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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20840
PRESIDENT CASINOS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0341200
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
802 North First Street, St. Louis, Missouri 63102
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Address of principal executive offices-Zip Code
314-622-3000
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.01 par value,
30,194,700 shares outstanding as of October 15, 1996.
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<PAGE>
PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Part I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of August 31 and February 29, 1996.............................1
Condensed Consolidated Statements of Operations
and Income/(Loss) Per Share Information (Unaudited) for the
Three and Six Months Ended August 31, 1996 and 1995...............2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended August 31, 1996 and 1995.................3
Notes to Condensed Consolidated Financial Statements................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................7
Part II. Other Information
Item 1. Legal Proceedings...........................................16
Item 2. Changes in Securities.......................................16
Item 3. Defaults Upon Senior Securities.............................16
Item 4. Submission of Matters to a Vote of Security Holders.........17
Item 5. Other Information...........................................17
Item 6. Exhibits and Reports on Form 8-K............................17
Signature..............................................................18
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
PRESIDENT CASINOS, INC. (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Aug. 31, Feb. 29,
1996 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 28,811 $ 19,756
Short-term investments......................... 600 1,008
Accounts receivable, net of allowance for
doubtful accounts of $443 and $423........... 762 1,943
Other current assets........................... 4,812 4,410
--------- ---------
Total current assets....................... 34,985 27,117
Property and equipment, net of accumulated
depreciation of $42,933 and $39,125............ 122,473 135,630
Other assets..................................... 7,126 5,277
--------- ---------
$164,584 $168,024
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........... $ 4,131 $ 1,769
Other current liabilities...................... 26,808 27,634
--------- ---------
Total current liabilities.................. 30,939 29,403
Long-term debt, net of current maturities........ 102,656 105,677
Other liabilities................................ 408 405
--------- ---------
Total liabilities.......................... 134,003 135,485
--------- ---------
Minority interest................................ 195 33
Commitments and contingencies.................... -- --
Stockholders' equity:
Preferred Stock, none issued and outstanding... -- --
Common Stock, 30,195 shares issued
and outstanding.............................. 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (71,645) (69,525)
--------- ---------
Total stockholders' equity................. 30,386 32,506
--------- ---------
$164,584 $168,024
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
PRESIDENT CASINOS, INC. AND LOSS PER SHARE INFORMATION (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands, except share data) Three Months Six Months
Ended Aug. 31, Ended Aug. 31,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise............. $ 42,715 $ 45,648 $ 87,876 $ 90,742
Food and beverage.................... 5,035 4,296 9,990 8,246
Hotel, retail and other.............. 2,835 3,585 5,476 5,731
Less promotional allowances.......... (3,063) (2,276) (6,227) (4,741)
--------- --------- --------- ---------
Net operating revenues.............. 47,522 51,253 97,115 99,978
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise............. 24,902 25,180 50,714 50,611
Food and beverage.................... 3,370 3,132 6,422 5,787
Hotel, retail and other.............. 651 503 1,279 1,131
Selling, general and administrative.. 13,437 14,282 26,494 26,690
Depreciation and amortization........ 3,933 4,133 7,934 7,960
Gain on sale of assets, net.......... (960) -- (976) --
Impairment of long-lived assets...... -- -- -- 11,000
Pre-opening expenses................. 145 -- 200 --
--------- --------- --------- ---------
Total operating costs and expenses.. 45,478 47,230 92,067 103,179
--------- --------- --------- ---------
OPERATING INCOME (LOSS) FROM
CONSOLIDATED SUBSIDIARIES............ 2,044 4,023 5,048 (3,201)
Equity loss in unconsolidated entities -- 51 -- 1,175
--------- --------- --------- ---------
OPERATING INCOME (LOSS)............... 2,044 3,972 5,048 (4,376)
Interest expense, net................. (3,454) (3,815) (7,006) (7,581)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTEREST.......... (1,410) 157 (1,958) (11,957)
Income tax expense (benefit).......... -- 53 -- (2,524)
Minority interest..................... 85 -- 162 --
--------- --------- --------- ---------
NET INCOME (LOSS)..................... $ (1,495) $ 104 $ (2,120) $ (9,433)
========= ========= ========= =========
Net income(loss) per common and
common equivalent share.............. $ (0.05) $ 0.00 $ (0.07) $ (0.31)
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding....... 30,195 30,195 30,195 30,195
====== ====== ====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Six Months Ended Aug. 31,
1996 1995
------ ------
<S> <C> <C>
Net cash provided by operating activities......... $ 5,367 $ 8,166
Cash flows from investing activities:
Expenditures for property and equipment.......... (5,301) (6,361)
Proceeds from the sale of property and equipment. 11,444 3
Investment in unconsolidated entities............ -- (210)
Purchase of lease options........................ (2,050) --
Purchase of short-term investments............... -- (208)
Maturity of short-term investments............... 408 --
--------- ---------
Net cash provided by (used in)
investing activities........................ 4,501 (6,776)
--------- ---------
Cash flows from financing activities:
Repayment of notes payable...................... (200) (3,652)
Payments on capital lease obligations........... (613) (134)
--------- ---------
Net cash used in financing activities......... (813) (3,786)
--------- ---------
Net increase (decrease) in
cash and cash equivalents....................... 9,055 (2,396)
Cash and cash equivalents at beginning of period.. 19,756 24,715
--------- ---------
Cash and cash equivalents at end of period........ $ 28,811 $ 22,319
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest............................ $ 6,942 $ 5,642
========= =========
Cash paid for income taxes, net
of amounts recovered............................ $ (59) $ 1,250
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Assets acquired under capital leases.............. $ -- $ 2,867
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
NOTES TO CONDENSED
PRESIDENT CASINOS, INC. CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts and
operations of President Casinos, Inc. ("PCI"), its wholly owned subsidiaries
and a 95% owned limited partnership (collectively, the "Company"). The Company
develops, owns and operates riverboat and/or dockside gaming casinos through
its subsidiaries. The Company conducts gaming operations in Davenport, Iowa,
Biloxi, Mississippi and St. Louis, Missouri. The Davenport operations are
managed by a wholly owned subsidiary which is the general partner of the 95%
Company owned operating partnership. The Company also operates two non-gaming
dinner cruise, excursion and sightseeing vessels on the Mississippi River in
St. Louis, Missouri. In addition, the Company owns and manages certain hotel
and ancillary facilities associated with its gaming operations. All material
intercompany accounts and transactions have been eliminated.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring entries unless otherwise disclosed, necessary to present
fairly the Company's financial information for the interim periods presented
and have been prepared in accordance with generally accepted accounting
principles. The interim results reflected in the condensed consolidated
financial statements are not necessarily indicative of results for the full
year or other periods.
The financial statements contained herein should be read in conjunction with
the audited consolidated financial statements and accompanying notes to the
consolidated financial statements for the fiscal year ended February 29, 1996
included in the Company's 1996 Annual Report on Form 10-K. Accordingly,
footnote disclosure which would substantially duplicate the disclosure in the
audited consolidated financial statements has been omitted.
Certain amounts for fiscal 1996 have been reclassified to conform with
fiscal 1997 financial statement presentation. These reclassifications had no
effect on the Company's net income.
2. SALE OF BILOXI LEASE RIGHTS
During July 1996, the Company, through its wholly owned subsidiary, The
President Riverboat Casino-Mississippi, Inc. ("PRCM"), entered into a letter
of intent with Primadonna Resorts, Inc. to sell PRCM's leasehold rights to the
property leased by PRCM at the Broadwater Marina in Biloxi, Mississippi for
$15 million in cash. PRCM currently leases the Broadwater Marina for use in
connection with its gaming operations under a long-term lease from BH
4
<PAGE>
Acquisition Corporation, a company wholly owned by John E. Connelly, the
chairman and principal stockholder of the Company. As contemplated by the
letter of intent, PRCM will lease the property back from Primadonna under a
triple net operating lease with no additional monthly rental obligations for
one year after closing, subject to certain conditions, PRCM also will receive
an option to extend the lease for up to an additional two-year period (subject
to termination on a 90-day notice) at a rental equal to 2% of net gaming
revenues during the extended term.
3. PROPERTY AND EQUIPMENT
During July 1996, the Company sold the "Diamond Jo" and certain nongaming
equipment under the terms of a charter agreement for an aggregate purchase
price of $11,355. The Company recognized a gain of $999 as a result of this
transaction.
4. COMMITMENTS AND CONTINGENT LIABILITIES
Regulatory Matters
The Missouri Gaming Commission met on June 19, 1996 and unanimously voted to
renew the license of President Riverboat Casino-Missouri, Inc. for the period
May 27, 1996 to May 26, 1998. The Mississippi Gaming Commission met on June
20, 1996 and unanimously voted to renew the license of The President Riverboat
Casino-Mississippi, Inc. for the period June 30, 1996 to June 29, 1998.
