EXECUTION COPY
COMPLETION GUARANTEE AND INVESTMENT BANKING AND FINANCING ARRANGEMENT
FEE AGREEMENT dated as of September 29, 1995, among TRADING COVE ASSOCIATES,
a Connecticut general partnership ("TCA"), WATERFORD GAMING L.L.C., a Delaware
limited liability company and successor to the interests of the Original
Partners of TCA ("Waterford"), and SUN INTERNATIONAL HOTELS LIMITED, a
Bahamian corporation ("SIHL"). Capitalised terms used herein but not defined
shall have the meaning set forth in the Amended and Restated Partnership
Agreement of TCA dated as of September 21, 1994, as amended (the "TCA
Partnership Agreement").
WHEREAS, TCA, through its Original Partners, secured a conditional
opportunity to develop and manage a casino in Montville, Connecticut (the
"Project") with the Mohegan Tribe of Indians of Connecticut (the "Tribe");
WHEREAS, the location of the Project is near the Foxwoods Resort and
Casino ("Foxwoods") which has approximately 3,800 slot machines and 200
table games, has been operating for several years and is the largest gaming
facility in the United States;
WHEREAS, the Tribe was only willing to retain TCA as manager if TCA
was capable of arranging the financing, development and construction of a
large world class facility capable of competing with Foxwoods;
WHEREAS, TCA, being incapable of arranging the financing, development
and construction of such a facility, desired to enter into a subcontract
with SIHL pursuant to which SIHL would arrange the financing, development
and the construction of the Project;
WHEREAS, Bear Xxxxxxx & Co. was not willing to act as financial advisor
to the Tribe and TCA unless SIHL specifically became a party to an engagement
letter (the "Engagement Letter") pursuant to which Bear Xxxxxxx & Co. would
underwrite $175 million of senior debt for the Project (the "Senior Debt");
WHEREAS, Bear Xxxxxxx & Co. advised TCA and the Tribe that it would be
impossible to raise the Senior Debt and to finance the Project without (i)
the acquisition by TCA or one of its partners or affiliates thereof of $40
million of subordinated debt of the Tribe or a tribal entity (the
"Subordinated Notes"), (ii) a completion guarantee executed by SIHL (the
"Completion Guarantee") pursuant to which SIHL would obligate itself to
complete construction of the Project and to loan the Tribe up to an additional
$50 million by purchasing additional subordinated debt (the "Completion
Guarantee Subordinated Notes"), (iii) a pledge of 1,500,000 shares of SIHL
stock with a market value of approximately $43 million (the "Pledge") as
collateral for SIHL's obligation under the Completion Guarantee and (iv) a
letter of credit in an amount of $15 million (the "Letter of Credit") to
support SIHL's obligation under the Completion Guarantee;
WHEREAS, TCA, being incapable of acquiring the Subordinated Notes, any
Completion Guarantee Subordinated Notes or performing under the Completion
Guarantee requested SIHL, as subcontractor, to acquire the Subordinated Notes,
execute the Completion Guarantee and the Engagement Letter and provide the
Pledge and the Letter of Credit;
WHEREAS, on September 29, 1995 in order to facilitate the underwriting
of the Senior Debt and the financing of the Project, TCA acquired $1.7 million
of Subordinated Notes and SIHL (i) acquired $38.3 million of Subordinated Notes
from the Mohegan Tribal Gaming Authority, an instrumentality of the Tribe
("MTGA") (ii) executed the Completion Guarantee obligating itself to complete
the Project and acquire up to $50 million of Completion Guarantee Subordinated
Notes, (iii) caused the Pledge to be made, (iv) caused the Letter of Credit to
be posted and (v) executed the Engagement Letter.
