As filed with the Securities and Exchange Commission on February 9, 2004
Registration No. 333-_________
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
CATSKILL LITIGATION TRUST
(Exact Name of Registrant as Specified in Its Declaration of Trust)
Delaware 6733 16-6547621
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
-----------------------------
C/O CHRISTIANA BANK & TRUST COMPANY
1314 KING STREET
WILMINGTON, DELAWARE 19801
(302) 888-7400
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
---------------------------------
JOSEPH E. BERNSTEIN AND
PAUL A. DEBARY, THE LITIGATION TRUSTEES
C/O CHRISTIANA BANK & TRUST COMPANY
1314 KING STREET
WILMINGTON, DELAWARE 19801
(302) 888-7400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
-----------------------------
Copies to:
ROBERT H. FRIEDMAN, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & Wolosky LLP
PARK AVENUE TOWER
65 EAST 55TH STREET
NEW YORK, NEW YORK 10022
(212) 451-2300
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
----------------------------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. / /
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. / /
CALCULATION OF REGISTRATION FEE
===========================================================================================================
Proposed Proposed
Title of Each Class of Maximum Maximum Amount of
Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered(1) Per Unit Price Fee
- -----------------------------------------------------------------------------------------------------------
Units ("Units") of 3,693,794 $0(2) $0 $0
Catskill Litigation
Trust (the "Litigation
Trust")
- -----------------------------------------------------------------------------------------------------------
Total $0
===========================================================================================================
(1) In the event of a Unit split, Unit dividend and similar transactions
involving the Registrant's Units of the Litigation Trust, the Units
registered hereby shall automatically be increased or decreased pursuant to
Rule 416 of the Securities Act of 1933, as amended (the "Securities Act").
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(f) of the Securities Act, based on
the book value of the Registrant as of January 12, 2004.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THIS REGISTRATION STATEMENT ON FORM S-1 IS BEING FILED IN CONNECTION WITH THE
REGISTRATION OF THE RESALE OF UNITS OF CATSKILL LITIGATION TRUST, A DELAWARE
STATUTORY TRUST (THE "REGISTRANT"), HELD BY EMPIRE RESORTS, INC.
(THE "DISTRIBUTOR") IN CONNECTION WITH A DIVIDEND OF THE
UNITS BY THE DISTRIBUTOR TO ITS HOLDERS OF COMMON STOCK.
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 2004
The information in this Preliminary Prospectus is not complete and may be
changed. The Distributor may not sell these Securities until the
Registration Statement filed with the Securities and Exchange Commission
is effective. This Preliminary Prospectus is not an offer to sell these
Securities and it is not soliciting offers to buy these Securities in
any state where the offer or sale is not permitted.
PROSPECTUS
3,693,794 UNITS
CATSKILL LITIGATION TRUST
This is a prospectus for the distribution of 3,693,794 of our Units to
certain shareholders of Empire Resorts, Inc., a Delaware corporation (the
"Distributor"). These Units are being distributed by the Distributor to its
common stockholders. These Units were originally issued in connection with the
formation of the Litigation Trust as part of the Distributor's recently
completed consolidation with Monticello Raceway Management, Inc., Monticello
Casino Management, LLC, Monticello Raceway Development Company, LLC and Mohawk
Management, LLC (the "Consolidation"). As a condition to closing the
Consolidation, each of Catskill Development, L.L.C., Monticello Raceway
Development Company, LLC and Mohawk Management, LLC assigned to us all of their
claims under or related to the alienation and frustration of their agreements
and business relations with the St. Regis Mohawk Tribe and their rights to any
proceeds from any settlement or award that may arise from any litigation
relating to that claim. We were then required to evidence the prorata ownership
of the interests in the claims assigned through the issuance of units of
ownership of the Litigation Trust (each a "Unit"). We will not receive any
proceeds as a result of the distribution of the Units registered under this
Prospectus.
There is currently no trading market for our Units. Our Units are not
listed on any exchange or a national market and no trading market is expected to
develop.
Our principal executive offices are located at c/o Christiana Bank &
Trust Company, 1314 King Street, Wilmington, Delaware 19801, and our telephone
number there is (302) 888-7400
- --------------------------------------------------------------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
- --------------------------------------------------------------------------------
The date of this prospectus is February [ ], 2004
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................6
USE OF PROCEEDS................................................................6
DIVIDEND POLICY................................................................6
MARKET FOR SECURITIES..........................................................6
SELECTED FINANCIAL DATA........................................................6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................................................7
PRINCIPAL UNITHOLDERS AND DISTRIBUTOR .........................................9
TRANSFER AGENT................................................................10
PLAN OF DISTRIBUTION..........................................................11
THE LITIGATION TRUST..........................................................11
THE LITIGATION TRUSTEES OF THE LITIGATION TRUST...............................17
COMPENSATION OF THE TRUSTEES..................................................18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................19
DESCRIPTION OF UNITS..........................................................19
UNITS ELIGIBLE FOR FUTURE SALE................................................19
FEDERAL INCOME TAX CONSEQUENCES...............................................19
LEGAL MATTERS.................................................................21
EXPERTS.......................................................................21
WHERE YOU CAN FIND MORE INFORMATION...........................................21
INDEX TO FINANCIAL STATEMENTS................................................F-1
i
PROSPECTUS SUMMARY
THE LITIGATION TRUST AND THE LITIGATION CLAIMS
We are a statutory trust (the "Litigation Trust") created under
Delaware law pursuant to a declaration of trust (the "Declaration of Trust") and
the filing of a certificate of trust filed with the Secretary of State of the
State of Delaware on January 12, 2004. Our formation was a condition precedent
to the consolidation of Empire Resorts, Inc. ("Empire Resorts"), Monticello
Raceway Management, Inc., Monticello Casino Management, LLC, Monticello Raceway
Development Company, LLC and Mohawk Management, LLC (the "Consolidation"). Also
as a condition to completing the Consolidation, each of Catskill Development,
LLC, Monticello Raceway Development Company, LLC and Mohawk Management, LLC
agreed to assign to us all of their claims under or related to the alienation
and frustration of their agreements and business relations with the St. Regis
Mohawk Tribe and their rights to any proceeds from any settlement or award that
may arise from any litigation relating to that claim. Our litigation claims
arise from the efforts of each of Catskill Development, LLC, Monticello Raceway
Development Company, LLC, and Mohawk Management, LLC to develop with the St
Regis Mohawk Tribe a Class III Gaming casino in Monticello, New York. After
spending several years and substantial funds to develop and obtain required
approvals for the casino, Park Place Entertainment Corporation, the world's
largest gaming corporation and Atlantic City's largest casino operator, entered
into an agreement providing for the St. Regis Mohawk Tribe to commit their
future casino development efforts exclusively to Park Place Entertainment
Corporation. That agreement conflicted with the Mohawk Tribe's agreements with
Catskill Development, Monticello Raceway Development and Mohawk Management.
There are two lawsuits presently pending. The first lawsuit is Catskill
Development, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway
Development Company, L.L.C., Plaintiffs. v. Park Place Entertainment
Corporation, Defendant. (Civil Action No. 00CIV8660 (CM)(GAY)) (United States
District Court Southern District of New York). This lawsuit had initially been
dismissed on a motion for summary judgment. However, those rulings have been
appealed. In addition, the trial court vacated the earlier decision granting
summary judgment to Park Place Entertainment, in order to allow additional
discovery proceedings. The second lawsuit is Catskill Development, L.L.C.,
Mohawk Management, L.L.C., and Monticello Raceway Development Company, L.L.C.,
Plaintiffs. against Gary Melius, Ivan Kaufman, Walter Horn, President R.C. - St.
Regis Management Company, et al, Defendants. (Index No. 891/03) (Supreme Court
of the State of New York County of Sullivan). This lawsuit is in its preliminary
stages. The purposes of the Litigation Trust are the prosecution of the
Litigation Claims now pending or hereafter filed through the recovery of any
settlement or final judgments thereof and the distribution of the net amount of
any such recoveries to the beneficiaries of the Litigation Trust.
DESCRIPTION OF THE LINE OF CREDIT
Empire Resorts has provided a line of credit (the "Credit Line") of
$2,500,000 to us for the purpose of paying any and all expenses of the
Litigation Trust permitted under the Declaration of Trust.