Litigation
In the Spring of 1994, William Ahern and William H. Poulos filed class
action lawsuits in the United States District Court for the Middle District of
Florida, Orlando Division, against over 38 casino operators, including the
Company, and certain suppliers and distributors of video poker and electronic
slot machines. The lawsuits contain substantially identical claims alleging
that the defendants fraudulently marketed and operated casino video poker
machines and electronic slot machines, and assert common law fraud and deceit,
unjust enrichment and negligent misrepresentation. The Company, as well as
the other defendants, filed motions to dismiss the lawsuits and/or transfer
the actions to Nevada and in opposition to the class certification. The two
lawsuits, "Poulos v. Caesar's World et. al." and "Ahern v. Caesar's World et.
al.," have been consolidated into a single action, and have been transferred
to the United States District Court for the District of Nevada without ruling
on the dismissal or the class certification motions. On September 26, 1995,
Larry Schreier, on behalf of himself and others similarly situated, filed a
class action lawsuit captioned "Schreier v. Caesar's World et. al." in the
United States District Court for the District of Nevada against the Company
and approximately 45 other casino operators and gaming equipment manufacturers
and distributors alleging substantially identical claims to the claims
asserted in the "Poulos" and "Ahern" class actions. On April 15, 1996, the
Court in the "Poulos" and "Ahern" actions granted the defendants' motions to
dismiss, and granted the plaintiffs' leave to file an amended petition. In
May 1996, the plaintiffs filed an amended complaint and the defendants renewed
5
<PAGE>
their motion to dismiss the complaint. Both motions are currently pending
before the court. In September 1996, the plaintiffs in "Schreier" filed with
the court an amended complaint. The defendants currently expect to renew
their motion to dismiss. Although the outcome of litigation is inherently
uncertain, management, after consultation with legal counsel, believes that
the "Poulos," "Ahern" and "Schreier" actions are without merit and does not
expect that the lawsuits will have a material adverse effect on the Company's
financial position.
A suit seeking status as a class action captioned "Paul Winklemen, Scott
Mayberry and Mr. and Mrs. Jeff Knoerle, Individually and as Class
Representatives v. President Casino-Missouri, Inc. and St. Charles Riverfront
Station, Inc." Cause No. 963-00682, was filed on February 26, 1996 in the
Circuit Court of the City of St. Louis naming as defendants President Missouri
and St. Charles Riverfront Station, Inc. The lawsuit seeks to recover gaming
losses that occurred within three months of the filing of the suit under
Section 434.030 of the Revised Statutes of Missouri which purports to permit
the recovery of gaming losses. Plaintiffs allege that they are entitled to
judgment in their favor consisting of (a) the amount of their individual
wagers lost, (b) the total adjusted gross gambling revenues collected by each
defendant within three months of the filing of the petition for distribution
to the class based on their amount of loss, (c) their attorney's fees based on
a percentage of the common fund created, and (d) their court costs. In August
1996, the Court granted the defendants' motion to dismiss. The time in which
the plaintiffs had to file an appeal with respect to the Court's action has
now expired.
The Company has been notified that the Environmental Protection Agency and
the U.S. Attorney's Office for the Eastern District of Missouri are conducting
a federal criminal investigation with respect to compliance by President
Missouri with federal environmental laws in connection with the operation of
"The Admiral" in St. Louis. The Company is cooperating fully with the
investigation and has provided certain information regarding "The Admiral's"
operations to the Environmental Protection Agency and the U.S. Attorney's
Office. In the event that the Company is charged with violating federal
environmental laws, the Company may be subject to substantial civil and
criminal penalties, including monetary fines. Based upon the Company's
preliminary discussions with the U.S. Attorney's Office and the results of the
Company's internal investigation of this matter, management does not believe
that the investigation will result in any monetary or other penalties which
would have a material adverse effect on the Company's financial condition, or
which would have any material adverse impact upon the gaming licenses of the
Company or its subsidiaries.
The Company serves alcoholic beverages at its gaming facilities and has from
time to time been the subject of claims related thereto. Although the Company
believes it maintains adequate insurance to cover these types of claims, it is
often difficult to predict the outcome of such litigation and the amount of
damages which may be awarded in these types of cases. The Company does not
believe that the outcome of any pending litigation related to the Company's
serving of alcoholic beverages will have a material adverse effect on its
financial position.
6
<PAGE>
The Company is also from time to time party to litigation, which may or may
not be covered by insurance, arising in the ordinary course of its business.
The Company does not believe that the outcome of any such litigation will have
a material adverse effect on the Company's financial condition or results of
operations, or which would have any material adverse impact upon the gaming
licenses of the Company or its subsidiaries.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the condensed consolidated financial statements
and the notes thereto included elsewhere in the report.
Overview
The Company's operating results are affected by a variety of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the seasonal nature of the Company's business, the
timing of the commencement of its proposed gaming operations, the amount of
pre-opening expenses incurred by the Company and general weather conditions.
Consequently, the Company's operating results may fluctuate from period to
period and the results for any period may not be indicative of results for
future periods.
Both new competition in our market areas and intensified competition for
patrons significantly impacted the results of operations at each of the
Company's three casino properties.
Since gaming began in Biloxi in August 1992, steadily increasing competition
along the Mississippi Gulf Coast, New Orleans and elsewhere in Louisiana and
Mississippi has had an adverse effect on the results of operations in Biloxi.
Several large hotel/casino complexes have been built in recent years and
several new large projects are under construction. The "Gold Coast Casino,"
which was placed in service in June 1995 replacing "The President Casino-
Mississippi," improved the Company's presence in Biloxi and has allowed the
Company to increase the size of its casino from 20,500 to 38,000 square feet.
However, it is apparent that it will continue to be more and more difficult to
compete as larger casino complexes enter the Biloxi market, many being built
by competitors having substantially greater name recognition and financial and
marketing resources than the Company.
Accordingly, on July 17, 1996, the Company, through its wholly owned
subsidiary, The President Riverboat Casino-Mississippi, Inc. ("PRCM"), entered
into a Letter of Intent with Primadonna Resorts, Inc. to sell PRCM's leasehold
rights to the property leased by PRCM at the Broadwater Marina in Biloxi,
Mississippi for $15 million in cash. PRCM currently leases the Broadwater
Marina for use in connection with its gaming operations under a long-term
lease from BH Acquisition Corporation, a company wholly owned by John E.
Connelly, the chairman and principal stockholder of the Company. As
contemplated by the letter of intent, PRCM will lease the property back from
7
<PAGE>
Primadonna under a triple net operating lease with no additional monthly
rental obligations for one year after closing, subject to certain conditions,
PRCM also will receive an option to extend the lease for up to an additional
two-year period (subject to termination on a 90-day notice) at a rental equal
to 2% of net gaming revenues during the extended term.
In April 1995, a new casino commenced gaming operations in the Davenport
market. In addition, during November 1995, the Company temporarily removed
its casino vessel "The President" from service in Davenport for its Coast
Guard mandated five-year hull inspection and to make certain improvements to
the facility. "The President" was out of service from November 1995 until
April 3, 1996. During such period the Company temporarily replaced "The
President" with a smaller vessel, "The President Casino-Mississippi."
The Company's operating results are susceptible to the effects of floods and
adverse weather conditions. On various occasions, the Company has temporarily
suspended operations as a result of such adversities. As a result of flood
conditions along the Mississippi River, the Company temporarily suspended
operations aboard "The Admiral" in St. Louis for three days in May and eight
days in June of 1996 and 41 days the prior year (from May 11 to June 21,
1995). Although the erection of auxiliary ramps during the current year's
flooding enabled the casino to remain open during water levels that forced the
casino to close during the prior year, the loss of parking and perceived ease
of access associated with the high water continued to negatively impact
revenues.
8
<PAGE>
Results of Operations
Three-Month Period Ended August 31, 1996 Compared to the
Three-Month Period Ended August 31, 1995
The following table highlights the results of operations for the Company's
operating subsidiaries (dollars in millions). The table does not include
results of operations for the Company's non-gaming subsidiaries or reflect the
effect of write-downs of certain of the Company's investments and non-income
producing assets unrelated to such operating subsidiaries.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Biloxi, Mississippi
Operating revenues................. $ 11.8 $ 10.8 $ 23.1 $ 19.4
Income (loss) from operations...... $ 0.2 $ (0.5) $ 0.1 $ (0.4)
EBITDA (a)......................... $ 0.9 $ 0.3 $ 1.5 $ 1.1
EBITDA margin...................... 7.6% 2.8% 6.5% 5.7%
Davenport, Iowa
Operating revenues................. $ 17.0 $ 19.3 $ 34.0 $ 40.7
Income from operations............. $ 3.0 $ 5.2 $ 6.3 $ 10.8
EBITDA (a)......................... $ 4.0 $ 6.3 $ 8.2 $ 13.1
EBITDA margin...................... 23.5% 32.6% 24.1% 32.2%
St. Louis, Missouri
Operating revenues................. $ 16.4 $ 19.8 $ 35.5 $ 37.3
Income from operations............. $ (0.6) $ 2.4 $ 0.8 $ 3.3
EBITDA (a)......................... $ 0.6 $ 3.7 $ 3.3 $ 6.0
EBITDA margin...................... 3.7% 18.7% 9.3% 16.1%
</TABLE>
(a) "EBITDA" consists of earnings from operations before income taxes,
depreciation and amortization for each of the operating subsidiaries.
