UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 333-17795-01
WATERFORD GAMING FINANCE CORP.
(Exact name of registrant as specified in its charter)
Delaware 06-1485836
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
914 Hartford Turnpike, P.O. Box 715
Waterford, CT 06385
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860) 442-4559
Securities registered pursuant to Section 12(b) of the Act:
NONE
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
The registrant meets the conditions set forth in General Instruction J(1) (a)
and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format.
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.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: Not applicable.
WATERFORD GAMING FINANCE CORP.
INDEX TO FORM 10-K
PART I. PAGE
Item 1. Business 1
Item 2. Properties 2
Item 3. Legal Proceedings 2
Item 4. Submission of Matters to a Vote of Security Holders 2
PART II.
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 2
Item 6. Selected Financial Data 2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
Item 8. Financial Statements and Supplementary Data 3
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 3
PART III.
Item 10. Directors and Executive Officers of the Registrant 3
Item 11. Executive Compensation 3
Item 12. Security Ownership of Certain Beneficial Owners and
Management 3
Item 13. Certain Relationships and Related Transactions 3
PART IV.
Item 14. Control Proceedures 4
Item 15. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 4
Signatures 7
Certifications 8
Part I
Certain Forward Looking Statements
- ----------------------------------
Certain information included in this Form 10-K and other materials filed or to
be filed by Waterford Gaming Finance Corp.(the "Company") with the Securities
and Exchange Commission (as well as information included in oral statements or
other written statements made or to be made by the Company) contains
forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future,
and accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company.
ITEM 1. BUSINESS
A. General
Waterford Gaming Finance Corp., a Delaware corporation, was formed on October
22, 1996 as a wholly owned subsidiary of Waterford Gaming, L.L.C. ("Gaming").
Effective as of May 15, 1997, the Company functioned as a co-issuer with its
parent, Gaming, to issue $65 million 12-3/4% senior notes payable (the "$65
Million Senior Notes"). The $65 Million Senior Notes were redeemed as part of
the Company's and Gaming's $125 million 9-1/2% senior notes (the "$125 Million
Senior Notes") offering which was completed on March 17, 1999.
B. $125 Million 9-1/2% Senior Notes
On March 17, 1999, the Company and Gaming, issued $125 Million Senior Notes,
which mature March 15, 2010. Payment of the principal of, and interest on, the
$125 Million Senior Notes is subordinate in right of payment to all their
existing and future secured debts.
Interest is payable semi-annually in arrears on March 15 and September 15 at a
rate of 9-1/2% per annum which commenced on September 15, 1999.
The principal amount of the $125 Million Senior Notes is payable on March 15,
2010. The Company and Gaming may elect to redeem the $125 Million Senior Notes
at any time on or after March 15, 2004 at a redemption price equal to a
percentage (105.182% after March 14, 2004, and declining to 104.318% after March
14, 2005, 103.455% after March 14, 2006, 102.591% after March 14, 2007, 101.727%
after March 14, 2008, 100.864% after March 14, 2009, and to 100% after March 14,
2010) of the principal amount thereof plus accrued interest. The $125 Million
Senior Notes provide that upon the occurrence of a Change of Control (as
defined), the holders thereof will have the option to require the redemption of
the $125 Million Senior Notes at a redemption price equal to 101% of the
principal amount thereof plus accrued interest.
