include: . Account balance information; . Fund prices and performance history; . Ability to exchange existing balances among funds; . Loan-balance information (if applicable); . Loan modeling (if applicable); . Ability to request loan and withdrawal forms; . Ability to request withdrawal of funds; . Ability to change security code; . Live Customer Service agent during normal business hours. [_] Paperless Loans [X] Automated Enrollment [_] Ability to change salary-deferral percentage; [X] Fleet RPS agrees to provide a Plan Sponsor Web Site (PlanHr) that can be accessed through the Internet. [LOGO] Fleet [X] Fleet RPS agrees to provide a Participant Web Site (PlanWeb) that can be accessed through the Internet. For daily-valued plans, fund transactions completed on the VRU by 4:00 p.m. EST on a business day will be executed at that day's closing price. Transactions completed after 4:00 p.m. EST or on weekends or holidays will be executed at the close of the following business day. However, if the plan is using an investment fund with which Fleet RPS has no after-hours trading agreement, transactions will be executed pursuant to the individual fund agreement. Furthermore, Fleet RPS cannot guarantee that trades of unitized employer stock will become effective in the conventional time frame described above. Finally, Fleet RPS is not responsible for any fluctuation in the value of stock occurring during the execution process. For periodic-valued plans, fund transfers are effective as of the first day of the next valuation period. G. IRS Annual Form 5500 Reporting Services [_] Fleet RPS will not prepare IRS Form 5500. [X] Fleet RPS will prepare IRS Form 5500, related schedules (not including Schedule B, Schedule T and an independent auditor's report), and the Summary Annual Report. Fleet RPS will only file a Form 5500 if it maintains custody of all Plan assets. The Employer is responsible for reviewing, signing, and filing the Form 5500 with the IRS, as well as reviewing same for factual accuracy. H. Proxy Services (for Plans with Employer Stock Funds) [_] Fleet RPS will forward all proxies to the Plan Sponsor, who shall then forward such proxies to participants. [_] Fleet RPS agrees to provide the following proxy services for employer stock funds: [_] Provide tape of name, address, and share positions to transfer agent or other designated agent for proxy distribution and tabulation [_] Provide proxy material directly to Plan participants and tabulate vote I. Brokerage Services Brokerage services, if available, will be provided in accordance with the attached Brokerage Services Agreement [LOGO] Fleet VI. ADDITIONAL INSTRUCTIONS The options selected and any instructions provided in sections VI(A-G) below represent the Employer's election with respect to Fleet RPS' duties and responsibilities under each section. A. Initial Funding (not applicable, start up plan) ------------------------------- [_] Deposit attached check. [_] Federal Wire transfer to be made on _____________ from __________________ (Date) (Institution) in the amount of _______________________. (Amount) [_] Receipt and re-registration of assets pursuant to an attached listing, including: [_] Stocks: Number of shares, CUSIPS, ticker symbols, original purchase price and year-end market value (if assets are held at the end of the last plan year) [_] Bonds: Face amount, maturing date, interest rate, etc. [_] Assets are currently invested at Fleet RPS. For certain types of assets, Fleet RPS may require additional information. B. Ongoing Funding [_] Fleet RPS is authorized to debit Fleet account number (account number) --------------- for the dollar amount provided on the file and report submitted by the Employer's payroll vendor, (vendor name). If sufficient funding is not in ------------- the account, then Fleet RPS cannot process payroll information. This is an ongoing authorization applicable on a __________ basis. It is understood that Fleet RPS is neither responsible nor liable for any erroneous data submitted on said file and report. Any such responsibility or liability is and will be an issue to be resolved between _____________________ and _____________________. (Vendor name) (Employer) [X] The Employer, The Mohegan Tribe, will wire (or ACH) funds for the dollar amount provided on the file and report submitted by the Employer's payroll vendor/department(s) (internal payroll). Until confirmation of the wire is received, Fleet RPS cannot process payroll information. It is understood that Fleet RPS is neither responsible nor liable for any erroneous data submitted on said file and report. Any such responsibility or liability is and will be an issue to be resolved between the internal payroll department(s) and The Mohegan Tribe. [LOGO] Fleet C. Compensation Fleet RPS will receive compensation for its services pursuant to the Schedule of Fees included in Exhibit A to this ASA. Fees are to be billed and/or charged as indicated below. 1. Asset Fees Mutual-Fund fees are taken at the fund level. Collective Investment Fund ("CIF") fees will be charged to [_] the trust account(s) [_] the Employer. Investment Management fees will be charged to [_] the trust account(s) [_] the Employer [X] not applicable . 