However, it does not include corporate operating expenses. EBITDA should not
be construed as an alternative to operating income as an indicator of the
Company's operating performance, or as an alternative to cash flows from
operational activities as a measure of liquidity. The Company has presented
EBITDA solely as a supplemental disclosure to facilitate a more complete
analysis of the Company's financial position. The Company believes that this
disclosure enhances the understanding of the financial performance of a
company with substantial depreciation and amortization.
Operating revenues. The Company generated consolidated operating revenues
of $47.5 million during the three-month period ended August 31, 1996 compared
to $51.3 million during the three-month period ended August 31, 1995, a
9
<PAGE>
decrease of $3.8 million or 7.4%. Operating revenue increases from the
Company's Biloxi property and corporate charter fees were offset by the
decreases at the Davenport and St. Louis properties. During both three-month
periods, operating revenues from the Company's St. Louis operations were
adversely affected by high water and flooding conditions on the Mississippi
River. High water conditions adversely affected the parking availability for
casino patrons and further flooding conditions caused the Company to suspend
its gaming operations during both years. The increase in operating revenues
at the Biloxi property was primarily attributable to the expansion of its
facility in July 1995. The Davenport property experienced a decrease in
operating revenue during the period primarily as a result of construction
activity relating to road access and parking (which negatively impacted
customer access to the casino) and intensified competition for patrons in the
Davenport market. Such construction is expected to continue throughout the
fall months.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) decreased to $4.8
million during the three-month period ended August 31, 1996, from $5.6 million
during the three-month period ended August 31, 1995, a decrease of $0.8
million or 14.3%. During the three-month period ended August 31, 1995, the
Company recorded business interruption proceeds of $1.9 million. The three-
month period ended August 31, 1996 had no business interruption proceeds but
did include a $1.1 million increase in charter revenues generated by the
leases of "Majestic Star" and "Diamond Jo."
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $24.9 million during the three-month
period ended August 31, 1996, compared to $25.2 million during the three-month
period ended August 31, 1995, a decrease of $0.3 million or 1.2%. As a
percentage of gaming revenues, gaming and gaming cruise costs increased to
58.3% during the three-month period ended August 31, 1996 from 55.3% during
the three-month period ended August 31, 1995. This decrease in gaming margin
was attributable to the decrease in gaming revenues at the Davenport and St.
Louis operations and their related contributions towards the fixed portion of
gaming costs.
The Company's consolidated selling, general and administrative expenses were
$13.4 million during the three-month period ended August 31, 1996, compared to
$14.3 million during the three-month period ended August 31, 1995, a decrease
of $0.9 million or 6.3%. Such decrease was primarily attributable to
reductions in corporate overhead and development costs. As a percentage of
consolidated revenues, selling, general and administrative expenses increased
to 28.2% during the three-month period ended August 31, 1996 from 27.9% during
the three-month period ended August 31, 1995.
During the three-month period ended August 31, 1996, the Company recognized
a net gain on the sale and disposal of assets of $1.0 million. This gain was
primarily related to the exercise of a purchase option by the charterer of the
Company's casino vessel, "Diamond Jo."
10
<PAGE>
Depreciation and amortization expenses were $3.9 million during the three-
month period ended August 31, 1996, compared to $4.1 million during the three-
month period ended August 31, 1995, a decrease of $0.2 million or 4.9%. This
decrease was primarily attributable to the sale of various assets partially
offset by the depreciation expense related to placing the "Majestic Star" in
service at the beginning of its charter in May 1996.
The Company has applied to the Missouri Gaming Commission for a license to
operate a second casino vessel at its St. Louis operations. Upon such
approval the Company intends to utilize the Company owned "The President
Casino- Mississippi" adjacent to its current operations aboard "The Admiral."
The second vessel will reduce the maximum waiting period for a guest to enter
a casino from 75 to 15 minutes. During the three-month period ended August
31, 1996, the Company incurred pre-opening costs of $0.1 million relating to
the proposed application and implementation of the second vessel.
Operating income. As a result of the items discussed above, the Company had
operating income of $2.0 million during the three-month period ended August
31, 1996, compared to $4.0 million during the three-month period ended August
31, 1995.
Interest expense, net. The Company incurred net interest expense of $3.5
million during the three-month period ended August 31, 1996, compared to $3.8
million during the three-month period ended August 31, 1995, a decrease of
$0.3 million or 7.9%. Such decrease was primarily related to the early
retirement of various debt instruments.
Income taxes. Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," requires the recognition of deferred tax assets
related to certain temporary differences between the Company's tax and
accounting records and net operating loss carryforwards to the extent that
realization of such benefit is "more likely than not." In fiscal year 1995,
management believed that the Company would return to profitability and that it
was more likely than not that the Company would be able to generate sufficient
taxable income to recognize fully these assets over the carryforward period.
This belief was based upon the Company's history of prior earnings, the fact
that the 1995 losses suffered by the Company were attributable, in large part,
to certain unprofitable operations which were terminated and the then recent
regulatory changes which enhanced the Company's earnings prospects. During
fiscal 1996, given the then current level of operations, the increased
competition and the overall uncertainty as to the Company's ability to return
to profitability, management determined that the deferred tax benefits did not
continue to satisfy the recognition requirements of SFAS No. 109. Accordingly,
based on the uncertainty regarding the Company's ability to generate future
taxable income, the Company established a valuation allowance for its deferred
tax assets. Management continues to assess the recognition requirements of
SFAS No. 109, and, as a result, there was no income tax benefit recorded for
the three-month period ended August 31, 1996, compared to an income tax
expense of $0.1 million during the three-month period ended August 31, 1995.
Net loss. The Company incurred a net loss of $1.5 during the three-month
11
<PAGE>
period ended August 31, 1996, compared to net income of $0.1 million during
the three-month period ended August 31, 1995.
Six-Month Period Ended August 31, 1996 Compared to the
Six-Month Period Ended August 31, 1995
Operating revenues. The Company generated consolidated operating revenues
of $97.1 million during the six-month period ended August 31, 1996 compared to
$100.0 million during the six-month period ended August 31, 1995, a decrease
of $2.9 million or 2.9%. This decrease was primarily attributable to lower
operating revenues from the Company's Davenport and St. Louis properties. The
Davenport property experienced a decrease in operating revenue during the
period as a result of increased competition in the Davenport market with the
addition of a third casino in April 1995, intensified competition for patrons,
construction activity relating to road access and parking (which negatively
impacted customer access to the casino) and the reduced capacity of its
temporary casino during "The President's" Coast Guard mandated five-year hull
inspection. During both six-month periods, operating revenues from the
Company's St. Louis operations were adversely affected by high water and
flooding conditions on the Mississippi River. High water conditions adversely
affected the parking availability for casino patrons and further flooding
conditions caused the Company to suspend its gaming operations in both years.
The increase in operating revenues at the Biloxi property was primarily
attributable to the expansion of its facility in July 1995. Hotel, retail and
other revenues were increased by the additional charter fee revenues generated
by the leases of "Majestic Star" and "Diamond Jo."
Though the Company's revenues from food and beverage, hotel, retail, charter
and other non-gaming activities (net of promotional allowances) remained the
same during both six-month periods the mix was significantly different.
During the six-month period ended August 31, 1995, the Company recorded
business interruption proceeds of $2.6 million. The six-month period ended
August 31, 1996 had no business interruption proceeds but did include a $2.2
million increase in charter revenues generated by the leases of "Majestic
Star" and "Diamond Jo." Revenue increases in food and beverage were offset by
the increase in promotional allowances.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $50.7 million during the six-month
period ended August 31, 1996, compared to $50.6 million during the six-month
period ended August 31, 1995, an increase of $0.1 million or 0.2%. As a
percentage of gaming revenues, gaming and gaming cruise costs increased to
57.7% during the six-month period ended August 31, 1996 from 55.8% during the
six-month period ended August 31, 1995. This decrease in gaming margin was
attributable to the decrease in gaming revenues at the Davenport and St. Louis
operations and their related contributions towards the fixed portion of gaming
costs.
The Company's consolidated selling, general and administrative expenses were
$26.5 million during the six-month period ended August 31, 1996, compared to
$26.7 million during the six-month period ended August 31, 1995, a decrease of
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$0.2 million or 0.8%. Such decrease was primarily attributable to the
decrease in corporate overhead and development costs, offset by three and 1/2
months of additional lease payments during fiscal 1997 related to the "Gold
Coast" barge used at the Biloxi property, which commenced in June 1995. As a
percentage of consolidated revenues, selling, general and administrative
expenses increased to 27.3% during the six-month period ended August 31, 1996,
from 26.7% during the six-month period ended August 31, 1995.
During the six-month period ended August 31, 1996, the Company recognized a
net gain on the sale and disposal of assets of $1.0 million. This gain was
primarily related to the exercise of a purchase option by the charterer of the
Company's casino vessel, "Diamond Jo."