THE TRUSTEES
Joseph E. Bernstein and Paul A. deBary are our litigation trustees
(the "Litigation Trustees"). They have the authority to make all decisions in
connection with the prosecution of our litigation claims, including selecting
and supervising existing and any new counsel, instituting additional lawsuits,
drawing on funds from the Credit Line and deciding whether or not to accept any
settlement offer.
Christiana Bank & Trust Company is our administrative trustee. The
primary function of the administrative trustee is to fulfill our requirement
under Delaware law to have one trustee with its principal place of business
located within the state of Delaware and to perform certain administrative
functions pursuant to the Declaration of Trust and at the direction of our
Litigation Trustees.
NO EXISTING TRADING MARKET FOR OUR UNITS
There is no current trading market for our Units and one is not likely
to develop. We have no current plans to apply to have our Units traded on an
exchange or a national market. Even if a market for our Units develops, there
would likely be minimal trading, limited liquidity and there can be no assurance
as to the price at which our Units would trade at any time and such price could
be subject to rapid and substantial change, depending upon, among other things,
developments regarding our litigation claims. See "Risk Factors."
THE UNITS ARE HIGHLY SPECULATIVE SECURITIES THAT INVOLVE A HIGH DEGREE
OF RISK. See "Risk Factors."
THE OFFERING
The Units being offered for resale under this prospectus consist
entirely of outstanding Units held by the Distributor.
Units offered by us: None
Units which may be sold by the 3,693,794
Distributor:
Use of Proceeds: We will not receive any
proceeds from the
distribution of the Units
offered by the
Distributor hereby. The
Units being offered under
this prospectus consist
entirely of Units being
distributed by the
Distributor to its common
stockholders. There will
thus be no proceeds from
the distribution of the
Units offered by the
Distributor hereby.
2
Risk Factors: The ownership of our
Units involves a high
degree of risk. You
should carefully review
and consider "Risk
Factors" beginning on
page 4.
3
RISK FACTORS
THE OWNERSHIP OF OUR UNITS INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OF THE OTHER INFORMATION
SET FORTH IN THIS PROSPECTUS. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES
FACING US. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM
IMMATERIAL MAY ALSO IMPAIR US.
WE WILL BE CONTROLLED BY OUR LITIGATION TRUSTEES
Pursuant to the Declaration of Trust, all decisions concerning the
conduct of our litigation claims, drawing on funds from the Credit Line,
distribution of assets and our termination are to be made by our Litigation
Trustees, in accordance with the terms of the Declaration of Trust. Our
Unitholders will have no control over these decisions.
OUR UNITHOLDERS WILL HAVE LIMITED RIGHTS
Pursuant to the Declaration of Trust, Unitholders will only be
entitled to the net proceeds from any settlement or award, if any, of our
litigation claims after the payment of the expenses of the Litigation Trust, the
fees of the Litigation Trustees, any amounts outstanding under the Credit Line
and $7,500,000 to Empire Resorts for reimbursement of prior expenses incurred in
connection with our litigation claims. Unitholders will not have any right to
bring suit against us or any party on our behalf, other than a suit for
nonpayment of the net proceeds of a settlement or award, and only after there is
an affirmative majority vote of all Unitholders to bring such suit.
WE MAY NOT BE SUCCESSFUL IN THE LITIGATION CLAIMS
We presently have two lawsuits pending in connection with our
litigation claims. The first lawsuit is against Park Place Entertainment, the
world's largest gaming conglomerate, which has substantially greater assets than
we do. We expect that Park Place Entertainment will use its substantial assets
to aggressively defend itself in this lawsuit. This lawsuit had initially been
dismissed on a motion for summary judgment. However, those rulings have been
appealed. In addition, the trial court vacated the earlier decision granting
summary judgment to Park Place Entertainment, in order to allow additional
discovery proceedings. There can be no assurance that we will be successful in
this litigation.
Our second suit against Gary Melius, Ivan Kaufman and Walter Horn,
each of whom served as an intermediary between the St. Regis Mohawk Tribe and
Park Place Entertainment during Park Place Entertainment's successful effort to
induce the St. Regis Mohawk Tribe to renounce their agreements with Catskill
Development, Monticello Raceway Development and Mohawk Management and commit
their casino efforts exclusively to Park Place Entertainment. The plaintiffs are
seeking $2 billion in damages. This lawsuit is still in its preliminary stages.
There can be no assurance that we will be successful in this litigation.
4
EVEN IF THERE IS A RECOVERY BASED ON OUR LITIGATION CLAIMS, THERE CAN BE NO
ASSURANCES THAT THERE WILL BE SUFFICIENT FUNDS TO MAKE ANY PAYMENTS TO OUR
UNITHOLDERS
Even if we obtain a settlement or award based on our litigation
claims, there can be no assurance that our Unitholders will receive any proceeds
from such settlement or award. Prior to our Unitholders receiving any payments,
we are required to pay all of our expenses and set aside a reserve for future
expenses, pay the fees of the Litigation Trustees, any amounts outstanding under
the Credit Line and $7,500,000 to Empire Resorts to reimburse it for prior
expenses incurred in connection with our litigation claims. See "THE LITIGATION
TRUST - Deposits to and Distributions from the Recovery Account."
WE MAY NOT HAVE SUFFICIENT FUNDS TO PAY FOR THE PROSECUTION OF OUR LITIGATION
CLAIMS
Our only source of capital to fund the prosecution of our litigation
claims is the Credit Line provided by Empire Resorts. We may be unable to obtain
additional financing on acceptable terms or at all. We may have to settle or
withdraw certain of our lawsuits, compromise or abandon our litigation claims or
even terminate our trust, which may have a material adverse effect on our
ability to distribute assets to our Unitholders.
THERE IS NO TRADING MARKET FOR OUR UNITS, ONE IS NOT LIKELY TO DEVELOP AND IT
MAY BE DIFFICULT TO ESTABLISH A PRICE PER UNIT OF OUR UNITS
There is no current trading market for our Units and we do not intend
to seek to have our Units traded on an exchange or a national market. Even if a
trading market were to develop, there would likely be minimal trading, limited
liquidity and the price of our Units may depend on a number of factors
including, but not limited to, the nature of court decisions and opinions, the
settlement of any of our pending lawsuits and any additional lawsuits and our
ability to fund the prosecution of the pending lawsuits and any additional
lawsuits arising from our litigation claims. Consequently, if a trading market
is established there may be wide fluctuations in the price of our Units.
UNITHOLDERS MAY NOT BE ABLE TO ADEQUATELY VALUE OUR UNITS BECAUSE WE MAY NOT BE
ABLE TO DISCLOSE ALL INFORMATION ABOUT OUR LAWSUITS TO OUR UNITHOLDERS
Our ability to disclose details of our litigation claims on a regular
basis may be limited by the inherent nature and rules of judicial proceedings,
including, among other things, proceedings and filings that are sealed by the
court, matters involving attorney-client privilege and proceedings that are
conducted on a confidential basis by agreement of the parties. Our inability to
disclose potentially material information may make it difficult to value our
Units.
OUR ABILITY TO SUCCESSFULLY PROSECUTE OUR LITIGATION CLAIMS DEPENDS ON THE
EFFORTS OF OUR LITIGATION TRUSTEES
Our success depends in large part upon the abilities of our Litigation
Trustees. Both Messrs. Bernstein and deBary have extensive knowledge regarding
our litigation claims. If either or both of them ceased to be a Litigation
Trustee, our ability to prosecute the litigation claims may be materially
adversely effected.
5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus are
"forward-looking statements" as that term is defined in the Private Securities
Litigation Reform Act. The words "anticipate", "believes", "estimates",
"expects", "plans", "intends" and similar expressions are meant to identify
these statements as forward-looking statements, but they are not the exclusive
means of identifying them. The forward-looking statements in this prospectus
reflect the current views of our Litigation Trustees; however, various risks,
uncertainties and contingencies would cause our actual results, performance or
achievements to differ materially from those expressed or implied by these
statements.
We assume no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
For a discussion of important risks of an investment in our Units, see the "Risk
Factors" section of this prospectus. In light of the risks and uncertainties
discussed in "Risk Factors" and elsewhere in this prospectus, events referred to
in forward-looking statements in this prospectus might not occur.