WHEREAS, as a result of SIHL performing the services set forth in this
Agreement, the Tribe entered into the Amended and Restated Gaming Facility
Management Agreement dated September 29, 0000,xxxx XXX pursuant to which
the Tribe is obligated to pay to TCA certain management fees (the "TCA
Management Fees");
WHEREAS, MTGA, as issuer of the Subordinated Notes, is obligated to pay
interest thereon at a rate per annum equal to 15%, with interest payments due
semi-annually on the interest payment dates of May 15 and November 15 as set
forth in the Subordinated Notes (the "Interest Payment Dates") with respect
to the six month periods ending, respectively, on the preceding April 30 and
October 31 (each, a Semi-Annual Period); provided, however, pursuant to the
Indenture dated September 29, 1995 relating to the Senior Debt (the "Senior
Note Indenture"), MTGA is prohibited from paying cash interest on the
Subordinated Notes on any Interest Payment Date unless certain financial tests
are met; in which case, for purposes of this Agreement, on any Interest
Payment Date that interest is not paid in cash, such interest shall be
considered paid-in-kind (the "Subordinated Note PIK Amount") and on the
first day after the applicable Semi-Annual Period the principal amount of
Subordinated Notes shall be deemed increased by and to include the
Subordinated Note PIK Amount;
WHEREAS, the Project was completed on October 8, 1996, and between
August 20, 1996 and January 3, 1997, SIHL funded $50 million under the
Completion Guarantee and acquired $50 million of Completion Guarantee
Subordinated Notes;
WHEREAS, MTGA, as issuer of the Completion Guarantee Subordinated
Notes, is obligated to pay interest on the Completion Guarantee Subordinated
Notes at a rate per annum equal to the sum of the prime rate announced from
time to time by the Chase Manhattan Bank ( which, for purposes of this
Agreement, shall be understood to be set on the first day of the applicable
Semi-Annual Period) plus 1% (the "Base Rate"), with interest payments due for
the applicable Semi-Annual Period on the applicable Interest Payment Date;
provided, however, pursuant to the Senior Note Indenture, MTGA is prohibited
from paying cash interest on any Completion Guarantee Subordinated Notes on
any Interest Payment Date unless certain financial conditions are met; in
which case, for purpose of this Agreement, on such Interest Payment Date that
interest is not paid in cash on $17.5 million principal amount of Completion
Guarantee Subordinated Notes (the "PIK Completion Guarantee Notes"), such
interest shall be considered paid-in-kind (the "Completion Guarantee PIK
Amount") and on the first day after the applicable Semi-Annual Period the
principal amount of PIK Completion Guarantee Notes shall be deemed increased
by and to include the Completion Guarantee PIK Amount;
WHEREAS, with respect to $32.5 million of Completion Guarantee
Subordinated Notes (the "Non-PIK Completion Guarantee Notes"), for purposes
of this Agreement, the principal amount of Non-PIK Completion Guarantee Notes
shall not be deemed increased as a result of the failure of MTGA to pay any
interest due thereon in cash; and
WHEREAS, SIHL is the holder of the Non-PIK Completion Guarantee Notes
and the PIK Completion Guarantee Notes;
NOW THEREFORE, the parties hereto agree as follows:
1. Investment Banking and Financial Structuring Services. It is hereby
acknowledged that SIHL, as subcontractor to TCA, arranged, structured and
negotiated the terms of the financing of the Project, including, without
limitation, the Senior Debt, Subordinated Notes, equipment financing and
bank financing, and it is further acknowledged that by acquiring the
Subordinated Notes, executing the Completion Guarantee, causing the Pledge
to be made and the Letter of Credit to be posted, and becoming a party to the
Engagement Letter, SIHL provided valuable services that enabled the Project
to be financed and developed.
2. Fees and Payment Terms. TCA and SIHL recognise that part of the
fees payable hereunder are to compensate SIHL for its exposure under the
Subordinated Notes and the Completion Guarantee Subordinated Notes and
accordingly, such fees should be reduced or increased based upon the
outstanding principal amount of Subordinated Notes and Completion Guarantee
Subordinated Notes held by SIHL. It is further recognized that SIHL shall
be permitted to sell and transfer its right to receive fees associated with
the Subordinated Notes and Completion Guarantee Subordinated Notes. This
principle being established, the parties agree that TCA shall pay SIHL
or one or more of its affiliates for the services rendered under this
Agreement the fees set forth below; provided, however, such fees shall be
payable only to the extent that TCA receives TCA Management Fees from the
Tribe in amounts adequate to pay such fees and meet its other obligations
and to the extent that TCA has not received adequate TCA Management Fees to
make the payments set forth below on the dates specified and meet its other
obligations, such fees shall be deferred (without the accrual of interest)
until TCA has received sufficient TCA Management Fees to pay them:
(i) $5,520,000, constituting two percent (2%) of the total
development costs of the Project (all so-called hard and
soft costs with respect to construction of the Project,
except land acquisition costs) shall be payable on October