Depreciation and amortization expenses were $7.9 million during the six-
month period ended August 31, 1996, compared to $8.0 million during the six-
month period ended August 31, 1995, a decrease of $0.1 million or 0.1%. This
decrease was primarily attributable to the sale of various assets partially
offset by the additional depreciation expense related to placing "Majestic
Star" in service at the beginning of its charter in May 1996.
During the six-month period ended August 31, 1995, the Company wrote-down
$11.0 million of long-lived assets related to reevaluated development
projects. There was no comparable expense during the six-month period ended
August 31, 1996.
The Company incurred a $1.2 million loss in unconsolidated entities during
the six-month period ended August 31, 1995, primarily related to the write-off
of the Company's Gary, Indiana investment. There was no comparable expense
during the six-month period ended August 31, 1996.
The Company has applied to the Missouri Gaming Commission for a license to
operate a second casino vessel at its St. Louis operations. If such license
is approved, the Company intends to utilize the Company owned "The President
Casino-Mississippi" adjacent to its current operations aboard "The Admiral."
The second vessel will reduce the maximum waiting period for a guest to enter
a casino from 75 to 15 minutes. During the six-month period ended August 31,
1996, the Company incurred pre-opening costs of $0.2 million relating to the
proposed application and implementation of the second vessel.
Operating income (loss). As a result of the items discussed above, the
Company had operating income of $5.0 million during the six-month period ended
August 31, 1996, compared to a loss of $4.4 million during the six-month
period ended August 31, 1995.
Interest expense, net. The Company incurred net interest expense of $7.0
million during the six-month period ended August 31, 1996, compared to $7.6
million during the six-month period ended August 31, 1995, a decrease of $0.6
million or 7.9%. Such decrease was primarily related to the early retirement
of various debt instruments.
Income taxes. "SFAS" No. 109, "Accounting for Income Taxes," requires the
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recognition of deferred tax assets related to certain temporary differences
between the Company's tax and accounting records and net operating loss
carryforwards to the extent that realization of such benefit is "more likely
than not." In fiscal year 1995, management believed that the Company would
return to profitability and that it was more likely than not that the Company
would be able to generate sufficient taxable income to recognize fully these
assets over the carryforward period. This belief was based upon the Company's
history of prior earnings, the fact that the 1995 losses suffered by the
Company were attributable, in large part, to certain unprofitable operations
which were terminated and the then recent regulatory changes which enhanced
the Company's earnings prospects. During fiscal 1996, given the then current
level of operations, the increased competition and the overall uncertainty as
to the Company's ability to return to profitability, management determined
that the deferred tax benefits did not continue to satisfy the recognition
requirements of SFAS No. 109. Accordingly, based on the uncertainty regarding
the Company's ability to generate future taxable income, the Company
established a valuation allowance for its deferred tax assets. Management
continues to assess the recognition requirements of SFAS No. 109, and, as a
result, there was no income tax benefit recorded for the six-month period
ended August 31, 1996, compared to an income tax benefit of $2.5 million
during the six-month period ended August 31, 1995.
Net loss. The Company incurred a net loss of $2.1 during the six-month
period ended August 31, 1996, compared to a net loss of $9.4 million during
the six-month period ended August 31, 1995.
Liquidity and Capital Resources.
The Company meets its working capital requirements from a combination of
internally generated sources including cash from operations and the sale or
charter of assets no longer utilized in the Company's operations.
The Company requires approximately $9.0 million of cash in order to fund
daily operations. As of August 31, 1996, the Company had approximately $29.4
million in cash and short-term investments available. The Company is heavily
dependant on cash generated from operations to continue to operate as planned
in its existing jurisdictions and to make major capital expenditures. The
Company anticipates that its existing available cash and cash equivalents and
its anticipated cash generated from operations will be sufficient to fund all
of its ongoing operations. To the extent cash generated from operations is
less than anticipated, the Company may be required to curtail certain planned
1997 expenditures or seek other sources of financing. The Company may be
limited in its ability to raise cash through additional financing.
Investing activities of the Company provided $4.5 million of cash proceeds
during the six-month period ended August 31, 1996, compared to the six-month
period ended August 31, 1995 which used $6.8 million. During the six-month
period ended August 31, 1996, $11.4 million of proceeds from the sale of
Diamond Jo" were partially offset by $5.3 million for expenditures for
property and equipment and $2.0 million related to the purchase of certain
lease options in Philadelphia. Cash used in investing activities during the
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six-month period ended August 31, 1995 related primarily to the expenditures
for property and equipment.
During the six-month period ended August 31, 1996, the Company made $0.8
million of principal payments, compared to $3.8 million during the six-month
period ended August 31, 1995.
The Indenture governing the Company's Senior Notes due 2001 (the
"Indenture"), restricts the Company's ability, among other things, to dispose
of or create liens on certain assets, to make certain investments and to pay
dividends. Under the Indenture, the Company has the ability to seek to borrow
additional funds of $14.4 million. The Indenture also provides that the
Company must use cash proceeds from the sale of certain assets within 180 days
to either (i) permanently reduce certain indebtedness or (ii) contract with an
unrelated third party to make investments or capital expenditures or to
acquire long-term tangible assets, in each case, in gaming and related
businesses (provided any such investment is substantially complete in 270
days). The Company intends to utilize all such cash proceeds in accordance
with the Indenture. In the event such cash proceeds are not so utilized, the
Company must make an offer to all holders of Senior Notes to repurchase at par
an aggregate principal amount of Senior Notes equal to the amount by which
such cash proceeds exceeds $5.0 million. As of August 31, 1996, approximately
$3.8 million of excess cash proceeds must be utilized by February 1997. The
Company believes it will utilize all such proceeds within the appropriate time
period.
In the event the Company identifies a potential growth opportunity, project
financing will be required. Capital investments may include all or some of
the following: acquisition and development of land; acquisition of vessels and
lease options on land and other facilities; and construction of vessels and
other facilities in anticipation of the approval of gaming operations in
potential new jurisdictions. In connection with development activities
relating to potential jurisdictions, the Company also makes expenditures for
professional services which are expensed as incurred. The Company's financing
requirements would depend upon actual development costs, the amounts and
timing of such expenditures, the amount of available cash flow from operations
and the availability of other financing arrangements.
In such case, the Company could pursue a number of alternatives to avail
itself of additional capital, including borrowing additional funds either
directly (the Indenture currently permits the Company to borrow up to $14.4
million) or on a stand-alone project basis, financing through lease
agreements, selling equity securities and selling assets (including gaming
vessels) which are not currently generating revenues. The Company may also
consider strategic combinations or alliances. Although there can be no
assurance that the Company can effectuate any of the financing strategies
discussed above, the Company believes that if it determines to seek any
additional licenses to operate gaming in other potential jurisdictions it will
be able to raise sufficient capital to pursue its strategic plan.
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Forward Looking Statements
The statements contained herein include forward-looking statements based on
management's current expectations of the Company's future performance.
Predictions relating to future performance are inherently uncertain and
subject to a number of risks. Consequently, the Company's actual results
could differ materially from the expectations expressed in the preceding
paragraphs. Factors that could cause the Company's actual results to differ
materially from the expected results include, among other things: the
intensely competitive nature of the riverboat and dockside casino gaming
industry; increases in the number of competitors in the markets in which the
Company operates; the seasonality of the riverboat and dockside casino gaming
industry in certain markets in which the Company operates; the susceptibility
of the Company's operating results to floods, adverse weather conditions and
natural disasters; the risk that jurisdictions in which the Company proposes
to operate do not enact legislation permitting riverboat or dockside casino
gaming or do not enact such legislation in a timely manner; changes in
governmental regulations governing the Company's activities and other risks
detailed in the Company's filings with the Securities and Exchange Commission.
Part II. Other Information
Item 1. Legal Proceedings
Information with respect to legal proceedings to which the Company is a
party is disclosed in Note 4 of Notes to Condensed Consolidated Financial
Statements included in Part I of this report and is incorporated herein by
reference.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
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Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual stockholders' meeting on August 22, 1996. The
following matters were voted upon at the meeting:
1. Election of Class I Directors
Votes Cast
-----------------------------
Against or
Name of Director Elected For Withheld
------------------------ ------------- --------------
Karl G. Andren 27,004,439 625
Royal P. Walker, Jr. 26,988,124 9,675
Name of Each Other Director Whose Term of
Office as Director Continues After the Meeting
----------------------------------------------
John E. Connelly
John S. Aylsworth
Terrence L. Wirginis
Floyd R. Ganassi
There were no broker non-votes with regard to the matters voted upon at
the meeting.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On July 30, 1996, the Company filed a Current Report on Form 8-K, dated
July 19, 1996, reporting under Item 5 that the Company had entered into a
letter of intent with Primadonna Resorts, Inc. to sell for $15 million its
leasehold rights to the property leased by The President Riverboat Casino-
Mississippi, Inc., a wholly owned subsidiary of the Company, at the
Broadwater Marina in Biloxi, Mississippi, the current site of the
Company's Biloxi casino operations.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
President Casinos, Inc.
--------------------------
(Registrant)
Date: October 15, 1996 /s/ James A. Zweifel
--------------------------
James A. Zweifel
Duly Authorized Officer and
Principal Financial Officer
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EXHIBIT INDEX
---------------
EXHIBIT NO.
