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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION
--- 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended: September 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 ____________
CHOCTAW RESORT DEVELOPMENT ENTERPRISE
(Exact name of registrant as specified in its charter)
Mississippi Band of Choctaw Indians 64-0345731
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
PO Box 6260, Choctaw Branch, Philadelphia, MS 39350
(Address of principal executive offices) (Zip code)
(601) 650-9294
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
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 __ No _X_
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 [ ]
Documents Incorporated by Reference: The information required by Part IV of this
Report, to the extent not set forth herein, is incorporated by reference from
the Registration Statement on Form S-4/A filed on September 26, 2001 with the
Securities and Exchange Commission.
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1
CHOCTAW RESORT DEVELOPMENT ENTERPRISE
SEPTEMBER 30, 2001 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports of Form 8-K
2
Disclosure Regarding Forward-Looking Statements
Some information included in this Form 10-K and other materials filed or to be
filed by the Choctaw Resort Development Enterprise with the Securities and
Exchange Commission contain forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements include information relating to plans for
future expansion and other business development activities, as well as other
capital spending, financing sources and the effects of regulation (including
gaming and tax regulation) and competition. 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
Enterprise. These risks and uncertainties include, but are not limited to, those
relating to development and construction activities, dependence on existing
management, leverage and debt service, domestic or global economic condition,
pending litigation, changes in federal tax laws or the administration of such
laws and changes in gaming laws or regulations (including the legalization of
gaming in certain jurisdictions).
PART I
Item 1. Business
General
The Mississippi Band of Choctaw Indians established the Choctaw Resort
Development Enterprise to operate the Silver Star Hotel and Casino and to
develop and operate the Golden Moon Hotel and Casino and related businesses.
References in this annual report to (1) the "Tribe" refer to the Mississippi
Band of Choctaw Indians, and (2) the "Enterprise," "we," "our," "ours" and "us"
refer to the Choctaw Resort Development Enterprise, business enterprise of the
Tribe.
The Tribe is a federally recognized, self governing Indian tribe with
approximately 8,300 enrolled members, most of whom live on or near the Tribe's
approximately 29,000-acre reservation in east-central Mississippi. The Indian
Gaming Regulatory Act of 1988 permits federally recognized Indian tribes to
conduct full-scale casino gaming operations on certain Indian lands, subject to,
among other things, the negotiation of a compact with the affected state. The
Tribe and the State of Mississippi entered into a compact in 1992, which was
approved by the U.S. Secretary of the Interior. The compact authorizes full
Class III gaming to the same extent as non-Indian casinos in the State of
Mississippi. The compact is not subject to a term of years and will continue
unless mutually terminated, imposes no required payments to the State of
Mississippi and limits distributions to each Tribal member to $1,000 per year.
The Tribe is the only entity legally authorized to operate land-based casinos in
the state.
Description of Business
The Enterprise is a business enterprise of the Tribe that was created
on October 12, 1999 to operate the Silver Star and to develop and operate the
Golden Moon and related businesses. Effective July 1, 2001, the Tribe
contributed the Dancing Rabbit to the Enterprise. No consideration was or is
intended to be given to the Tribe for such contribution.
The Silver Star Hotel and Casino
The Silver Star Hotel and Casino is a full service gaming and
entertainment complex located on a 32-acre site on the Tribe's reservation
approximately 86 miles northeast of Jackson, Mississippi. The Silver Star is
currently the only land-based casino in the state and the casino closest to
Birmingham and Tuscaloosa, Alabama. Also, there are no legally authorized
casinos in Alabama or Georgia.
The Silver Star opened in July 1994 at a total cost of approximately
$32 million. The Silver Star originally opened with 100 hotel rooms and has
increased its size through three major expansions, increasing the number of
rooms to 498 and adding additional gaming space and conference facilities.
3
The Silver Star is an approximately 518,000 square foot facility that,
as of September 30, 2001, featured: a 12-story hotel with 498 rooms, including
89 suites; approximately 85,000 square feet of gaming space with 3,156 slot
machines, 82 table games and 11 poker tables; approximately 30,000 square feet
of meeting and convention space, which also serves as a 2,000 seat live
entertainment and sports venue with sky boxes; 3,387 parking spaces, including
an approximately 1,100 space parking garage; six restaurants with a total of 881
seats; six lounges; three retail outlets; a swimming pool; a full-service spa;
fitness facilities; and access to the adjacent Dancing Rabbit Golf Club.
The Dancing Rabbit Golf Club
Adjoining the casino is the Dancing Rabbit Golf Club, a 750-acre
property containing two 18-hole championship golf courses designed by golf
course designer Tom Fazio and PGA veteran Jerry Pate. Each 18-hole golf course
spans over 7,000 yards and offers five tee locations. The golf club also
contains a full-service golf shop, a teaching and practice facility, eight
guestrooms, event coordinators and a restaurant and bar. The Dancing Rabbit was
ranked 37th in Golf Magazine's 2000 "Top 100 You Can Play" list of courses.
Effective July 1, 2001, the Tribe contributed the Dancing Rabbit to the
Enterprise. No consideration was or is intended to be given to the Tribe for
such contribution.
The Golden Moon
We have under construction the Golden Moon, an approximately 840,000
square foot hotel and casino that will be located directly across the highway
from the Silver Star. The Golden Moon will be connected to the Silver Star via a
walkway bridge, which will span the highway separating the two casinos. The
bridge will be enclosed and climate controlled and will feature moving ramps to
ease movement from one casino to the other.
Current plans for the development of the Golden Moon include: a
572-room hotel with more than 100 suites, including 32 VIP suites; approximately
90,000 square feet of gaming space with approximately 1,750 slot machines and 56
table games; an approximately 8,000 square foot executive conference center;
approximately 3,000 new parking spaces; five restaurants with approximately 455
seats; five lounges; approximately 8,000 square feet of retail space; a 315-foot
tower topped by an 80-foot geodesic sphere housing a restaurant, lounge and
observation deck; an aqua-scape, including fountains and other water effects; an
indoor/outdoor swimming pool; a full service spa; and fitness facilities.
Pearl River Resort
The Tribe intends to market the Silver Star, Golden Moon and Dancing
Rabbit under the Pearl River Resort trade name and to establish these collective
properties as a premier regional entertainment and destination resort.
Construction Budget
We expect the cost of developing, constructing, equipping and opening
the Golden Moon and making related improvements to the Silver Star to total
approximately $290.6 million, including pre-opening expenses, initial working
capital and capitalized interest. The Enterprise has entered into a guaranteed
maximum price contract with W.G. Yates & Sons Construction, which covers $146.8
million of the so-called "hard" costs of constructing the Golden Moon. Pursuant
to this contract, Yates has provided a payment and performance bond for the
entire contract price of $146.8 million. Yates may require modifications to
plans and specifications, including some changes arising from proposed change
orders by us, provided that no such required modifications may be inconsistent
with the description of the Golden Moon contained in the contract or with
budgeted line items. The Enterprise is required to approve any change order.
The remaining $142.5 million of budgeted costs includes
Enterprise-managed construction (approximately $26.0 million), additional
furniture, fixtures and equipment, certain so-called "soft" costs, which include
fees of the architect, attorneys and other professionals, pre-opening expenses,
capitalized interest and other costs that are not "hard" costs. Accordingly,
neither the construction contract's guaranteed maximum price nor other
safeguards against cost overruns, other than the Enterprise's budget contingency
of $13.0 million, will provide any guaranty against increased costs relative to
excluded items. Neither we nor the Tribe can provide assurance that the Golden
Moon project will be completed within the budgeted costs.
4
Construction Schedule
Construction of the Golden Moon has begun, and the Golden Moon is
expected to open in the second half of 2002. The Tribe has previously overseen
construction projects on its reservation, including the construction of the
existing Silver Star facility and its subsequent expansions.
Market
According to the Mississippi Gaming Commission, the Mississippi gaming
market, excluding the Silver Star, generated $2.6 billion of annual gaming
revenues in 2000. Including the Silver Star, there are currently 31 casinos
operating in Mississippi, covering 1.6 million square feet of gaming space and
offering approximately 44,000 slot machines and 1,400 table games. Of the 31
casinos, the Silver Star is the only land-based casino in the state. Other
casinos in the State must operate as dockside casinos and are moored on either
the Mississippi River or the Mississippi Gulf Coast. The Silver Star is
separated by an approximately two and one-half hour drive from its nearest
significant competitor.
Competition
The Tribe is the only legally authorized operator of land-based casinos
in Mississippi. The Silver Star's primary competitors are the 30 casinos
concentrated in Mississippi's three regional gaming markets: the North River
Region, the South River Region and the Coastal Region. The Silver Star currently
draws most of its customers from within a 150-mile radius, including Jackson,
Mississippi, and also has established customer bases in Birmingham, Montgomery
and Tuscaloosa, Alabama.
The North River Region is located in Tunica County, approximately 180
miles northwest of the Silver Star, and currently has eleven dockside casinos
along the Mississippi River. Major operators in this market include Boyd Gaming
Corporation, Harrah's Entertainment, Inc., Hollywood Casino Corporation,
Horseshoe Gaming, LLC, Isle of Capri Casinos, Inc., Mandalay Resort Group and
Park Place Entertainment, Inc. Casinos in the North River Region attract a
significant number of their customers from nearby Memphis, Tennessee and Little
Rock, Arkansas.
The South River Region is located along the southern portion of the
Mississippi River, approximately 125 miles west of the Silver Star, and
currently has seven dockside casinos in the cities of Vicksburg, Greenville and
Natchez. Major operators in this market include Ameristar Casinos, Inc.,
Harrah's Entertainment, Inc., and Isle of Capri Casinos, Inc. The South River
market customer base is primarily regional, with most customers coming from
within a 50-mile radius.
The Coastal Region is located approximately 200 miles south of the
Silver Star along the Mississippi Gulf Coast and is the largest gaming market in
Mississippi with dockside and riverboat casinos in Biloxi, Gulfport and Bay St.
Louis. Major operators in this market include Park Place Entertainment
Corporation, Pinnacle Entertainment, Inc., Penn National Gaming, Inc. and Isle
of Capri Casinos, Inc. MGM MIRAGE entered the market in March 1999 with the
opening of the Beau Rivage in Biloxi, Mississippi. In addition to attracting
gaming customers from the local area, Gulf Coast casinos, particularly the Beau
Rivage, which is located in a traditional regional beach resort area, tend to
draw a significant number of customers from greater Mississippi and from outside
the state.
Description of Material Agreements
The Compact
The Tribe entered into the Tribal-State Compact for Regulation of Class
III Gaming on the Mississippi Band of Choctaw Indians Reservation in Mississippi
on December 4, 1992, which became effective on January 4, 1993 and was
subsequently amended on August 26, 1994 and May 24, 1996. The Compact by its
terms remains in effect until terminated by mutual consent of the parties or by
Act of Congress. The Compact does not require the Tribe to make any contribution
to the State of Mississippi except for reimbursement of expenses incurred by the
State.
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Under the Compact, the Tribe is permitted to operate all Class III
gaming allowed by Mississippi law and under the IGRA. This allows the Tribe to
conduct most forms of Class III gaming, including slot machines. The Tribe
currently has no Class II gaming operations.
The Tribe is authorized to own and operate one or more casinos on its
reservation. Reservation lands are land which are held in trust by the United
States for the benefit of the Tribe as of October 17, 1988. The Tribe may not
conduct Class III gaming on lands acquired by the United States in trust for the
benefit of the Tribe after October 17, 1988, unless such lands are located
within or continuous to the boundaries of the Tribe's reservation as of October
17, 1988 and the Secretary of the Interior and the Governor of the State of
Mississippi determine that gaming on such lands would be in the Tribe's best
interest and not be detrimental to the surrounding community. The Silver Star is
wholly located on the Tribe's reservation. The location of all proposed
buildings for the Golden Moon is also within the Tribe's reservation.
Other provisions of the Mississippi Choctaw Compact provide as follows:
(1) The Tribe, the United States and the State of Mississippi exercise
concurrent civil jurisdiction over Class III gaming activities at the
Tribe's casinos. The Tribe exercises exclusive criminal and civil
jurisdiction over Tribal members and all other Indians to the extent
allowed by federal law, the United States retains its criminal jurisdiction
over all of the Class III gaming on the reservation, and the State of
Mississippi exercises exclusive or concurrent criminal jurisdiction over
non-Indians as to some crimes to the extent allowed by federal law.
(2) No person under the age of 21 is permitted to play any Class III game.
(3) Net revenues to the Tribe from Class III gaming will be used only in
accordance with budgets adopted by resolution of the Tribal Council and to
fund tribal government operations and programs, to provide for the general
welfare of the members of the Tribe, to promote economic development, to
donate to charitable organizations and to help fund the operations of local
government agencies. Per capita payments to tribal members are limited to
$1,000 per year.
(4) The Choctaw Gaming Commission, as established by the tribal government, has
primary regulatory authority over the gaming activities of the Tribe. The
Mississippi Gaming Commission cooperates with the Choctaw Gaming Commission
and its agents have the right to inspect the operations of Class III gaming
on reservation lands upon the presentation of appropriate identification to
the on-site Choctaw Gaming Commission official without any further notice
to the Choctaw Gaming Commission during normal business hours.
(5) The Tribe and the State of Mississippi shall mutually agree upon a budget
for necessary and actual expenses that may be reasonably incurred by the
State during the calendar year in connection with the gaming activities for
regulation, enforcement and state-funded capital improvements that benefit
the Tribe's casinos. The Tribe shall reimburse actual expenses specified in
such budget incurred by the State within 30 days after the State submits a
quarterly payment request. The Tribe and the State shall separately provide
$250,000 each year in matching funds to be used for the advertising and
promotion of tourism. The Tribe's contribution shall be paid in quarterly
installments, conditioned on the Tribe receiving profits of at least
$62,500 for the preceding quarter.
(6) The sale of alcoholic beverages on reservation lands designated by the
Tribal Council as a resort area is permitted by the State of Mississippi.
The Tribe is required to purchase alcoholic beverages exclusively from the
State warehouse.
(7) All management officials and key employees and any other person who enters
into a management contract with the Tribe is required to have a Class III
gaming license or work permit issued by the Choctaw Gaming Commission.
6
Government Regulation
General
The Enterprise is subject to special federal, state and tribal laws
applicable to both commercial relationships with Indians generally and to Indian
gaming and the management and financing of casinos owned by an Indian tribe
specifically. In addition, the Enterprise is regulated by federal and state laws
applicable to the gaming industry generally and to the distribution of gaming
equipment. The following description of the regulatory environment in which
Indian gaming takes place and in which the Enterprise operates is only a summary
and not a complete recitation of all applicable law. Moreover, this particular
regulatory environment is more susceptible to changes in public policy
considerations than others. It is impossible to predict how particular
provisions will be interpreted from time to time or whether they will remain
intact. Changes in such laws could have a material adverse impact on the
Enterprise's operations.
Tribal Law and Legal Systems
Applicability of Federal Law. Federally recognized Indian tribes are
independent governments, subordinate to the United States, with sovereign
powers, except as those powers may have been limited by treaty or by the United
States Congress. The power of Indian tribes to enact their own laws to regulate
gaming, subject to Federal laws, derives from the exercise of tribal
sovereignty. Indian tribes maintain their own governmental systems and often
their own judicial systems. Indian tribes have the right to tax persons and
businesses conducting business on Indian lands, and also have the right to
require licenses and to impose other forms of regulations and regulatory fees on
persons and businesses operating on their lands.
Waiver of Sovereign Immunity; Jurisdiction; Exhaustion of Tribal Remedies.
Indian tribes enjoy sovereign immunity from unconsented suit similar to that of
the states and the United States. In order to sue an Indian tribe (or an agency
or instrumentality of an Indian tribe such as the Enterprise), the tribe must
have effectively waived its sovereign immunity with respect to the matter in
dispute. Further, in most commercial disputes with Indian tribes, the
jurisdiction of the federal courts, which are courts of limited jurisdiction,
may be difficult or impossible to obtain. A commercial dispute is unlikely to
present a federal question, and some courts have ruled that an Indian tribe as a
party is not a citizen of any state for purposes of establishing diversity
jurisdiction in the federal courts. The remedies available against an Indian
tribe also depend, at least in part, upon the rules of comity requiring initial
exhaustion of remedies of tribal tribunals and, as to some judicial remedies,
the tribe's consent to jurisdictional provisions contained in the disputed
agreements. The United States Supreme Court has held that where a tribal court
exists, the jurisdiction in that forum must first be exhausted before any
dispute arising on or involving the affected tribe's reservation and to which
the tribe, a tribal entity such as the Enterprise or a tribal member is a party,
can be properly heard by federal courts which would otherwise have jurisdiction.
Generally, where a dispute as to the existence of jurisdiction in the tribal
forum exists, the tribal court must first rule as to the limits of its own
jurisdiction, subject to specific limited exceptions enumerated by the United
States Supreme Court.
The Indian Gaming Regulatory Act of 1988
Regulatory Authority. The operation of casinos and of all gaming on Indian land
are subject to the Indian Gaming Regulatory Act of 1988. IGRA is administered by
the National Indian Gaming Commission, or NIGC, an independent agency, within
the U.S. Department of Interior, exercising primary federal regulatory
responsibility over Indian gaming. The NIGC has exclusive authority to issue
regulations governing tribal gaming activities, approve tribal ordinances for
regulating Class II and Class III Gaming (as described below), approve
management agreements for gaming facilities, conduct investigations and
generally monitor tribal gaming. Certain responsibilities under IGRA (such as
the approval of per capita distribution plans to tribal members and the approval
of transfer of lands into trust status for gaming) are retained by the Bureau of
Indian Affairs, or BIA, which is a bureau of the United States Department of the
Interior. The BIA also has responsibility to review and approve land leases and
other agreements relating to Indian lands. Criminal enforcement is a shared
responsibility of the United States Department of Justice, the state in which
the Tribe is located and the Tribe, in accordance with federal law.
The NIGC is empowered to inspect and audit all Indian gaming
facilities, to conduct background checks on all persons associated with Indian
gaming, to hold hearings, issue subpoenas, take depositions, adopt regulations
and
7
assess fees and impose civil penalties for violations of IGRA. IGRA also
provides for federal criminal penalties for illegal gaming on Indian land and
for theft from Indian gaming facilities. The NIGC has adopted rules implementing
specific provisions of IGRA. These rules govern, among other things, the
submission and approval of tribal gaming ordinances or resolutions and require
an Indian tribe to have the sole proprietary interest in and responsibility for
the conduct of any gaming. Tribes are required to issue gaming licenses only
under articulated standards, to conduct or commission financial audits of their
gaming enterprises, to perform or commission background investigations for
primary management officials and key employees and to maintain facilities in a
manner that adequately protects the environment and the public health and
safety. These rules also set out review and reporting procedures for tribal
licensing of gaming operation employees.