2. Administrative & Other Fees [X] Waived [_] Charge the trust account(s). [_] Bill the Employer 3. Loan Fees [X] Not Applicable [_] Charge the trust account(s). [_] Bill the Employer. [_] Charge the participant account(s). 4. Distribution Fees [_] Charge the trust account(s). [_] Bill the Employer. [X] Charge the participant account(s). Bills for services or invoices of charges to the trust account(s) are to be sent to: Donna St. Germain Mohegan Sun Director of Compensation and Benefits 1 Mohegan Sun Blvd Uncasville, CT 06382 [LOGO] Fleet D. Trust Accounting Statements Fleet RPS will provide: [X] Annual Accounting Plan-Year End: 12/31 ----- (Date [X] Interim Cycle [_] Monthly [X] Quarterly [_] Semi-Annually Employer recipient: Donna St. Germain Leo Chupaska Mohegan Sun The Mohegan Tribe Director of Compensation and Benefits Chief Financial Officer 1 Mohegan Sun Blvd 5 Crow Hill Road Uncasville, CT 06382 PO Box 488 Uncasville, CT 06382 1 copy 1 copy Valuation frequency must coincide with the interim cycle for periodic recordkeeping accounts. E. Signing Authority Until and unless notified to the contrary, Fleet RPS is hereby authorized to accept administrative instructions from the person(s) whose specimen signature(s) appear(s) in section VI(F) or (G) to Fleet RPS pursuant to the delegation of administrative duties section of the appropriate Plan document. Authorization must be made by a member of the Administrative Committee or an Authorized Signer as set forth in section VI(F) or (G) as described in section VI(F) or (G). NOTE: Every person who "handles funds or property" shall be bonded. F. Administrative Committee Appointment The undersigned persons are members of the Administrative Committee with all of the powers and duties to administer and to instruct Fleet RPS regarding the administration of the Plan pursuant to the terms of the Plan document. [LOGO]Fleet All instructions and requests from the Administrative Committee must be in writing and be signed by two of the undersigned persons. Fleet RPS may rely on the continuance of authority of each individual listed below until notified to the contrary in writing by the Employer. No instructions of the Administrative Committee and/or Employer shall be binding upon Fleet RPS unless signed by two authorized individuals as evidenced by his or her signature on record.
Printed Name(s) Signature(s) Bill Velardo /s/ Bill Velardo - --------------------------------------------------------- ----------------------------------------------------- Mitchell Etess /s/ Mitchell Etess - --------------------------------------------------------- ----------------------------------------------------- Jeff Hartmann /s/ Jeff Hartmann - --------------------------------------------------------- ----------------------------------------------------- Jeannette Ziegler /s/ Jeannette Ziegler - --------------------------------------------------------- ----------------------------------------------------- Kevin Bogle /s/ Kevin Bogle - --------------------------------------------------------- ----------------------------------------------------- Donna St. Germain /s/ Donna St. Germain - --------------------------------------------------------- ----------------------------------------------------- Leo Chupaska /s/ Leo Chupaska - --------------------------------------------------------- ----------------------------------------------------- Debra Maxeiner /s/ Debra Maxeiner - --------------------------------------------------------- ----------------------------------------------------- _________________________________________________________ _____________________________________________________
G. Authorized Signers Appointment The undersigned persons are Authorized Signers with all of the powers and duties to administer the Plan pursuant to the terms of the Plan document. The undersigned persons are also authorized to direct Fleet RPS to deposit and transfer funds and to make distributions. All instructions and requests from the Authorized Signers must be in writing and be signed by one of the undersigned persons. Fleet RPS may rely on the continuance of authority of each individual listed below until notified to the contrary in writing by the Employer. No instructions given by the Authorized Signers and/or Employer shall be binding upon Fleet RPS unless signed by one authorized individual as evidenced by his or her signature on record. [LOGO]Fleet
Printed Name(s) Signature(s) - --------------------------------------------------------- ----------------------------------------------------- Donna St. Germain /s/ Donna St. Germain - --------------------------------------------------------- ----------------------------------------------------- Debra Maxeiner /s/ Debra Maxeiner - --------------------------------------------------------- ----------------------------------------------------- Allison Smith /s/ Allison Smith - --------------------------------------------------------- ----------------------------------------------------- Roberta Lepore /s/ Roberta Lepore - --------------------------------------------------------- ----------------------------------------------------- _________________________________________________________ _____________________________________________________ _________________________________________________________ _____________________________________________________