10.1 Asset Acquisition Agreement dated July 30, 1996, by and between
President Riverboat Casino-New York, Inc. and Greater Dubuque
Riverboat Entertainment Company, L.C.
10.2 First Amendment to Lease Agreement dated July 31, 1996, by and
between President Riverboat Casino-Philadelphia, Inc. and Liberty
Landing Associates.
10.3 Second Amendment to Lease Agreement dated July 31, 1996, by and
between President Riverboat Casino-Philadelphia, Inc. and Liberty
Landing Associates.
10.4 First Amendment to Corporate Guaranty dated July 31, 1996 by
President Casinos, Inc.
10.5 Option Agreement dated July 31, 1996, by and between Liberty Landing
Associates and President Riverboat Casino-Philadelphia, Inc.
27 Financial Data Schedule.
19
ASSET ACQUISITION AGREEMENT
July 30, 1996
The parties to this Agreement are PRESIDENT RIVERBOAT CASINO - NEW YORK,
INC., a Delaware corporation (the "Seller") and GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C., an Iowa limited liability company (the "Buyer").
Seller is the owner of the United States Flag Excursion Vessels named "The
President/Missouri," built in 1991, official number 973800 and "The President
Casino/Missouri II," built in 1991, official number 973801 (the "Vessel").
Buyer, as charterer, has been in sole and exclusive possession of the Vessel
since the Closing Date (the "Charter Agreement Closing Date") pursuant to that
certain Charter Agreement, dated as of August 18, 1995, by and between Buyer
and Seller and as amended on September 12, 1995 (the "Charter Agreement").
Pursuant to the terms of the Charter Agreement, Buyer was granted the option
to acquire the Vessel and certain assets relating to the Vessel on the terms
and conditions contained herein, and Buyer has duly notified Seller of its
election to exercise such option. Seller desires to sell the Vessel and
certain assets relating to the Vessel to Buyer, and Buyer desires to purchase
the Vessel and those assets, on the terms and conditions contained in this
Agreement. All capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to them in the Charter Agreement.
Accordingly, the parties hereto, intending to be legally bound hereby, agree
as follows:
1. Sale and Purchase of Assets.
1.1 Sale of Assets to Buyer. At the Closing referred to in Section 3,
Seller shall sell and assign to Buyer, and Buyer shall purchase and acquire
from Seller, the Vessel and certain of the assets of Seller used by Buyer,
pursuant to the terms of the Charter Agreement, in connection with the
operation of the Vessel. Except as otherwise provided in Section 1.2, the
assets to be sold and assigned hereunder (collectively, the "Acquired Assets")
include all of Seller's right, title and interest in and to the following:
(a) The Vessel;
(b) All fixtures, furniture, equipment, supplies and other items
of tangible personal property, other than the Excluded Equipment and the
Gaming Equipment, used in connection with the operation of the Vessel in
accordance with the terms of the Charter Agreement and listed on Schedule 1(d)
to the Charter Agreement (the "Equipment"), which schedule is affixed hereto
as Schedule 1.1(b);
(c) All improvements to the Vessel;
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(d) All rights under manufacturers and vendor's warranties
relating to items otherwise included in the Acquired Assets and all similar
rights against third parties relating to items otherwise included in the
Acquired Assets, if any; and
(e) All permits, licenses, certificates, approvals and notices of
inspection in affect at the time of the Closing related to the operation of
Vessel, to the extent such are owned by Charterer.
1.2 Books and Records. Seller shall make available to Buyer, all of
its books, ledgers, files, logs and other records and data principally related
to the marine operation of the Vessel, including but not limited to, technical
information and engineering data, which documents Buyer shall have the right
to photocopy.
1.3 Excluded Assets. The Acquired Assets expressly to not include the
following:
(a) The assets listed on Schedule 1(e) to the Charter Agreement;
(b) The Gaming Equipment (as defined in the Charter Agreement);
and
(c) Any lease, commitment, or other agreement as to which Buyer
does not specifically assume any obligation or liability pursuant to Section
2(c).
1.4 Assumption of Liabilities. As expressly provided in Section 2(c),
from and after the Closing Date, Buyer shall assume, and shall have liability
for, any liabilities or obligations in connection with, arising out of or
related to the Acquired Assets. Buyer shall pay, perform, and discharge all
the liabilities and obligations described in Section 2(c) and Buyer shall, in
accordance with the provisions of Section 12.2, indemnify and hold Seller
harmless from and against any loss, liability, damage, or expense (including
reasonable attorneys' fees) arising out of Buyer's failure to pay, perform, or
discharge any of those liabilities and obligations.
2. Purchase Price. As full consideration for the Acquired Assets, at the
Closing Buyer shall:
(a) Pay to Seller, by wire transfer of immediately available
funds, a sum equal to the total due set forth on Exhibit "A" which with the
Initial Payment Amount set forth in Section 1(a) of the Charter Agreement
(that is identified in the Purchase Option Schedule as the Down Payment and is
released pursuant to Section 2(b) hereof) and amounts due under Subsection
2(c) hereof shall be the entire amount due to Seller by Buyer;
(b) Execute a release granting Seller the right to retain the
Initial Payment; and
(c) Assume, and agree to pay, perform, and discharge (i) all of
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<PAGE>
Seller's liabilities and obligations under any leases, commitments, and other
agreements included in the Acquired Assets and (ii) all other liabilities and
obligations (other than those arising as a result of any Consensual Lien on
the Acquired Assets, to the extent, and only to the extent, such Consensual
Liens relate to the period prior to the Closing Date), of whatever kind or
nature, arising out of or directly or indirectly related to the Acquired
Assets or the use and operation thereof, whether direct or indirect, known or
unknown, contingent or not contingent or matured or not matured, in each case,
to the extent, and only to the extent, such liabilities and obligations relate
to the period after the Charter Agreement Closing Date pursuant to the terms
of the Charter Agreement (the "Post Delivery Period").
3. Closing. The Closing of the transactions contemplated hereby
("Closing") shall take place at the offices of Klehr, Harrison, Harvey,
Branzburg & Ellers, 1401 Walnut Street, Philadelphia, Pennsylvania 19102 (or
at such other place as the parties may agree upon in writing) on such date
within one hundred twenty (120) days after the execution of this Agreement, as
the parties shall mutually agree upon. The date on which the Closing is held
is referred to in this Agreement as the "Closing Date." At the Closing, the
parties shall execute and deliver the documents and take the actions described
in Section 10 hereof.
4. Representations of Seller. Seller hereby represents, warrants, and
agrees as follows:
4.1 Organization and Authority. Seller is a corporation duly
organized, validly existing in good standing under the laws of the
jurisdiction in which it is incorporated and has the full corporate power and
authority to enter into and to perform this Agreement and to carry on its
business as it is presently being conducted.
4.2 Authorization of Agreement. The execution, delivery, and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general and subject to
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4.3 Conflicts; Consents of Third Parties. Subject to the receipt of
consents and approvals set forth on Schedule 4.3, the execution, delivery, and
performance of this Agreement by Seller will not (i) conflict with the
certificate of incorporation or bylaws of Seller and will not conflict with,
or result in the breach or termination of, or constitute a default under, any
lease, charter, agreement, commitment, or other instrument, or any order,
judgment, decree, injunction, regulation or ruling of any governmental
authority or regulatory organization, domestic or foreign, to which Seller is
a party or by which it is bound or to which any of the Acquired Assets is
subject; (ii) constitute a violation by Seller of any law or regulation
applicable o it or to the Acquired Assets; or (iii) result in the creation of
3
<PAGE>
any lien, claim, charge, encumbrance, or other restriction of any kind or
character ("Lien") upon any of the Acquired Assets, other than Liens caused
by, or directly or indirectly arising as a result of (x) any action or
inaction on the part of Buyer or (y) Buyer's operations or Buyer's possession
of the Acquired Assets. Except as set forth on Schedule 4.3 or as otherwise
expressly contemplated by this Agreement, no consent, approval, or
authorization of, or designation, declaration or filing with, any governmental
authority is required on the part of the Seller in connection with the
execution, delivery, and performance of this Agreement.
4.4 Title to Acquired Assets; Encumbrances. On the Closing Date Buyer
will receive good, valid, and marketable title to all the Acquired Assets,
free and clear of any Liens, other than Liens caused by, or directly or
indirectly arising as a result of (i) any action or inaction on the part of
Buyer or (ii) Buyer's operations or Buyer's possession of the Acquired Assets.
4.5 Broker's or Finder's Fees. Coastal Marine has acted as the sole
broker on behalf of Seller in connection with the transactions contemplated by
this Agreement and the Charter Agreement and all broker's fees to which the
Coastal Marine is entitled on account hereof and thereof have been paid in
full by Seller.
5. Representations of the Buyer. Buyer represents, warrants, and agrees as
follows:
5.1 Organization Authority. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction in
which it is incorporated and has the full corporate power and authority to
enter into and to perform this Agreement and to carry on its business as it is
presently being conducted.