Classes of Gaming. IGRA classifies games that may be conducted on Indian lands
into three categories. "Class I Gaming" includes social games solely for prizes
of minimal value or traditional forms of Indian gaming engaged in by individuals
as part of, or in connection with, tribal ceremonies or celebrations. "Class II
Gaming" includes bingo, pulltabs, lotto, punch boards, non-banked card games,
tip jars, instant bingo and other games similar to bingo, if those games are
played at the same location as bingo is played. "Class III Gaming" includes all
other forms of gaming, such as slot machines, video casino games, table games
and other commercial gaming, such as sports betting and pari-mutuel wagering.
Class I Gaming on Indian lands is within the exclusive jurisdiction of
the Indian tribes and is not subject to IGRA. Class II Gaming is permitted on
Indian lands if: the state in which the Indian lands lie permits such gaming for
any purpose by any person, organization or entity; the gaming is not otherwise
specifically prohibited on Indian lands by federal law; the gaming is conducted
in accordance with a tribal ordinance or resolution which has been approved by
the NIGC; an Indian tribe has sole proprietary interest and responsibility for
the conduct of gaming; the primary management officials and key employees are
tribally licensed; and several other requirements are met.
Class III Gaming is permitted on Indian lands if the conditions
applicable to Class II Gaming are met and, in addition, the gaming is conducted
in conformity with the terms of a tribal-state compact, which is a written
agreement between the tribal government and the government of the state within
whose boundaries the tribe's lands lie.
Tribal-State Compacts. IGRA requires Indian tribes to enter into tribal-state
compacts in order to conduct Class III Gaming. Such tribal- state compacts may
include provisions for the allocation of criminal and civil jurisdiction between
the state and the Indian tribe necessary for the enforcement of such laws and
regulations, taxation by the Indian tribe of such activity in amounts comparable
to those amounts assessed by the state for comparable activities, remedies for
breach, standards for the operation of such activity and maintenance of the
gaming facility, including licensing and any other subjects that are directly
related to the operation of gaming activities. While the terms of tribal-state
compacts vary from state to state, compacts within one state tend to be
substantially similar. Tribal-state compacts usually specify the types of
permitted games, establish technical standards for video gaming machines, set
maximum and minimum machine payout percentages, entitle the state to inspect
casinos, require background investigations and licensing of casino employees and
may require the tribe to pay a portion of the state's expenses for establishing
and maintaining regulatory agencies. Some tribal-state compacts are for set
terms, while others are for indefinite duration. The Tribe's Compact has no
fixed termination date and will continue in force until terminated by mutual
agreement of the State and the Tribe or by Act of Congress.
There has also been litigation challenging the authority of governors,
under state law, to enter into tribal-state compacts. Federal courts have upheld
the authority of the governors of Louisiana and Mississippi to enter into
compacts, while the highest state courts of New Mexico and Kansas have held that
the governors of those states did not have authority to enter into such compacts
without the consent or authorization of the legislatures of those states. In the
New Mexico and Kansas cases, the courts held that compacting is a legislative
function under the respective state constitutions. The court in the New Mexico
case also held that then existing state law did not permit casino-style gaming.
8
The Enterprise's operation of gaming is subject to the requirements and
restrictions contained in the Mississippi Choctaw Compact. The Mississippi
Choctaw Compact authorizes the Tribe to conduct most forms of Class III gaming.
For additional information, see "Description of Material Agreements-The
Compact".
Tribal Ordinances. Under IGRA, except to the extent otherwise provided in a
tribal-state compact as described below, Indian tribal governments have primary
regulatory authority over Class III Gaming on land within a tribe's
jurisdiction. Therefore, the Enterprise's gaming operations, and persons engaged
in gaming activities, are guided by and subject to the provisions of the Tribe's
ordinances and regulations regarding gaming.
IGRA requires that the NIGC review tribal gaming ordinances and
authorizes the NIGC to approve such ordinances only if they meet specific
requirements relating to (1) the ownership, security, personnel background,
recordkeeping and auditing of a tribe's gaming enterprises; (2) the use of the
revenues from such gaming; and (3) the protection of the environment and the
public health and safety.
Possible Changes in Federal Law
Several bills have been introduced in Congress which would amend IGRA.
While there have been a number of technical amendments to the law, to date there
have been no material changes to the IGRA. Any amendment of IGRA could change
the governmental structure and requirements within which the Tribe could conduct
gaming, and may have an adverse effect on our results of operations or impose
additional regulatory or operational burdens.
Employee and Labor Relations
As of September 30, 2001, we had 2,351 full-time employees. We expect
to hire approximately 2,000 additional full-time employees in connection with
the opening of the Golden Moon. Pursuant to the ordinance establishing the
Enterprise, we are required to extend preferential treatment to qualified
members of the Tribe in recruitment, employment and promotion. Our employees are
not covered by any collective bargaining agreements. We believe that our labor
relations with our employees are good.
We have developed and implemented training programs for Silver Star
employees and believe that we will be able to hire and train a sufficient number
of employees for the operation of both the Silver Star and the Golden Moon.
Item 2. Properties
The Enterprise currently operates the Silver Star and is constructing
the Golden Moon, which the Enterprise will also operate upon its completion.
Effective July 1, 2001, the Tribe contributed the Dancing Rabbit to the
Enterprise. No consideration was or is intended to be given to the Tribe for
such contribution. The Enterprise, however, does not and will not own the real
property comprising the Silver Star and the Golden Moon. The United States
government holds and will continue to hold all of the real property in trust for
the benefit of the Tribe.
Item 3. Legal Proceedings
On July 26, 2001, a lawsuit was filed in Mississippi's First Judicial
District of Hinds County Chancery Court by Eddie Fears, "a citizen and
taxpayer", against Ronnie Musgrove, Governor of the State of Mississippi,
Mississippi Gaming Commission and the members of the Mississippi Gaming
Commission. Neither the Tribe nor the Enterprise are parties to the action. The
plaintiff is seeking declaratory and injunctive relief against the Governor and
Mississippi Gaming Commission. No monetary damages are being sought. The lawsuit
alleges that the Tribal-State Compact entered into by the State of Mississippi
and the Tribe is invalid for a number of reasons, including that the
then-Governor of the State of Mississippi did not have the legal power to bind
the State to the terms of the Compact. In 1994, the same legal issue was
addressed by the United States District Court for the Southern District of
Mississippi in Brantley Willis v. Governor Kirk Fordice, et al., 850 F. Supp.
523 (S.D. Miss. 1994), aff'd 55 F.3d 633 (5th Cir. 1995) (table). The Court
ruled on April 8, 1994 that the Governor had the authority to enter into the
Compact. The Tribe believes that the Federal Court's ruling in that case was
correct and that the Compact is valid. It is not possible to predict the outcome
of this lawsuit, and management is unable to make a meaningful estimate of the
amount or range of
9
loss, if any, that could result from an unfavorable outcome of this lawsuit. We
are also involved in litigation incurred in the normal course of business;
however, we are not currently a party to any other material pending claim or
legal action than what is discussed above.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Enterprise has not issued or sold any equity securities.
Item 6. Selected Financial Data
Selected Historical Financial and Other Data
Prior to the establishment of the Enterprise, the Silver Star operated
as a separate operating business entity of the Tribe. On October 12, 1999, the
Tribe contributed the Silver Star to the Enterprise in a reorganization. This
reorganization was accounted for as a reorganization of entities under common
control. Effective July 1, 2001, the Tribe contributed Dancing Rabbit to the
Enterprise. Prior to its contribution to the Enterprise, the Dancing Rabbit
operated as a separate, wholly owned business enterprise of the Tribe. This
reorganization is also accounted for as a reorganization of entities under
common control. Accordingly, the financial statements of the Enterprise for all
periods are presented as if the reorganizations occurred at the beginning of the
earliest period presented and include the accounts of the Enterprise, the Silver
Star, and the Dancing Rabbit on a historical cost basis, in a manner similar to
the treatment found in a pooling of interests transaction. All intercompany
balances and transactions have been eliminated. You should read the following
financial data in conjunction with the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes included in this Form 10-K.
Fiscal Year Ended September 30,
-------------------------------------------------------------------
2001 2000 1999 1998 1997
(in thousands)
Statement of Income Data:
Net Revenues............................. $237,619 $248,227 $244,224 $233,411 $216,632
Operating Income (a)................... 109,315 40,050 87,310 92,622 88,970
Net Income (a)........................... 98,042 36,894 87,629 92,928 89,080
Balance Sheet Data:
Cash and cash equivalants.......... $ 81,823 $ 34,780 $ 21,286 $ 20,732 $ 21,223
Restricted cash............................ $ 2,568 $ 2,443 $ 2,295 $ 2,186 $ 1,689
Total assets.............................. 386,847 195,698 175,704 179,122 174,989
Total debt................................. 200,300 62,800 1,633 3,333 5,333
Total owner's equity.................... 145,226 114,775 153,027 154,875 149,308
(a) In connection with the termination of the management agreement with
Boyd Mississippi, Inc. ("Boyd"), a wholly owned subsidiary of Boyd
Gaming Corporation, the Enterprise paid a $72.0 million one time
payment to Boyd on February 1, 2000 resulting in the elimination of all
future management fees under the management agreement. The $72.0
million payment was made from the proceeds of a $75.0 million term
loan.
10
SELECTED QUARTERLY FINANCIAL INFORMATION
(unaudited, in thousands)
Fiscal Year Ended September 30, 2001
------------------------------------------------------------------------------------------------------
First Second Third Fourth Total
Net Revenues............................. $ 57,156 $ 64,102 $ 59,093 $ 57,268 $ 237,619
Operating Income................... $ 25,247 $ 32,548 $ 27,285 $ 24,235 $ 109,315
Net Income............................ $ 23,462 $ 30,630 $ 23,650 $ 20,300 $ 98,042
Fiscal Year Ended September 30, 2000
-----------------------------------------------------------------------------------------------------
First Second Third Fourth Total
Net Revenues............................. $ 58,572 $ 65,931 $ 61,314 $ 62,410 $ 248,227
Operating Income................... $ 18,430 $ (40,300) $ 30,615 $ 31,305 $ 40,050
Net Income............................ $ 18,512 $ (41,166) $ 29,362 $ 30,186 $ 36,894
In December 1993, the Tribe entered into a management agreement with Boyd to
finance the construction of and operate the Silver Star. The term of the
management agreement was seven years, commencing upon the opening of the Silver
Star on July 1, 1994. The Tribe effected an early termination of the management
agreement on January 31, 2000. Pursuant to the provisions of the termination
agreement, we made a termination payment to Boyd in the amount of $72.0 million
on February 1, 2000. The termination payment is reflected in the second quarter
for the fiscal year ended September 30, 2000. No further management fee payments
are required to be made to Boyd under the management agreement.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
We are a business enterprise of the Tribe. The Tribe established the
Enterprise on October 12, 1999 for the purpose of operating the Silver Star,
Golden Moon and related businesses. Effective July 1, 2001, the Tribe
contributed the Dancing Rabbit to the Enterprise in a reorganization. No
consideration was or is intended to be given to the Tribe for such contribution.
Prior to the establishment of the Enterprise, the Silver Star operated as a
separate, wholly owned business entity of the Tribe. On October 12, 1999, the
Tribe contributed the Silver Star to the Enterprise in a reorganization. Both
reorganizations were accounted for as reorganizations of entities under common
control. Accordingly, the financial statements of the Enterprise for all periods
are presented as if the reorganizations occurred at the beginning of the
earliest period presented and include the accounts of the Enterprise, the Silver
Star and the Dancing Rabbit on a historical cost basis, in a manner similar to
the treatment found in a pooling of interests transaction.
- On July 1, 1994, the Silver Star commenced operations as a hotel and
casino on the Tribe's reservation in east-central Mississippi. At its
opening, the Silver Star had approximately 1,300 gaming positions, 100
hotel rooms and three restaurants.
- Hotel, convention and casino expansions and other major renovations
were undertaken at the Silver Star in fiscal years 1995, 1996 and
1997.
11
- At the beginning of fiscal 1998, the Silver Star had approximately
2,800 slot machines, 84 table games, 473 hotel rooms, five restaurants
and a spa and fitness facility.
- As of September 30, 2001, the Silver Star had approximately 85,000
square feet of gaming space, 3,156 slot machines, 82 table games, 498
hotel rooms, a 30,000 square foot conference facility and six
restaurants.
- In November 2000, a 1,100 space parking garage was completed adjacent
to the Silver Star.
In December 1993, the Tribe entered into a management agreement with
Boyd to finance the construction of and operate the Silver Star. The term of the
management agreement was seven years, commencing upon the opening of the Silver
Star on July 1, 1994. The Tribe effected an early termination of the management
agreement on January 31, 2000. Pursuant to the provisions of the termination
agreement, we made a termination payment to Boyd in the amount of $72.0 million
on February 1, 2000. In connection with the early termination, the Tribe entered
into the $75.0 million term loan agreement with Bank of America, N.A., of which
$72.0 million of the proceeds were used to fund the termination payment to Boyd;
the term loan was amended and restated in December 2000 and assumed by the
Enterprise. No further management fee payments are required to be made to Boyd
under the management agreement. As a result of managing of the Silver Star
independently, selling, general and administrative costs have increased.
To accommodate customer demand and attract new patrons to the Pearl
River Resort, we are developing the Golden Moon across the highway from the
Silver Star.
- The Golden Moon will be a full-service hotel and casino with 90,000
square feet of gaming space and 572 hotel rooms.
- Construction of the Golden Moon has commenced and is expected to be
completed by the second half of 2002.
- We expect the cost of developing, constructing and opening the Golden
Moon to be approximately $290.6 million, including pre-opening
expenses, initial working capital and capitalized interest.
- On January 24, 2001, the Enterprise entered into a $146.8 million
guaranteed maximum price construction contract with W.G. Yates & Sons
Construction for the "hard" costs associated with the construction of
the Golden Moon.
Fiscal Year Ended September 30, 2001 Compared to Fiscal Year September 30, 2000
Net Revenues. Net revenues for the fiscal year ended September 30, 2001 were
$237.7 million compared to $248.2 million for the fiscal year ended September
30, 2000. The $10.5 million, or 4.2%, decrease in net revenues was primarily due
to a decrease in gaming revenues. Complimentary revenues are included in gross
revenues but are deducted as a promotional allowance to arrive at net revenues.
Revenues were adversely affected by flooding that occurred during the
quarter ended June 30, 2001. On April 4, 2001, the local community was
devastated by heavy rains, resulting in widespread flash flooding which
enveloped approximately one-half of the Silver Star's casino area. As a result,
as many as 2,110 slot machines and six table games were inactivated for periods
ranging from several hours to several days. The effect of the closing of a
portion of the gaming floor, some retail outlets and restaurants, along with the
related clean up, was a significant decrease in overall casino traffic during
these periods. Additionally, the clean up and restoration process continued to
significantly affect casino revenue for several weeks. Revenues for the month of
April 2001 were significantly lower than those of April 2000 due to the affect
of the flooding and related clean up. September 2001 revenues were also affected
due to the disruption caused by the replacement of the carpeting on the casino
floor. The carpet replacement was a direct result of the flooding experienced in
April 2001.
12
Revenues for the latter part of September 2001 were also negatively
affected by the events of September 11, 2001. Although the affect was not as
significant as reported by other jurisdictions, we did experience a decline in
casino traffic. A more detailed discussion of the affect of the events of
September 11, 2001 is provided later.
Casino. Casino revenues were $221.3 million for fiscal 2001 compared to $231.8
million for fiscal 2000, a decrease of $10.5 million, or 4.5%. The decline in
casino revenue for the fiscal year is discussed below.
Table game drop was $171.4 million for fiscal 2001 compared to table
game drop of $176.1 million for fiscal 2000, a decrease of $4.7 million or 2.7%.
Table games revenue was $33.4 million for fiscal 2001 compared to $38.3 million
for fiscal 2000, a decrease of $4.9 million, or 12.8%. The decrease in revenue
is the result of the lower table drop combined with a lower hold percentage for
fiscal 2001 as compared to fiscal 2000. Table game hold percentage was 19.5% for
fiscal 2001 compared to 21.7% for fiscal 2000.
Slot revenues were $186.6 million for fiscal 2001, compared to $192.0
million for fiscal 2000, a decrease of $5.4 million, or 2.8%. This decrease is
primarily due to a decline in coin-in for fiscal 2001, compared to fiscal 2000.
The decrease in coin-in is due in part to the effects of the flooding noted
earlier as well as the decline in customer traffic described above.
Food and beverage. Food and beverage revenues increased $1.4 million, or 7.1%,
from $19.6 million in fiscal 2000 to $21.0 million in fiscal 2001. Complimentary
revenues totaled $14.9 million for fiscal 2001 compared to $13.3 million for
fiscal 2000, an increase of 12.0%. The increase in complimentary food and
beverages was consistent with our plan to improve rewards to the Silver Star's
frequent customers. During fiscal 2001, the Silver Star turned 1,357,700 covers
with an average revenue per cover of $11.72 compared to 1,262,500 covers with an
average revenue per cover of $10.89 for fiscal 2000.
Rooms. Room revenues were $8.5 million for fiscal 2001 compared to $8.8 million
for fiscal 2000, a decrease of $300,000 or 3.4%. This reflects a slight decrease
in average daily room rate to $52.67 for fiscal 2001 from $53.73 for fiscal
2000. Our occupancy rate increased to 89.6% for fiscal 2001 compared to 88.6%
for fiscal 2000. During fiscal 2001, 60.0% of our hotel revenue was attributable
to rooms occupied by Silver Star customers on a complimentary basis. These
complimentary revenues totaled $5.1 million for fiscal 2001 compared to $5.2
million for fiscal 2000, a decrease of 1.9%.
Other. Other revenues were $9.5 million and $8.3 million for fiscal 2001 and
2000, respectively, representing an $1.2 million or 14.5% increase. Other
revenues are comprised primarily of revenue from the casino's various retail
outlets, the convention center, fees earned from cash advances to customers and
other miscellaneous items. Also included in other revenue is the revenue from
the Dancing Rabbit. The increase in other revenue is directly attributable to
the increase in convention center revenue and golf revenue. Convention center
revenues were $2.3 million for fiscal 2001 compared to $1.5 million for fiscal
2000, an increase of $800,000 or 53.3%. The increase in convention center
revenue is attributable to the quantity and quality of headline entertainment.