H. Acknowledgment/Consent to Invest The Employer consents to the use of the shares of the Galaxy Funds and the Columbia Funds ("The Funds"), certain other funds distributed by registered investment companies (Third-Party Funds"), and, if selected, the CIF (Fleet Stable Asset Fund) as investment options for the Plan. [LOGO]Fleet 1. Mutual Funds (Columbia and Galaxy) [X] As a fiduciary to the Plan, the Employer acknowledges that the assets of the Plan may be invested in one or more of the following investment options and that the Employer has received a copy of the prospectus for each of the following Funds as well as additional documents relating to the Funds and the fees charged to the Plan by Fleet RPS: [_] Galaxy Small Company Equity [_] Galaxy Growth & Income [_] Galaxy U.S. Treasury [_] Galaxy Government [_] Galaxy Money Market [_] Galaxy Short-Term Bond [_] Galaxy U.S. Treasury Index [_] Galaxy Intermediate Government Income [_] Galaxy Corporate Bond [_] Galaxy High Quality Bond [_] Galaxy Asset Allocation [_] Galaxy Equity Income [_] Galaxy Utility Index [_] Galaxy Equity Value [X] Galaxy Large Company Index [X] Galaxy Equity Growth [_] Galaxy Small Company Index [X] Galaxy Small Cap Value [_] Galaxy International Equity [_] Galaxy Institutional Government [_] Columbia Special [_] Columbia Real Estate Equity [_] Columbia Fixed Income Securities [_] Columbia High Yield [_] Columbia Common Stock [_] Columbia Growth [_] Columbia International Stock [_] Columbia Small Cap [_] Columbia Balanced [_] Columbia Daily Income Company [_] Columbia U.S. Government Securities [X] The Employer understands that Fleet Investment Advisors, Inc. ("FIA"), a Bank affiliate, advises the Galaxy Funds and receives a management fee as disclosed in the prospectuses. [X] The Columbia Advisor Group advises the Columbia Funds. [X] The Employer has been advised of the fees charged to the Plan by Fleet RPS. [X] The Employer is independent of and unrelated to FIA and Fleet RPS. [LOGO] Fleet 2. The Fleet Easy Investment Option The Fleet Easy Investment Option is a series of managed trusts that provide diversification by investing in a range of Galaxy Funds. Investment professionals at FIA monitor and reallocate portfolios as necessary to ensure that each participant's portfolio is invested consistent with the strategy of the chosen Easy Investment Option. [X] The Employer has received the Fleet Easy Investment Brochure and a copy of the prospectus for each of the Galaxy Funds in which the Fleet Easy Investment Options are invested: [X] Conservative Income [X] Balanced Income [X] Balanced Growth [X] Growth [X] Aggressive Growth 3. Third-Party Funds [X] The Employer has received a copy of the prospectus for each of the following third-party funds in which the assets of the Plan are to be invested: a. Fidelity Advisor Funds (Class T Shares) [_] Fidelity Growth Opportunities [_] Fidelity Equity Growth [_] Fidelity Overseas [_] Fidelity Balanced [_] Fidelity Equity Income [X] Fidelity Intermediate Bond [_] Fidelity Government Investment [_] Fidelity Natural Resources b. INVESCO Funds [X] INVESCO Equity Income (Industrial) [_] INVESCO Small Company Growth Fund [X] INVESCO Dynamics [_] INVESCO Emerging Growth [_] INVESCO Total Return [_] INVESCO Growth [_] INVESCO Strategic Leisure [LOGO] Fleet c. The Janus Fund [X] The Janus Fund d. Neuberger Berman Funds [_] Neuberger Berman Guardian Trust [_] Neuberger Berman Partners Trust [_] Neuberger Berman Focus Trust [_] Neuberger Berman Manhattan Trust [_] Neuberger Berman Genesis Trust * e. Putnam Funds (Class M Shares) [_] George Putnam Fund of Boston [_] Putnam Fund for Growth & Income [X] Putnam International Growth [_] Putnam Vista [_] Putnam Voyager [_] Putnam New Opportunity * [_] Putnam OTC Emerging Growth * There may be certain restrictions on the availability of this Fund. [X] The Employer has been advised that Fleet RPS receives Section 12(b)-1 fees from the Funds for providing administrative services to the Funds. [X] The Employer has been advised of the fees charged to the Plan by Fleet RPS. Employer Consent: Based upon the receipt of (1) A prospectus setting forth the investment portfolios and describing the investment advisory and any other fees paid by the Funds or investors therein; and (2) Notice of disclosure of any investment advisory and other fees paid by the Employer or the Plan to Fleet RPS or any affiliate of Fleet RPS, the Employer consents to the investment of assets of the Plan in the Funds designated above pursuant to the instructions of Plan participants (which shall be conveyed to Fleet RPS in such manner as the Employer and Fleet RPS agree upon). The Employer may revoke this consent by written notice to Fleet RPS. The distributor or investment advisor of each of the Third-Party Funds has entered into