5.2 Authorization of Agreement. The execution, delivery, and
performance of this Agreement by Buyer have been duly authorized by all
necessary corporate action of Buyer and this Agreement constitutes the valid
and binding obligation of Buyer enforceable against it and in accordance with
its terms, except as may be limited by bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law).
5.3 Conflict; Consents of Third Parties. The execution, delivery, and
performance of this Agreement by Buyer will not (i) conflict with the Articles
of Organization or Operating Agreement of Buyer and will not conflict with, or
result in the breach or termination of, or constitute a default under, any
lease, charter, agreement, commitment, or other instrument, or any order,
judgment, decree, injunction, regulation or ruling of any governmental
authority or regulatory organization, domestic or foreign, to which Buyer is a
party or by which it is bound or to which any of its assets is subject; or
(ii) constitute a violation by Buyer of any law or regulation applicable to
Buyer. Except as set forth on Schedule 5.3 or as otherwise expressly
contemplated by this Agreement, no consent, approval, or authorization of, or
4
<PAGE>
designation, declaration or filing with, any governmental authority is
required on the part of Buyer in connection with the execution, delivery, and
performance of this Agreement.
5.4 Broker's or Finder's Fees. No agent, broker, person, or firm
acting on behalf of Buyer is, or will be, entitled to any commission or
broker's or finder's fee from either of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated hereby.
5.5 Control of Vessel. Buyer acknowledges that subject to the terms of
the Charter Agreement it has had, since the Charter Agreement Closing Date,
complete and sole control over the use and operation of the Vessel and the
other assets included in the Acquired Assets. As a result, Buyer is in the
best possible position to evaluate and inspect the condition of the Acquired
Assets and, in that regard, Buyer has had the full and complete opportunity to
inspect and evaluate the condition of the Acquired Assets. Buyer acknowledges
that it has independently evaluated the Acquired Assets and the liabilities
and obligations to be assumed by it hereunder and acknowledges and confirms
that it has determined to enter into this Agreement and to consummate the
transactions contemplated hereby based solely upon such evaluations and
criteria as it has independently deemed appropriate. Buyer has not relied
upon, and is not entering into this transaction in consideration of, any
information, written or oral, given to Buyer by Seller or any representative
or agent of Seller.
6. No Representation or Warranty Other than as Expressly Set Forth Herein.
Except for the representations and warranties expressly set forth in Section 4
above, no representations or warranties, expressed or implied, are, or have
been, made by Seller or anyone acting on behalf of Seller. In particular,
without in any way limiting the generality of the foregoing, Seller is not
making any representation or warranty regarding the condition of the Vessel or
any of the other assets included in the Acquired Assets. The Acquired Assets
are being sold "as is," "where is," and without recourse to or warranty by
Seller.
7. Status of Vessel During the Period Beginning on the Date of this
Agreement and Ending on the Closing Date. During the period beginning on the
date of this Agreement and ending on the Closing Date, the Vessel and the
other assets included in the Acquired Assets shall continue to be subject to
the terms and conditions of the Charter Agreement and the Buyer shall continue
to be bound by all of its obligations thereunder, including, without
limitation, the obligation to continue to pay Charter Hire to maintain and
repair the Vessel and the other assets included in the Acquired Assets and to
maintain insurance, all as more particularly set forth in the Charter
Agreement.
8. Conditions to Buyer's Obligations. The obligations of Buyer to
consummate the purchase of the Acquired Assets in accordance with the terms
hereof are subject to the satisfaction, on or before the Closing Date, of the
following conditions (any of which may be waived in writing by Buyer):
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8.1 Truth of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement (including any Schedule
delivered pursuant hereto) shall be true and correct in all material respects
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
8.2 Performance of Agreements. Each and all of the agreements of
Seller to be performed on or before the Closing Date pursuant to the terms
hereof shall be duly performed in all material respects.
8.3 No Litigation Threatened. No injunction or restraining order shall
be in effect and no action or proceeding shall have been instituted or, to the
best of Seller's knowledge, shall have been threatened before a court or other
governmental body, or by any public authority, to restrain or prohibit any of
the transactions contemplated hereby.
8.4 Governmental Approvals. All federal, state, and local governmental
consents, approvals, and other actions, if any, necessary to permit the
consummation of the transactions contemplated by this Agreement shall have
been received or taken.
8.5 Consents. Seller shall have received, without any conditions
adverse to Buyer, all consents and approvals listed in Schedules 4.3.
8.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Buyer and its
counsel, and Buyer shall have received copies of all such documents and all
other evidence as Buyer or its counsel may reasonably request in order to
establish the consummation of such transactions and the taking of all
appropriate proceedings in connection therewith.
8.7 Officer Certificate. Buyer shall have been furnished with a
certificate of an executive officer of the Seller dated the Closing Date in
form and substance reasonably satisfactory to Buyer certifying the fulfillment
of the conditions set forth in Sections 8.1, 8.2, 8.3, 8.4, and 8.5.
9. Conditions to the Seller's Obligations. The obligation of Seller to
consummate the sale of the Acquired Assets is subject to the satisfaction, on
or before the Closing Date, of the following conditions (any of which may be
waived in writing by Seller);
9.1 Truth of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement (including any Schedule
delivered pursuant hereto) shall be true and correct in all respects on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
9.2 Performance of Agreements. Each and all of the agreements of Buyer
to be performed on or before the Closing Date pursuant to the terms hereof
shall have been duly performed in all material respects.
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9.3 No Litigation Threatened. No injunction or restraining order shall
be in effect and no action or proceeding shall have been instituted or, to the
best of Buyer's knowledge, shall have been threatened before a court or other
governmental body, or by any public authority, to restrain or prohibit any of
the transactions contemplated hereby.
9.4 Governmental Approvals. All federal, state, and local governmental
consents and approvals, if any, necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been received.
9.5 Consents. Buyer shall have received, without any conditions
adverse to Seller, all consents and approvals listed on Schedule 5.3.
9.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Seller and its
counsel and Seller shall have received copies of all of such documents and all
other evidence as Seller or its counsel may reasonably request in order to
establish the consummation of transactions and the taking of all appropriate
proceedings in connection therewith.
9.7 Officer's Certificate. Seller shall have been furnished with a
certificate of an executive officer of Buyer dated the Closing Date in a form
and substance reasonably satisfactory to Seller certifying to the fulfillment
of the conditions set forth in Sections 9.1, 9.2, 9.3, 9.4 and 9.5.
10. Transactions at Closing.
10.1 Documents to be Delivered and Actions to be Taken by Seller. At
the Closing, Seller shall deliver to Buyer the following:
(a) Such bills of sale, assignments, or other instruments of
transfer and conveyance, and such estoppel certificates, termination letters,
UCC-3 termination statements and other instruments evidencing the satisfaction
of Liens, if any, all in form and substance satisfactory to Buyer and its
counsel, as shall be effective to vest in Buyer good, valid, and marketable
title to the Acquired Assets, free and clear of any Liens, other than Liens
caused by or directly or indirectly arising out of (i) any action or inaction
on the part of Buyer or (ii) Buyer's operations or Buyer's possession of the
Acquired Assets;
(b) A copy of resolutions of Seller authorizing the execution,
delivery, and performance of this Agreement by Seller and a certificate of the
secretary or assistant secretary of Seller dated the Closing Date certifying
that such resolutions were duly adopted, are in full force and effect, and
have not been amended or modified; and
(c) Copies of any required consents and approvals.
7
<PAGE>
In addition, on or as soon as practicable after the Closing Date, Seller
shall deliver to Buyer any of the assets included in the Acquired Assets which
are not then in Buyer's possession.
10.2 Documents to be Delivered and Actions to be Taken by Buyer. At the
Closing, Buyer shall deliver to Seller the following:
(a) A wire transfer of funds in the amount provided in Section
2(a);
(b) The release described in Section 2(b);
(c) Such instruments, in form and substance reasonably
satisfactory to Seller and its counsel, as Seller shall reasonably request to
legally effect Buyer's assumption of the obligations and liabilities to be
assumed by Buyer pursuant to Section 2(c); and
(d) A copy of resolutions of Buyer authorizing the execution,
delivery, and performance of this Agreement by Buyer and a certificate of the
secretary or assistant secretary of Buyer dated the Closing Date certifying
that such resolutions were duly adopted, are in full force and effect, and
have not been amended or modified.
11. Risk of Loss. At all times after the Charter Agreement Closing Date,
including, without limitation, the period following execution of this
Agreement, the risk of loss or damage to any of the Acquired Assets shall be
on the Buyer. In the event of such loss or damage occurring after the
execution of this Agreement, Buyer shall be obligated to complete the Closing
hereunder and shall be entitled to retain the insurance proceeds paid or to be
paid with respect to such damage or loss in accordance with the terms of the
insurance policies maintained by Buyer in accordance with the terms of the
Charter Agreement.