Golf revenues were $3.6 million for fiscal 2001 compared to $3.2 million for
fiscal 2000, an increase of $400,000 or 12.5%. The increase in golf revenue is
attributable to increased golf rounds due to the combined marketing efforts of
the Dancing Rabbit and the casino.
Promotional Allowances. Promotional allowances were $22.6 million for fiscal
2001 compared to $20.2 million for fiscal 2000, an increase of $2.4 million or
11.9%. During fiscal 2001, promotional allowances increased to 8.7% of gross
revenues from 7.5% during fiscal 2000. This increase is attributable to our
efforts to attract new customers as well as to our plan to improve rewards for
frequent customers.
Costs and Expenses. Total costs and expenses were $128.4 million for fiscal
2001 compared to $208.2 million for fiscal 2000, a decrease of $79.8 million or
38.3%. The decrease is primarily due to our payment of the $72 million
termination fee to Boyd in February 2000 and a decrease in management fees,
offset by an increase in casino, selling, general and administrative costs, some
of which reflect costs that Boyd historically had paid.
Casino. Casino costs and expenses were $60.1 million for fiscal 2001, compared
to $59.0 million for fiscal 2000, an increase of $1.1 million, or 1.9%. This
increase was largely attributable to an increase in the cost of complimentaries
provided to the casino department.
13
Food and Beverage. Food and Beverage costs were $7.7 million for fiscal 2001,
compared to $6.9 million for fiscal 2000, an increase of $800,000, or 11.6%.
This increase was a direct result of costs incurred to improve food quality,
primarily in the buffet and Terrace Cafe, improvements in the quality of service
provided and the increased volume in our restaurants.
Other. Other costs and expenses were $7.4 million and $7.2 million for fiscal
2001 and 2000, respectively, representing an $200,000 or 2.8% increase. Other
expenses are comprised of the costs related to the operation of retail outlets
and the convention center. Also included in other expenses are the operating
expenses of the Dancing Rabbit. Golf operating expenses were $4.2 million for
fiscal 2001 compared to $4.1 million for fiscal 2000, an increase of $100,000 or
2.4%. The increase in golf operating expenses is attributable to increased golf
rounds as noted earlier.
Selling, General and Administrative. Selling, general and administrative costs
and expenses were $33.9 million for fiscal 2001 compared to $28.3 million for
fiscal 2000, an increase of $5.6 million, or 19.8%. This increase was largely
the result of incurring costs that previously had been paid by Boyd as a result
of assuming management responsibilities of the Silver Star.
Management Fee. No management fee was paid for fiscal 2001 compared to
$16.4 million for fiscal 2000. The decrease is due to the termination agreement
with Boyd effective February 1, 2000.
Management Agreement Termination Fee. In connection with the termination of the
management agreement, we paid a $72.0 million one time payment to Boyd on
February 1, 2000 resulting in the elimination of all future management fees
under the management agreement. The $72.0 million payment was made from the
proceeds of a $75.0 million term loan.
Operating Income (loss). Operating income was $109.3 million for fiscal 2001
compared to operating income of $40.1 million for fiscal 2000, an increase of
$69.2 million. The increase was due to the elimination of the management fee
paid to Boyd and the payment of termination fee and, to a lesser extent, the
revenue and expense variations previously discussed.
Other Income (Expense). Other expense was $11.3 million for fiscal 2001
compared to other expense of $3.2 million for fiscal 2000, representing an
increase of $8.1 million which is attributed to the effect of interest rate
changes on our interest rate swap arrangement of $1.8 million and an increase in
interest expense of $9.1 million, offset by an increase in interest income of
$2.9 million. Other income (expense) is comprised of interest income minus
interest expense and other expense.
Effective October 1, 2000, the Enterprise adopted Statement of
Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative
Instruments and Hedging Activities", as amended by Statement of Financial
Accounting Standards No. 138. The interest rate swap agreement referred to above
is defined as a derivative instrument under SFAS 133. Although the Enterprise
had designated this interest rate swap agreement as a hedge since its inception
on February 1, 2000, the Enterprise did not elect to seek hedge accounting for
this agreement upon adoption of SFAS 133. Accordingly, during fiscal 2001, the
Enterprise recognized other expense of $1.8 million due to the effect of
interest rate changes on the interest rate swap agreement.
Fiscal Year Ended September 30, 2000 Compared to Fiscal Year Ended September 30,
1999
Net Revenues. Net revenues for the fiscal year ended September 30, 2000 were
$248.3 million compared to $244.2 million for the fiscal year ended September
30, 1999. The $4.1 million or 1.7% increase in net revenues was primarily due to
an increase in casino revenues, and, to a lesser extent, to an increase in
revenues from all other departments, offset in part by higher promotional
allowances. Complimentary revenues are included in gross revenues but are
deducted as a promotional allowance to arrive at net revenues.
Casino. Casino revenues increased $3.5 million or 1.5% to $231.8 million for
fiscal 2000 from $228.3 million for fiscal 1999. Table game revenues led the
increase, rising to $38.3 million for fiscal 2000 from $34.7 million for fiscal
1999, an increase of $3.6 million or 10.4%. The increase in table game revenues
was the result of increases in table game drop from $166.1 million in fiscal
1999 to $176.1 million in fiscal 2000, a 6% increase in activity. Table game
14
hold percentage increased to 21.7% in fiscal 2000 from 20.9% in fiscal 1999. We
believe that the increase in table game wagering volume was attributable to
increased casino marketing efforts during the second half of fiscal 2000,
primarily in proximate geographic areas in which the Silver Star historically
had not conducted such marketing.
Upon termination of our management agreement with Boyd, we commenced an
aggressive campaign to replace many of the outdated slot machines at the Silver
Star. From March 2000 through September 2000, we replaced approximately 400
machines and increased the total number of machines on the floor by 21 units.
Despite the improvement in the quality of our slot machines and the slight
increase in the total number of slot machines, slot revenues were virtually
unchanged between fiscal 2000 and fiscal 1999 at $192.0 million and $191.9
million, respectively. This lack of change was due to a slight increase in
coin-in, offset by a slight decline in slot win percentage for fiscal 2000. A
primary factor affecting slot play during fiscal 2000 was construction activity
associated with our new parking garage. In April 2000, we began construction of
a 1,100 space parking garage that opened on November 17, 2000. During
construction, approximately 500 parking spaces were taken out of service. We
believe the decline in the number of available parking spaces affected slot
revenues during high volume weekends and holidays. We believe that we were able
to sustain slot revenues as a result of the casino marketing efforts during the
second half of fiscal 2000.
Food and Beverage. For fiscal 2000, food and beverage revenues were $19.6
million, an increase of $1.5 million or 8.3% from $18.1 million for fiscal 1999,
primarily as a result of an increase in food and beverages provided to Silver
Star customers on a complimentary basis. Complimentary revenues totaled $13.3
million for fiscal 2000 compared to $11.7 million for fiscal 1999, an increase
of 13.7%. The increase in complimentary food and beverages was consistent with
our plan to improve rewards to the Silver Star's frequent customers. During
fiscal 2000, the Silver Star turned 1,262,500 covers with an average revenue per
cover of $10.89 compared to 1,256,200 covers with an average revenue per cover
of $10.21 during fiscal 1999.
Rooms. Room revenues increased approximately $400,000 to $8.8 million for
fiscal 2000 from $8.4 million for fiscal 1999, reflecting a slight increase in
the average daily room rate to $53.73 for fiscal 2000 from $53.44 for fiscal
1999. Our occupancy rate increased to 88.6% for fiscal 2000 compared to 85.1%
for fiscal 1999. During fiscal 2000, 59.3% of our hotel revenue was attributable
to rooms occupied by Silver Star customers on a complimentary basis. These
complimentary revenues totaled $5.2 million for fiscal 2000 compared to $4.5
million for fiscal 1999, an increase of 15.6%.
Other. Other revenues were $8.3 million and $6.9 million for fiscal 2000 and
1999, respectively. Other revenues are composed primarily of revenue from the
casino's various retail outlets, the convention center, fees earned from cash
advances to customers and other miscellaneous income. Also included in other
revenue is the revenue from the Dancing Rabbit. The $1.4 million or 20.3%
increase reflects a $700,000 or 15.9% increase in retail sales, partially offset
by a decline in conference center revenues. The increase in retail sales was
attributable to increased utilization of complimentaries in our retail stores by
members of the Silver Star Players Club. Golf revenues were $3.2 million for
fiscal 2000 compared to $2.5 million for fiscal 1999, an increase of $700,000 or
28.0%. The increase in golf revenue is attributable to increased golf rounds due
to the combined marketing efforts of the Dancing Rabbit and the casino.
Promotional Allowances. Promotional allowances totaled $20.2 million for fiscal
2000, representing a $2.7 million or 15.4% increase over promotional allowances
of $17.5 million for fiscal 1999. During fiscal 2000, promotional allowances
increased to 7.5% of gross revenues from 6.7% during fiscal 1999. This increase
was attributable to our plan to improve rewards to frequent customers.
Costs and Expenses. Total costs and expenses were $208.2 million for fiscal
2000 compared to $156.9 million for fiscal 1999, an increase of $51.3 million or
32.7%. This increase was primarily due to our payment of the $72 million
management agreement termination fee in fiscal 2000, offset by a $27.1 million
decrease in management fees to $16.4 million for fiscal 2000 from $43.5 million
for fiscal 1999 as a result of our termination of the Boyd management agreement
discussed above. In arriving at total costs and expenses, the overall decrease
in management fees was partially offset by increases in casino and selling,
general and administrative expenses described below. Our number of employees
increased to 2,363 at September 30, 2000 from 2,289 at September 30, 1999.
15
Casino. Casino costs and expenses were $59.0 million for fiscal 2000, an
increase of $3.1 million or 5.5% from $55.9 million for fiscal 1999. This
increase was largely attributable to a $1.7 million or 10.4% increase in the
cost of complimentaries provided to the casino department.
Other. Other costs and expenses were $7.2 million for fiscal 2000, representing
a decrease of $700,000 or 8.9% from $7.9 million for fiscal 1999. Other expenses
are comprised of the costs related to the operation of retail outlets and the
convention center. Also included in other expenses are the operating expenses of
the Dancing Rabbit. Golf operating expenses were $4.1 million for fiscal 2000
compared to $4.3 million for fiscal 1999, a decrease of $200,000 or 4.7%.
Selling, General and Administrative. Selling, general and administrative costs
and expenses were $28.3 million for fiscal 2000 compared to $23.0 million for
fiscal 1999, an increase of $5.3 million or 23.0%. This increase was largely due
to a $2.7 million or 50% increase in sales, advertising and promotional
department expenses to $8.1 million for fiscal 2000 from $5.4 million for fiscal
1999, as a result of our increased casino marketing efforts during the second
half of fiscal 2000. The increase in selling, general and administrative costs
also reflects increases in general and administrative costs arising from the
termination of the Boyd management agreement, which resulted in increases in
expenses that were previously paid by Boyd under the terms of the management
agreement. Such increases in fiscal 2000 compared to fiscal 1999 include:
- increased costs for management information systems and accounting
services of approximately $700,000 or 25%, reflecting central data
processing and accounting previously provided by Boyd;
- an increase in general and administrative salaries of approximately
$900,000 or 34%, reflecting compensation of Silver Star senior
management hired in connection with the termination of the Boyd
management agreement; and
- increases in costs for insurance and professional fees of
approximately $900,000 or 64%, reflecting such costs previously paid
by Boyd.
Management Fee. We paid management fees of $16.4 million in fiscal 2000
compared to $43.5 million in fiscal 1999. This decrease of $27.1 million was the
result of the termination of the Boyd management agreement effective February 1,
2000.
Management Agreement Termination Fee. In connection with the termination of the
Boyd management agreement, we paid $72.0 million to Boyd on February 1, 2000
resulting in the elimination of all future management fees under the management
agreement. The $72.0 million payment was made from the proceeds of a $75.0
million term loan.
Operating Income. Operating income was $40.1 million in fiscal 2000 compared to
$87.3 million in fiscal 1999. This $47.2 million or 54.1% decrease was primarily
due to the payment of the one-time $72.0 million termination fee described
above, and increases in selling, general and administrative costs and expenses
offset by the $27.1 million reduction of the management fee to $16.4 million for
fiscal 2000 and the revenue and expense variations previously noted.
Other Income (Expense). Other expense was $3.2 million for fiscal 2000, an
increase of $3.5 million from other income of $300,000 for fiscal 1999. Other
income (expense) is comprised of interest income minus interest expense and
other expense. The increase was attributable to interest expense on the term
loan obtained in February 2000 to finance the management agreement termination
fee.
Liquidity and Capital Resources
As of September 30, 2001, 2000, and 1999, we held cash and cash
equivalents of $81.8 million, $34.8 million, and $21.3 million, respectively.
Our principal sources of liquidity have consisted of cash provided by operating
activities and debt financing. Cash provided by operating activities was $117.2
million in fiscal 2001 compared to $46.5 million in fiscal 2000. The increase of
$70.7 million was due primarily to the increase in net income to $98.0 million
in fiscal 2001 from $36.9 million in fiscal 2000. This increase reflects the
$72.0 million management agreement termination fee paid on February 1, 2000,
partially offset by a $27.1 million decrease in management fees
16
paid during fiscal 2001 compared to fiscal 2000. Cash provided by operating
activities was $101.9 million in fiscal 1999
Cash used in investing activities in the fiscal year ended September
30, 2001 for capital expenditures totaled $47.7 million. The Enterprise also
purchased $103.3 million in short term investments and received $21.4 million
from the sale of short term investments in the fiscal year ended September 30,
2001. Cash used in investing activities in the fiscal year ended September 30,
2000 was primarily for capital expenditures and totaled $6.0 million. Cash used
in investing activities in fiscal 2000 for capital expenditures totaled $5.9
million. This amount excludes $5.6 million payable to the Tribe at September 30,
2000 as reimbursement for the Tribe's construction of a parking garage adjacent
to the Silver Star. For fiscal 2000, cash capital expenditures also exclude $7.3
million of other property and equipment contributed to the Enterprise at the
Tribe's cost, consisting primarily of $6.9 million in architectural and design
fees associated with the Golden Moon project. Cash used in investing activities
in fiscal 1999 was primarily for capital expenditures and totaled $4.7 million.
Our outstanding revolving credit facility restricts our ability to make
capital expenditures. We may not spend more than $10 million on capital
expenditures and improvements in any fiscal year for each of the Silver Star and
Golden Moon (following its opening). In addition, we are limited to a maximum
construction expenditure, exclusive of the Golden Moon project, which includes
the parking garage adjacent to the Silver Star, of $25 million during the term
of this loan. In the ordinary course of business, we will continue to maintain
and improve the Silver Star as necessary to continue to provide a competitive
and attractive facility to our customers. We intend to make capital expenditures
up to the amounts permitted under our credit facilities to maintain the
property.
During the years ended September 30, 2001, 2000, and 1999, the Tribe
made contributions of property and equipment to the Enterprise of $3.2 million,
$7.3 million, and $3.5 million, respectively. Contributions of property and
equipment to the Enterprise are made at the Tribe's discretion and the Tribe is
not legally obligated to continue making any such contributions in the future.
The revolving credit facility does not limit the Tribe's ability to make
contributions of property and equipment to the Enterprise, and any such
contribution would not impact the Enterprise's $10 million capital expenditure
limitation described above.
We had $2.6 million and $2.4 million of restricted cash as of September
30, 2001 and 2000, respectively. The balances are required by the Boyd
management agreement for employment, workers compensation and other third party
claims not otherwise covered by insurance proceeds that may be filed or become
due after the date the management agreement was terminated. The claims reserve
will survive for three years after the date of the termination of the management
agreement. Any unused portion of the claims reserve at the end of the three-year
period will become unrestricted.
Cash provided by financing activities was $59.6 million in the fiscal
year ended September 30, 2001 compared to cash used by financing activities of
$27.0 million in the fiscal year ended September 30, 2000. The primary use of
cash in each period was distributions to the Tribe of $96.9 million and $89.9
million in the fiscal years ended September 30, 2001 and 2000, respectively and
the repayment of the term loan in the amount $62.5 million in the fiscal year
ended September 30, 2001. The primary source of funds provided by financing
activities was the issuance of $200.0 million in notes and the term loan to
buyout the Boyd management contract in the amount of $75.0 million in the fiscal
years ended September 30, 2001 and 2000 respectively. Cash used in financing
activities was $96.7 million in fiscal 1999. The primary use of cash for fiscal
1999 was distributions to the Tribe of $99.4 million.
Pursuant to the indenture dated March 30, 2001, we used a portion of
the proceeds from the offering of the notes to repay the remaining outstanding
balance under the term loan and will use the remaining proceeds (currently held
as cash and short-term investments) to finance the construction of the Golden
Moon. We anticipate that the revolving credit facility will remain undrawn until
February 2002, when it will become necessary to use the proceeds from this
facility, together with the net proceeds of the offering of the notes, to
complete the Golden Moon.
On December 19, 2000, we entered into a $125.0 million reducing senior
secured revolving credit facility and amended our outstanding amortizing senior
secured term loan. At September 30, 2001, no amounts were drawn on this facility
and the term loan was paid in full.
17
The terms of the notes and the revolving credit facility restrict our
ability to sell or dispose of assets, incur additional debt or contingent
obligations, extend credit, make investments, commingle our assets with the
assets of other Tribal business enterprises, require us to maintain certain
financial ratios, limit our ability to make distributions to the Tribe and limit
the amount of capital expenditures we may incur related to the Silver Star.
Through September 30, 2001, $60.7 million of the budgeted $290.6
million Golden Moon construction has been completed through contributions of
cash and property and equipment from the Tribe. We anticipate the remaining
$229.9 million of budgeted expenditures to be financed from cash on hand and
short-term investments which includes the balance of the proceeds from the
$200.0 million note offering and the $125.0 million facility. The Golden Moon is
expected to be completed and opened in August 2002.
The notes contain specific covenants that restrict our ability to
borrow additional money, pay dividends or make other distributions, make
investments, create liens, enter into specific transactions with affiliates, and
sell specific assets or merge with or into another person. Under limited
circumstances, the covenant limiting our ability to make specific payments,
distributions and investments will be suspended. The indenture prescribes that
the Enterprise may make an annual distribution to the Tribe (the "Annual Service
Payment") in the amount of $55 million per year (payable in equal monthly
installments), which amount is increased annually on each September 30,
commencing with September 30, 2001, by 5% per annum. Any distributions to the
Tribe are made at the Tribe's discretion, but distributions other than the
Annual Service Payment (referred to as "Restricted Payments") are limited by the
covenants of the indenture. The most significant of such covenants limit
Restricted Payments such that the cumulative Restricted Payments from inception
of the indenture shall not exceed 50% of the Enterprise's cumulative net income
(with measurement commencing on January 1, 2001) plus $75 million. Restricted
Payments are further limited by the Indenture's requirement for the Enterprise
to maintain a minimum Fixed Charge Coverage Ratio (as defined) of 2.5 to 1
(increasing to 3.0 to 1 after December 31, 2001), and thus limiting the
Enterprise's ability to incur additional debt to make Restricted Payments.