If the Company and Gaming have any Company Excess Cash, as defined, they must
redeem the $125 Million Senior Notes (on a semi-annual basis on March 15 and
September 15) equal to a percentage (109.500% after March 15, 1999 and declining
to 108.636% after March 14, 2000, 107.773% after March 14, 2001, 106.909% after
March 14, 2002, 106.045% after March 14, 2003, 105.182% after March 14, 2004,
104.318% after March 14, 2005, 103.455% after March 14, 2006, 102.591% after
March 14, 2007, 101.727% after March 14, 2008, 100.864% after March 14, 2009,
and to 100% after March 14, 2010). On August 1, 1999 the Company and Gaming had
Company Excess Cash, as defined, available for mandatory redemption of the $125
Million Senior Notes totaling approximately $8,983,000, and accordingly on
September 15, 1999 the Company and Gaming made a mandatory redemption of $125
Million Senior Notes in the principal amount of $2,841,000 at the redemption
price of 109.50%. On February 1, 2000 the Company and Gaming had Company Excess
Cash, as defined, available for mandatory redemption of the $125 Million Senior
Notes totaling approximately $8,276,000, and accordingly on March 15, 2000 the
Company and Gaming made a mandatory redemption of $125 Million Senior Notes in
the principal amount of $2,277,000 at the redemption price of 108.636%. On
February 1, 2001 the Company and Gaming had Company Excess Cash, as defined,
available for mandatory redemption of $125 Million Senior notes totaling
approximately $6,173,000 and accordingly the Company and Gaming made a mandatory
redemption of $125 Million Senior Notes in the principal amount of $452,000 at
the redemption price of 107.773% on March 15, 2001. On August 1, 2001 the
Company and Gaming had Company Excess Cash, as defined, available for mandatory
redemption of $125 Million Senior Notes totaling approximately $9,765,000 and
accordingly on September 15, 2001 the Company and Gaming made a mandatory
redemption of $125 Million Senior Notes in the principal amount of $3,805,000 at
the redemption price of 107.773%. On February 1, 2002 the Company and Gaming had
Company Excess Cash, as defined, available for mandatory redemption of $125
Million Senior Notes totaling approximately $9,793,000, and accordingly on March
15, 2002 the Company and Gaming made a mandatory redemption of $125 Million
Senior Notes in the principal amount of $4,031,000 at the redemption price of
106.909%. On August 1, 2002 the Company and Finance had Company Excess Cash, as
defined, available for mandatory redemption of the $125 Million Senior Notes
totaling approximately $8,923,000 and accordingly on September 15, 2002 the
Company and Finance made a mandatory redemption of the $125 Million Senior Notes
in the principal amount of $3,396,000, at the redemption price of 106.909%. On
February 1, 2003 the Company and Finance had Company Excess Cash, as defined,
available for mandatory redemption of the $125 Million Senior Notes totaling
approximately $11,131,000 and accordingly on March 15, 2003 the Company and
Finance made a mandatory redemption of the $125 Million Senior Notes in the
principal amount of $5,658,000 at the redemption price of 106.045%. In certain
circumstances, if either Gaming or its partner in Trading Cove Associates
("TCA") exercises the option to buy or sell partnership interests in TCA, the
Company and Gaming must redeem the $125 Million Senior Notes.
The indenture relating to the $125 Million Senior Notes (the "Indenture")
contains certain affirmative and negative covenants customarily contained in
agreements of this type, including without limitation, covenants that restrict,
subject to specified exceptions the Company's and Gaming's ability to (i) borrow
money, (ii) pay dividends on stock or make certain other restricted payments,
(iii) use assets as security in other transactions, (iv) make investments, (v)
sell other assets or merge with other companies and (vi) engage in any business
except as currently conducted or contemplated or amend their relationship with
TCA. The Indenture also provides for customary events of default and the
establishment of a restricted investment fund with a trustee for interest
reserves.
1
ITEM 2. PROPERTIES
The Company does not have an ownership interest in real property.
ITEM 3. LEGAL PROCEEDINGS
On January 6, 1998, Leisure Resort Technology, Inc. ("Leisure") and defendants
Waterford Gaming, L.L.C., Trading Cove Associates, LMW Investments, Inc., and
Slavik Suites, Inc. settled a prior lawsuit brought by Leisure. In connection
with this settlement, Leisure and Trading Cove Associates, Waterford Gaming,
L.L.C., LMW Investments, Inc., and Slavik Suites, Inc. entered into a settlement
and release agreement. Pursuant to this settlement and release agreement,
Waterford Gaming, L.L.C. bought out Leisure's beneficial interest in Trading
Cove Associates.
By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter has been
transferred to the complex litigation docket and is pending in Waterbury,
Connecticut. The complaint alleged breach of fiduciary duties, fraudulent
non-disclosure, violation of Connecticut Statutes Section 42-110a, et seq., and
unjust enrichment in connection with the negotiation by certain of the
Defendants of the settlement and release agreement. The complaint also brought a
claim for an accounting. The complaint seeks unspecified legal and equitable
damages. On February 29 2000, Defendants filed a Motion to Strike and a Motion
for Summary Judgement, each with respect to all claims. The Court granted
Defendants' Motion to Strike in part and denied Defendants' Motion for Summary
Judgement, on October 13, 2000. The Courts order dismissed the claim for an
accounting and the claim under Connecticut Statues Section 42-110a, et seq. The
Court also struck the alter ego allegations in the complaint against LMW
Investments, Inc., Slavik Suites, Inc., Len Wolman and Mark Wolman. In a
decision dated August 6, 2001, the Court dismissed all claims against LMW
Investments, Inc., Slavik Suites, Inc., Len Wolman and Mark Wolman.