USE OF PROCEEDS
We will not receive any proceeds from the distribution of the Units by
the Distributor. The Units being offered under this prospectus consist entirely
of Units being distributed by the Distributor to its common stockholders
pursuant to a dividend. There will thus be no proceeds from the distribution of
the Units offered by the Distributor hereby.
DIVIDEND POLICY
We have never paid a cash dividend on our Units and we do not
anticipate paying cash dividends on our Units in the foreseeable future.
MARKET FOR SECURITIES
There is no current trading market for the Units and we do not intend
to seek to have our Units traded on an exchange or a national market.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with the financial statements and the notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. The balance sheet data as of January 12, 2004 have
been derived from our financial statements, which have been audited by Marcum &
Kliegman LLP, independent auditors.
6
As of January 12, 2004
----------------------
BALANCE SHEET DATA:
Assets $--
Liabilities $--
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussions in conjunction with our
financial statements and the related notes thereto and other financial
information appearing elsewhere in this prospectus. The following discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the
forward-looking statements as a result of various factors, including those
discussed in "Risk Factors" and elsewhere in this prospectus.
GENERAL
We are a statutory trust (the "Litigation Trust") created under
Delaware law pursuant to a declaration of trust (the "Declaration of Trust") and
the filing of a certificate of trust filed with the Secretary of State of the
State of Delaware on January 12, 2004. Our formation was a condition precedent
to the consolidation of Empire Resorts, Inc. ("Empire Resorts"), Monticello
Raceway Management, Inc., Monticello Casino Management, LLC, Monticello Raceway
Development Company, LLC and Mohawk Management, LLC (the "Consolidation"). Also
as a condition to completing the Consolidation, each of Catskill Development,
LLC, Monticello Raceway Development Company, LLC and Mohawk Management, LLC
agreed to assign to us all of their claims under or related to the alienation
and frustration of their agreements and business relations with the St. Regis
Mohawk Tribe and their rights to any proceeds from any settlement or award that
may arise from any litigation relating to that claim. Our litigation claims
arise from the efforts of each of Catskill Development, LLC, Monticello Raceway
Development Company, LLC, and Mohawk Management, LLC to develop with the St
Regis Mohawk Tribe a Class III Gaming casino in Monticello, New York. After
spending several years and substantial funds to develop and obtain required
approvals for the casino, Park Place Entertainment Corporation, the world's
largest gaming corporation and Atlantic City's largest casino operator, entered
into an agreement providing for the St. Regis Mohawk Tribe to commit their
future casino development efforts exclusively to Park Place Entertainment
Corporation. That agreement conflicted with the Mohawk Tribe's agreements with
Catskill Development, Monticello Raceway Development and Mohawk Management.
There are two lawsuits presently pending. The first lawsuit is Catskill
Development, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway
Development Company, L.L.C., Plaintiffs. v. Park Place Entertainment
Corporation, Defendant. (Civil Action No. 00CIV8660 (CM)(GAY)) (United States
District Court Southern District of New York). This lawsuit had initially been
dismissed on a motion for summary judgment. However, those rulings have been
appealed. In addition, the trial court vacated the earlier decision granting
summary judgment to Park Place Entertainment, in order to allow additional
discovery proceedings. The second lawsuit is Catskill Development, L.L.C.,
7
Mohawk Management, L.L.C., and Monticello Raceway Development Company, L.L.C.,
Plaintiffs. against Gary Melius, Ivan Kaufman, Walter Horn, President R.C. - St.
Regis Management Company, et al, Defendants. (Index No. 891/03) (Supreme Court
of the State of New York County of Sullivan). This lawsuit is in its preliminary
stages. The purposes of the Litigation Trust are the prosecution of the
Litigation Claims now pending or hereafter filed through the recovery of any
settlement or final judgments thereof and the distribution of the net amount of
any such recoveries to the beneficiaries of the Litigation Trust.
The administration of the Litigation Trust will involve the
authentication and payment of fees and expenses for legal and related services
in connection with the Litigation Claims, reporting and regulatory compliance
and the maintenance of litigation, financial and Unitholder records.
Administrative expenses are currently estimated to be approximately $175,000 per
year, including the fees of the litigation and administrative trustees, auditors
and accountants and other support services. Legal fees and other expenses
involved in the Litigations are impossible to predict with any degree of
accuracy. No assurance can be given that the amounts available to the Litigation
Trust for the payment of such expenses under the Line of Credit will be
sufficient to carry the Litigations through to a successful conclusion or that
alternative funds will be available for such purpose.
LIQUIDITY AND CAPITAL RESOURCES
The Distributor has provided the Litigation Trust with an irrevocable
line of credit of up to $2,500,000 (the "Credit Line") to provide funds to pay
any and all expenses of the Litigation Trust permitted under the Declaration of
Trust. No interest is payable on amounts advanced under the Credit Line. Amounts
outstanding under the Credit Line are to be repaid by the Litigation Trust from
amounts in the Recovery Account (as hereinafter defined) after payment of an
amount necessary to pay the Litigation Trustees the fees for their services as
Litigation Trustees as set forth in the Declaration of Trust. Repayments of
amounts outstanding under the Credit Line may be made as a whole or in part from
time to time at any time without notice. The Litigation Trust may reborrow any
amounts so repaid. The Credit Line shall remain in full force and effect until
termination of the Litigation Trust.
8
PRINCIPAL UNITHOLDERS AND DISTRIBUTOR
The Distributor is distributing a total of 3,693,794 Units under this
prospectus to its common stockholders pursuant to a dividend. The Units being
offered under this prospectus were originally issued in connection with the
Consolidation. The Units offered under this prospectus may be distributed for
the account of the Distributor. The following table contains information
regarding the Distributor and its beneficial ownership of our Units as of
January 30, 2004, and as adjusted to give effect to the sale of the Units
offered hereunder.
Beneficial Ownership
After Offering(1)
Beneficial --------------------
Ownership Number of Units
Prior to be distributed Number Percent
Name to Offering in the Offering of Units of Class
---- ----------- --------------- -------- --------
Empire Resorts, Inc. 3,693,794 3,693,794 0 --
(1) This registration statement also shall cover any additional Units which
become issuable in connection with the Units registered for resale hereby by
reason of any Unit dividend, Unit split, recapitalization or other similar
transaction effected without the receipt of consideration which results in an
increase in the number of outstanding Units.
The following table sets forth as of January 30, 2004 certain
information with respect to the beneficial ownership (including beneficial
ownership as an Empire Resorts shareholder) of Units of (1) each of our
Litigation Trustees, and (2) each person known to us to own beneficially five
percent or more of our outstanding Units:
Number of Units Percent of Class of Units
Name and Address(1) Beneficially Owned(2) Beneficially Owned(3)
- ---------------- ------------------ ------------------
Joseph E. Bernstein
6663 Casa Grande Way
Delray Beach, FL 33446 2,408,253(4) 10.61%
Paul A. deBary
477 Madison Avenue
New York, New York 10022 250,422(5) 1.1%
Monticello Realty, L.L.C. 5,732,261 25.25%
Americas Tower Partners 6,599,294 29.07%
Robert A. Berman 5,625,429(6) 24.78%
(1) Unless otherwise indicated, the address of each named holder is c/o
Christiana Bank & Trust Company, 1314 King Street, Wilmington, Delaware
19801.
9
(2) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities.
(3) Based on 22,702,896 Units outstanding as of January 30, 2004.
(4) Includes (1) 2,309,753 Units held by Americas Tower Partners and (2) 98,500
Units corresponding to 98,500 shares of Empire held in the name of Joseph
E. Bernstein on behalf of the JB Trust. Joseph E. Bernstein beneficially
owns a 1% economic interest and 50% voting power in Americas Tower
Partners, and the JB Trust, in which Mr. Bernstein's mother, Helen
Berstein, is sole trustee and Mr. Bernstein's children are ultimate
beneficiaries, beneficially owns a 49% economic interest, with no voting
rights.
(5) Includes 52,103 Units corresponding to 52,103 shares of common stock of
Empire owned directly by Paul A. deBary and 198,319 Units held directly by
Mr. deBary.