8, 1996;
(ii) $2,500,000 shall be payable on April 30, 1996, and
$2,500,000 shall be payable on October 31, 1996;
(iii) $2,700,000 shall be payable on April 30, 1997;
(iv) every six months, beginning October 31, 1997, there shall
be payable an amount equal to the product of (1) $2,300,000
and (2) a fraction, the numerator of which is the weighted
average principal amount of Subordinated Notes outstanding
during the applicable Semi-Annual Period (including all
Subordinated Note PIK Amounts) and the denominator of which
is $40,000,000;
(v) $525,000 shall be payable on October 31, 1996, $2,600,000
shall be payable on April 30, 1997, and every six months,
beginning October 31, 1997, there shall be payable an amount
equal to the product of the (a) the number arrived at by
dividing the difference between (26 1/2 % and the Base Rate)
by two (the "Multiplier") and (2) weighted average of
principal amount of Non-PIK Completion Guarantee Notes
outstanding during the applicable Semi-Annual Period;
(vi) $80,000 shall be payable on October 31, 1996, $1,350,000
shall be payable on April 30, 1997, and every six months,
beginning October 31, 1997, there shall be payable an amount
equal to the product of (1) the Multiplier and (2) the weighted
average of principal amount of PIK Completion Guarantee Notes
(including all Completion Guarantee PIK Amounts) outstanding
during the applicable Semi-Annual Period;
3. Obligation to acquire Certain Deferred Interest. On November 15,
1996, and on each Interest Payment Date thereafter for so long as MTGA does
not pay cash interest with respect to the Non-PIK Completion Guarantee Notes
(the "Deferred Interest Amount") TCA shall acquire from SIHL, the Deferred
Interest Amount, for a purchase price equal to the face value of the Deferred
Interest Amount (the "Purchase Price"). To the extent that TCA has not
received sufficient TCA Management Fees to acquire the applicable Deferred
Interest Amount on the applicable Interest Payment Date, such acquisition shall
be postponed until it has received sufficient TCA Management Fees. If such
acquisition does not occur before the next Interest Payment Date, the Purchase
Price payable to SIHL shall accrue interest at the Base Rate from such next
Interest Payment Date until such time as such acquisition is consummated. Any
acquisition contemplated by this paragraph 3 shall be effected by the execution
of a sale document in the form attached hereto as Exhibit A. SIHL agrees that
at such time as MTGA pays SIHL any amounts relating to the Non-PIK Completion
Guarantee Notes (other than current interest), such amounts that relate to the
Deferred Interest Amounts acquired pursuant to this paragraph 3 shall be
immediately paid over to TCA.
4. Acquisition of Certain SIHL Subordinated Notes. On November 8,
1996, Waterford acquired from SIHL certain Subordinated Notes and SIHL has
assigned to Waterford its right to receive $2,500,000 of the fees payable
pursuant to subparagraph (ii) of Section 2 of this Agreement. As a result
of this acquisition the parties acknowledge that, SIHL has assigned to
Waterford its right to receive fees of $1,350,000 that have accrued pursuant
to subparagraph (iii) of Section 2 of this Agreement as of April 30, 1997.
It is further acknowledged that as a result of this acquisition, Waterford
and SIHL each hold 50% of the Subordinated Notes (including all Subordinated
Note PIK Amounts), and, accordingly, from May 1, 1997, each of SIHL and
Waterford shall be entitled to one half of the fee set forth in subparagraph
(iv) of Section 2 of this Agreement.
5. Certain Expenses. TCA shall reimburse SIHL for the out of pocket
expenses (without premium) incurred solely for the purpose of arranging the
purchase of the Subordinated Notes; such reimbursement shall not in any case
exceed $1,000,000. On each anniversary such Letter of Credit is outstanding,
TCA shall pay SIHL a fee equal to the costs incurred by SIHL or its affiliates
in posting such Letter of Credit plus 1% of the principal amount thereof;
provided, however, the amount payable to SIHL by TCA shall not exceed for any
one year 2% of the undrawn and outstanding principal amount of such Letter
of Credit. The parties acknowledge that the obligations set forth in this
paragraph 5 have been fully satisfied.
6. Acquisition of certain Non-PIK Completion Guarantee Notes. On each
of October 12, 1997, October 12, 1998 and October 12, 1999 (each a "Closing
Date"), Waterford shall purchase from SIHL, and SIHL shall sell to Waterford,
for full value, (i) one-sixth of the outstanding principal amount of the first
funded $15 million of Non-PIK Completion Guarantee Notes (ii) all accrued and
unpaid interest thereon not otherwise paid by TCA pursuant to paragraph 3
hereof and (iii) all accrued and unpaid fees calculated pursuant to
subparagraph (v) of Section 2 of this Agreement attributable to the portion
of Non-PIK Completion Guarantee Notes being acquired. Such sale shall be
effected by the execution of a sale document in the form of Exhibit B attached
hereto. Upon the acquisition of the Non-PIK Completion Guarantee Notes
pursuant to this paragraph 6, Waterford shall become obligated to pay over to
TCA any amounts it receives from MTGA in connection with such Non-PIK
Completion Guarantee Notes in accordance with the principle set forth in
the last sentence of paragraph 3 hereof.