On November 15, 2000, Waterford Gaming, L.L.C. and its co-defendants answered
the complaint. In addition, Waterford Gaming, L.L.C. and Trading Cove Associates
asserted counterclaims for breach of the settlement and release agreement and
breach of the implied covenant of good faith against Leisure and its president,
Lee Tyrol. In a decision dated June 6, 2001, the Court dismissed the
counterclaim against Lee Tyrol. Leisure has moved for summary judgement seeking
dismissal of the counterclaims in full. This motion for summary judgement is
pending.
Discovery has commenced. Pursuant to the current scheduling order, all
depositions are to be completed by June 30, 2003. A trial date has not been set.
Waterford Gaming, L.L.C. believes that it has meritorious defenses and intends
to vigorously contest the claims in this action and to assert all available
defenses. At the present time, Waterford Gaming, L.L.C. is unable to express an
opinion on the likelihood of an unfavorable outcome or to give an estimate of
the amount or range of potential loss to Waterford Gaming, L.L.C. as a result of
this litigation due to the disputed issues of law and/or facts on which the
outcome of this litigation depends and due to the infancy of both the action and
discovery in the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted.
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS
Not Applicable.
ITEM 6. SELECTED FINANCIAL DATA
Omitted.
2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussions should be read in conjunction with, and is qualified
in its entirety by, the Company's financial statements and the notes thereto
included elsewhere herein.
Discussion of the years ended December 31, 2002, 2001 and 2000
- --------------------------------------------------------------
For the years ended December 31, 2002, 2001 and 2000 the Company had no revenue
and expense.
The Company is a wholly-owned subsidiary of Waterford Gaming, L.L.C..
The Company is not expected to have significant operating activity. Funding for
future operations will come from the financial support of its parent company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements on Page 5.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to persons who
are members of the Board of Directors of the Company or who are executive
officers of the Company.
Name Age Position
Len Wolman 48 President, Chief
Executive Officer, Member
of the Board of Directors
Del J. Lauria 54 Secretary, Treasurer,
Member of the Board of
Directors
ITEM 11. EXECUTIVE COMPENSATION
Omitted.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Company is a wholly owned subsidiary of Gaming.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted.
3
Part IV
ITEM 14. CONTROL PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's reports filed
with, or furnished to, the Securities and Exchange Commission, or the SEC,
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Treasurer, as
appropriate, to allow timely decisions regarding required disclosure based on
the definition of "disclosure controls and procedures" in Rule 13a-14(c) and
15d-14(c) of the Securities Exchange Act of 1934.
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Treasurer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on the foregoing evaluation, the
Company's Chief Executive Officer and Treasurer concluded that the Company's
disclosure controls and procedures were effective.
(b) Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the evaluation of those controls by the Chief Executive Officer and Treaurer,
including any corrective actions with regard to any significant deficiencies and
material weaknesses. The Company believes that its internal controls and
procedures are effective.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Exhibits
--------
Exhibit No. Description
3.1 Certificate of Incorporation of
Waterford Gaming Finance Corp. (i)
3.2 Bylaws of Waterford Gaming Finance Corp. (i)
4.1 Indenture, dated as of November 8, 1996, between
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., the issuers, and Fleet National
Bank, as trustee, relating to $65,000,000 12-3/4%
Senior Notes due 2003. (i)
4.1.1 First Supplemental Indenture, dated as of March 4,
1999, among Waterford Gaming, L.L.C. and Waterford
Gaming Finance Corp., as issuers, and State Street
Bank and Trust Company, as trustee, relating to
$65,000,000 12-3/4% Senior Notes due 2003. (iii)
4.2 Indenture, dated as of March 17, 1999, among
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., as issuers, and State Street Bank
and Trust Company, as trustee, relating to
$125,000,000 9-1/2% Senior Notes due 2010. (iii)
4.3 Security and Control Agreement, dated as of March
17, 1999, among Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp., as pledgors and
State Street Bank and Trust Company, as securities
intermediary. (iii)
4.4 Specimen Form of 9-1/2% Senior Notes due 2010
(included in Exhibit 4.2). (iii)
10.1 Purchase Agreement, dated as of March 10, 1999,
among Waterford Gaming, L.L.C., Waterford Gaming
Finance Corp., Bear, Stearns & Co., Inc., Merrill
Lynch, Pierce, Fenner and Smith Inc. and Salomon
Smith Barney (iii)
10.2 Waiver and Acknowledgment of Noteholder. (ii)
21.1 Subsidiaries of Waterford Gaming
Finance Corp. (i)
99.1 Annual Report, for the year ended December 31,
2002 on Form 10-K of Waterford Gaming, L.L.C.,
dated March 26, 2003, incorporated by reference to
Waterford Gaming, L.L.C.'s electronic filing of
such report on Form 10-K Securities and Exchange
Commission (the "Commission") file reference no.