(6) Includes 1,094,004 Units corresponding to 1,094,004 shares of common stock
owned of Empire directly by Robert A. Berman and 4,531,425 Units held
directly by Robert A. Berman.
10
TRANSFER AGENT
The Company has appointed Continental Stock Transfer & Trust
Company, New York, New York, as Transfer Agent and Registrar for the Units.
PLAN OF DISTRIBUTION
We are registering the Units offered under this prospectus on behalf
of the Distributor. The Distributor is distributing the Units to its common
stockholders in connection with a dividend of the Units declared by the
Distributor. The Distributor shall bear the cost and expense of such
distribution.
THE LITIGATION TRUST
FORMATION AND PURPOSE OF THE LITIGATION TRUST
As a condition to closing the acquisition (the "CONSOLIDATION") by
Empire Resorts, Inc. ("EMPIRE RESORTS") of Monticello Raceway Management, Inc.
("MONTICELLO RACEWAY MANAGEMENT"), Monticello Casino Management, LLC
("MONTICELLO CASINO MANAGEMENT"), Monticello Raceway Development Company, LLC
("MONTICELLO RACEWAY DEVELOPMENT") and Mohawk Management, LLC ("MOHAWK
MANAGEMENT") on January 12, 2004, Catskill Litigation Trust, a Delaware
statutory trust (the "LITIGATION TRUST") was formed. Also on January 12, 2004,
Empire Resorts, Catskill Development, L.L.C. ("CATSKILL DEVELOPMENT"),
Monticello Raceway Management, Mohawk Management, Joseph E. Bernstein, Paul A.
deBary (Messrs. Bernstein and deBary are hereinafter referred to as the
"LITIGATION TRUSTEES") and Christiana Bank & Trust Company (the "ADMINISTRATIVE
TRUSTEE") entered into the Declaration of Trust of Catskill Litigation of Trust
(the "DECLARATION OF TRUST"). Pursuant to the Declaration of Trust, each of
Catskill Development, Monticello Raceway Development and Mohawk Management
assigned to the Litigation Trust all of their claims under or related to the
alienation and frustration of their agreements and business relations with the
St. Regis Mohawk Tribe and their rights to any proceeds from any judgment or
settlement that may arise from any litigation relating to that claim (the
"LITIGATION CLAIMS"), including (1) that certain litigation entitled Catskill
Development, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway
Development Company, L.L.C., Plaintiffs. v. Park Place Entertainment
Corporation, Defendant. (Civil Action No. 00CIV8660 (CM)(GAY)) (United States
District Court Southern District Of New York) (the "PARK PLACE LITIGATION") and
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(2) that certain litigation entitled Catskill Development, L.L.C., Mohawk
Management, L.L.C., and Monticello Raceway Development Company, L.L.C.,
Plaintiffs. v. Gary Melius, Ivan Kaufman, Walter Horn, President R.C. - St.
Regis Management Company, et al, Defendants. (Index No. 891/03) (Supreme Court
of the State of New York County of Sullivan) (the "MELIUS LITIGATION"). The
purposes of the Litigation Trust are the prosecution of the Litigation Claims
now pending or hereafter filed through the recovery of any settlements or final
judgments thereof and the distribution of the net amount of any such recoveries
to the beneficiaries of the Litigation Trust.
TERMINATION OF THE LITIGATION TRUST
If at any time the Litigation Trustees determine, in their absolute
discretion, that the assets of the Litigation Trust are not sufficient to
justify its continuance, the Litigation Trustees are authorized to terminate the
Litigation Trust. In addition, the Litigation Trust shall terminate on the date
that all the Litigation Claims shall have been fully prosecuted to final
judgment or dismissal, including all appeals, and all the Litigation Trust
assets shall have been distributed to the Litigation Trust's beneficiaries.
LINE OF CREDIT
The Distributor has provided the Litigation Trust with an irrevocable
line of credit of up to $2,500,000 (the "Credit Line") to provide funds to pay
any and all expenses of the Litigation Trust permitted under the Declaration of
Trust. No interest is payable on amounts advanced under the Credit Line. Amounts
outstanding under the Credit Line are to be repaid by the Litigation Trust from
amounts in the Recovery Account (as hereinafter defined) after payment of an
amount necessary to pay the Litigation Trustees the fees for their services as
Litigation Trustees as set forth in the Declaration of Trust. Repayments of
amounts outstanding under the Credit Line may be made as a whole or in part from
time to time at any time without notice. The Litigation Trust may reborrow any
amounts so repaid. The Credit Line shall remain in full force and effect until
termination of the Litigation Trust.
BACKGROUND OF THE LITIGATION CLAIMS
In 1996, a group of businessmen formed a coalition with Empire Resorts
and two other entities and commenced negotiations with the St. Regis Mohawk
Tribe about developing a Class III Gaming casino on land adjacent to Monticello
Raceway. This coalition then formed three entities to accomplish distinct
aspects of the project:
o Catskill Development was formed to acquire the land on which the
casino would be built and obtain approval for and implement the
transfer of the land to the United States of America in trust for
the St. Regis Mohawk Tribe for off-reservation gaming.
o Monticello Raceway Development was formed to develop the casino
property, and provide technical expertise for the planning,
design, engineering, and construction of the casino. It would
also help the St. Regis Mohawk Tribe in obtaining financing for
the casino undertaking.
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o Mohawk Management was formed to manage the casino.
Each party negotiated a separate contract with the St. Regis Mohawk
Tribe to cover its role. Thus, Catskill Development, after acquiring title to
Monticello Raceway and the surrounding property for $10 million, negotiated a
land purchase agreement; Mohawk Management negotiated a gaming facility
management agreement; and Monticello Raceway Development negotiated a gaming
facility development and construction agreement. Each of the land purchase
agreement and gaming facility management agreement were subject to certain
regulatory approvals from the Bureau of Indian Affairs, the National Indian
Gaming Commission and the State of New York.
On August 2, 1996, Catskill Development applied to the Bureau of
Indian Affairs and National Indian Gaming Commission to place 29 acres of land
adjacent to Monticello Raceway in trust status and to approve the land for Class
III Gaming. The Bureau of Indian Affairs then spent 3 1/2 years reviewing and
processing the application, finally approving it on April 6, 2000 and
simultaneously requesting that New York State Governor George Pataki concur.
Before the Governor could formally concur or the National Indian
Gaming Commission could approve the casino management agreement, Park Place
Entertainment Corporation, the world's largest gaming corporation and Atlantic
City's largest casino operator, entered into an agreement providing for the St.
Regis Mohawk Tribe to commit their future casino development efforts exclusively
to Park Place Entertainment Corporation, which conflicted with their agreements
with Catskill Development, Monticello Raceway Development and Mohawk Management.
In an agreement executed on April 14, 2000, the St. Regis Mohawk Tribe promised
to work exclusively with Park Place Entertainment Corporation for consideration,
among other things, of $3,000,000 in cash and Park Place Entertainment
Corporation's promise to indemnify the St. Regis Mohawk Tribe against any
litigation that may result. For a new casino project at another location in the
Catskills, Park Place Entertainment Corporation and the St. Regis Mohawk Tribe
agreed to enter into agreements very similar to those between Catskill
Development, Monticello Raceway Development and Mohawk Management and the St.
Regis Mohawk Tribe, substituting Park Place Entertainment Corporation's name for
that of Catskill Development, Monticello Raceway Development and Mohawk
Management.
In response to these events, each of Catskill Development, Monticello
Raceway Development and Mohawk Management brought the Park Place Litigation,
asserting claims under New York law for intentional interference with
contractual relations and interference with business relations. The trial court
subsequently dismissed the claim for intentional interference with contractual
relations on the grounds that the contracts were subject to certain approvals
and granted Park Place Entertainment Corporation's motion for summary judgment
with respect to the interference with business relations complaint on the
grounds that insufficient evidence of causation or wrongful conduct had been
produced, effectively dismissing the entire case. These court rulings, however,
have been appealed. In addition, on October 7, 2003, after receiving a remand of
jurisdiction from the Second Circuit Court of Appeals, the trial court granted
the plaintiffs' motion to vacate the earlier decision granting summary judgment
to Park Place Entertainment Corporation, in order to allow additional discovery
proceedings with respect to evidence that the plaintiffs had not received in
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connection with their earlier discovery requests prior to the summary judgment
decision.