7. Assignments. Neither party may assign its rights and/or obligations
under this Agreement, except: (i) to a Partner or any affiliate of a Partner,
or (ii) with the prior written consent of all parties hereto. Any assignment
shall be subject to and made in accordance with applicable gaming, securities
or other laws and the assignee shall agree to be bound by the terms of this
Agreement.
8. Authorization; Representations and Warranties. Each party represents
and warrants to the other that:
(a) The execution, delivery, and performance by it of this Agreement
and the transactions contemplated herein have been duly authorized by all
necessary action, and the individual(s) executing this Agreement on its behalf
are duly authorized to do so;
(b) It is duly organized and in good standing under the laws of the
jurisdiction of its formation; and
(c) The execution, delivery and performance of this Agreement does
not and shall not violate any existing agreement, bylaw, statute, rule,
regulation and/or ordinance applicable to such party or its execution, delivery
and/or performance of this Agreement.
9. Notices. All notices hereunder shall be deemed properly given upon
(i) receipt by the addressee by personal delivery or facsimile transmission,
(ii) two (2) business days after delivery by an overnight express delivery
service for the next business day delivery, or (iii) if mailed, upon the first
to occur of receipt or the expiration of five (5) business days after deposit
in United States Postal Service certified mail, postage prepaid, addressed to
the parties at the addresses appearing below. Such addresses may be changed by
notice given in the same manner.
If to TCA: Xxx Xxxxxx
c/o LMW Investments, Inc.
000 Xxxxxxxx Xxxxxxxx
X.X. Xxx 000
Xxxxxxxxx, XX 00000
Telecopy No. (000) 000-0000
With Copy to: Honigman, Miller, Xxxxxxxx and Xxxx
0000 Xxxxx Xxxxxxxx Xxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq
Telecopy No. (000) 000-0000
If to SIHL: Xxxxxx ("Xxxxx") Xxxxxxx
Sun International Hotels Limited
Executive Offices
Atlantis, Coral Towers
Paradise Island, The Bahamas
Telecopy No. (000) 000-0000
10. Amendments. This Agreement may be amended or modified only by
written instrument executed by all of the parties hereto.
11. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
12. Severability. If any provision hereof shall be judicially determined
to be illegal, or if the application thereof to any party or in any
circumstance shall, to any extent, be judicially determined to be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to parties or in circumstances other than those to which it has
been judicially determined to be invalid or unenforceable, shall not be
affected thereby, and each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
13. Counterparts. This Agreement may be executed by facsimile and in
any number of counterparts, each of which shall constitute an original and
all of which together shall constitute one and the same Agreement.
14. Further Assurances. The parties will execute and deliver such
further instruments and undertake such further actions as may be required to
carry out the intent and purposes of this Agreement.
15. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
September 10, 1997, to be effective as of the day and year first above written.
TRADING COVE ASSOCIATES,
By: SUN COVE, LTD.,
By: /s/Xxxxxx Xxxxxxx
Name:
Title:
By: WATERFORD GAMING, L.L.C.,
By: /s/Xxx Xxxxxx
Name:
Title:
SUN INTERNATIONAL HOTELS LIMITED,
By: /s/Xxxxxxx Xxxxx
Name:
Title:
WATERFORD GAMING, L.L.C.,
By: /s/Xxx Xxxxxx
Name:
Title:
EXHIBIT A
Pursuant to the Completion Guarantee and Investment Banking and
Financing Arrangement Fee Agreement dated as of September 29, 1995 (the
"Agreement"), between Sun International Hotels Limited ("SIHL") and Trading
Cove Associates ("TCA"), SIHL for value received in cash of $______________,
hereby sells and transfers to TCA, $________________ of Deferred Interest
Amount (as defined in paragraph 3 of the Agreement). Set forth below is
the total amount of Deferred Interest Amount outstanding as on the date of
this sale, and the amount of Deferred Interest being sold hereunder.
Deferred Interest Amount $_________________
Amount sold hereunder $_________________
EXHIBIT B
Pursuant to Section 6 of the Completion Guarantee and Investment Banking
and Financing Arrangement Fee Agreement dated as of September 29, 1995 (the
"Agreement"), among Sun International Hotels Limited ("SIHL"), Trading Cove
Associates ("TCA") and Waterford Gaming, L.L.C., ("Waterford"), SIHL for
value received in cash of $________________, hereby sells and transfers to
Waterford the following:
$_______________ of principal amount of Non-PIK Completion Guarantee Notes
$_______________ of accrued and unpaid interest thereon not paid by TCA
pursuant to paragraph 3 of the Agreement
$_______________ of accrued and unpaid fees described in Section 2(v) of the
Agreement relating to such Non-PIK Completion Guarantee
Notes