12. Survival of Representation; Indemnification.
12.1 Survival of Representations. The respective representations and
warranties of Seller and Buyer contained in this Agreement and in any Schedule
delivered pursuant hereto shall survive the sale and purchase of the Acquired
Assets contemplated hereby for a period of twenty-one (21) months from the
Closing Date, notwithstanding any investigation made by or on behalf of the
other party, and shall not be considered waived by consummation of the
transactions contemplated by this Agreement regardless of knowledge of the
misrepresentation or breach of warranty; provided, however, the
representations and warranties contained in Section 4.4 shall survive for the
applicable statute of limitations period.
12.2 Indemnification.
(a) Seller agrees to indemnify and hold Buyer and its officers,
directors, employees, shareholders, and agents (collectively, "Affiliates")
harmless from and against all damages, losses or expenses (including
8
<PAGE>
reasonable attorneys' fees), judgments, and cost of settlement (collectively,
"Losses") suffered or incurred by Buyer or its Affiliates as the result of any
and all claims, demands, suits, causes of action, proceedings, judgments and
liabilities, assessed, incurred, or sustained by or against any of them
(collectively, "Claims") with respect to or arising out of (i) the failure of
any representation or warranty made by Seller in this Agreement to be true and
correct in all material respects as of the date of this Agreement and as of
the Closing Date, (ii) any Losses incurred by Buyer in connection with the
breach by Seller of any of its covenants or agreements contained herein, or
(iii) any other Losses incurred by Buyer arising from or related to
liabilities asserted in respect of the Acquired Assets insofar as, and only to
the extent that, such liabilities were incurred or arose prior to the Post
Delivery Period.
(b) Buyer agrees to indemnify and hold Seller and its Affiliates
harmless from and against all Losses suffered or incurred by Seller or its
Affiliates as a result of any and all Claims with respect to or arising out of
(i) the failure of any representation or warranty made by Buyer in this
Agreement to be true and correct in all respects as of the date of this
Agreement and as of the Closing Date, (ii) any Losses incurred by Seller in
connection with a breach by Buyer of any of its covenants or agreements
contained herein, including without limitation its covenants set forth in
Section 2(c), or iii) any other Losses incurred by Seller arising from or
related to liabilities asserted in respect of the Acquired Assets, insofar as,
and only to the extent that, such liabilities were incurred or arose after the
commencement of the Post Delivery Period or which otherwise relate to, or are
a result of, actions or inactions taken by Buyer.
(c) The party entitled to be indemnified hereunder shall be
entitled to control the defense of any such claim with counsel reasonably
acceptable to the indemnifying party; provided, however, that such
indemnifying party shall not be required to pay any amounts incurred in
settlement of any claim unless it shall have consented to such settlement
(such consent not to be unreasonably withheld). The party entitled to be
indemnified hereunder shall give the indemnifying party prompt notice of any
claim, provided that failure to give such notice shall not relieve the
indemnifying party of its obligation to indemnify hereunder except to the
extent such indemnifying party is actually prejudiced thereby. The
indemnifying party and the party entitled to be indemnified hereunder shall
provide each other with reasonable cooperation in the event of any claim.
(d) If any party determines that it is entitled to be indemnified
pursuant to the provisions of this Section 12.2, such party shall promptly
notify the party from whom indemnification is sought in writing specifying the
basis on which such indemnification is sought and the amount of the asserted
claim.
(e) The parties respective obligations to indemnify and hold
harmless pursuant to this Section 12.2 shall survive the consummation of
transactions contemplated by this Agreement and shall not be affected by any
investigation made by or on behalf of the parties entitled to indemnification
9
<PAGE>
hereunder.
13. Miscellaneous.
13.1 Governing Law; Jurisdiction. The admiralty and maritime laws of
the United States, and to the extent applicable and not inconsistent
therewith, the laws of the State of Iowa shall govern the construction,
interpretation, performance, and enforcement of this Agreement.
13.2 Captions. The captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
13.3 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective legal and
financial advisors.
13.4 Notices. Any notice or other communications required or permitted
hereunder shall be considered given when delivered, if delivered in person, or
on the earlier of receipt or two days following dispatch, if sent by
facsimile, mailed by registered or certified mail, postage pre-paid, or sent
by recognized overnight delivery service addressed as follows:
If to Buyer:
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT
COMPANY, L.C.
400 E. 3rd Street
P.O. Box 1683
Dubuque, Iowa 52001
Attention: Manager
Facsimile: (319) 583-7516
With copy to:
Brown, Winick, Graves, Gross, Baskerville,
Schoenebaum and Walker, P.L.C.
Suite 1100 Two Ruan Center
601 Locust Street
Des Moines, Iowa 50309
Attention: Douglas E. Gross
Facsimile: (515) 283-0231
If to Seller:
PRESIDENT RIVERBOAT CASINO-NEW YORK, INC.
c/o President Riverboat Casinos, Inc.
802 North First Street
St. Louis, Missouri 63102
Attention: President
Facsimile: (314) 622-3049
10
<PAGE>
With copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, Pennsylvania 19102
Attention: Michael C. Forman
Facsimile: (215) 568-6603
13.5 Parties in Interest. The parties may only sell, assign,
hypothecate, mortgage or pledge any of their rights under this Agreement in
accordance with the provisions of Section 25(e) of the Charter Agreement.
13.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
13.7 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
13.8 Amendments. This Agreement may not be changed orally, but only by
an Agreement in writing signed by the parties hereto.
13.9 Severability. In case any provision in this Agreement shall be
held invalid, illegal, or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
13.10 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto and those persons otherwise
expressly provided herein.
13.11 Sales Tax. Buyer shall pay any and all state and local sales and
use taxes payable in connection with the sale, transfer, and assignment of the
Acquired Assets.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PRESIDENT RIVERBOAT CASINO-NEW
YORK, INC.
By:___________________________________
Name:
Title:
GREATER DUBUQUE RIVERBOAT
ENTERTAINMENT COMPANY, L.C.
11
<PAGE>
By:___________________________________
Name:
Title:
12
FIRST AMENDMENT TO LEASE AGREEMENT
__________________________________
This First Amendment to Lease Agreement dated this 31st day of July, 1996,
by and between President Riverboat Casino-Philadelphia, Inc., a Pennsylvania
corporation ("Tenant"), and Liberty Landing Associates, a Pennsylvania general
partnership ("Landlord").
WITNESSETH:
WHEREAS, Landlord and Tenant have entered into that certain Lease Agreement
dated December 14, 1993 (the "Lease Agreement"), which Lease Agreement sets
forth the terms and conditions of Tenant's leasing of Landlord's real property
situate in Philadelphia, Pennsylvania (said real property being more fully
described in Exhibit "A" attached hereto and made a part hereof, and said real
property being hereinafter called the "Premises"); and
WHEREAS, the "Preliminary Term" of the Lease Agreement is currently in
effect, and the Preliminary Term will, by the current terms of the Lease
Agreement, expire at midnight on December 31, 1996; and
WHEREAS, Landlord and Tenant desire to extend the "Preliminary Term"
of the Lease Agreement for a period of up to a maximum of three (3) years
commencing on January 1, 1997 and terminating on December 31, 1999, in
accordance with the terms and conditions as hereinafter set forth; and
WHEREAS, Landlord (as Optionor) and Tenant (as Optionee) are concurrently
herewith entering into an Option Agreement dated of even date herewith (the
"Option Agreement"), which Option Agreement (i) grants to Tenant (as Optionee)
the right to amend the Lease Agreement such that the terms and conditions of
the Second Amendment to Lease Agreement shall be effective upon Tenant's
exercise of the Option Agreement; and (ii) is for an initial term commencing
on the date hereof and expiring on December 1, 1999, provided that such option
Term has been continued by Tenant (as Optionee) in accordance with the terms
of Paragraph 5 of the Option Agreement. Pursuant to the terms of the Option
Agreement, if Tenant (as Optionee) exercises its option to amend the Lease
Agreement, then the Second Amendment to Lease Agreement (as agreed to by
Landlord and Tenant as of the date hereof) shall thereafter be effective to
amend, restate, supersede and replace the terms and conditions of the Lease
1
<PAGE>
Agreement and the terms and conditions of this First Amendment to Lease
Agreement.
NOW, THEREFORE, in consideration of the Landlord (as Optionor) and the
Tenant (as Optionee) entering into the Option Agreement and the consideration
and payments referenced therein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, covenant and agree as follows:
1. Unless otherwise specifically noted herein, all capitalized terms not
defined herein shall have the same definition and meaning as under the
Lease Agreement.