333-17795.
(i) Incorporated by reference to the Registrant's Registration Statement on
Form S-4, Commission File No. 333-17795-01, declared effective on May 15,
1997.
(ii) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1998, Commission File No. 333-17795-01, as
accepted by the Commission on May 14, 1998.
(iii)Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1999, Commission File No. 333-17795-01, as
accepted by the Commission on May 17, 1999.
4
(b) Financial Statement Schedules
-----------------------------
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-1
Financial Statements:
Balance Sheets as of December 31, 2002 and 2001 F-2
Statements of Operations and Retained
Earnings (Deficit) for the years ended
December 31, 2002, 2001 and 2000 F-3
Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000 F-4
Notes to Financial Statements F-5
5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
Waterford Gaming Finance Corp.
In our opinion, the accompanying balance sheets and the related statements of
operations, retained earnings (deficit) and of cash flows present fairly, in all
material respects, the financial position of Waterford Gaming Finance Corp. (the
"Company") at December 31, 2002 and 2001, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2002
in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
March 18, 2003
F-1
WATERFORD GAMING FINANCE CORP.
BALANCE SHEETS
December 31, 2002 and 2001
--------------------------
2002 2001
------ ------
ASSETS
Cash $ 100 $ 100
====== ======
STOCKHOLDER'S EQUITY
Stockholder's equity:
Common stock, $.01
par value; 1,000 shares
authorized, issued
and outstanding $ 10 $ 10
Additional paid-in
capital 90 90
Retained earnings (deficit) -- --
------ ------
Total stockholder's equity $ 100 $ 100
====== ======
The accompanying notes are an integral part of these financial statements.
F-2
WATERFORD GAMING FINANCE CORP.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
For the Years Ended December 31, 2002, 2001 and 2000
--------------------------
2002 2001 2000
-------------- -------------- --------------
Revenue: $ -- $ -- $ --
Expenses: -- -- --
----- ----- -----
Net income -- -- --
Retained earnings (deficit),
beginning of year -- -- --
----- ----- -----
Retained earnings (deficit),
end of year $ -- $ -- $ --
===== ===== =====
The accompanying notes are an integral part of these financial statements.
F-3
WATERFORD GAMING FINANCE CORP.
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 2002, 2001 and 2000
--------------------------
2002 2001 2000
------------ ------------ ------------
Cash flows from operating activities:
Net income $ -- $ -- $ --
----- ----- -----
Net cash provided by
operating
activities -- -- --
----- ----- -----
Net increase
in cash -- -- --
Cash at beginning
of year 100 100 100
----- ----- -----
Cash at end of
year $ 100 $ 100 $ 100
===== ===== =====
The accompanying notes are an integral part of these financial statements.
F-4
WATERFORD GAMING FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
--------------------------
1. ORGANIZATION:
Waterford Gaming Finance Corp. (the "Company"), a Delaware corporation, was
formed on October 22, 1996 as a wholly-owned subsidiary of Waterford Gaming,
L.L.C. ("Gaming"). Effective as of May 15, 1997 the Company functioned as a
co-issuer with its parent, Gaming, to issue $65 million 12-3/4% senior notes
payable (the "$65 Million Senior Notes"). The $65 Million Senior Notes were
redeemed as part of the Company's and Gaming's $125 million 9-1/2% senior notes
(the "$125 Million Senior Notes") offering which was completed on March 17,
1999. The Company is not expected to have significant operating activity.
Funding for future operations will come from the financial support of its
parent, Gaming.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Accounting Method
The financial statements have been prepared utilizing the accrual method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
3. $125 Million 9-1/2% Senior Notes:
On March 17, 1999, the Company and Gaming, issued $125 Million Senior Notes,
which mature March 15, 2010. Payment of the principal of, and interest on, the
$125 Million Senior Notes is subordinate in right of payment to all their
existing and future secured debts.