We believe that existing cash balances, short-term investments,
operating cash flow and anticipated borrowings under the credit facility and the
proceeds from the notes will provide sufficient resources to fund operations and
to meet our debt payment obligations and expected distributions to the Tribe,
foreseeable capital expenditure requirements at the Silver Star and
construction, development and opening costs of the Golden Moon.
Affect of the Events of September 11, 2001
The events of September 11, 2001 produced a negative impact on customer
visitation and revenue for September 2001. Although the affects have not been as
significant as reported by other gaming jurisdictions, we have experienced a
decline in traffic and revenue. While local drive-in traffic continues, the long
distance and commercial air travelers are making less frequent trips. This
results in a reduction in both slot coin-in and table game drop. Increased
marketing and advertising efforts have enabled us to maintain occupancy levels
and local customer visits.
Recently Issued Accounting Standards
The Securities and Exchange Commission has issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). The
Enterprise adopted SAB 101 during the fiscal year ended September 30, 2000 and
such adoption had no impact on the Enterprise's financial statements.
On January 1, 2001, the Enterprise adopted Emerging Issue Task Force
Issues 00-14 and 00-22 ("EITF 00-14 and 00-22"). EITF 00-14 and 00-22 require
that cash discounts and other cash incentives related to gaming play be recorded
as a reduction to gross casino revenues. The adoption of EITF 00-14 and 00-22
did not have a material effect on the Enterprise's financial statements. There
is no effect on previously reported net income.
Regulation and Taxes
The Silver Star is subject to extensive regulation by the Choctaw
Gaming Commission, and it is anticipated that the Golden Moon will also be
subject to such regulation. Changes in applicable laws or regulations could have
a significant impact on our operations.
18
The Enterprise is owned by the Tribe, a federally recognized Indian
tribe located on reservation land held in trust by the United States of America;
therefore, the Enterprise was not subject to federal or state income taxes for
the years ended September 30, 2001, 2000, or 1999, nor is it anticipated that
the Enterprise will be subject to such taxes for the foreseeable future. Various
efforts have been made in Congress over the past several years to enact
legislation that would subject the income of tribal business entities, such as
the Enterprise, to federal income tax. Although no such legislation has been
enacted, similar legislation could be passed in the future. A change in our
non-taxable status could have a material adverse affect on our cash flows from
operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Impact of Inflation
Absent changes in competitive and economic conditions or in specific
prices affecting the industry, we do not expect that inflation will have a
significant impact on our operations. Changes in specific prices, such as fuel
and transportation prices, relative to the general rate of inflation may have a
material adverse effect on the hotel and casino industry in general.
Market Risk
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk,
which was initially associated with our long-term debt. We had previously
entered into the interest rate swap agreement to fix the interest rate on our
term loan at 8.25%. Pursuant to the indenture, we used a portion of the proceeds
from the offering of the notes to repay the remaining outstanding balance under
our term loan. Upon the prepayment of the term loan, we did not settle the
existing interest rate swap agreement, which will terminate on January 31, 2004.
At September 30, 2001, the interest rate swap agreement had a notional amount of
$45.3 million. The notional amount does not represent amounts exchanged by the
parties, and thus is not a measure of exposure to the Enterprise. The amount
exchanged is based on the notional amount. The fair value liability of our
interest rate swap is based on the cash termination value of the agreement using
quotes from our counter-party and was approximately $2.2 million at September
30, 2001.
Management has and will continue to limit our exposure to interest rate
risk by maintaining a conservative ratio of fixed rate, long-term debt to total
debt such that variable rate exposure is kept at an acceptable level and fixing
long-term variable rate debt through the use of interest rate swaps or interest
rate caps with appropriately matching maturities.
19
Item 8. Financial Statements and Supplementary Data
Report of Independent Accountants
Mr. Phillip Martin, Chief
Mississippi Band of Choctaw Indians
Board of Directors
Choctaw Resort Development Enterprise
In our opinion, the accompanying balance sheets and the related statements of
operations, owner's equity, and cash flows present fairly, in all material
respects, the financial position of the Choctaw Resort Development Enterprise
(the "Enterprise"), an unincorporated business enterprise of the Mississippi
Band of Choctaw Indians, at September 30, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
September 30, 2001 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Enterprise'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 audits 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.
/s/ PricewaterhouseCoopers LLP
Las Vegas, Nevada
November 9, 2001
20
Choctaw Resort Development Enterprise
Balance Sheets
September 30, 2001 and 2000
- --------------------------------------------------------------------------------
September 30, September 30,
Assets 2001 2000
------------------- -------------------
Current assets:
Cash and cash equivalents $ 81,822,543 $ 34,779,920
Short term investments 81,949,037 -
Accounts receivable (net of allowance of $1,685,009
and $845,259) 3,085,106 3,262,521
Inventories 1,517,052 1,417,321
Prepaid expenses and other 1,784,209 914,674
------------------- -------------------
Total current assets 170,157,947 40,374,436
Property and equipment, net 206,222,932 151,962,227
Restricted cash 2,568,256 2,443,344
Deferred loan costs, net 6,595,249 299,082
Other assets 1,302,131 618,770
------------------- -------------------
Total assets $ 386,846,515 $ 195,697,859
------------------- -------------------
Liabilities and Owner's Equity
Current liabilities:
Current maturities of long-term debt $ 300,000 $ 19,050,000
Accounts payable 2,519,767 2,186,913
Construction accounts payable 15,883,132 -
Due to Tribe 81,401 5,562,108
Accrued liabilities:
Accrued payroll and related 5,247,757 4,836,791
Accrued expenses and other liabilities 7,991,053 5,513,488
Accrued interest expense 9,597,633 23,307
------------------- -------------------
Total current liabilities 41,620,743 37,172,607
Long-term debt, less current maturities 200,000,000 43,750,000
Commitments and contingencies - -
Owner's equity:
Contributed capital 181,552,126 151,844,084
Retained earnings (deficit) (35,932,309) (37,068,832)
Accumulated other comprehensive loss (394,045) -
------------------- -------------------
Total owner's equity 145,225,772 114,775,252
------------------- -------------------
Total liabilities and owner's equity $ 386,846,515 $ 195,697,859
------------------- -------------------
The accompanying notes are an integral part of these financial statements.
21
Choctaw Resort Development Enterprise
Statements of Operations
For the years ended September 30, 2001, 2000 and 1999
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
2001 2000 1999
-------------------- -------------------- --------------------
Revenue:
Casino $ 221,262,983 $ 231,764,213 $ 228,289,431
Food and beverage 20,983,807 19,566,492 18,079,356
Rooms 8,463,478 8,763,236 8,412,111
Other 9,521,734 8,340,032 6,916,274
-------------------- -------------------- --------------------
Gross revenue 260,232,002 268,433,973 261,697,172
Less promotional allowances (22,612,559) (20,206,918) (17,473,273)
-------------------- -------------------- --------------------
Net revenue 237,619,443 248,227,055 244,223,899
-------------------- -------------------- --------------------
Costs and expenses:
Casino 60,086,718 58,990,590 55,920,872
Food and beverage 7,680,105 6,912,038 6,824,706
Rooms 1,500,193 1,404,184 1,268,988
Other 7,363,497 7,170,758 7,940,526
Selling, general and administrative 33,935,006 28,272,380 23,034,211
Maintenance and utilities 5,370,512 4,800,747 5,871,447
Management fee - 16,413,592 43,457,949
Depreciation 12,368,395 12,212,702 12,594,756
Management agreement termination fee - 72,000,000 -
-------------------- -------------------- --------------------
Total 128,304,426 208,176,991 156,913,455
-------------------- -------------------- --------------------
Operating income 109,315,017 40,050,064 87,310,444
-------------------- -------------------- --------------------
Other income (expense):
Interest income 3,682,974 796,614 533,096
Interest expense (13,117,655) (3,953,040) (214,120)
Other income (expense) (1,838,801) - -
-------------------- -------------------- --------------------
Total (11,273,482) (3,156,426) 318,976
-------------------- -------------------- --------------------
Net income 98,041,535 36,893,638 87,629,420
Other comprehensive income (loss) (394,045) - -
-------------------- -------------------- --------------------
Comprehensive income $ 97,647,490 $ 36,893,638 $ 87,629,420
-------------------- -------------------- --------------------
The accompanying notes are an integral part of these financial statements.
22
Choctaw Resort Development Enterprise
Statements of Owner's Equity
For the years ended September 30, 2001, 2000 and 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Retained Accumulated
Contributed Earnings Other Total
Capital (Deficit) Comprehensive Less Owner's Equity
-------------------- -------------------- ---------------------------- --------------------
Balances, September 30, 1998 $ 134,565,119 $ 20,309,561 $ - $ 154,874,680
Net income - 87,629,420 - 87,629,420
Contributed capital 7,841,827 - - 7,841,827
Distributions - (97,318,690) - (97,318,690)
-------------------- -------------------- ---------------------------- --------------------
Balances, September 30, 1999 142,406,946 10,620,291 - 153,027,237
Net income - 36,893,638 - 36,893,638
Contributed capital 9,437,138 - - 9,437,138
Distributions - (84,582,761) - (84,582,761)
-------------------- -------------------- ---------------------------- --------------------
Balances, September 30, 2000 151,844,084 (37,068,832) - 114,775,252
-------------------- -------------------- ---------------------------- --------------------
Net income 98,041,535 - 98,041,535
Contributed capital 29,708,042 - 29,708,042
Distributions (96,905,012) - (96,905,012)
Cumulative transition effect
of adopting SFAS 133 (541,847) (541,847)
Reclassification adjustment
under SFAS 133 147,802 147,802
-------------------- -------------------- ---------------------------- --------------------
Balances, September 30, 2001 $ 181,552,126 $ (35,932,309) $ (394,045) $ 145,225,772
-------------------- -------------------- ---------------------------- --------------------
The accompanying notes are an integral part of these financial statements.
23
Choctaw Resort Development Enterprise
Statements of Cash Flows
For the years ended September 30, 2001, 2000 and 1999
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
2001 2000 1999
---------------- ---------------- -----------------
Cash flows from operating activities:
Net income $ 98,041,535 $ 36,893,638 $ 87,629,420
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change (541,847) - -
Depreciation and amortization 13,806,760 12,272,518 12,594,756
Loss on disposal of property and equipment 102,454 71,634 591,761
Change in operating assets and liabilities:
Accounts receivable, net 177,415 295,087 (1,247,432)
Inventories (99,731) (405,058) (92,104)
Prepaid expenses and other (869,535) 561,548 427,987
Other assets (656,790) (41,764) (157,938)
Accounts payable and due to Tribe (5,229,254) (253,613) 1,479,934
Accrued liabilities 12,462,857 (2,909,774) 706,472
---------------- ---------------- -----------------
Net cash provided by operating activities 117,193,864 46,484,216 101,932,856
---------------- ---------------- -----------------
Cash flows from investing activities:
Acquisitions of property and equipment, net of amounts in
construction accounts payable (47,610,281) (5,926,546) (4,576,367)
Proceeds from disposal of property and equipment 50,709 -
Purchase of short-term investments (103,391,616) - -
Proceeds from sale of short-term investments 21,392,039 - -
Restricted cash (124,912) (148,295) (108,578)
---------------- ---------------- -----------------
Net cash used in investing activities (129,734,770) (6,024,132) (4,684,945)
---------------- ---------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of bonds 200,000,000 - -
Proceeds from issuance of long-term debt - 75,000,000 -
Proceeds from note to Tribe - - 300,000
Repayment of long-term debt (62,500,000) (12,500,000) -
Contribution of cash from Tribe 24,707,375 2,128,224 4,381,829
Distributions to the Tribe (96,905,012) (89,902,518) (99,375,965)
Repayment of note payable to Boyd - (1,333,240) (2,000,004)
Loan fees paid (5,718,834) (358,898) -
---------------- ---------------- -----------------
Net cash provided by (used in) financing activities 59,583,529 (26,966,432) (96,694,140)
---------------- ---------------- -----------------
Net increase in cash and cash equivalents 47,042,623 13,493,652 553,771
Cash and cash equivalents at beginning of period 34,779,920 21,286,268 20,732,497
---------------- ---------------- -----------------
Cash and cash equivalents at end of period $ 81,822,543 $ 34,779,920 $ 21,286,268
---------------- ---------------- -----------------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,596,449 $ 3,863,151 $ 228,834
---------------- ---------------- -----------------
Cash received for interest $ 2,986,891 $ - $ -
---------------- ---------------- -----------------
Supplemental disclosure of non-cash investing and
financing activities:
Contributions of property and equipment from
the Tribe $ 3,156,740 $ 7,308,914 $ 3,459,998
---------------- ---------------- -----------------
Distributions to the Tribe accrued but not paid $ - $ - $ 5,319,757
---------------- ---------------- -----------------
Write-off of fully depreciated property and equipment $ 78,983 $ 18,493 $ 1,268,508
---------------- ---------------- -----------------
Disposals of equipment $ 312,553 $ - $ -
---------------- ---------------- -----------------
Due to Tribe for property and equipment $ 81,401 $ 5,562,108 $ -
---------------- ---------------- -----------------
Contributions of other assets from the Tribe $ 1,843,927 $ - $ -
---------------- ---------------- -----------------
Accounts payable for construction $ 15,883,132 $ - $ -
---------------- ---------------- -----------------
The accompanying notes are an integral part of these financial statements.
24
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
Description of Operations
The Choctaw Resort Development Enterprise (the "Enterprise") is an enterprise of
the Mississippi Band of Choctaw Indians (the "Tribe"). The Enterprise was
established on October 12, 1999 by the Tribe for the purpose of managing the
existing and future Tribal gaming and other resort operations at the Tribe's
Pearl River Community. Prior to July 1, 2001, the Silver Star Hotel and Casino
(the "Silver Star") was the sole operating entity of the Enterprise. The Silver
Star commenced operations of a gaming, hotel, conference center and restaurant
complex near Philadelphia, Mississippi on trust lands of the Tribe on July 1,
1994. In addition, the Enterprise is currently developing a second hotel and
casino, the "Golden Moon", to be located adjacent to the Silver Star.
In connection with the development of the Silver Star, the Tribe entered into a
seven-year management agreement (the "Management Agreement") with Boyd
Mississippi, Inc., a subsidiary of Boyd Gaming Corporation ("Boyd"), to
construct and operate the Silver Star. The Tribe entered into a termination
agreement (the "Termination Agreement") with Boyd to terminate the Management
Agreement on January 31, 2000. Pursuant to the provisions of the Termination
Agreement, the Enterprise made a termination payment to Boyd in the amount of
$72 million on February 1, 2000.
Basis of Presentation
Prior to the establishment of the Enterprise, the Silver Star operated as a
separate, wholly owned unincorporated business of the Tribe. On October 12,
1999, the Tribe contributed the Silver Star to the Enterprise. Due to the common
control of the Silver Star and the Enterprise, the contribution was accounted
for as a reorganization of entities under common control.
Effective July 1, 2001, the Tribe contributed Dancing Rabbit Golf Club (the
"Dancing Rabbit") to the Enterprise. Prior to its contribution to the
Enterprise, the Dancing Rabbit operated as a separate, wholly owned
unincorporated business enterprise of the Tribe. Due to common control of the
Dancing Rabbit and the Enterprise the contribution was accounted for as a
reorganization of entities under common control.
The financial statements of the Enterprise for all periods are presented as if
the contributions described above occurred at the beginning of the earliest
period presented and include the accounts of the Enterprise, the Silver Star,
and the Dancing Rabbit on a historical cost basis, in a manner similar to a
pooling of interests.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit with banks and
other financial institutions. The Enterprise considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Short-term Investments
Short-term investments include debt securities and other investments, which
mature within one year but do not qualify as cash equivalents. All short-term
investments are classified as held-to-maturity because the Enterprise has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost.
Inventories
Inventories, consisting primarily of food, beverage, and gift shop merchandise,
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out inventory method.
25
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Costs of
major construction, including interest incurred during construction of new
facilities, are capitalized; costs of normal repairs and maintenance are charged
to expense as incurred. Gains or losses on disposals of assets are recognized as
incurred.
Deferred Loan Costs
Deferred loan costs consist of costs incurred in the issuance of long-term debt.
Amortization of deferred loan costs is computed using the interest method over
the stated maturity of long-term debt. Accumulated amortization of the deferred
loan costs is $565,941 and $59,816 at September 30, 2001 and 2000, respectively.
Accounting for Derivative Instruments and Hedging Activities
On October 1, 2000, the Enterprise adopted Statement of Financial Accounting
Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and
Hedging Activities", as amended by Statements of Financial Standards No. 138.
See Note 4.
Contributed Capital
Contributed capital consists of (i) equipment and facilities related primarily
to various construction and expansion projects since the Silver Star opened
which have been funded by the Tribe and contributed upon their completion at the
Tribe's cost, (ii) certain development costs for the Golden Moon, also funded by
the Tribe and contributed at the Tribe's cost and (iii) cash to fund Golden Moon
construction and development.
Casino and Other Revenue
Casino revenue is net win from gaming activities, which is the difference
between gaming wins and losses. Gross revenues include the estimated retail
value of rooms, food and beverage, and other goods and services provided to
customers on a complimentary basis. Such amounts are then deducted as
promotional allowances. The estimated cost of providing these promotional
allowances is charged to the casino department in the following amounts:
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
2001 2000 1999
-------------------- -------------------- --------------------
Food and beverage $ 15,329,781 $ 13,104,757 $ 11,684,335
Rooms 3,465,643 3,134,430 3,031,001
Other 2,815,409 1,783,529 1,604,804
-------------------- -------------------- --------------------
$ 21,610,833 $ 18,022,716 $ 16,320,140
-------------------- -------------------- --------------------
26
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
Complimentary revenues have been earned in the following casino departments as
follows:
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
2001 2000 1999
-------------------- -------------------- --------------------
Food and beverage $ 14,930,850 $ 13,343,244 $ 11,712,208
Rooms 5,078,394 5,195,611 4,476,735
Other 2,603,315 1,668,063 1,284,330
-------------------- -------------------- --------------------
$ 22,612,559 $ 20,206,918 $ 17,473,273
-------------------- -------------------- --------------------
Income Taxes
The Enterprise is an unincorporated business enterprise owned by the Mississippi
Band of Choctaw Indians, a federally recognized Indian Tribe located on
reservation land held in trust by the United States of America; therefore, the
Enterprise was not subject to Federal or state income taxes for the years ended
September 30, 2001, 2000 and 1999.