Separately, on April 11, 2003, each of Catskill Development,
Monticello Raceway Development and Mohawk Management filed the Melius Litigation
against Gary Melius, Ivan Kaufman and Walter Horn, each of whom served as an
intermediary between the St. Regis Mohawk Tribe and Park Place Entertainment
Corporation during Park Place Entertainment Corporation's successful effort to
induce the St. Regis Mohawk Tribe to renounce their agreements with Catskill
Development, Monticello Raceway Development and Mohawk Management and commit
their casino efforts exclusively to Park Place Entertainment Corporation. In
this lawsuit, the plaintiffs have alleged that the defendants engaged in a
conspiracy to restrain and interfere with the plaintiffs' efforts to develop a
casino in Monticello, New York with the St. Regis Mohawk Tribe. In addition, the
plaintiffs have alleged that the defendants engaged in a fraud and conspiracy by
withholding material evidence from the plaintiffs in connection with their
lawsuit against Park Place Entertainment Corporation. The plaintiffs are seeking
$2 billion in damages. This lawsuit is still in its preliminary stages.
At this time it is too difficult to determine whether there will be
any judgments or awards based on either the Park Place Litigation or the Melius
Litigation or on any other lawsuit based on the Litigation Claims.
THE FUND, THE EXPENSE ACCOUNT AND THE RECOVERY ACCOUNT
The Litigation Trust has established a fund (the "FUND") to be
maintained by the Administrative Trustee which shall consist of two accounts, an
expense account (the "EXPENSE ACCOUNT") and a recovery account (the "RECOVERY
ACCOUNT"). For the Fund, the Administrative Trustee may establish on behalf of
the Litigation Trust one or more accounts with banks or brokerage firms in which
all or part of the moneys or investments of the Litigation Trust to be deposited
in the Fund may be held, invested and reinvested by the Administrative Trustee
pending disbursement or distribution as provided in the Declaration of Trust.
Any amount on deposit in the Fund that is not required to be held for present
use or distributions shall be accumulated and retained in the Fund and shall be
invested and reinvested by the Administrative Trustee as directed in the sole
discretion of the Litigation Trustees so as to obtain a reasonable return on
investment with proper regard for the preservation of the principal and so as to
be reasonably available at the times estimated to be necessary for distributions
in accordance with the purposes of the Litigation Trust.
DEPOSITS TO AND PAYMENTS OUT OF THE EXPENSE ACCOUNT
Amounts drawn on the Credit Line, amounts transferred from the
Recovery Account to the Expense Account as provided in the Declaration of Trust
and any other amounts received by the Litigation Trust, other than amounts
received as a recovery of any settlement or award of the Litigation Claims,
shall be deposited in the Expense Account. Amounts in the Expense Account shall
be used to pay any expenses determined to be necessary or useful for the
purposes of the Litigation Trust in the sole and absolute discretion of the
Litigation Trustees.
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The Administrative Trustee shall make payments out of the Expense
Account upon (i) the written direction of one of the Litigation Trustees as of
the first business day of each calendar quarter to pay the quarterly fees of the
Litigation Trustees and the Administrative Trustee, and (ii) written direction
signed by one of the Litigation Trustees with respect to expenses set forth in a
budget (provided that the Litigation Trustee shall specify in the written
direction the line item of such budget that includes such expense) and by both
Litigation Trustees with respect to all other expenses. The Administrative
Trustee shall have no obligation to verify that the amounts so requisitioned are
to be used for the purposes of the Litigation Trust. Notwithstanding anything to
the contrary in the Declaration of Trust, the Litigation Trustees may, at any
time and from time to time, direct the Administrative Trustee to pay any expense
of the Litigation Claims or apply to or for the benefit of the beneficiaries of
the Litigation Trust so much or the entire principal of the Expense Account, as
the Litigation Trustees, in their sole discretion, may deem available.
DEPOSITS TO AND DISTRIBUTIONS FROM THE RECOVERY ACCOUNT
The amount of proceeds received on account of any settlement or award
in connection with the Litigation Claims shall be deposited in the Recovery
Account. In the event that the Litigation Trust receives any proceeds on account
of any settlement or award, an amount necessary to pay any current debts or
other obligations of the Litigation Trust and to provide for future expenses of
the Litigation Trust shall be transferred to the Expense Account from the
Recovery Account or applied directly to the retirement of such debts or other
obligations at the direction of the Litigation Trustees. Not later than thirty
days after the close of each calendar year, if there have been deposits in the
Recovery Account during such year, or within thirty days of receipt by the
Administrative Trustee of a notice of termination of the Litigation Trust, the
Administrative Trustee shall calculate the balance in the Recovery Account at
the end of such year or as of the date of such notice and the amount so
calculated shall be withdrawn from the Recovery Account and shall be applied and
used to make distributions for the purposes of the Litigation Trust as follows:
FIRST: An amount necessary to pay the Litigation Trustees their fees
for their services as Litigation Trustees.
SECOND: If any amount remains after the above requirements have been
met, $7,500,000 shall be paid to Empire Resorts to reimburse it for prior
expenses incurred in connection with the Litigation Claims and any amounts
outstanding under the Credit Line shall be repaid to Empire Resorts.
THIRD: If any amount remains after the above requirements have been
met, such amount remaining shall be divided among the beneficiaries of the
Litigation Trust in proportion to their ownership of Units as shown on the
registration books of the Administrative Trustee or transfer agent, as
applicable, as of the date that such distribution is made.
All distributions of the Litigation Trust are to be made in the sole
discretion of the Litigation Trustees. In making and scheduling distributions
from the Litigation Trust, no Litigation Trustee shall have any liability to the
beneficiaries of the Litigation Trust, or to potential beneficiaries of the
Litigation Trust, or to any other person, for any failure or alleged failure to
15
follow such direction nor shall any Litigation Trustee be subject to suit by any
person that contests the validity of any action taken under the Declaration of
Trust or seeks to compel or direct the use, investment or application of amounts
in the Litigation Trust other than as determined in the discretion of the
Litigation Trustees.
RESALE OF UNITS
The Units registered pursuant to the Registration Statement of which
this Prospectus is a part will be freely transferable by their holders, except
for those holders who may be deemed to be our "affiliates" under applicable
federal securities laws.
NO EXISTING TRADING MARKET FOR OUR UNITS
There is no current trading market for the Units and one is not likely
to develop. The Litigation Trust has no current plans to apply to have the Units
traded on an exchange or a national market. Even if a market for the Units
develops, there would likely be minimal trading, limited liquidity and there can
be no assurance as to the price at which the Units would trade at any time and
such price could be subject to rapid and substantial change, depending upon,
among other things, developments regarding the Litigation Claims. See "Risk
Factors."
INDEMNIFICATION
The Litigation Trust shall indemnify, to the fullest extent permitted
by law, Empire Resorts, Monticello Raceway Management, Monticello Casino
Management, Monticello Raceway Development, Mohawk Management, the Litigation
Trustees, the Administrative Trustees and any of their officers, directors,
stockholders, members, partners, employees, representatives, custodians,
nominees, agents, heirs, successors, assigns or affiliates (each an "INDEMNIFIED
PERSON") in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by any
individual, corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature (each a "PERSON"), arising out of or relating to the
Litigation Trust, the Credit Line, the Litigation Claims or any acts or
omissions of the Litigation Trustees or the Administrative Trustee in their
capacity or purportedly in their capacity as Litigation Trustees or
Administrative Trustee, as the case may be, or actions taken by the Litigation
Trustees or the Administrative Trustee (including actions taken by the
Litigation Trustees or Administrative Trustee, as the case may be in their
capacity as officers or directors of any entity that is a party to the
Consolidation so long as such actions relate to the Litigation Trust including,
without limitation, the negotiation of the terms of the Litigation Trust and the
approval of the establishment of the Litigation Trust and related transactions,
but otherwise excluding actions taken by the Litigation Trustees or
Administrative Trustee, as the case may be in such capacities), against any and
all losses, liabilities, damages, judgments, demands, suits, claims,
assessments, charges, fines, penalties and other costs and expenses, including
attorneys' fees and expenses and other fees and expenses associated with the
defense of a claim or incurred by such Indemnified Person in obtaining
indemnification under the Declaration of Trust, whether or not in a formal
proceeding (collectively, "DAMAGES").