Interest is payable semi-annually in arrears on March 15 and September 15 at a
rate of 9-1/2% annum and commenced on September 15, 1999.
The principal amount of the $125 Million Senior Notes is payable on March 15,
2010. The Company and Gaming may elect to redeem the $125 Million Senior Notes
at any time on or after March 15, 2004 at a redemption price equal to a
percentage (105.182% after March 14, 2004 and declining to 104.318% after March
14, 2005, 103.455% after March 14, 2006, 102.591% after March 14, 2007, 101.727%
after March 14, 2008, 100.864% after March 14, 2009 and to 100% after March 14,
2010) of the principal amount thereof plus accrued interest. The $125 Million
Senior Notes provide that upon the occurrence of a Change of Control (as
defined), the holders thereof will have the option to require the redemption of
the $125 Million Senior Notes at a redemption price equal to 101% of the
principal amount thereof plus accrued interest.
If the Company and Gaming have any Company Excess Cash, as defined, they must
redeem the $125 Million Senior Notes (on a semi-annual basis on March 15 and
September 15) equal to a percentage (109.500% after March 15, 1999 and declining
to 108.636% after March 14, 2000, 107.773% after March 14, 2001,, 106.909% after
March 14, 2002, 106.045% after March 14, 2003, 105.182% after March 14, 2004,
104.318% after March 14, 2005, 103.455% after March 14, 2006, 102.591% after
March 14, 2007, 101.727% after March 14, 2008, 100.864% after March 14, 2009 and
to 100% after March 14, 2010). On August 1, 1999 the Company and Gaming had
Company Excess Cash, as defined, available for mandatory redemption of the $125
Million Senior Notes totaling approximately $8,983,000, and accordingly on
September 15, 1999 the Company and Gaming made a mandatory redemption of $125
Million Senior Notes in the principal amount of $2,841,000 at the redemption
price of 109.50%. On February 1, 2000 the Company and Gaming had Company Excess
Cash, as defined, available for mandatory redemption of the $125 Million Senior
Notes totaling approximately $8,276,000 and accordingly the Company and Gaming
made a mandatory redemption of $125 Million Senior Notes in the principal amount
of $2,277,000 at the redemption price of 108.636% on March 15, 2000. On August
1, 2000 the Company and Gaming had Company Excess Cash, as defined, available
for mandatory redemption of the $125 Million Senior Notes, totaling
approximately $5,902,000, and accordingly on September 15, 2000 the Company and
Gaming made a mandatory redemption of $125 Million Senior Notes in the principal
amount of $191,000 at the redemption price of 108.636%. On February 1, 2001 the
Company and Gaming had Company Excess Cash, as defined, available for mandatory
redemption of the $125 Million Senior Notes totaling approximately $6,173,000
and accordingly the Company and Gaming made a mandatory redemption of $125
Million Senior Notes in the principal amount of $452,000 at the redemption price
of 107.773% on March 15, 2001. On August 1, 2001 the Company and Gaming had
Company Excess Cash, as defined, available for mandatory redemption of the $125
Million Senior Notes totaling approximately $9,765,000 and accordingly on
September 15, 2001 the Company and Gaming made a mandatory redemption of the
$125 Million Senior Notes in the principal amount of $3,805,000 at the
redemption price of 107.773%. On February 1, 2002 the Company and Gaming had
Company Excess Cash, as defined, available for mandatory redemption of the $125
Million Senior Notes totaling approximately $9,793,000, and accordingly on March
15, 2002 the Company and Gaming made a mandatory redemption of the $125 Million
Senior Notes in the principal amount of $4,031,000 at the redemption price of
106.909%. On August 1, 2002 the Company and Finance had Company Excess Cash, as
defined, available for mandatory redemption of the $125 Million Senior Notes
totaling approximately $8,923,000 and accordingly on September 15, 2002 the
Company and Finance made a mandatory redemption of the $125 Million Senior Notes
in the principal amount of $3,396,000, at the redemption price of 106.909%. On
February 1, 2003 the Company and Finance had Company Excess Cash, as defined,
available for mandatory redemption of the $125 Million Senior Notes totaling
approximately $11,131,000 and accordingly on March 15, 2003 the Company and
Finance made a mandatory redemption of the $125 Million Senior Notes in the
principal amount of $5,658,000 at the redemption price of 106.045%. In certain
circumstances, if either Gaming or its partner in Trading Cove Associates
("TCA") exercises the option to buy or sell partnership interests in TCA, the
Company and Gaming must redeem the $125 Million Senior Notes.