Advertising Expense
Advertising is expensed as incurred and is included in selling, general, and
administrative expense and casino costs and expenses. Advertising expense was
$5,285,965, $4,896,757, and $4,370,508 for the years ended September 30, 2001,
2000 and 1999, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates used by the Enterprise include the estimated useful lives
of depreciable assets and the estimated allowance for doubtful accounts
receivable. Actual results could differ from those estimates.
Preopening Expenses
Preopening costs are expensed as incurred and are included in selling, general,
and administrative costs. Preopening costs incurred during the years ended
September 30, 2001, 2000 and 1999, were $375,206, $0 and $0, respectively.
27
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 2 - Property and Equipment
Property and equipment consists of the following:
Useful Lives September 30, September 30,
(Years) 2001 2000
------------------ -------------------- --------------------
Land and improvements $ 16,799,809 $ 16,825,721
Buildings and improvements 20-40 124,375,524 116,807,731
Golf course improvements 5-15 2,723,984 2,723,984
Furniture and equipment 5-10 63,447,006 56,190,813
Vehicles 3 928,407 643,861
-------------------- --------------------
208,274,730 193,192,110
Less accumulated depreciation 65,804,004 53,724,690
-------------------- --------------------
142,470,726 139,467,420
Construction in progress 63,752,206 12,494,807
-------------------- --------------------
$ 206,222,932 $ 151,962,227
-------------------- --------------------
At September 30, 2001, construction in progress consists of $59,447,482 incurred
related to the development of the Golden Moon, $847,384 incurred related to the
development of an administrative building and $2,231,568 incurred related to the
development of a hospitality institute. Construction in progress includes
$1,225,772 of interest capitalized during the year ended September 30, 2001.
Note 3 - Restricted Cash
The Enterprise had $2,568,256 and $2,443,344 of restricted cash classified as a
non-current asset as of September 30, 2001 and 2000, respectively. The balances
represent cash reserve funds required by the Management Agreement for
employment, workers compensation, and other third party claims not otherwise
covered by insurance proceeds (the "Claims Reserve") that may be filed or become
due after the Management Agreement termination date. The Claims Reserve will
survive for three years after the date of the Termination Agreement and is
governed by the terms of the Management Agreement. Any unused portion of the
claims reserve at the end of the three-year period will become unrestricted.
Note 4 - Long-Term Debt
In March 2001, the Enterprise issued unsecured senior notes (the "Notes") in the
amount of $200,000,000. The proceeds of the offering were used to retire the $75
million term loan described below and are being used to finance the construction
of the Golden Moon. The Notes bear interest at 9.25% and require semiannual
payments of interest beginning with the first payment on October 1, 2001 with
the Notes maturing on April 1, 2009. The indenture governing the Notes (the
"Indenture") contains certain financial covenants which restrict the
Enterprise's ability to borrow money, pay dividends or make distributions, make
investments, create liens, enter into certain transactions with affiliates and
sell specific assets or merge with or into another entity. Under specific
circumstances, the covenant limiting the Enterprise's ability to make certain
payments, distributions and investments will be suspended.
After April 1, 2005, the Enterprise may redeem all or part of the Notes at
specified redemption prices plus accrued and unpaid interest on the redemption
date. The Notes are subject to redemption requirements imposed by certain gaming
laws and regulations.
On February 1, 2000, the Enterprise entered into an installment note agreement
(the "Loan") with Bank of America, N.A. in the amount of $75 million, using $72
million of the proceeds to terminate the Management Agreement described in Note
1. On April 24, 2001, the Loan was repaid from proceeds of the Notes.
28
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
On December 29, 2000, the Enterprise entered into a $125 million reducing
revolving credit facility (the "Facility"). The Facility will be used by the
Enterprise to (i) finance the construction of the Golden Moon, (ii) provide
working capital, (iii) finance permitted capital expenditures, and (iv) for
general purposes of the Enterprise. At September 30, 2001, there were no amounts
drawn on the Facility. For the year ended September 30, 2001, the Enterprise
paid commitment fees totaling $125,861 on the Facility.
The Facility is collaterized by the personal property of and the revenue
generated by the Silver Star and the Golden Moon. The Facility has a maturity
date of December 28, 2005. Borrowings available under the Facility will reduce
quarterly beginning on the earlier of December 31, 2002 or the last day of the
first full fiscal quarter following the completion of the Golden Moon, in the
amount of $6.25 million per quarter, until the amount of the facility has been
reduced to $40 million. The interest rate on the facility varies based upon the
Enterprise's total recourse debt to gaming EBITA ratio, as defined. The Facility
contains certain affirmative and negative covenants, including limiting the
Enterprise's Total Leverage Ratio and Fixed Charge Coverage Ratio, as defined,
during the term of the agreement. Additionally, the Enterprise is not permitted
to expend more than $325 million for the completion of the Golden Moon project
and has agreed to cause the Golden Moon to be opened and available for gaming
patrons by September 30, 2002.
On October 26, 1999, the Enterprise, entered into a note agreement with MBCI
Resort and Capital Fund, a related party, in the amount of $300,000 that is
payable on demand with annual interest of 6% due monthly.
As of September 30, 2001, management believes that the Enterprise is in
compliance with all debt covenants under the Notes and the Facility.
The Enterprise entered into an interest rate swap agreement for the purpose of
fixing interest rates on the Loan, thus reducing exposures to interest rate
fluctuations. At September 30, 2001, the Enterprise's interest rate swap had a
notional amount of $45,312,500. This agreement effectively fixed the interest
rate on the Loan at 8.25%. The notional amount does not represent amounts
exchanged by the parties, and thus is not a measure of exposure to the
Enterprise. The amount exchanged is based on the notional amount. The term of
the interest rate swap agreement is through January 31, 2004. As discussed
above, the Loan was repaid on April 24, 2001, however, the Enterprise did not
concurrently settle the interest rate swap agreement. The differences to be paid
or received by the Enterprise under the interest swap agreement are recognized
as an adjustment to interest expense. The agreement is with a major financial
institution, which is expected to fully perform under the terms of the
agreement.
Effective October 1, 2000, the Enterprise adopted SFAS 133. The interest rate
swap agreement described above is defined as a derivative instrument under SFAS
133. In accordance with the transition provisions of SFAS 133, the Enterprise
recorded a cumulative-effect-type transition adjustment of $541,847 in other
comprehensive loss and in accrued expenses and other liabilities to recognize
the fair value of the Enterprise's liability under this swap agreement on
October 1, 2000. Although the Enterprise had designated this swap agreement as a
hedge since its inception on February 1, 2000, the Enterprise did not elect to
seek hedge accounting for this agreement upon adoption of SFAS 133. Accordingly,
during the period from October 1, 2000 through September 30, 2001, the
Enterprise recognized other expenses of $1,838,801 and a related increase in
accrued expenses and other liabilities representing the effect during this
period of interest rate charges. Reclassifications from other comprehensive
income during the period from October 1, 2000 through September 30, 2001 are
$147,802.
Note 5 - Fair Value of Financial Instruments
The carrying values of the Enterprise's cash and cash equivalents, short-term
investments, accounts receivable, note payable, and accounts payable approximate
fair value because of the short maturity of those instruments. Estimated fair
value of the Notes is $198,000,000 at September 30, 2001 based on quoted market
prices on or about September 30, 2001.
Fair value of the Enterprise's interest rate swap agreement is based on the
termination value of the agreement using quotes from the Enterprise's counter
party. The fair value liability of the Enterprise's interest rate swap at
September 30, 2001 was $2,232,846 and is included in accrued expenses and other
liabilities.
29
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 6 - Leases
The Enterprise leases various equipment and advertising billboards under
operating leases. The initial terms of these leases range from one to five
years. Future minimum lease payments required under the operating leases as of
September 30, 2001 are as follows:
2002 $ 296,922
Thereafter -
---------------
$ 296,922
---------------
Rent expense incurred under operating leases was $652,006, $697,621 and $790,678
for the years ended September 30, 2001, 2000 and 1999, respectively.
Note 7 - Enterprise Licensing and Regulation
The Mississippi Band of Choctaw Indians, by vote of the Tribal members,
authorized casino gaming on Tribal lands located in Mississippi. In accordance
with the Indian Gaming Regulatory Act, the Tribe signed a Tribal-State Compact
with the State of Mississippi on December 4, 1992 and enacted ordinances
authorizing bingo (Class II) and casino-type (Class III) gaming. The Tribal
Council created the Choctaw Gaming Commission and authorized it as the
regulatory agency responsible for the licensing of the Casino and the on-site
regulation of the gaming operations. The Choctaw Gaming Commission has
promulgated regulations that govern the gaming operations.
Note 8 - Management Agreement and Other Transactions with Boyd
The Tribe entered into the seven-year Management Agreement and received in
December 1993, the necessary approvals from the National Indian Gaming
Commission to construct and operate the Silver Star. The Tribe contracted with
Boyd to finance the original construction of the Silver Star property and to
manage the Silver Star for a term of seven years. Boyd paid the Tribe a fee of
$1,000,000 for the Management Agreement. The Management Agreement provided for a
management fee payable monthly to Boyd equal to 30% of the operating profits (as
defined) of the Silver Star in the first five years of the Agreement, and 40% in
the sixth and seventh years. The Termination Agreement discontinued the payment
of management fees to Boyd for operating profits earned subsequent to January
31, 2000. Certain termination adjustments were recorded by the Enterprise for
which the management fee was adjusted based upon terms agreed upon by the Tribe
and Boyd pursuant to the provisions of the Termination Agreement.
Management fees paid to Boyd for the years ended September 30, 2000 and 1999
totaled $16,413,592 and $43,457,949, respectively. No amounts were paid for
management fees for the year ended September 30, 2001. Boyd paid certain
expenses including customer airfare, legal fees, and other administrative
expenses, which were reimbursed by the Enterprise. The Enterprise paid,
$1,054,684 and $3,315,922 under this arrangement for the years ended September
30, 2000 and 1999, respectively. No amounts were paid under this arrangement for
the year ended September 30, 2001. Prior to February 1, 2000, the Enterprise
provided for employee health coverage after a pre-determined waiting period
through a self-insured plan administered by Boyd. Administration fees related to
this plan were $36,000 and $108,000 for the years ended September 30, 2000 and
1999, respectively. No amounts were paid related to administration fees for the
year ended September 30, 2001.
Note 9 - Related Party Transactions
Net distributions to the Tribe were $96,905,012, $84,582,761 and $97,318,690 for
the years ended September 30, 2001, 2000 and 1999, respectively. Subsequent to
January 31, 2000, the Enterprise makes distributions to the Tribe at the Tribe's
discretion, subject to the distribution restrictions under the Notes described
in Note 4.
30
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
Subsequent to January 31, 2000, employees of the Enterprise are provided health
coverage through the Tribe's health plan. The Enterprise and its employees paid
$7,856,211 and $4,549,758 to the Tribe under this arrangement for the years
ended September 30, 2001 and 2000, respectively.
The Enterprise collects from customers and remits to the Tribe a 7% sales tax on
rooms, food, beverage, sundry and entertainment revenue. The total sales tax
paid was $778,561, $816,761 and $885,389 for the years ended September 30, 2001,
2000 and 1999, respectively. For the years ended September 30, 2001, 2000 and
1999, the Enterprise paid rent and purchased certain goods and services from the
Tribe and its businesses in the amount of $3,276,271, $9,218,753 (which includes
$5,562,108 payable to the Tribe at September 30, 2000 for the construction of
the parking garage) and $1,784,878, respectively.
The Enterprise paid $250,000 to the Tribal/State Tourism Fund for the promotion
of tourism in Mississippi for each of the years ended September 30, 2001, 2000
and 1999 under the Tribal-State Compact. The Choctaw Gaming Commission was paid
$2,281,082, $2,317,642 and $2,282,894 for the years ended September 30, 2001,
2000 and 1999, respectively, for fees assessed at 1% of gaming revenues as
defined per the Tribal Code.
The Enterprise paid $1,896,519 and has incurred an additional $729,430 payable
to the Choctaw Development Enterprise for the construction of administrative
offices and a hospitality institute for the year ended September 30, 2001.
During the years ended September 30, 2001, 2000 and 1999, the Tribe contributed
property and equipment to the Enterprise at the Tribe's cost of $3,156,740,
$7,308,914 and $3,459,998, respectively. During the twelve months ended
September 30, 2001, the Tribe contributed other assets to the Enterprise at the
Tribe's cost of $1,843,927. During the twelve months ended September 30, 2001,
the Tribe contributed $24,707,375 in cash to the Enterprise to fund Golden Moon
construction. During the year ended September 30, 2000 the Tribe contributed
$2,128,224 in cash to the Enterprise.
As of September 30, 2001 the Tribe had outstanding liabilities of $5.5 million
under credit facilities with $8.0 million available in borrowings, which did not
preclude recourse to assets held by the Enterprise.
Note 10 - Employee Benefit Plans
Through January 31, 2000, the employees of the Enterprise were employees of Boyd
with the Enterprise incurring all salary and related expenses. As employees of
Boyd, the Enterprise's employees participated in Boyd's profit sharing plan and
retirement savings plan. The Enterprise expensed contributions of $65,267 and
$302,710 for the years ended September 30, 2000 and 1999, respectively.
Subsequent to January 31, 2000, employees of the Enterprise became eligible to
participate in the Tribe's 401(k) plan. The Enterprise expensed contributions of
$1,780,837 and $1,137,653 to this plan for the years ended September 30, 2001
and 2000, respectively.
The Enterprise has no formal commitments to provide post-retirement health care
benefits to retirees.
Note 11 - Contingencies
The Enterprise is subject to various claims and litigation in the normal course
of business. In the opinion of management, all pending legal matters are either
adequately covered by insurance or, if not insured, will not have a material
adverse impact on the Enterprise's financial position, results of operation or
cash flows.
31
Choctaw Resort Development Enterprise
Notes to Financial Statements
- --------------------------------------------------------------------------------
On July 26, 2001, a lawsuit was filed in a Mississippi state court by Eddie
Fears, "a citizen and taxpayer", against Ronnie Musgrove, Governor of the State
of Mississippi, the Mississippi Gaming Commission and the members of the
Mississippi Gaming Commission. The lawsuit alleges that the Tribal-State Compact
entered into by the State of Mississippi and the Tribe is invalid for a number
of reasons, including that the then-Governor of the State of Mississippi did not
have the legal power to bind the State to the terms of the Compact. In 1994, the
same legal issue was addressed by the United States District Court for the
Southern District of Mississippi in Brantley Willis v, Governor Kirk Fordice, et
al., U.S.D.C. Southern District of Mississippi, Jackson Division, Civ. No
3:93-CV-818BN (1994). The Court ruled on April 8, 1994 that the Governor had the
authority to enter into the Compact. The Tribe believes that the Federal Court's
ruling in that case was correct and that the Compact is valid. It is not
possible to predict the outcome of this lawsuit, and management is unable to
make a meaningful estimate of the amount or range of loss, if any, that could
result from an unfavorable outcome of this lawsuit.
The Enterprise has entered into a guaranteed maximum price contract with W.G.
Yates & Sons Construction ("Yates"), which covers $146.8 million of the "hard"
costs of constructing the Golden Moon. This contract requires Yates to provide a
payment and performance bond for the entire contract price of $146.8 million.
Yates may require modifications to plans and specifications, including some
changes arising from proposed change orders by the Enterprise, provided that no
such required modifications may be inconsistent with the description of the
Golden Moon contained in the contract or with budgeted line items. The
Enterprise is required to approve any change order.
The remaining $142.5 million of budgeted costs includes Enterprise-managed
construction (approximately $26.0 million), additional furniture, fixtures and
equipment, certain "soft" costs, which include fees of the architect, attorneys
and other professionals, pre-opening expenses, capitalized interest and other
costs that are not "hard" costs. Accordingly, neither the construction
contract's guaranteed maximum price nor other safeguards against cost overruns,
other than the Enterprise's budget contingency of $13.0 million, will provide
any guaranty against increased costs relative to excluded items.
Note 12 - Subsequent Events
On November 6, 2001 and November 29, 2001, the Enterprise distributed $6,225,337
and $5,741,741 to the Tribe, respectively. On October 1, 2001 the Enterprise
made a $9,301,389 interest payment on the Notes.
Note 13 - Recently Issued Accounting Pronouncements
On January 1, 2001, the Enterprise adopted Emerging Issue Task Force Issues
00-14 and 00-22 ("EITF 00-14 and 00-22"). EITF 00-14 and 00-22 require that cash
discounts and other cash incentives related to gaming play be recorded as a
reduction to gross casino revenues. The adoption of EITF 00-14 and 00-22 did not
have a material effect on the Enterprise's financial statements. There is no
effect on previously reported net income.
The Securities and Exchange Commission has issued Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" ("SAB 101"). The Enterprise
adopted SAB 101 during the fiscal year ended September 30, 2000 and such
adoption had no impact on the Enterprise's financial statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
32
PART III
Item 10. Directors and Executive Officers of the Registrant
The Choctaw Resort Development Enterprise
The Tribe established the Enterprise on October 12, 1999, as an
unincorporated business enterprise of the Tribe, to operate the Silver Star and
the proposed Golden Moon. The Enterprise is governed by a five-member Board of
Directors, which consists of the Tribal Chief, the Secretary-Treasurer of the
Tribal Council and three other members appointed by the Tribal Council. The
Tribal Chief and the Secretary-Treasurer serve on the Board of Directors during
their term of office on the Tribal Council. The other members of the Board of
Directors serve staggered four-year terms. To establish staggered terms, the
initial terms of such members are either two years or four years as determined
by the Tribal Council.
Enterprise Management
The table below sets forth the names, ages and positions of the
executive officers of the Enterprise.
Name Age Position
- ---- --- --------
Jay Dorris.............................. 37 President
Michael Donald.......................... 37 Vice President of Resort Finance
James Angus............................. 56 Vice President of Construction
Operations
Donna Brolick........................... 38 Vice President of Human Relations
Jay Dorris assumed the position of President for the Enterprise in
August 2001. Mr. Dorris has over 10 years experience in architectural and
project development. For over ten years, Mr. Dorris has worked directly and
indirectly for the Tribe developing various projects, including most recently
serving as Tribal Project Manager for the Golden Moon project and the Tribe's
recreational lake project.