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Notwithstanding the preceding paragraph, no indemnification shall
apply in the case of the indemnification of (i) the Litigation Trustees, if the
Unitholders establish in a final judicial determination by clear and convincing
evidence that such Damages arose as the result of acts or omissions of the
Litigation Trustees with deliberate intent to injure the Unitholders or with
reckless disregard for the best interests of the Unitholders, (ii) the
Administrative Trustee, if it is established in a final judicial determination
by clear and convincing evidence that such Damages arose as a result of its
gross negligence or willful misconduct, or (iii) Empire Resorts or its
successors, if it is established in a final judicial determination by clear and
convincing evidence in an action brought by the Litigation Trustees or by the
Unitholders that such Damages arose as the result of Empire Resorts or its
successor's material breach of any of its obligations under the Line of Credit.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, as
applicable, shall not, of itself, create a presumption that (i) the Litigation
Trustees acted or decided with deliberate intent to injure the Unitholders or
with reckless disregard for the best interests of the Unitholders, (ii) the
Administrative Trustee acted with gross negligence or willful misconduct, or
(iii) the Litigation Trustees or the Unitholders established by clear and
convincing evidence that Empire Resorts or its successor materially breached any
of its obligations under the Credit Line.
To the fullest extent permitted by law, expenses (including attorneys'
fees and expenses) incurred by an Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding for which
such Indemnified Person is entitled to indemnification shall be paid by the
Litigation Trust in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking (without bond or security) by or on
behalf of such Indemnified Person to repay such amount if it shall ultimately be
determined that he or it is not entitled to be indemnified by the Litigation
Trust as set forth in the Declaration of Trust.
The Litigation Trust may purchase and maintain insurance to cover its
indemnification obligations and any other liabilities of the Litigation Trustees
and the Administrative Trustee. The Litigation Trust will use amounts from the
Expense Account (or amounts from other sources of the Litigation Trust) to pay
for such insurance.
The indemnification and advancement of expenses provided by, or
granted pursuant to the Declaration of Trust shall continue as to a Person who
has ceased to be an Indemnified Person and shall inure to the benefit of the
heirs, executors and administrators of such a Person.
REPORTS TO THE BENEFICIARIES
The Litigation Trustees are required to issue annual reports to the
beneficiaries of the Litigation Trust showing the assets and liabilities of the
Litigation Trust at the end of each fiscal year and the receipts and
disbursements of the Litigation Trust for the fiscal year then ended. The annual
reports also will describe changes in the Litigation Trust's assets, significant
changes in the status of the Litigation Claims during the reporting period and
significant actions taken by the Litigation Trustees during the period. The
Litigation Trustees are also required to distribute to the beneficiaries of the
Litigation Trust a special report if, in the opinion of the Litigation Trustees,
a material event relating to the Litigation Trust's assets has occurred.
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GOVERNING LAW
The Declaration of Trust and the rights of the parties thereunder are
governed by and interpreted in accordance with the laws of the State of
Delaware.
THE LITIGATION TRUSTEES OF THE LITIGATION TRUST
OUR LITIGATION TRUSTEES AND THEIR AGES ARE AS FOLLOWS:
Name Age
---- ---
Paul A. deBary 57
Joseph E. Bernstein 54
PAUL A. DEBARY has been a member of Empire Resorts' board of directors
since February 2002. He has also been a Managing Director at Marquette deBary
Co., Inc., a New York based broker-dealer since 1997, where he serves as a
financial advisor for state and local government agencies, public and private
corporations and non-profits. Prior to assuming his current position, Mr. deBary
served as Managing Director in the Public Finance Department of Prudential
Securities from 1994 to 1997. He was a partner in the law firm of Hawkins,
Delafield & Wood in New York from 1975 to 1994. Mr. deBary received an AB in
1968, and an MBA and JD in 1971 from Columbia University. He is a member of the
American Bar Association, the New York State Bar Association, the Association of
the Bar of the City of New York and the National Association of Bond Lawyers and
serves a President and as a Director of the Society of Columbia Graduates.
JOSEPH E. BERNSTEIN has been a member of Empire Resorts' board of
directors since 2003 and a managing director of Americas Tower Partners. He
started his career as a corporate tax attorney on Wall Street at Cahill Gordon &
Reindel and as an international tax attorney at Rosenman & Colin. He later
started his own international tax practice. Since the early 1980s, Mr. Bernstein
(along with his brother Ralph, and their partner, Morad Tahbaz, through their
jointly-owned entity, Americas Tower Partners) has been involved in the
development of three million square feet of commercial property in Manhattan,
including Americas Tower, a 50-story office building on Avenue of the Americas
and 46th Street, serving as world headquarters to PriceWaterhouseCoopers and US
headquarters to Israel's largest bank, Bank Hapoalim. Americas Tower Partners is
presently developing AQUARIA Entertainment City, a $375 million tourism project
in Eilat, Israel, and the $100 million Mt. Arbel Resort & Residence Club, with
36 holes of golf designed by Robert Trent Jones II, overlooking the Sea of
Galilee. Mr. Bernstein holds a B.A. in economics from the University of
California at Davis; a B.A. in agricultural business management from the
University of California at Davis; an M.B.A. in Finance from UCLA Graduate
School of Management; a J.D. from the University of California at Davis School
of Law; and, a Master of Laws Degree (L.L.M.) in taxation from the New York
University School of Law.
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COMPENSATION OF THE TRUSTEES
COMPENSATION OF THE LITIGATION TRUSTEES
Each Litigation Trustee shall be entitled to reimbursement of any
expenses incurred in carrying out the purposes of the Litigation Trust,
including telephone, mail and messenger, travel, conference, meeting, research
and other administrative and office expenses not paid for directly by the
Litigation Trust and each Litigation Trustee shall also receive compensation for
his services equal to $5,000 per month in accordance with the terms of the
Declaration of Trust, to the extent there are funds available. In addition,
Joseph Bernstein and Paul deBary shall receive compensation for their services
as Litigation Trustees equal to 4% and 1%, respectively, of the total amount
deposited into the Recovery Account (as hereinafter defined) in accordance with
the terms of the Declaration of Trust, to the extent there are funds available.
In the event of the resignation or death of a Litigation Trustee, the percentage
fees payable to such Litigation Trustee, if any, shall be pro rated for time
served as a Litigation Trustee between the resigned or deceased Litigation
Trustee and his successor Litigation Trustee(s) and the amount payable to such
resigned or deceased Litigation Trustee shall be paid to the Litigation Trustee
or his estate in the case of a deceased Litigation Trustee; provided, however,
that in the case of the resignation or death of Joseph Bernstein, the portion of
the fee to be pro-rated shall be equal to 1% of the total amount deposited into
the Recovery Account and Joseph Bernstein or his estate, as the case may be,
shall continue to be entitled to receive an amount equal to 3% of the total
amount deposited into the Recovery Account.
COMPENSATION OF THE ADMINISTRATIVE TRUSTEE
The Administrative Trustee of the Litigation Trust is Christiana Bank
& Trust Company. The primary function of the Administrative Trustee is to
fulfill Delaware law requirement to have one trustee have its principal place of
business located within the state of Delaware. The Administrative Trustee will
also perform certain administrative functions pursuant to our Declaration of
Trust and at the direction of our Litigation Trustees. The Administrative
Trustee shall receive compensation for its services as follows:
Acceptance Fee..............................................$5,000.00;
Includes the first month administration fee
Monthly Administration Fee..............................$ 500.00; and
Custody Fee on any cash or marketable securities, other than on
certain cash balances:
.05 of 1% (5.00 basis points) per annum the first $10,000,000 of the
accounts fair market value; and
.03 of 1% (3.00 basis points) per annum on the balance of the accounts
fair market value.
Plus: $15 for each DTC or FED eligible trade, if applicable, and
outgoing wire transfers: $20 per transfer.