F-5
The indenture relating to the $125 Million Senior Notes (the "Indenture")
contains certain affirmative and negative covenants customarily contained in
agreements of this type, including without limitation, covenants that restrict,
subject to specified exceptions the Company's and Gaming's ability to (i) borrow
money, (ii) pay dividends on stock or make certain other restricted payments,
(iii) use assets as security in other transactions, (iv) make investments, (v)
sell other assets or merge with other companies and (vi) engage in any business
except as currently conducted or contemplated or amend their relationship with
TCA. The Indenture also provides for customary events of default and the
establishment of a restricted investment fund with a trustee for interest
reserves.
4. CONTINGENCIES:
LEGAL PROCEEDINGS
On January 6, 1998, Leisure Resort Technology, Inc. ("Leisure") and defendants
Waterford Gaming, L.L.C., Trading Cove Associates, LMW Investments, Inc., and
Slavik Suites, Inc. settled a prior lawsuit brought by Leisure. In connection
with this settlement, Leisure and Trading Cove Associates, Waterford Gaming,
L.L.C., LMW Investments, Inc., and Slavik Suites, Inc. entered into a settlement
and release agreement. Pursuant to this settlement and release agreement,
Waterford Gaming, L.L.C. bought out Leisure's beneficial interest in Trading
Cove Associates.
By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter has been
transferred to the complex litigation docket and is pending in Waterbury,
Connecticut. The complaint alleged breach of fiduciary duties, fraudulent
non-disclosure, violation of Connecticut Statutes Section 42-110a, et seq., and
unjust enrichment in connection with the negotiation by certain of the
Defendants of the settlement and release agreement. The complaint also brought a
claim for an accounting. The complaint seeks unspecified legal and equitable
damages. On February 29, 2000, Defendants filed a Motion to Strike and a Motion
for Summary Judgement, each with respect to all claims. The Court granted
Defendants' Motion to Strike in part and denied Defendants' Motion for Summary
Judgement, on October 13, 2000. The Courts order dismissed the claim for an
accounting and the claim under Connecticut Statues Section 42-110a, et seq. The
Court also struck the alter ego allegations in the complaint against LMW
Investments, Inc., Slavik Suites, Inc., Len Wolman and Mark Wolman. In a
decision dated August 6, 2001, the Court dismissed all claims against LMW
Investments, Inc., Slavik Suites, Inc., Len Wolman and Mark Wolman.
On November 15, 2000, Waterford Gaming, L.L.C. and its co-defendants answered
the complaint. In addition, Waterford Gaming, L.L.C. and Trading Cove Associates
asserted counterclaims for breach of the settlement and release agreement and
breach of the implied covenant of good faith against Leisure and its president,
Lee Tyrol. In a decision dated June 6, 2001, the Court dismissed the
counterclaim against Lee Tyrol. Leisure has moved for summary judgement seeking
dismissal of the counterclaims in full. This motion for summary judgement is
pending.
Discovery has commenced. Pursuant to the current scheduling order, all
depositions are to be completed by June 30, 2003. A trial date has not been set.
Waterford Gaming, L.L.C. believes that it has meritorious defenses and intends
to vigorously contest the claims in this action and to assert all available
defenses. At the present time, Waterford Gaming, L.L.C. is unable to express an
opinion on the likelihood of an unfavorable outcome or to give an estimate of
the amount or range of potential loss to Waterford Gaming, L.L.C. as a result of
this litigation due to the disputed issues of law and/or facts on which the
outcome of this litigation depends and due to the infancy of both the action and
discovery in the action.
F-6
(c) Reports on Form 8-K
-------------------
(i) Form 8-K filed on November 13, 2002
Item 5.
The Mohegan Tribal Gaming Authority (the "Authority") filed:
i) Form 10-Q/A for the quarter ended December 31, 2000, ii)
Form 10-Q/A for the quarter ended March 31, 2001, iii) Form
10-Q/A for the quarter ended June 30, 2001, iv) Form 10-K/A
for the fiscal year ended September 30, 2001, v) Form 10-Q/A
for the quarter ended December 31, 2001, vi) Form 10-Q/A for
the quarter ended March 31, 2002 and vii) Form 10-Q/A for
the quarter ended June 30, 2002 a copy of each of which has
been filed as an exhibit to this report and is incorporated
by reference to the Authority's electronic filing of such
reports on Form 10-Q/A and Form 10-K/A, Securities and
Exchange Commission file reference no. 033-80655.