an agreement with Fleet National Bank, under which Fleet National Bank will perform certain sub-account and administrative functions ("Sub-Account Services") on a per-account basis with [LOGO] Fleet respect to shares of the Third-Party Funds held by the Plan in return for a fee. Fleet RPS and its affiliates neither receive any other fees nor perform any other services for the Third-Party Funds. The Employer acknowledges and understands that: . The Galaxy Funds are distributed by PFPC INC. . The Columbia Funds are distributed by Provident Distributors, Inc. . The Fidelity Advisor Funds are distributed by Fidelity Management Research Co. + . The Janus Fund is distributed by the Janus Group + . The INVESCO Funds are distributed by INVESCO Funds Group, Inc. + . The Neuberger Berman Funds are distributed by Neuberger Berman Management, Inc. + . The Putnam Funds are distributed by Putnam Investments, Inc. + + These entities are affiliated with neither Fleet Boston Financial nor Fleet RPS. 4. CIF [X] The Employer acknowledges that it has read the following information regarding the Fleet Stable Asset Fund in which assets of the Plan are to be invested. With respect to the Fleet Stable Asset Fund, Fleet National Bank is hereby authorized to: . Invest Plan assets in the Fleet Stable Asset Fund, which is comprised of Guaranteed Investment Contracts ("GICs") and other investment vehicles, whose value fluctuates due to market changes . Subject the Fleet Stable Asset Fund to a restriction of the twelve-month notice requirement of Plan-level withdrawals under certain circumstances provided in the Fund instrument . Employ FIA, an affiliate, and / or an affiliated or outside investment advisors which FIA may hire as co-advisor to the Fund for an aggregate fee to be paid by the Fund, which will not exceed amounts permitted under Federal Law VII. TERMS OF AGREEMENT A. Entire Agreement This ASA and attached exhibits constitute the entire Administrative Services Agreement between the parties named herein and may be modified or amended only by written agreement of the parties. [LOGO] Fleet B. Scope of Services 1. Limitation of Responsibilities The performance of services on behalf of the Employer under this ASA will not be deemed to make Fleet RPS a fiduciary to the Plan and Trust. Except to the extent that Fleet RPS has specifically agreed to perform certain duties under this ASA, Fleet RPS is not responsible for any matters affecting the Plan, including, but not limited to: . The initial or ongoing qualification of the Employer's Plan . Participation in said Plan . Any tax filing (excluding Forms 1099R and 945, if applicable) and any tax liability that may be imposed on the Trustee, Plan, Plan Administrator, participant, or beneficiary In the event that Fleet RPS informs the Employer that the Plan fails to pass any non-discrimination test performed by Fleet RPS, it shall be the sole responsibility of the Employer to take all action necessary to bring the Plan into compliance. Fleet RPS shall be under no obligation to take any action or provide any advice regarding any corrective action. 2. Investment Responsibility With respect to the Plan, Fleet RPS may have investment responsibility to the extent provided in other agreements that Fleet RPS has executed relating to the Plan (such as a trust or investment management agreement). If there is no such agreement, then the Employer acknowledges that Fleet RPS has no responsibility for the selection of investments under the Plan and will not provide investment advice to any person in connection with the selection of investment vehicles for the Plan under this ASA. C. Services and Expenses The Employer agrees to pay Fleet RPS service fees and expenses in such amounts and at such times as are set forth in Exhibit A attached hereto. Changes in the fee schedule shall be made only upon thirty (30) days written notice, subject to the terms of Exhibit A, to the Employer/Plan Administrator before the effective date of such change. The Employer may request that Fleet RPS perform services in addition to the services described in this ASA. Charges for services not specifically described herein will be as mutually agreed upon by the Employer and Fleet RPS at the time of the request. Fleet RPS will prepare a written price quotation for any services requested by the Employer/Plan Administrator. If Fleet RPS consents to the performance of such additional services, then Fleet RPS will provide the services for a fee as set forth in an addendum to this ASA that is signed and acknowledged by the Employer and Fleet RPS. [LOGO] Fleet If any invoice is outstanding at the end of thirty (30) days, Fleet RPS reserves the right to charge the Trust account and/or terminate this ASA. D. Supplying Information The Employer will supply Fleet RPS in a timely manner with copies of the current, executed Plan and Trust documents and all amendments, if applicable, Custodial Agreement, and Plan data, participant information, documentation, and instructions Fleet RPS needs from time to time to perform its duties under this ASA. Fleet RPS will be protected in relying on any written