Michael Donald assumed the position of Vice President of Resort Finance
for the Enterprise in August 2001. Mr. Donald is a Certified Public Accountant
with over 13 years experience in accounting and financial management. For the
past three years, Mr. Donald has served as Director of Tribal Gaming Audit and
Financial Compliance for the Tribe. Mr. Donald began his career with KPMG Peat
Marwick and spent eight years in public accounting before joining the Tribe as
Senior Internal Auditor in May 1996.
James Angus assumed the position of Vice President of Construction
Operations for the Enterprise in August 2001. Mr. Angus has over 32 years
experience in the construction industry. For the previous four years, Mr. Angus
worked as a Vice President of Operations and Construction for Boyken
International, Inc. From the end of 1994 until mid-1997, he worked as a general
contractor for Precept Builders.
Donna Brolick assumed the position of Vice President of Human Relations
for the Enterprise on October 1, 2001. Ms. Brolick has both bachelors and
masters degrees in Public Administration from the University of Mississippi.
Prior to joining the Enterprise, Ms. Brolick served as Human Resources Director
with the Mississippi Department of Education for over 8 years. Ms. Brolick has
approximately 14 years experience in the field of Human Resources.
33
Board of Directors
The table below sets forth the names, ages and positions of our
directors and the year in which their current term expires.
Name Age Position Current Term Expires
- ---- --- -------- --------------------
Phillip Martin...................... 75 Chairman 2003
Harrison Ben........................ 66 Secretary-Treasurer 2003
Rufus Tubby......................... 48 Vice-Chairman 2003
Gerald Stoliby...................... 33 Director 2005
Billy Chickaway..................... 51 Director 2005
Set forth below is a description of the current business experience
during the past five years of each of the directors listed above.
Chief Phillip Martin has been elected to six four-year terms as Tribal
Chief and has served as a leader of the Tribe for over 40 years. After returning
from a ten-year tour in the Air Force, Chief Martin is credited with introducing
the Tribe into various industries including the production of wire harnesses for
automobiles, greeting cards, electronic components, plastics, printing and
publishing and casino gaming. As a result, unemployment on the Tribe's
reservation has dropped from 75% in the 1970s to around 2.6% today.
Harrison Ben has been a member of Tribal Council for five years.
Rufus Tubby has been a member of the Tribal Council for approximately
10 years.
Gerald Stoliby has been a member of the Tribal Council for four years.
Mr. Stoliby is the President, Chief Executive Officer and majority owner of
Choctaw Paper Company, Inc., a private coarse paper and janitorial supply
company.
Billy Chickaway has been a member of the Tribal Council for four years.
Compensation of Directors
Members of our Board of Directors do not receive any compensation from
the Enterprise or the Tribe for their services as members of our board or any
committee thereof.
Silver Star Management Team
The table below sets forth the names, ages and positions of the
executive officers of the Silver Star as of September 30, 2001.
Name Age Position
- ---- --- --------
Doug Pattison *....................... 47 Chief Executive Officer, Silver Star
Richard Stewart....................... 49 Marketing Director
Joe Cavilla........................... 60 Slot Operations Director
Thomas Allard......................... 45 Table Games Director
Doug Pattison assumed the role of Chief Executive Officer of the Silver
Star in December, 1999. He has 18 years of experience in the casino and
hospitality industry. He helped open the Sheraton Casino and Hotel, Tunica,
Mississippi and served as the General Manager and Senior Vice President of the
Sheraton-Tunica for six years prior to joining the Silver Star.
34
Richard Stewart has over 25 years experience in the gaming industry. He
was hired at the Silver Star in 1996 as marketing director and remained in that
position following the management transition from Boyd Gaming. Prior to joining
the Silver Star, Mr. Stewart was the marketing director for Boomtown Casino
based in Reno, Nevada from 1993 to 1996.
Joseph L. Cavilla assumed the position of slot operations director at
the Silver Star in February 2000. He came to the Silver Star from the ITT
Sheraton in Tunica, Mississippi where he worked from 1998 to 2000. Mr. Cavilla
has over twenty years of experience in the gaming industry. He previously worked
at the ITT Sheraton, Halifax, Nova Scotia from 1995 to 1998, and the Bally's
Moon Landing, Tunica from 1993 to 1995.
Thomas Allard has over sixteen years experience in the gaming industry.
In March of 1994, Mr. Allard began his employment with the Silver Star as Casino
Shift Manager and was promoted to Director of Table Games as of February 2000.
* On December 13, 2001 a Settlement and General Release Agreement was
entered into between Mr. Pattison and the Enterprise. This agreement terminates
the employment of Mr. Pattison effective December 13, 2001. The Enterprise is
currently searching for a candidate to fill this position
Mississippi Band of Choctaw Indians
The Mississippi Band of Choctaw Indians is a federally recognized, self
governing Indian tribe with approximately 8,300 enrolled members, most of whom
live on or near the Tribe's 29,000-acre reservation in east-central Mississippi.
Pursuant to the Tribe's Constitution, an elected Tribal Chief and a 16-member
Tribal Council govern the Tribe and oversee all Tribal government operations and
services. The Tribe's Constitution vests all executive powers of the Tribe in
the Tribal Chief and all legislative powers in the Tribal Council, including the
power to establish unincorporated business enterprises of the Tribe. The Tribal
Chief is the principal executive officer of the Tribe. The Tribal government has
functions similar to local, state and federal governments and is responsible for
providing Tribal members with education, healthcare, job training, housing,
police and fire protection, Tribal courts, utilities and other community
infrastructure. The Tribe operates the largest unified reservation school system
in the United States, with more than 1,700 students enrolled in kindergarten
through grade twelve.
The Tribe is one of the ten largest employers in Mississippi with more
than 6,600 permanent, full-time employees and an annual payroll of approximately
$120 million. The Tribe has nine manufacturing plants on its reservation, which
provide supplies to the automotive industry and other companies, including
Caterpillar. In addition, the Tribe operates the Silver Star and the 36-hole
Dancing Rabbit Golf Club through the Enterprise.
35
Tribal Council
The Tribe is governed by the Tribal Chief and a 16-member Tribal
Council that is responsible for passing all tribal laws and regulations on the
reservation. Tribal Council members are elected for staggered four-year terms
from the seven communities comprising the Tribe's reservation.
The table below sets forth information about the Tribal Council.
Name Position Age Experience
- ---- -------- --- ----------
Phillip Martin.............. Tribal Chief 75 Over 40 years
Harrison Ben................ Tribal Secretary/Treasurer 66 5 years
Gerald Stoliby.............. Tribal Councilman 33 4 years
Bobby Thompson.............. Tribal Councilman 55 4 years
Billy Chickaway............. Tribal Councilman 51 4 years
Richard Isaac............... Tribal Councilman 35 1 year
Brenda Stephens............. Tribal Councilman 40 4 years
Dorothy Farve............... Tribal Councilman 47 2 years
Linda Farve................. Tribal Councilman 51 2 years
Woodlin Lewis............... Tribal Councilman 60 7 years
Edward Wesley............... Tribal Councilman 43 5 years
Rufus Tubby................. Tribal Councilman 48 10 years
Birdie Steve................ Tribal Councilman 50 2 years
Beasley Denson.............. Tribal Councilman 51 4 years
Roger Anderson.............. Tribal Councilman 54 14 years
Ronnie Henry, Sr............ Tribal Councilman 42 Newly elected
Claude Johnson.............. Tribal Councilman 44 Newly elected
36
Item 11. Executive Compensation
Summary Compensation Table
This section provides certain summary information concerning
compensation paid by the Enterprise to its senior executive officers.
Fiscal Annual Other Annual
Name and Principal Position Year Salary (1) Salary (1) Bonus (2) Compensation
Jay Dorris, President and CEO 2001 212,500 24,519 (6) - -
2000 - - - -
Doug Pattison, Chief Executive Officer, 2001 400,000 400,000 122,600 (7) -
Silver Star 2000 400,000 333,333 102,267 40,000 (3)
James Angus, Vice President of 2001 210,000 18,577 (6) - 28,159 (4)
Construction Operations 2000 - - - -
Michael A. Donald, Vice President of 2001 135,000 15,577 (6) - -
Resort Finance 2000 - - - -
Richard Stewart, Director of Marketing 2001 120,000 116,423 - -
2000 110,000 73,616 (5) 22,499 -
(1) Prior to February 1, 2000, all employees of the Enterprise were employed by
Boyd and as such, the salaries were paid by Boyd and charged to Silver Star
for periods prior to February 1, 2000. Therefore, no amounts are shown for
fiscal year 1999.
(2) Silver Star employees are eligible to receive a performance based bonus at
the annual discretion of the Board of Directors. As of the date of the
filing of this annual report, bonuses had not been authorized by the
Enterprise's Board of Directors for the fiscal year 2001, except for the
bonus for Doug Pattison.
(3) Mr. Pattison was provided with a relocation allowance of $40,000 that was
paid in fiscal 2000. The Enterprise provides Mr. Pattison with an
automobile at its expense.
(4) Mr. Angus received a one-time payment of $25,000 upon employment with the
Enterprise. Mr. Angus was provided with a relocation allowance of $3,159
that was paid in fiscal 2001. The Enterprise provides Mr. Angus with an
automobile at its expense.
(5) Mr. Stewart and Mr. Allard were employed by Boyd prior to February 1, 2000,
and as such, they had salaries paid by Boyd and charged to Silver Star for
the period October 1, 1999 through January 31, 2000.
(6) Mr. Dorris and Mr. Donald were employed by the Tribe prior to August 6,
2001, and as such, they had salaries paid by the Tribe for the period
October 1, 2000 through August 6, 2001. Mr. Angus began his employment on
August 6, 2001. Prior to that time he was not employed by the Tribe or any
of its enterprises.
(7) The Enterprise's Board of Directors authorized the bonus for Doug Pattison
for the fiscal year 2001 as part of the Settlement and General Release
Agreement dated December 13, 2001.
37
Employment Contracts
Jay Dorris
An agreement to employ Mr. Dorris as the President was executed on
August 6, 2001. The employment agreement provides for a term ending August 5,
2005, renewing automatically for one-year periods after the end of the initial
four-year term.
Mr. Dorris will receive a base salary of $212,500 which amount was
pro-rated for the two months he was employed in fiscal year 2001. Mr. Dorris
also has the opportunity to receive an incentive bonus based on the Silver Star
bonus program approved by the Board of Directors on May 3, 2001.
Mr. Dorris is entitled to all amounts due under the agreement, unless
he resigns or is terminated by the Enterprise for cause or under other limited
circumstances, in which case he will only be entitled to payments of salary and
bonus earned but unpaid to the date of resignation or termination, as the case
may be.
Doug Pattison
An agreement to employ Mr. Pattison as the Chief Executive Officer of
the Silver Star was executed on December 1, 1999. The employment agreement
provides for a term ending September 30, 2005, renewing automatically for
one-year periods after the end of the initial five-year term.
Mr. Pattison received a pro-rated annual base salary of $333,333 for
the ten months he was employed in fiscal year 2000, and will receive a base
salary of $400,000 in subsequent years. Mr. Pattison also has the opportunity to
receive an incentive bonus based on the Silver Star bonus program approved by
the Board of Directors on May 3, 2001.
On December 13, 2001 a Settlement and General Release Agreement was
entered into between Mr. Pattison and the Enterprise. This agreement terminates
the employment of Mr. Pattison effective December 13, 2001. The agreement calls
for the Enterprise to pay Mr. Pattison a gross sum of $800,000 as severance pay
as well as $122,600 for bonuses earned for the fiscal year 2001, $25,000 for
bonuses earned for the fiscal year 2002 up to and until the effective date of
termination, and $43,638 of accrued and unused vacation time.
Michael Donald
The Enterprise has reached an arrangement to employ Mr. Donald as the
Enterprise's Vice President of Resort Finance. Mr. Donald has an initial
four-year contract through August 2005, with an annual salary of $135,000. Mr.
Donald will also receive the typical fringe benefits of tribal employees.
James Angus
The Enterprise has reached an arrangement to employ Mr. Angus as the
Enterprise's Vice President of Construction Operations. Mr. Angus has an initial
four-year contract through August 2005, with an annual salary of $210,000. Mr.
Angus will receive typical moving expenses, temporary living quarters, the use
of an automobile and other typical fringe benefits of tribal employees. Mr.
Angus will also receive a one-time payment of $25,000.
Donna Brolick
The Enterprise has reached an arrangement to employ Ms. Brolick as the
Enterprise's Vice President of Human resources. Ms. Brolick has an initial
four-year contract through October 2005, with an annual salary of $90,000. Ms.
Brolick will also receive typical moving expenses and other typical fringe
benefits of tribal employees.
Golden Moon Management
We intend to hire a management team for the Golden Moon upon its
completion that has experience in gaming comparable to that of the management
and staff of the Silver Star.
38
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Enterprise has no outstanding equity securities.
Item 13. Certain Relationships and Related Transactions
Recourse Liabilities
As of September 30, 2001, the Tribe had outstanding liabilities of $5.5
million under credit facilities with $8.0 million available in borrowings, which
do not preclude recourse to assets held by the Enterprise. If other assets of
the Tribe are insufficient to repay this existing debt, then our creditors may
deem these obligations to be liabilities of the Enterprise. Under the indenture
relating to the notes, the Tribe has agreed that it will not incur indebtedness
in the future that would give such creditors recourse to the assets of the
Enterprise, except as may be incurred by the Enterprise under the indenture.
Payments to the Tribe
The Management Agreement provided for a monthly cash distribution to
the Tribe based on operating profits (as defined) plus depreciation less the
management fee. The minimum guaranteed monthly distribution to the Tribe was
$100,000.
Net distributions to the Tribe were $96.9 million, $84.6 million, and
$97.3 million for the years ended September 30, 2001, 2000, and 1999,
respectively. In addition, there were net distributions made to the Tribe of
$6.2 million on November 6, 2001 and $5.7 million on November 29, 2001. The
payments to the Tribe discussed below are made separately and are not included
in the net distribution calculation. Subsequent to January 31, 2000, the
Enterprise makes distributions to the Tribe at the Tribe's discretion.
Subsequent to January 31, 2000, we provided health insurance coverage
to our employees through the Tribe's health plan. The Enterprise and its
employees paid $7.9 million and $4.5 million to the Tribe under this arrangement
for the years ended September 30, 2001 and 2000 respectively.
We collect and remit a 7% sales tax to the Tribe on rooms, food,
beverage, sundry and entertainment revenue. The total sales tax paid was
$779,000, $817,000, and $885,000 for the years ended September 30, 2001, 2000,
and 1999, respectively. During the fiscal year ended September 30, 2001, we also
paid rent for office space in non-casino buildings and purchased certain goods
and services from the Tribe and its businesses in the amount of $3.3 million.
During the years ended September 30, 2000 and 1999, we also paid rent for office
space in non-casino buildings and purchased certain goods and services from the
Tribe and its businesses in the amount of $9.2 million, which includes $5.6
million payable to the Tribe at September 30, 2000 for the construction of a
parking garage, and $1.8 million, respectively.
The Enterprise paid $250,000 to the Tribal/State Tourism Fund for the
promotion of tourism in Mississippi for each of the years ended September 30,
2001, 2000, and 1999, under the Tribal-State Compact. The Choctaw Gaming
Commission was paid $2.2 million for the year ended September 30, 2001 and $2.3
million for the years ended September 30, 2000 and 1999 for fees assessed at 1%
of gaming revenues per the Tribal Code.
During the years ended September 30, 2001, 2000, and 1999, the Tribe
contributed property and equipment to us at the Tribe's cost of $3.2 million,
$7.3 million, and $3.5 million, respectively. During the fiscal year ended
September 30, 2001, the Tribe contributed other assets to the Enterprise at the
Tribe's cost of $1.8 million. During the fiscal years ended September 30, 2001
and 2000, the Tribe contributed $24.7 million and $2.1 million in cash to the
Enterprise to fund the Golden Moon construction. The Tribe has no plans to
require us to repay the cash contributions.
39
Affiliate Transactions
Gerald Stoliby, a member of our board of directors and a Tribal Council
Member, owns a majority interest in and is the President and Chief Executive
Officer of Choctaw Paper Company, Inc. The Enterprise purchases coarse paper and
janitorial products from Choctaw Paper Company, Inc. in the ordinary course of
its business. For the fiscal year ended September 30, 2001, the Enterprise had
purchased approximately $465,000 in goods from the Choctaw Paper Company, Inc.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Financial Statements
The following financial statements are filed as part of this Report under "Item
8 - Financial Statements and Supplementary Data":
Report of Independent Accountants
Consolidated Balance Sheets at September 30, 2001 and 2000
Consolidated Statements of Operations for the Three Fiscal Years
in the Period Ended September 30, 2001
Consolidated Statements of Changes in Owners' Equity for the Three
Fiscal Years in the Period Ended September 30, 2001
Consolidated Statements of Cash Flows for the Three Fiscal Years in
the Period Ended September 30, 2001
Notes to Consolidated Financial Statements
Reports on Form 8-K
None
Exhibits
The following exhibits are filed as a part of this Report:
Exhibit
No. Description of Exhibit
------- ----------------------
3.1* Revised Constitution and Bylaws of the Mississippi Band of Choctaw
Indians, as approved by the Commissioner of Indian Affairs on March
28, 1975 (ratified by Tribe on December 17, 1974).
3.2* Ordinance 56 by the Mississippi Band of Choctaw Indians, an
ordinance providing for classification, regulation, and creation of
wholly-owned Tribal business enterprises and establishment of
business enterprise division of the Tribal Government Executive
Branch, dated November 20, 1997.
3.3* Resolution CHO 00-010 by the Mississippi Band of Choctaw Indians, a
resolution to establish the Choctaw Resort Development Enterprise
under Ordinance 56, dated October 12, 1999.
3.6* Title XXV, Choctaw Tort Claims Act, added by Tribal Ordinance
16-CCC to the Choctaw Tribal Code on January 19, 2000.
40
Exhibit
No. Description of Exhibit
------- ----------------------
4.1* Indenture, dated March 30, 2001, among the Mississippi Band of
Choctaw Indians d/b/a Choctaw Resort Development Enterprise, the
Mississippi Band of Choctaw Indians and Firstar Bank, N.A., as
Trustee, relating to the 9 1/4% Senior Notes due 2009 of the
Choctaw Resort Development Enterprise.
4.2* Form of 144A Global 9 1/4% Senior Note due 2009 of the Mississippi
Band of Choctaw Indians d/b/a Choctaw Resort Development Enterprise
(contained in the Indenture, filed as Exhibit 4.1).