Date of Report: November 12, 2002
(ii) Form 8-K filed on December 6, 2002
Item 5.
On December 5, 2002, the Mohegan Tribal Gaming Authority
(the "Authority") filed a press release report on Form 8-K
for the fourth quarter and fiscal year ended September 30,
2002, a copy of which has been filed as an exhibit to this
report and is incorporated by reference to the Authority's
electronic filing of such report on Form 8-K, Securities and
Exchange Commission file reference no. 033-80655.
Date of Report: December 5, 2002
(iii) Form 8-K filed on December 20, 2002
Item 5.
On December 19, 2002, the Mohegan Tribal Gaming Authority
(the "Authority") filed its annual report on Form 10-K for
the year ended September 30, 2002, a copy of which has been
filed as an exhibit to this report and is incorporated by
reference to the Authority's electronic filing of such
report on Form 10-K, Securities and Exchange Commission file
reference no. 033-80655
Date of Report: December 19, 2002
(iv) Form 8-K filed on February 3, 2003
Item 5.
On January 29, 2003, the Mohegan Tribal Gaming Authority
(the "Authority") filed a copy of Amendment No. 6 to its
senior credit facility (the "Amendment") on Form 8-K, a copy
of which has been filed as an exhibit to this report and is
incorporated by reference to the Authority's electronic
filing of such report on Form 8-K, Securities and Exchange
Commission file reference no. 033-80655. The Amendment
allows the Authority to create a new subsidiary for the
purpose of acquiring a woman's professional basketball team
franchise.
On January 30, 2003, the Mohegan Tribal Gaming Authority
(the "Authority") filed a press release report on Form 8-K,
announcing its first quarter ended December 31, 2002
operating results, a copy of which has been filed as an
exhibit to this report and is incorporated by reference to
the Authority's electronic filing of such report on Form
8-K, Securities and Exchange Commission file reference no.
033-80655.
On January 30, 2003, the Mohegan Tribal Gaming Authority
(the "Authority") filed a copy of a Membership Agreement,
dated January 28, 2003, by and among WNBA, LLC, the Mohegan
Basketball Club LLC, the Mohegan Tribal Gaming Authority and
the Mohegan Tribe of Indians of Connecticut on Form 8-K, a
copy of which has been filed as an exhibit to this report
and is incorporated by reference to the Authority's
electronic filing of such report on Form 8-K, Securities and
Exchange Commission file reference no. 033-80655.
Date of Report: January 29, 2003
(v) Form 8-K filed on February 13, 2003
Item 5.
On February 13, 2003, the Mohegan Tribal Gaming Authority
(the "Authority") filed its quarterly report on Form 10-Q
for the quarter ended December 31, 2002, a copy of which has
been filed as an exhibit to this report and is incorporated
by reference to the Authority's electronic filing of such
report on Form 10-Q, Securities and Exchange Commission file
reference no. 033-80655.
Date of Report: February 13, 2003
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Waterford Gaming Finance Corp.
Date: March 26, 2003 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: March 26, 2003 By: /s/Del Lauria
Del Lauria, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on March 26, 2003.
Signature Title
/s/ Len Wolman President, Chief Executive Officer,
- ---------------------- Member of the Board of Directors
Len Wolman
/s/ Del J. Lauria Secretary, Treasurer,
- ---------------------- Member of the Board of Directors
Del J. Lauria
7
CERTIFICATION
I, Len Wolman, certify that:
1. I have reviewed this annual report on Form 10-K of Waterford Gaming Finance
Corp.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, and any consolidated subsidiaries,
is made known to us by others within the registrant, particularly during
the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the registrant's board
of directors (or persons performing equivalent functions):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003
/s/ Len Wolman Chief Executive Officer
- ----------------------
Len Wolman
8
CERTIFICATION
I, Del J. Lauria, certify that:
1. I have reviewed this annual report on Form 10-K of Waterford Gaming Finance
Corp.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, and any consolidated subsidiaries,
is made known to us by others within the registrant, particularly during
the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the registrant's board
of directors (or persons performing equivalent functions):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 26, 2003
/s/ Del J. Lauria Treasurer
- ----------------------
Del J. Lauria
9