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Out of pocket expenses, including legal fees, which may be incurred
during the set-up and administration of the Litigation Trust, will be billed at
cost in addition to the above-described fees. In the event that special
administrative services and attention are required due to unusual circumstances,
an additional maintenance fee will be charged to cover time and expenses. In the
event Christiana Bank & Trust Company is no longer acting as Administrative
Trustee, the compensation of the Administrative Trustee shall be as mutually
agreed to by the Litigation Trustees and the Administrative Trustee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Declaration of Trust, in the event there is a
settlement or award, Empire Resorts is to be paid $7,500,000 prior to the
Unitholders receiving any proceeds.
The Litigation Trustees are both currently members of the Board of
Directors of Empire Resorts. The Litigation Trustees will receive compensation
for their services as Litigation Trustees. See "Compensation of the Trustees."
DESCRIPTION OF UNITS
Beneficial interests in the Litigation Trust are represented by the
Units. The Litigation Trust has one class of Units which represent an assignable
and transferable beneficial interest in the net proceeds, if any, to be received
by us from the settlements or awards, if any, of the Litigation Claims. The
Unitholders have no rights to dividends, interests, liquidation preferences or
any other distributions. The holders of the Units have no voting rights.
UNITS ELIGIBLE FOR FUTURE SALE
The 3,693,794 Units registered under the Registration Statement of
which this prospectus is a part will be freely tradable. The remaining
19,009,102 outstanding Units will be "restricted securities," as that term is
defined in Rule 144 and may only be sold pursuant to a registration statement
under the Securities Act or an applicable exemption from registration
thereunder, including pursuant to Rule 144.
FEDERAL INCOME TAX CONSEQUENCES
THE DISTRIBUTION
The distribution of the Units owned by Empire Resorts to its holders
of common stock will be characterized as a dividend, taxable as ordinary income,
in an amount equal to the fair market value of Units as determined in good faith
by Empire Resorts' board of directors, but only to the extent of Empire Resorts'
current or accumulated earnings and profits. To the extent that all or part of a
distribution to a holder exceeds such holder's allocable share of Empire
Resorts' current or accumulated earnings and profits, such amount will first be
treated as a return of capital that will reduce the holder's adjusted tax basis
in his shares of Empire Resorts' common stock and then to the extent that the
distribution exceeds such basis, such excess will be taxed as a capital gain
(long-term capital gain if the holder's holding period for such common stock has
been more than one year). Any tax liability to the Empire Resorts or its common
stockholders as a result of the distribution is expected to be insignificant.
20
A corporate holder will generally be entitled to a 70%
dividends-received deduction with respect to distributions that are treated as
dividends on shares of Empire Resorts common stock that the corporate holder has
held for at least 46 days during the 90-day period that begins 45 days before
the stock becomes ex-dividend. A taxpayer's holding period for this purpose is
reduced by periods during which the taxpayer's risk of loss with respect to the
shares is considered diminished by reason of the existence of certain options,
contracts to sell or other similar transactions. Also, the dividends-received
deduction may be reduced or eliminated if a corporation has indebtedness
"directly attributable to its investment" in portfolio stock.
A corporate holder is required to reduce its basis (but not below
zero) in stock by the non-taxed portion (generally the portion eligible for the
dividends-received deduction described above) of an "extraordinary-dividend" as
defined in Section 1059 of the Internal Revenue Code, if the holder has not held
such stock subject to a risk of loss for more than two years before Empire
Resorts declared, announced, or agreed to, the amount or payment of such
dividend, whichever is earliest. If any part of the non-taxed portion of an
extraordinary dividend has not been applied to reduce the basis as a result of
the limitation on reducing basis below zero, such part will be treated as gain
from the sale or exchange of stock.
In addition, for purposes of computing its alternative minimum tax
liability, a corporate holder may, in general, be required to include in its
alternative minimum taxable income a portion of any dividends-received deduction
allowed in computing regular taxable income.
OWNERSHIP OF UNITS
The Litigation Trust will be treated as a grantor trust for federal
income tax purposes. Under the grantor trust rules, each holder of a Unit will
be treated for federal income tax purposes as the owner of his or her share of
the Litigation Trust's assets. While the matter is not free from doubt, any
proceeds received on account of any settlement or award in connection with the
Litigation Claims may be taxed as ordinary income. Furthermore, certain fees and
expenses incurred by the Litigation Trust may be treated as miscellaneous
itemized expenses, deductible only to the extent the individual taxpayer's total
miscellaneous itemized deductions exceed 2% of the taxpayer's adjusted gross
income.
The foregoing discussion is based upon the Internal Revenue Code of
1986, as amended, Treasury regulations, and Internal Revenue Service rulings and
judicial decisions now in effect, all of which are subject to change at any
time, possibly with retroactive effect, by legislative, judicial or
administrative action. In addition, the tax consequences to a particular holder
(including life insurance companies, tax-exempt organizations, financial
institutions, dealers in securities, foreign corporations and nonresident alien
individuals) may be affected by matters not discussed herein.
BECAUSE THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN DEPEND
UPON EACH HOLDER'S PARTICULAR TAX STATUS, AND DEPEND FURTHER UPON FEDERAL TAX
LAWS, REGULATIONS, RULINGS AND DECISIONS, WHICH ARE SUBJECT TO CHANGE (WHICH
CHANGES MAY BE RETROACTIVE IN EFFECT), PROSPECTIVE INVESTORS SHOULD CONSULT
21
THEIR OWN TAX ADVISORS.
LEGAL MATTERS
The legality of the Units offered hereby will be passed upon for us by
Olshan Grundman Frome Rosenzweig & Wolosky LLP, New York, New York.
EXPERTS
The financial statements of the Litigation Trust as of January 12,
2004 included in this prospectus have been audited by Marcum & Kliegman LLP,
independent auditors and have been so included in reliance upon the report of
Marcum & Kliegman LLP appearing elsewhere herein, given on the authority of such
firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange a registration
statement on Form S-1, including exhibits, schedules and amendments, under the
Securities Act with respect to the Units to be sold in this offering. This
prospectus does not contain all of the information included in the registration
statement (including the exhibits to the registration statement). For further
information about us and the Units to be sold in this offering, please refer to
this registration statement, which you may inspect, without charge, at the
public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or online at WWW.SEC.GOV, or obtain at prescribed rates
from the public reference facilities of the SEC at the above address.
You may request, and we will provide, a copy of our filings, at no
cost to you, by writing or telephoning us at the following address:
Catskill Litigation Trust
c/o Christiana Bank & Trust Company
1314 King Street
Wilmington, Delaware 19801
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
22
INDEX TO FINANCIAL STATEMENTS
CATSKILL LITIGATION TRUST
CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENT
Balance Sheet F-3
NOTES TO FINANCIAL STATEMENT F4-6
F-1
INDEPENDENT AUDITORS' REPORT
To the Trustees
Catskill Litigation Trust
We have audited the accompanying balance sheet of Catskill Litigation Trust as
of January 12, 2004. This financial statement is the responsibility of the
Trustees of the Trust. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Catskill Litigation Trust as of
January 12, 2004 in conformity with accounting principles generally accepted in
the United States of America.
/s/ Marcum & Kliegman LLP
New York, New York
January 30, 2004
F-2
Catskill Litigation Trust
Balance Sheet
At January 12, 2004
- --------------------------------------------------------------------------------
ASSETS
------
ASSETS $ --
- ------ ============
LIABILITIES AND TRUST EQUITY
----------------------------
LIABILITIES $ --
- -----------
COMMITMENTS AND CONTINGENCIES
- -----------------------------
TRUST EQUITY
- ------------
Units of beneficial interest - 22,702,896 units authorized, --
issued and outstanding ------------
TOTAL LIABILITIES AND TRUST EQUITY $ --
============
The accompanying notes are an integral part of this financial statement.
F-3
CATSKILL LITIGATION TRUST
NOTES TO FINANCIAL STATEMENT
- --------------------------------------------------------------------------------
NOTE 1 - The Trust
---------
The Catskill Litigation Trust, a Delaware statutory trust (the
"Litigation Trust"), was formed by Empire Resorts, Inc. ("Empire"),
Monticello Raceway Management, Inc., ("MRMI"), Monticello Casino
Management, LLC, Monticello Raceway Development Company, LLC ("MRDC")
and Mohawk Management, LLC ("Mohawk") on January 12, 2004 and
22,702,896 units of beneficial interest were issued to the members and
stockholders of those entities. Also, on January 12, 2004, Empire,
Catskill Development, L.L.C. ("Catskill"), MRMI, Mohawk, Joseph E.