4.3* Form of Regulation S Global 9 1/4% Senior Note due 2009 of the
Mississippi Band of Choctaw Indians d/b/a Choctaw Resort
Development Enterprise (contained in the Indenture, filed as
Exhibit 4.1).
4.4* Form of registered Global 9 1/4% Senior Note due 2009 of the
Mississippi Band of Choctaw Indians d/b/a Choctaw Resort
Development Enterprise.
4.5* Registration Rights Agreement, dated March 30, 2001, among the
Choctaw Resort Development Enterprise, Banc of America Securities
LLC, as Representative of the Initial Purchasers.
10.1* Tribal-State Compact for Regulation of Class III Gaming on the
Mississippi Band of Choctaw Indians Reservation in Mississippi,
dated December 4, 1992, between the Mississippi Band of Choctaw
Indians and the State of Mississippi.
10.2* First Amendment to the Tribal-State Compact for Regulation of Class
III Gaming on the Mississippi Band of Choctaw Indians Reservation
in Mississippi, dated August 26, 1994, between the Mississippi Band
of Choctaw Indians and the State of Mississippi.
10.3* Second Amendment to the Tribal-State Compact for Regulation of
Class III Gaming on the Mississippi Band of Choctaw Indians
Reservation in Mississippi, dated May 24, 1996, between the
Mississippi Band of Choctaw Indians and the State of Mississippi.
10.4* Contractor's Agreement, dated January 24, 2001, between the
Mississippi Band of Choctaw Indians dba Choctaw Resort Development
Enterprise and W.G. Yates & Sons Construction Company.
10.5* Basic Architectural Services Contract, dated October 13, 1999,
between the Mississippi Band of Choctaw Indians and Arquitectonica
International Corp.
10.6* Loan Agreement, dated December 19, 2000, between the Mississippi
Band of Choctaw Indians d/b/a Choctaw Resort Development
Enterprise, the Mississippi Band of Choctaw Indians and Bank of
America, N.A., as leader of syndicate of lenders.
10.7* Consent Letter of the Administrative Agent under the Amended and
Restated Term Loan Agreement and the Loan Agreement, dated March
30, 2001
10.8* Employment Agreement of Douglas Pattison, dated December 1, 1999,
between the Mississippi Band of Choctaw Indians d/b/a Choctaw
Resort Development Enterprise and Douglas Pattison.
10.9* Amendment No. 1 to Employment Agreement of Douglas Pattison, dated
July 18, 2001, between the Mississippi Band of Choctaw Indians
d/b/a Choctaw Resort Development Enterprise and Douglas Pattison.
10.10* Employment Agreement of Mike Donald, dated August 2, 2001, between
the Mississippi Band of Choctaw Indians d/b/a Choctaw Resort
Development Enterprise and Mike Donald.
10.11* Employment Agreement of Jim Angus, dated August 2, 2001, between
the Mississippi Band of Choctaw Indians d/b/a Choctaw Resort
Development Enterprise and Jim Angus.
10.12 Employment Agreement of Jay Dorris, dated August 6, 2001, 2001,
between the Mississippi Band of Choctaw Indians d/b/a Choctaw
Resort Development Enterprise and Jay Dorris.
10.13 Employment Agreement of Donna Brolick, dated September 14, 2001,
2001, between the Mississippi Band of Choctaw Indians d/b/a Choctaw
Resort Development Enterprise and Donna Brolick.
10.14 Settlement and General Release Agreement, dated December 13, 2001,
2001, between the Mississippi Band of Choctaw Indians d/b/a Choctaw
Resort Development Enterprise and Douglas Pattison.
41
Exhibit
No. Description of Exhibit
------- ----------------------
23.1* Consent of Latham & Watkins (contained in Exhibit 5.1).
24.1* Power of attorney (included on the signature page).
25.1* Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of 1939 of Firstar Bank, N.A.
* Filed by the Enterprise with its Registration Statement on Form S-4 (file no.
333-63348), and incorporated herein by reference
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
Mississippi Band of Choctaw Indian's reservation in the city of Choctaw, state
of Mississippi, on December 21, 2001.
CHOCTAW RESORT DEVELOPMENT ENTERPRISE
By: /s/ Phillip Martin
-------------------------------------
Phillip Martin
Chairman of the Board
By: /s/ Harrison Ben
-------------------------------------
Harrison Ben
Secretary-Treasurer
Pursuant to the requirements of the Securities Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and as of the dates indicated.
/s/ Phillip Martin Chairman of the Board December 21, 2001
- ----------------------------------------------------------
Phillip Martin
--------------
/s/ Jay Dorris President December 21, 2001
- ----------------------------------------------------------
Jay Dorris
----------
/s/ Michael A. Donald Vice President of Resort Finance December 21, 2001
- ----------------------------------------------------------
Michael A. Donald
-----------------
/s/ Harrison Ben Secretary-Treasurer December 21, 2001
- ----------------------------------------------------------
Harrison Ben
------------
/s/ Rufus Tubby Vice-Chairman December 21, 2001
- ----------------------------------------------------------
Rufus Tubby
-----------
/s/ Gerald Stoliby Director December 21, 2001
- ----------------------------------------------------------
Gerald Stoliby
--------------
/s/ Billy Chickaway Director December 21, 2001
- ----------------------------------------------------------
Billy Chickaway
---------------
43
Exhibit 10.12
MISSISSIPPI BAND OF CHOCTAW INDIANS
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of August 6, 2001 by and between
JAY DORRIS (hereinafter called "Executive") and the Mississippi Band of Choctaw
Indians d/b/a CHOCTAW RESORT DEVELOPMENT ENTERPRISE (hereinafter called
"Employer").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
Section 1. Duties of Executive:
Employer hereby employs Executive as PRESIDENT of MISSISSIPPI BAND OF CHOCTAW
INDIANS d/b/a CHOCTAW RESORT DEVELOPMENT ENTERPRISE on the terms and conditions
hereinafter stated. Executive hereby agrees that during the term of his
employment hereunder, he will faithfully, industriously and to the best of his
ability and experience perform all duties that may be required of him by virtue
of his position as PRESIDENT of MISSISSIPPI BAND OF CHOCTAW INDIANS d/b/a
CHOCTAW RESORT DEVELOPMENT ENTERPRISE to the reasonable satisfaction of the
Board of Directors of Employer and in accordance with all applicable laws and
regulations and the directives and instructions of the Board of Directors.
Executive shall have the right and duty to develop Employers Enterprise
organizational structure including the right to hire and fire. Executive
understands and agrees that all positions at the department director level and
above must be submitted to the Chairman of Board prior to any employment action
being taken. All positions of vice president (or equivalent) must be submitted
to Chairman of Board and must have Board of Directors approval prior to any
employment action being taken. The Executive shall report directly to the
Chairman of Board and shall keep the Chairman of Board fully informed of
Enterprise and property operating and financial status and shall make monthly
written reports to the Chairman of Board and other reports, as from time to
time, may be requested by the Chairman of Board. Executive represents that he is
under no legal impediment which would distract, limit or prohibit the
performance of his duties and responsibilities under this Employment Agreements.
The employment pursuant to this Agreement shall be considered, full-time
employment, such that Executive shall devote necessary time, attention and
energy to Employer's business and shall not during the term of this Agreement
accept other employment for gain or profit. However, the acceptance of full-time
employment under this Agreement will not restrict Executive from making
investments in other business enterprises, (so long as such other businesses do
not compete with Employer and do not violate any conflict of interest
restrictions of the Employer). The Executive shall refrain during the term of
this Agreement from using official authority or influence for the purpose of
affecting the result of a Tribal election or legislation, and he shall not
knowingly solicit, accept or make a political contribution for the purpose of
affecting the result of a Tribal election or legislation. This shall not be
construed to prohibit Executive from making recommendations or expressing his
opinions on matters related to his duties as PRESIDENT of MISSISSIPPI BAND OF
CHOCTAW INDIANS d/b/a CHOCTAW RESORT DEVELOPMENT ENTERPRISE. On a date mutually
agreed to, Executive shall submit to the Board of Directors of Employer for
their approval a two (2) year performance goals report and the report shall be
updated on at least an annual basis thereafter during the term of this
Agreement. The report shall be "operations" as well as "bottom line" oriented
and shall further address other good business practices, including but not
limited to strategic planning, expansion, employee training and career
enhancement for the Tribal members employed by Employer.
Section 2. Compensation:
(a) Base Salary. Employer agrees to pay to Executive as
compensation for the services to be performed by him during
the term of his employment hereunder, a base salary at the
rate of $212,500.00 per annum. Such base salary shall be
payable in equal monthly installments throughout the term of
this Agreement, or in such other installments as shall be
agreed to by the parties. Base salary shall be prorated for
first year of employment based on a September 30, 2001,
fiscal year end and beginning on the date Executive begins
duties on site at employer's business. In the event full
time, onsite employment begins on a day other than the first
day of the month, then said base salary for that month shall
be ratably apportioned based on the remaining number of days
in said month expressed as a percentage.
(b) Incentive Bonus. The Employer shall pay Executive an annual
incentive bonus based on the following criteria:
1. Annual Bonus: The Executive shall receive an annual
bonus in an amount determined by using the bonus
calculation methodology contained in Choctaw Resort
Development Enterprise bonus plan dated May 3, 2001.
For purpose of Executive's bonus calculation, Executive
shall be considered as a "Tier 1" level employee.
2. Participation: The Executive's participation in the
bonus plan shall coincide with the fiscal year of the
Enterprise with payment of any bonus due the Executive
for a particular year no later than 45 days after the
start of a new fiscal year for the Enterprise or
termination of this Agreement and such bonus shall be
pro-rated. For purposes of this Employment Agreement,
the Executive shall become eligible for a bonus
beginning with the fiscal year starting October 1,
2001.
(c) Fringe Benefits. Employer shall provide Executive those
fringe benefits offered by the Mississippi Band of Choctaw
Indians d/b/a Choctaw Resort Development Enterprise,
including but not limited to, health care and retirement
benefits, travel and other business expenses and leave time
provided regular full-time executive employees. Annual and
sick leave accrued by the Executive in his previous
employment with the tribal government services division
shall transfer to his new role under this Employment
Agreement. In addition, Employer shall provide Executive
with the following benefits during the term of employment as
PRESIDENT of MISSISSIPPI BAND OF CHOCTAW INDIANS d/b/a
CHOCTAW RESORT DEVELOPMENT ENTERPRISE.
1. Employer shall provide Executive with the use of an
automobile (Lincoln Town car or equivalent), owned by
Employer, with such automobile to be traded every three
(3) years or sooner with the approval of the Board of
Directors of Employer. Insurance, upkeep, maintenance,
and gas for the automobile provided Executive shall be
paid by Employer.
2. Employer shall pay all reasonable costs associated with
the licensing of the Executive.
Section 3. Term and Renewal:
(a) The term of this Agreement shall commence on August 6,
2001 and end on August 5, 2005, unless renewed pursuant
to Section 3(b) or unless sooner terminated in
accordance with Section 4.
(b) On the expiration date and each subsequent annual
anniversary date thereafter, this Agreement may be
renewed by the parties.
(c) The termination of this Agreement by virtue of Sections
(a) or (b) above is not intended, nor shall it be
deemed to entitle Executive to any compensation other
than salary, bonus or vested benefits earned by the
Executive to the date of termination.
Section 4. Termination:
(a) Mutual Agreement. This Agreement may be terminated at
any time upon the mutual written agreement of the
parties.
(b) Disability. If Executive is unable to perform his
duties hereunder due to illness or disability for a
period of ninety (90) consecutive days, then Employer
may at its option hire a replacement and/or terminate
this Agreement, and Employer shall pay salary and bonus
earned through the effective date of termination and
any benefits that have vested prior to such
termination.
(c) Death. If Executive dies during the term of this
Agreement, this Agreement shall automatically
terminate, and Employer shall pay to the estate of
Executive any portion of the salary and bonus earned by
Executive and any benefits that have vested in
Executive pursuant to this Agreement prior to
termination.
(d) Employer Unilateral Termination. Employer may
immediately terminate the employment of Executive
pursuant to this Agreement upon a majority vote of the
Board of Directors of Employer in the event (i)
Executive is indicted or convicted of any felony or any
gaming offense, (ii) Executive violates this Agreement,
Employer Bylaws, or Tribal, state or federal laws or
regulations relating to Employer operations that would
result in any gaming or ABC license of the Executive
being revoked, (iii) Executive violates the prohibition
against Executive having an interest in an enterprise
that competes with Employer, or violation of Employer's
conflict of interest restrictions, including but not
limited to outside employment and Tribal political
activity, (iv) Executive's wilful and obstinate
resistance to achieving the performance goals pursuant
to Section 1 of this Agreement or his refusal to follow
or implement a lawful order, instruction or policy of
Board of Directors or the Chairman of Board after prior
written notice. (v) Executive provides comps to any
party prohibited from receiving comps by law, order,
regulation or resolution, whether federal or tribal, or
provides comps to any elected public official of the
Tribe. Employer shall provide Executive with a list of
those parties prohibited by Tribal Council Resolution
from accepting comps. Elected officials of the Tribe
means the Tribal Chief or Tribal Council members.
Executive agrees and understands that comps are to be
used only for gaming related purposes to patrons
generating revenues or who may potentially generate
revenues. Employer's only obligation shall be to pay
any portion of the salary earned by Executive and any
benefits other than bonus that have been vested in
Executive pursuant to this Agreement prior to
termination.
(e) Business Closure or Sale. Employer may terminate the
employment of Executive in the event Employer sells or
closes its facilities located at Pearl River Resort.
Employer's only obligation shall be to pay any portion
of the salary and bonus earned by Executive and any
benefits that have been vested in Executive pursuant to
this Agreement prior to termination.
(f) Resignation. The Executive may terminate this Agreement
at any time effective upon ninety (90) days prior
written notice to Employer. Employer's only obligation
shall be to pay any portion of the salary earned by
Executive and any benefits other than bonus that have
been vested in Executive pursuant to this Agreement
prior to termination.
(g) Failure to Maintain License. Employer may terminate
employment of the Executive immediately in the event
Executive fails to maintain at all times a valid
license from the Choctaw Gaming Commission, fails to be
approved by the Choctaw Gaming Commission as a result
of any background investigation of Executive conducted
at any time during the term of this Agreement by the
Choctaw Gaming Commission or in the event any gaming
license of Executive in any other jurisdiction is
suspended or revoked for any reason.
(h) Termination At Will: Employer, in its sole discretion,
retains the right to terminate Executive at any time
other than for reasons set forth at Section 4. Non
renewal of this Agreement under the provisions of
Section 3 is not intended to not shall it be deemed to
a "Termination At Will". Should Employer terminate
under the provisions of this paragraph (4h), it shall
pay Executive in addition to base salary and bonus
earned to date, the amount of one years base salary
plus a lump sum payment of $25,000 for relocation
expenses. Said payment shall be made within ten (10)
days of written notice of termination under this
provision or upon the satisfactory delivery by
Executive to Employer of all personal property of
Employer, of any kind or character, whichever is the
later. Payment of said amounts shall constitute a full,
final and complete settlement between Employer and
Executive growing out of or related in any way to the
employment relationship and shall constitute a complete
accord and satisfaction. Executive covenants and agrees
that the amounts referenced herein are fair and
reasonable and fully compensate Executive for any loss
or inconvenience which will be experienced by Executive
whether or not the same be known or foreseeable.
Payment of said amounts are acknowledged by Executive
to be compensation, in adequate and sufficient amounts
to compensate the Executive for the restrictions set
forth in Section 15.
Section 5. Reporting Adverse Actions:
Executive shall notify the Chairman of the Board of Directors of Employer in
writing within one (1) working day of any investigation, proposed adverse action
or other adverse action, whether final or not, taken by any licensing authority
against him in any jurisdiction.
Section 6. Employer Property:
Executive agrees that upon termination, expiration or resignation, he will
promptly return to Employer any property owned by Employer.
Section 7. Confidentiality:
Employer has developed and compiled, at substantial cost, certain products,
technology, commercial data, financial data and other materials and information
that are confidential and proprietary in nature. Executive agrees to maintain
the confidentiality of any such products, technology, commercial data, financial
data, and other materials and information developed or produced by Employer, the
Mississippi Band of Choctaw Indians, or the predecessor, successors or
affiliated companies of any of them of which Executive gains knowledge or access
by reason of his employment relationship with Employer. Executive further agrees
that he will not use or disclose any of such information unless (a) it is in the
business or for the benefit of Employer, (b) the information has already been
made public without any participation by Executive, (c) disclosure is required
by law or regulation, or (d) Employer, the Mississippi Band of Choctaw Indians,
or Employer's predecessors, successors or affiliates, consents in writing to the
disclosure. This provision shall survive termination of this Agreement for any
reason.
Section 8. Severability:
This Agreement and any related documents shall be construed according to the
laws of the Mississippi Band of Choctaw Indians and the State of Mississippi
(pursuant to Section 1-1-4, Choctaw Tribal Code.) Exclusive venue and
jurisdiction shall be in the Tribal Court of the Mississippi Band of Choctaw
Indians. This Agreement and any related document is subject to the Choctaw
Tribal Tort Claims Act. Nothing contained in this Agreement or any related
documents shall be construed or deemed to provide recourse to Government
Services Division assets. It is agreed that if any clause or provision of this
Agreement is found by the court to be invalid, illegal or unenforceable, the
rest of Agreement shall not
be affected, and the rights and obligations of the
parties shall be enforced as if the Agreement did not contain such illegal,
invalid or unenforceable clause or provision.
Section 9. Waiver of Provisions:
Failure of either party to insist, in one or more instances, on performance by
the other in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver of relinquishment of any right granted hereunder or
of the future performance of any such term or condition or of any other term or
condition of this Agreement, unless such waiver is contained in a writing signed
by or on behalf of both parties.
Section 10. Notices:
Any notice or other communication required or permitted hereunder shall be
deemed sufficiently given if personally delivered or sent by registered or
certified mail, postage and fees prepaid, addressed to the party to be notified
as follows:
(a) If to Employer: Mississippi Band of Choctaw Indians
d/b/a Choctaw Resort Development
Enterprise
Chief Phillip Martin
Chairman of the Board
Tribal Office Building
P.O. Box 6010, Choctaw Branch
Philadelphia, Mississippi 39350
(b) If to Executive: Jay Dorris
901 Redbud Place
Philadelphia, MS 39350
or in each case to such other address as either party may from time to time
designate in writing to the other. Such notice or communication shall be deemed
to have been given as of the date so mailed or personally delivered as provided
in this Section 10.