instructions or any oral instructions which are confirmed in writing by the Employer. If it is necessary for Fleet RPS to perform additional services due to incomplete, incorrect, or delayed information supplied by the Employer, the Employer agrees to pay Fleet RPS for such additional services. E. Indemnification Fleet RPS' duties are expressly limited to those enumerated in this ASA. Fleet RPS will perform the administrative duties set forth in this ASA subject to the direction of the Employer/Plan Administrator. Nothing in this ASA will be deemed to impose upon Fleet RPS a duty to exercise its own discretion in the administration, control, management, or disposition of the Plan or of any Plan assets. Fleet RPS is under no duty to investigate or question any directions supplied by the Employer/Plan Administrator or Agent thereof. In the event of any claim brought or asserted by or on behalf of any third party against Fleet RPS in connection with Fleet RRS' performance of its duties under this ASA, the Employer shall indemnify and hold Fleet RPS harmless against all losses, claims, damages, liabilities, and expenses, including reasonable attorneys' fees, which Fleet RPS may incur or which may be asserted against Fleet RPS, unless such claims are a result of the negligence, willful misconduct, or failure of Fleet RPS to perform its duties hereunder. In the event that such a third party claim is asserted against Fleet RPS, Fleet RPS shall promptly notify the Employer of the claim. Absent notice by Fleet RPS to the Employer within a reasonable period of time, the Employer shall have no indemnification obligation hereunder. Upon receipt of notice of the third party claim, the Employer shall have the option at its own expense to defend Fleet RPS against the claim rather than to indemnify Fleet RPS for its attorneys' fees. F. Duration of Agreement This ASA will continue in effect and will be automatically renewed from year to year unless terminated as herein provided. [LOGO] Fleet G. Termination/Amendment of Agreement Upon ninety (90) days written notice, this ASA may be terminated by either of the parties named hereunder. This ASA may be modified or amended from time to time by written agreement of the parties. H. Plan Information Plan Name: Mohegan Retirement Plan Employer: The Mohegan Tribe Plan Contact: Donna St. Germain Plan Administrator: Kevin Bogle - ------------------------------------------------------------ ------------------- Employer's Address Plan Administrator's Address - ------------------ ---------------------------- The Mohegan Tribe Mohegan Tribal Gaming Authority 5 Crow Hill Road Vice President of Human Resources P.O. Box 488 Mohegan Sun Boulevard Uncasville, CT 06382 Uncasville, CT 06382 - ------------------------------------------------------------------------------- Employer ID # : 06-1259539 Plan ID #: 002 Plan Year: January 1 to December 31 Effective Date of Plan: 7/2/001 Effective Date of Most Recent Amendment: N/A I. Execution of Agreement/Signatures On behalf of the Mohegan Retirement Plan, the undersigned, authorized Plan representative accepts this ASA and agrees to the terms therein. Signed this 25th day of July, 2001. Vice President, By: /s/ Kevin Bogle Human Resources _____________________________________________ ________________________ (Employer/Plan Administrator) (Title) Director, By: /s/ Donna St. Germain Compensation and Benefits _____________________________________________ ________________________ (Employer/Plan Administrator) (Title) [LOGO] Fleet This ASA is not effective until and unless properly counter-signed by an authorized employee of Fleet RPS. Agreed and accepted by: Dorothy R. Paquette Vice President _____________________ (Title) /s/ Dorothy R. Paquette July 30, 2001 ______________________________________________________ _______________________ (Signature) (Date) [LOGO] Fleet Operation Addendum to the Administrative Services Agreement - ------------------------------------------------------------------------------- Plan Name: The Mohegan Retirement Plan - ------------------------------------------------------------------------------- Contribution Election Default Fund: . In the absence of written participant investment direction, Fleet will invest the contribution into the Fleet Easy Investment Option Balanced Income Fund. Forfeiture Fund . Forfeitures will automatically be transferred into the Fleet Stable Asset Fund. Date : July 25, 2001 ________________________________________________________ Signature: /s/ Kevin Bogle ________________________________________________________ Name: Kevin Bogle ________________________________________________________ Title: Vice President, Human Resources ________________________________________________________ Date : July 25, 2001 ________________________________________________________ Signature: /s/ Donna St. Germain ________________________________________________________ Name: Donna St. Germain ________________________________________________________ Title: Director, Compensation and Benefits ________________________________________________________ -----END PRIVACY-ENHANCED MESSAGE-----