Bernstein, Paul A. deBary (Messrs. Bernstein and deBary are hereinafter
referred to as the "Litigation Trustees") and Christiana Bank and Trust
Company (the "Administrative Trustee") entered into the Declaration of
Trust of Catskill Litigation Trust (the "Declaration of Trust").
Pursuant to the Declaration of Trust, Catskill, MRDC and the Mohawk
assigned to the Trust all of their claims under or related to the
alienation and frustration of their agreements and business relations
with the St. Regis Mohawk Tribe and their rights to any judgment or
settlement that may arise from any litigation relating to two
litigations entitled Catskill Development, L.L.C., Mohawk Management
L.L.C. and Monticello Raceway Development Company L.L.C., Plaintiffs v.
Park Place Entertainment Corporation, Defendant and Catskill
Development, L.L.C., Mohawk Management, L.L.C., Monticello Raceway
Development Company, L.L.C., Plaintiffs v. Gary Melius, Ivan Kaufman,
Walter Horn, President R.C. - St. Regis Management Company, et al,
Defendants (hereinafter referred to as the "Litigation"). If at any
time the Litigation Trustees determine, in their absolute discretion,
that the assets of the Litigation Trust are not sufficient to justify
its continuance, the Litigation Trustees are authorized to terminate
the Litigation Trust. In addition, the Litigation Trust shall terminate
on the date that all litigation has been fully prosecuted to final
judgment or dismissal, including all appeals, and all Litigation Trust
assets have been distributed to the Litigation Trust's beneficiaries.
NOTE 2 - Summary of Significant Accounting Policies
------------------------------------------
Use of Estimates in the Financial Statements
--------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the trustees to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-4
Income Taxes
------------
For Federal income tax purposes, the Litigation Trust is treated as a
grantor trust. Under the grantor trust rules, each holder of a unit of
beneficial interest is treated as the owner of his or her share of the
Litigation Trust's assets, income and expenses.
NOTE 3 - Line of Credit
--------------
Empire, a related party, has provided the Litigation Trust with a
line-of-credit of up to $2,500,000. The line-of-credit can be utilized
to pay all expenses of the Litigation Trust permitted under the
Declaration of Trust, including but not limited to professional fees
and Litigation and Administrative Trustees fees and expenses. The
line-of-credit is non-interest bearing and is to be repaid from any
amounts received from litigation settlements or awards. The
line-of-credit expires upon the termination of the Litigation Trust.
NOTE 4 - Distributions
-------------
The distribution of any net proceeds from litigation settlements or
awards, after amounts applied to expenses of the Litigation Trust, are
to be made at the sole discretion of the Litigation Trustees and will
be distributed as follows:
First: An amount necessary to pay the Litigation Trustees their fees
arising from litigation settlements or awards. (See Note 5)
Second: If any amounts remain, $7,500,000 shall be paid to Empire to
reimburse it for expenses incurred in connection with the Litigation
prior to the formation of the Litigation Trust and any amounts
outstanding under the line-of-credit.
Third: If any amount remains after the above requirements are met, such
amount remaining shall be divided among the beneficiaries of the
Litigation Trust in proportion to their ownership of Units as of the
date the distribution is made.
NOTE 5 - Commitments and Contingencies
-----------------------------
Compensation of Litigation Trustees
-----------------------------------
Each of the two Litigation Trustees is entitled to annual compensation
of $60,000 plus reimbursement of expenses incurred carrying out the
purpose of the Litigation Trust. In addition, one trustee is entitled
to 4%, and the other 1%, of any litigation settlements or awards.
Compensation of the Administrative Trustee
------------------------------------------
The Administrative Trustee is entitled to a $5,000 acceptance fee
(which includes the first month administrative fee) and a monthly
administrative fee of $500. In addition, the Administrative Trustee is
entitled to a custody fee on certain cash balances and marketable
securities of .5% per annum on the first $10,000,000 of fair value and
.3% on the excess and reimbursement for certain fees and expenses.
F-5
Expenses Paid by Empire prior to the Formation of the Trust
-------------------------------------------------------------------
As discussed in Note 4, the Trust is obligated to pay to Empire up to
$7,500,000. This amount represents Empire's expenses incurred prior to
the formation of the Litigation Trust. The amount is payable solely
from the proceeds of litigation settlements or awards.
NOTE 6 - Certain Relationships
---------------------
The Litigation Trustees are both currently members of the Empire Board
of Directors.
F-6
================================================================================
No one (including any salesman or broker) is authorized to provide oral or
written information about this offering that is not included in this prospectus.
February ___, 2004
CATSKILL LITIGATION TRUST
3,693,794 UNITS
-----------------------
PROSPECTUS
-----------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
-------------------------------------------
The following table sets forth the costs and expenses payable by the
registrant in connection with the securities being registered. With the
exception of the SEC registration fee, all amounts shown are estimates.
SEC registration fee ...................................................$ 0
Legal fees and expenses ................................................ 25,000
Accounting fees and expenses............................................ 5,000
Blue Sky fees amd expenses.............................................. 3,000
Miscellaneous expenses ................................................. 2,000
Total $ 35,000
ITEM 14. Indemnification of Directors and Officers.
-----------------------------------------
The Declaration of Trust of the Registrant provides in substance that
the Registrant shall indemnify to the fullest extent permitted by law (a) the
Litigation Trustees, any affiliate of the Litigation Trustees and any officers,
directors, stockholders, members, partners, employees, representatives,
custodians, nominees or agents of the Litigation Trustees, (b) the settlors of
the Litigation Trust, any affiliate of such settlors and any partners,
employees, representatives or agents of such settlors, (c) the administrative
trustee of the Litigation Trust, any affiliate of such Administrative Trustee
and any officers, employees, representatives or agents of the administrative
trustee and (d) any officer, employee or agent of the Litigation Trust or its
affiliates in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative by any
person arising out of or relating to the Litigation Trust or any acts or
omissions of the Litigation Trustees or the administrative trustee in their
capacity or purportedly in their capacity as Litigation Trustees or
administrative trustee against any and all losses, liabilities, damages,
judgments, demand, suits, claims, assessments, charges, fines, penalties and
other costs and expenses, including attorneys' fees and expenses and other fees
and expenses associated with the defense of a claim or incurred by such
indemnified person in obtaining indemnification under the Declaration of Trust.
Such indemnification (other than an order by a court) shall be made by the
Registrant only upon a determination that indemnification is proper in the
circumstances because the individual met the applicable standard of conduct.
Advances for such indemnification may be made pending such determination.
The Registrant's authority to indemnify its trustees is governed by
the provisions of Section 3817 of the Delaware Statutory Trust Act, which
states:
II-1
Subject to such standards and restrictions, if any, as are set forth
in the governing instrument of a statutory trust, a statutory trust shall have
the power to indemnify and hold harmless any trustee or beneficial owner or
other person from and against any and all claims and demands whatsoever.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 15. Recent Sales of Unregistered Securities.
---------------------------------------
In connection with the formation of the Registrant and the completion
of the Consolidation, the Registrant issued on January 12, 2004, in a single
transaction, 22,702,896 Units, representing all of its currently outstanding
Units, pursuant to Section 4(2) of the Securities Act of 1933, as amended.
ITEM 16. Exhibits and Financial Statement Schedules
------------------------------------------
(a) Exhibits:
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
*3.1 Certificate of Trust of the Registrant.
*3.2 Declaration of Trust of the Registrant.
*4.1 Specimen Certificate for the Registrant's Units.
*5 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
*10.1 Line of Credit dated January 12, 2004 between the Registrant and
Empire Resorts, Inc. and related promissory note.
*23.1 Consent of accountants.
*23.2 Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP
(contained in Exhibit 5).
* Filed herewith.
(b) Financial Statement Schedules: None
ITEM 17. Undertakings.
------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
II-2
successful defense of an action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 6th day of
February, 2004.
CATSKILL LITIGATION TRUST
By: /s/ Joseph E. Bernstein
-------------------------------
Joseph E. Bernstein
Litigation Trustee
By: /s/ Paul A. deBary
-------------------------------
Paul A. deBary
Litigation Trustee
II-4