Section 11. Modification and Amendment:
This Agreement contains the sole and entire Agreement between the parties with
respect to the subject matter hereof, and any such prior agreements, shall, from
and after the date hereof, be null and void. Except as otherwise specifically
provided, the terms and conditions of this Agreement may be amended at any time
by mutual agreement of the parties, provided that before any amendment shall be
valid or effective, it shall have been reduced to writing and signed by the
Chairman of the Board and by Executive.
Section 12. Binding Effect:
This Agreement shall be binding upon and inure to the benefit of Employer, its
successors and assigns, and upon Executive, his administrators, executors,
legatees, heirs and assigns.
Section 13. Non-Disparagement:
Executive will not, during the term hereof or at any time thereafter, publicly
disparage employer or its officers, directors, employees, or agents. The
preceding sentence shall not apply to disclosures required by applicable law,
regulation or
order of court or governmental agency.
Section 14. Indian Preference:
The Executive recognizes the principle of Choctaw Self-Determination and will
employ, train, promote or discharge employees of Employer in compliance with the
policy of Indian Preference, including formal and on the job training at the
management level, with an annual report to be made through the Chief to the
Tribal Council. A career tracking system will be established by the Tribe and
Employer to allow Choctaw college students to work for Employer with follow-up
and support provided. All steps taken in furtherence of Indian Preference are
subject to the approval of the Board of Directors of the Employer.
Section 15. Covenant Not to Compete:
(a) Restrictions. In consideration of the confidential
information disclosed to Executive and as an inducement to
Employer to enter into this Agreement and to pay the
compensation referred to herein, Executive agrees that, unless
otherwise agreed in writing by Employer, during the term of
this Agreement and continuing until the end of twelve (12)
months following termination of his employment pursuant to
Section 4, Executive shall not enter negotiations for any
investment in or employment or services with or on behalf of
any competitor of Employer. For purposes of this Agreement a
competitor of Employer is considered to be any business that
provides resort/ casino facilities within the States of
Mississippi, Alabama, Louisiana, Arkansas, and Tennessee. For
purposes of this Section, prohibited "negotiations" by
Executive shall include the direct or indirect discussions of
investments in a competitor or contractual arrangements for
consulting, employment or other services, either as an
individual or as a partner, employee, member, officer,
director, or shareholder of any legal entity. In the event the
employment of the Executive is terminated by the Employer
pursuant to Section 4(d) Unilateral Termination the above
restrictions shall be inapplicable. Notwithstanding any other
provision of this Agreement, Executive further agrees that for
a period of twelve (12) months following the termination of
this Agreement for any reason, Executive shall not for himself
or on behalf of any other person, firm, partnership or
corporation, directly or indirectly, solicit any employee of
the Mississippi Band of Choctaw Indians or any of its
enterprises or affiliated companies for the purpose of
competing with the Employer, nor shall Executive directly or
indirectly solicit, make known, or divulge the name,
identities or addresses of any of the customers of the
Employer nor utilize nor make use of any said customers for
the purpose of competing with the Employer.
(b)Remedies. Executive has carefully read and considered the
provisions of this Section, and having done so, agrees that
the restrictions are fair and reasonable and are reasonably
required for the protection of the investment of Employer and
do not prevent Executive from earning a livelihood in the
event of termination of employment pursuant to this Agreement.
In the event of a breach or threatened breach by Executive of
any of this provision of this Section, Employer, in addition
to and not in limitation of other rights, remedies or damages
available to Employer at law or in equity, shall be entitled
to a permanent injunction in order to prevent or restrain any
such breach by Executive or by Executive's future partners,
employers, or any other third persons acting directly or
indirectly for or with Executive.
(c) Reformation. In the event that any of the provisions of
this Section 15 shall be held to be invalid or unenforceable
by a court of law, the remaining provisions shall nevertheless
continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included, and the
restrictions on time and locations of practice may be reformed
by the court so as not to exceed the maximum time period or
location restrictions which the court deems reasonable and
enforceable.
Section 16. Other Activities:
Executive will promptly communicate to Employer in writing when requested,
marketing strategies, technical designs and concepts, and other ideas pertaining
to Employer business which are conceived or developed by Executive, along or
with others, at any time (during or after business hours) while Executive is
employed by Employer. Executive acknowledges that all of those ideas will be
exclusive property of Employer. Executive agrees to sign any documents which
employer deems necessary to confirm its ownership of those ideas.
Section 17. Residence:
Executive shall maintain his principal place of residence within a distance of
75 miles from Pearl River Community, Choctaw Indian Reservation, Neshoba County,
Mississippi.
Section 18. Relationship with Tribe:
Without altering or amending Section 4(d) in any way, Executive agrees that
complementaries, or the equivalent thereof, are to be used for business purposes
only and that the utilization of complementaries, or the equivalent thereof, for
any other purposes are not allowed. Executive and employer each agree and
understand that Executive's relationship with the Tribe is a professional
business relationship and that any requests not authorized by this Agreement are
to be directed to the Chairman of the Board.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above mentioned.
JAY DORRIS MISSISSIPPI BAND OF
CHOCTAW INDIANS
d/b/a CHOCTAW RESORT
DEVELOPMENT ENTERPRISE
/s/ Jay Dorris By: /s/ Phillip Martin
- ------------------- -------------------
Phillip Martin, Tribal Chief and Chairman
of the Board of Directors
Attest:
/s/ Harrison Ben
-----------------
Harrison Ben, Secretary-Treasurer
Exhibit 10.13
/logo/
September 14, 2001
Dear Ms. Brolick:
We are pleased to extend an offer of employment to you for the position
of Vice President of Human Relations for the Mississippi Band of Choctaw Indians
d/b/a Choctaw Resort Development Enterprise. The Board of Directors has approved
this offer and we look forward to working with you.
The terms of this offer are as follows:
The length of your employment is four years commencing on the effective
date of your employment. The effective date (defined as the first day
you are to report for work under the terms of this offer) of your
employment shall be mutually agreed upon but shall not exceed 30 days
from the date this offer is made. The terms of this offer may be
amended or extended upon our mutual agreement; and
Your annual salary shall be $90,000; and
The Enterprise shall reimburse you for moving expenses on an actual
cost basis provided that you obtain three bids for such services and
utilize the best and lowest bidder provided that you move your place
of residence from Brandon to the Choctaw area within two (2) years of
the date of this offer; and
You will receive other fringe benefits as typical for tribal employees.
You understand that you will be subject to all
personnel policies applicable to employees of Choctaw Resort
Development Enterprise as passed by the Board of Directors.
This offer and any related documents shall be construed to the laws of
the Mississippi Band of Choctaw Indians and the State of Mississippi (pursuant
to Section 1-1-4, Choctaw Tribal Code). Exclusive venue and jurisdiction shall
be in the Tribal Court of the Mississippi Band of Choctaw Indians. This offer
and any related documents are subject to the Choctaw Tribal Tort Claims Act.
Nothing contained in this Offer or any related documents shall be construed or
deemed to provide recourse to the Government Services Division assets or to any
gaming assets currently owned or hereafter acquired, including without
limitation to those of the Choctaw Resort Development Enterprise, all such
recourse being hereby expressly disclaimed.
It is our understanding that you can report for duty (the effective
date of your employment) no later than 30 days after receipt of this letter. A
copy of the position duties and responsibilities are attached to this letter and
will serve as the basis of your job description. There are two signed copies of
this letter. Upon your acceptance of our offer please sign both and return one
copy to us. We trust this letter summarizes our agreement and we welcome you to
Pearl River Resort.
/s/ Jay Dorris
--------------
Jay Dorris, President/CEO
/s/ Phillip Martin
-------------------
Phillip Martin, Chairman of the Board
/s/ Donna Brolick
- -----------------
Donna Brolick, VP for Human Relations
Exhibit 10.14
SETTLEMENT AND GENERAL RELEASE AGREEMENT
This Settlement and General Release Agreement ("Agreement") is entered into
as of this 13th day of December, 2001, by and between Doug Pattison ("Mr.
Pattison") on the one hand, and Mississippi Band of Choctaw Indians d/b/a
Choctaw Resort Development Enterprise, its parent, subsidiaries, affiliated or
related enterprises and divisions on the other, with reference to the following
facts:
Choctaw Resort Development Enterprise and Mr. Pattison have agreed on the
terms and conditions under which Mr. Pattison's employment by Choctaw Resort
Development Enterprise has terminated; and
The parties have confirmed such agreement in writing herein.
In consideration of the mutual covenants set forth in this Agreement, Mr.
Pattison and Choctaw Resort Development Enterprise hereby agree as follows:
1. Effective at the close of business on December 13th, 2001, Mr. Pattison's
employment was terminated.
2. Choctaw Resort Development Enterprise agrees as follows:
(a) To pay Mr. Pattison: (i) his salary up to and until December 21st,
(ii) the bonuses earned by Mr. Pattison for FY 2001 in the amount of
$122,600.00 and for FY 2002 up to and until the effective date of
termination stated in Section 1 in the amount of 25,000.00, and (iii)
his unused vacation time of 226.92 hours in the amount of $43,638.46.
(b) To pay Mr. Pattison, as consideration nominated as severance pay, a
gross sum equal to $800,000.00, less applicable withholding for taxes,
an amount to which he is not otherwise entitled.
(c) To permit Mr. Pattison to maintain medical insurance coverage after
termination in accordance with the Comprehensive Omnibus Budget
Reconciliation Act (COBRA).
3. Mr. Pattison covenants and agrees as follows:
(a) To refrain from any actions which may lead to the impairment of
Choctaw Resort Development Enterprise's reputation and good standing
in the community or industry, or which may interfere with its
relations with its customers or employees;
(b) To fully cooperate with Choctaw Resort Development Enterprise and
Choctaw Resort Development Enterprise attorneys concerning any current
or future Choctaw Resort Development Enterprise litigation or any
other Choctaw Resort Development Enterprise legal matters where Mr.
Pattison could have knowledge of facts pertaining thereto. Mr.
Pattison will be reimbursed for out-of-pocket expenses incurred
therewith;
(c) In exchange for Choctaw Resort Development Enterprise providing Mr.
Pattison the consideration set forth above, Mr. Pattison (and any
entity or business in which Mr. Pattison or any affiliate of Mr.
Pattison has any direct or indirect ownership or financial interest)
shall not, unless acting as an officer, stockholder or employee of, or
consultant or lender to, Choctaw Resort Development Enterprise or any
of
its affiliates or any successor to any of the foregoing, directly or
indirectly: (i) for a period commencing on the date that Mr.
Pattison's employment with the Choctaw Resort Development Enterprise
terminates and ending eighteen (18) months thereafter (the "Noncompete
Period"), own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as an
officer, director, employee, stockholder, consultant, advisor, partner
or otherwise (whether or not compensated for any of the foregoing)
with, any business which at any time during the Noncompete Period is
in the gaming industry business in the State of Mississippi or owned
by an Indian Tribe in the State of Louisiana, including, without
limitation, a casino in the State of Mississippi or owned by an Indian
Tribe in Louisiana; or (ii) for a period commencing on the date that
Mr. Pattison's employment with the Choctaw Resort Development
Enterprise terminates and ending twelve (12) months thereafter,
solicit, employ, retain as a consultant, interfere with or attempt to
entice away from Choctaw Resort Development Enterprise or any of its
affiliates or any successor to any of the foregoing, any individual
who is, has agreed to be or within one year of such solicitation,
employment, retention, interference or enticement has been, employed
or retained by Choctaw Resort Development Enterprise or any of its
affiliates or any successor to any of the foregoing, in any executive
capacity; or (iii) for a period commencing on the date that Mr.
Pattison's employment with the Choctaw Resort Development Enterprise
terminates and ending eighteen (18) months thereafter, engage or
participate in any effort or act to induce any customers, suppliers,
associates, or independent contractors of Choctaw Resort Development
Enterprise or any successor to any of the foregoing to take any action
which might be disadvantageous to Choctaw Resort Development
Enterprise or any of its affiliates or any successor to any of the
foregoing or to the business or line of business in which any of them
are then engaged, including but not limited to, solicitation of
customers, suppliers, associates, or independent contractors of
Choctaw Resort Development Enterprise or any of its affiliates or any
successor to any of the foregoing to cease doing business, or their
association or employment, with Choctaw Resort Development Enterprise
or any of its affiliates or any successor to any of the foregoing, as
applicable; provided, however, that this provision shall not be
construed to prohibit the ownership by Mr. Pattison of less than 2% of
any class of securities of any corporation that has a class of
securities registered pursuant to the Securities Exchange Act of 1934
so long as he remains a passive investor in such entity.
(d) To keep confidential and not disclose, publish, use or authorize
anyone else to disclose, publish or use, any confidential information,
proprietary information, or trade secrets, that are not otherwise
already publicly known, acquired by him in the course of his
employment by Choctaw Resort Development Enterprise, unless required
to do so by court order or other lawful process, without the prior
written approval of Choctaw Resort Development Enterprise;
(e) As a material inducement to Choctaw Resort Development Enterprise to
enter into this Agreement, Mr. Pattison, for himself, his successors,
assigns, heirs, executors and legal representatives, does hereby
release and forever discharge the Mississippi Band of Choctaw Indians,
its agencies, enterprises, regulatory bodies, joint ventures and all
other associated entities and their officers, directors, agents,
attorneys, accountants, employees, successors and assigns including
the Mississippi Band of Choctaw Indians d/b/a Choctaw Resort
Development Enterprise and its officers, directors, agents, attorneys,
accountants, employees, successors and assigns, from any and all
claims of any and every kind, nature and character, known or unknown,
including any and all claims for attorneys' fees and costs which Mr.
Pattison may now have, or may ever have, known or unknown, against
those stated above, which arise in whole or in part from Mr.
Pattison's employment relationship with the Mississippi Band of
Choctaw Indians d/b/a Choctaw Resort Development Enterprise, the
termination of that relationship and/or any other employment related
dealings of any kind between Mr. Pattison on the one hand, and the
Mississippi Band of Choctaw Indians or the Mississippi Band of Choctaw
Indians d/b/a Choctaw Resort Development Enterprise and/or any
officer, director, agent, attorney, accountant or employee of the
Mississippi Band of Choctaw Indians or the Mississippi Band of Choctaw
Indians d/b/a Choctaw Resort Development Enterprise on the other
including, but not limited to, any and all claims, rights, demands and
causes of action for breach of any employment contract or employment
agreement, including but not limited to Exhibit A hereto, wrongful
discharge, breach of the covenant or duty of good faith and fair
dealing; intentional or negligent infliction of emotional distress,
fraud or misrepresentation; failure to pay wages, stock awards,
bonuses, incentive pay, benefits, vacation pay, profit sharing,
severance or other compensation of any sort; discrimination on the
basis of race, color, national origin, religion, sex, age, handicap,
disability; and/or violation of any and all statutes, rules,
regulations or ordinances whether state, federal or local, including,
but not limited to Title VII of the Civil Rights Act of 1964, as
amended; Age Discrimination in Employment Act; and Employee Retirement
Income Security Act; provided, however, that nothing herein shall
release claims to rights which he may now or hereafter have in any
pension plans in effect during the time he was an employee of Choctaw
Resort Development Enterprise or to future rights he may hereafter
acquire under Federal statute or to rights which he or any of his
covered dependents may have for reimbursement or payment of dental or
health claims;
4. Choctaw Resort Development Enterprise and Mr. Pattison both agree not to
publicize or disclose the contents of this Agreement or the basis for any
claims or allegations which were or could have been made which concern and
are within the scope of this Agreement to any person or entity, without the
prior written consent of the other party, unless required by law and both
parties will use their best efforts to prevent any future publicity or
disclosure. Mr. Pattison is permitted, however, to make confidential
disclosures as required to his accountants, attorneys, governmental taxing
authorities, spouse, or to remedy a breach of any term or condition of this
Agreement. As applicable to Choctaw Resort Development Enterprise, the term
"person" refers to persons who are not employed by Choctaw Resort
Development Enterprise or do not represent Choctaw Resort Development
Enterprise in a business or professional capacity. Choctaw Resort
Development Enterprise officers, managers, attorneys, accountants,
auditors, employees and other representatives may discuss the
aforementioned matters internally as necessary in the ordinary course of
business.
5. Mr. Pattison and the Board of Directors of Choctaw Resort Development
Enterprise agree that neither Mr. Pattison nor the Board of Directors of
Choctaw Resort Development Enterprise shall disparage the other.
6. Mr. Pattison acknowledges and agrees that before signing or rejecting
this Agreement, he was, given at least 21 days to consider the terms of the
Agreement and that he has been encouraged by Choctaw Resort Development
Enterprise to consult with an attorney to review this Agreement and its
consequences.
7. Mr. Pattison acknowledges and agrees that he may revoke this Agreement
at any time up to and including the seventh (7th) day after he has executed it.
Any such revocation must be in writing to Choctaw Resort Development Enterprise
by the close of business on the seventh (7th) day. If revoked, this Agreement
shall be null and void in its entirety.
8. This Agreement was reached after good faith negotiations. Mr. Pattison
is fully aware of his right to discuss any and all aspects of this matter with
his attorney and has been advised to consult his attorney. Mr. Pattison
represents and agrees that he has carefully read and fully understands all of
the provisions of this Agreement and that he is voluntarily entering into this
Agreement.
9. This Agreement and any related documents shall be construed to the laws
of the Mississippi Band of Choctaw Indians and the State of Mississippi
(pursuant to Section 1-1-4, Choctaw Tribal Code.) Exclusive venue and
jurisdiction shall be in the Tribal Court of the Mississippi Band of Choctaw
Indians. This Agreement and any related document is subject to the Choctaw
Tribal Tort Claims Act. Nothing contained in this Agreement or any related
documents shall be construed or deemed to provide recourse to Government
Services Division assets.
10. This Agreement shall not in any way be construed as an admission by
either party of any acts of wrongdoing by either party against the other. Nor,
shall this Agreement or its offer or negotiation be evidence of an admission of
wrongdoing.
11. This Agreement sets forth the entire agreement between the parties
hereto and fully supersedes any and all prior agreements or understandings
between the parties thereto pertaining to the subject matter hereof. PLEASE READ
CAREFULLY. THIS SETTLEMENT AND GENERAL RELEASE AGREEMENT INCLUDES A RELEASE OF
ALL KNOWN AND UNKNOWN CLAIMS.
Executed at Pearl River Community, Mississippi Choctaw Indian
Reservation, Choctaw, Mississippi.
DATE: 12/13/01 /s/ Doug Pattison
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Doug Pattison
DATE: 12/13/01 /s/ Phillip Martin
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Phillip Martin, Tribal Chief and
Chairman of the Board
Choctaw Resort Development Enterprise
/s/ Harrison Ben
----------------
Harrison Ben, Secretary/Treasurer
Choctaw Resort Development Enterprise