2. The Tenant shall have the right to continue the Preliminary Term of the
Lease Agreement for up to a maximum of five (5) successive additional
periods as hereinafter described. The Tenant's continuation of the
Preliminary Term shall be made concurrently with the Tenant's (as
Optionee) exercise of its right to continue the Term (as defined in the
Option Agreement) of the Option (as defined in the Option Agreement) in
accordance with the terms of Paragraph 5 of the Option Agreement. If
Tenant does not exercise its right to continue the Preliminary Term of
the Lease Agreement through the "First Preliminary Term Extension" (as
hereinafter defined), then the Preliminary Term of the Lease Agreement
shall expire on December 31, 1996. In order to continue the Preliminary
Term of the Lease Agreement for the First Preliminary Term Extension (as
hereinafter defined), Tenant must exercise its right to continue the
Preliminary Term for the First Preliminary Term Extension, in writing, on
or before December 1, 1996.
a. The first of such continuations of the Preliminary Term beyond the
December 31, 1996 termination date of the Lease Agreement shall be a
continuation of the Preliminary Term for a period of one (1) year commencing
on January 1, 1997 and expiring on December 31, 1997 (the "First Preliminary
Term Extension"). If Tenant elects to exercise its right to continue the
Preliminary Term for the First Preliminary Term Extension, such continuation
by Tenant must occur on or before December 1, 1996.
b. The second of such continuations of the Preliminary Term shall be
a continuation of the Preliminary Term for a period of six (6) months
commencing upon the expiration of the First Preliminary Term Extension (the
"Second Preliminary Term Extension"). In order to continue the Preliminary
Term for the Second Preliminary Term Extension, Tenant must exercise the
continuation of the Preliminary Term for the Second Preliminary Term
Extension, in writing, no later than thirty (30) days prior to the expiration
of the First Preliminary Term Extension.
c. The third of such continuations of the Preliminary Term shall be a
continuation of the Preliminary Term for a period of six (6) months commencing
upon the expiration of the Second Preliminary Terms Extension (the "Third
Preliminary Term Extension"). In order to continue the Preliminary Term for
the Third Preliminary Term Extension, Tenant must exercise the continuation of
2
<PAGE>
the Preliminary Term for the Third Preliminary Term Extension, in writing, no
later than thirty (30) days prior to the expiration of the Second Preliminary
Term Extension.
d. The fourth of such continuations of the Preliminary Term shall be
a continuation of the Preliminary Term for a period of six (6) months
commencing upon the expiration of the Third Preliminary Term Extension (the
"Fourth Preliminary Term Extension"). In order to continue the Preliminary
Term for the Fourth Preliminary Term Extension, Tenant must exercise the
continuation of the Preliminary Term for the Fourth Preliminary Term
Extension, in writing, no later than thirty (30) days prior to the expiration
of the Third Preliminary Term Extension.
e. The fifth of such continuations of the Preliminary Term shall be a
continuation of the Preliminary Term for a period of six (6) months commencing
upon the expiration of the Fourth Preliminary Term Extension (the "Fifth
Preliminary Term Extension"). In order to continue the Preliminary Term for
the Fifth Preliminary Term Extension, Tenant must exercise the continuation of
the Preliminary Term for the Fifth Preliminary Term Extension, in writing, no
later than thirty (30) days prior to the expiration of the Fourth Preliminary
Term Extension.
f. The First Preliminary Term Extension, the Second Preliminary Term
Extension, the Third Preliminary Term Extension, the Fourth Preliminary Term
Extension, and the Fifth Preliminary Term Extension are collectively called
the "Preliminary Term Extension Periods".
g. Notwithstanding any provision to the contrary set forth elsewhere
in the Lease Agreement, Tenant shall not be deemed to have failed timely to
have given notice to Landlord with respect to Tenant's continuation of the
Preliminary Term of the Lease for any of the Preliminary Term Extension
Periods unless Landlord shall have given to Tenant written notice ("Reminder
Notice") that the last date by which Tenant is permitted to give to Landlord a
notice to continue the Preliminary Term of the Lease for the next of the
Preliminary Term Extension Periods has passed without such notice having been
given, and unless Tenant thereafter fails to give to Landlord the notice of
the continuation of the Preliminary Term of the Lease for the next of the
Preliminary Term Extension Periods within ten (10) days after the date on
which Landlord has given the Reminder Notice to Tenant.
3. The Tenant's right to continue the Preliminary Term as set forth in
Paragraph 2 hereinabove may be exercised by Tenant at any time during any
of the "Preliminary Term Extension Periods" (as defined in Paragraph 2
hereof) by depositing in the United States mail, certified mail, postage
prepaid, a written notice to Landlord notifying it of Tenant's exercise of
its right to continue the Preliminary Term. Such notice shall be
addressed to Landlord at the following addresses:
3
<PAGE>
The Sheet Metal Workers Delaware Avenue Development Corp.
International Association c/o Mr. Mark Mendelson
Local Union #19 541 Hamilton Street
c/o Mr. Thomas J. Kelly Allentown, PA 18101
President and Business Manager
301 South Columbus Blvd. Delaware-Washington Corp.
Philadelphia, PA 19147 c/o Mr. Thomas J. Kelly
1301 South Columbus Boulevard
Liberty Landing Associates Philadelphia, PA 19147
c/o Mr. Thomas J. Kelly and
Mr. Mark Mendelson
1301 South Columbus Boulevard
Philadelphia, PA 19147
or such other then existing address as Landlord may hereafter notify Tenant in
writing (such notice from Landlord regarding a change of address shall
specifically refer to this First Amendment to Lease Agreement). The Tenant's
notice of its exercise of the Tenant's right to continue the Preliminary Term
may be contained in the same notice which is given by Tenant (as Optionee) to
Landlord (as Optionor) regarding Tenant's continuation of the Term of the
Option in accordance with the terms of Paragraph 5 of the Option Agreement.
4. Except as expressly amended hereby, the Lease Agreement remains in full
force and effect in accordance with its terms.
4
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have set their hands and seals as of the day and year first above written.
ATTEST: LANDLORD:
LIBERTY LANDING ASSOCIATES
By: Delaware Avenue Development Corporation,
Partner
/s/ Mark Mendelson BY: /s/ Mark Mendelson
- ------------------- ------------------------------
ITS: Pres.
------------------------------
By: Delaware-Washington Corporation - Partner
/s/ Thomas J. Kelly BY: /s/ Thomas J. Kelly
- -------------------- -------------------------------
ITS: President
-------------------------------
ATTEST: TENANT:
PRESIDENT RIVERBOAT CASINO-PHILADELPHIA, INC.
BY: /s/ James A Zweifel BY: /s/ John S. Aylsworth
------------------- --------------------------------
ITS: C.O.O.
--------------------------------
5
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF Philadelphia )
On July 31, 1996, Before me, a Notary Public in and for said County and State,
personally appeared Mark Mendelson, known to me or satisfactorily proven to be
the President of Delaware Avenue Development Corporation, and who acknowledged
that he, as such President executed the foregoing Second Amendment to Lease
Agreement for the purposes therein contained.
/s/ Mary Ann McMasters
_______________________________________
Notary Public
6
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF Philadelphia )
On July 31, 1996, Before me, a Notary Public in and for said County and State,
personally appeared Thoams J. Kelly, known to me or satisfactorily proven to
be the President of Delaware-Washington Corporation, and who acknowledged that
he, as such President executed the foregoing Second Amendment to Lease
Agreement for the purposes therein contained.
/s/ Mary Ann McMasters
_______________________________________
Notary Public
7
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF Philadelphia )
On July 31, 1996, Before me, a Notary Public in and for said County and State,
personally appeared John S. Aylsworth, known to me or satisfactorily proven to
be the C.O.O. of President Riverboat Casino-Philadelphia, Inc., and who
acknowledged that he, as such C.O.O. executed the foregoing Second Amendment
to Lease Agreement for the purposes therein contained.
/s/ Mary Ann McMasters
_______________________________________
Notary Public
8
<PAGE>
MEMORANDUM OF FIRST AMENDMENT TO LEASE
----------------------------------------
THIS MEMORANDUM OF FIRST AMENDMENT TO LEASE is made as of the 31st day of
July, 1996, by and between LIBERTY LANDING ASSOCIATES, a Pennsylvania general
partnership ("Landlord") and PRESIDENT RIVERBOAT CASINO-PHILADELPHIA, INC., a
Pennsylvania corporation ("Tenant"), pursuant to Section 2 of the Act of June
2, 1959, P.L. 454, 21 P.S. Section 405, et seq., and is a memorandum of the
First Amendment to Lease Agreement dated July 31, 1996, (the "First
Amendment"), which First Amendment amends a Lease Agreement dated December 14,
1993 (the "Lease") between Landlord, as lessor, and Tenant, as lessee. As
required by the aforesaid statute, the following additional information is
hereby provided with respect to the Lease and the First Amendment:
1. The name and address of the Landlord set forth in the Lease is:
Liberty Landing Associates
c/o Sheet Metal Workers' Association Local Union No. 19
1301 S. Delaware Avenue
Philadelphia, PA 19147
2. The name and address of the Tenant set forth in the Lease is:
President Riverboat Casino-Philadelphia, Inc.
c/o President Casinos, Inc.
802 N. First Street
St. Louis, MO 63102
Attention: John Aylsworth,
Chief Operating Officer
3. The date of the Lease is December 14, 1993.
4. The date of the First Amendment to Lease Agreement is July 31, 1996.
5. The description of the demised premises which is the subject of the Lease
and the First Amendment is as follows:
The "Premises" shall mean all that certain lot or piece of ground
situate in the 1st Ward of the City of Philadelphia described
according to a Survey and Plan of Property made for Sheet Metal
Workers Local No. 19 by William E. Barton, Land Surveyor, No.
786A dated September 9, 1993, last revised September 28, 1993,
as more fully described by metes and bounds on Exhibit "A"
attached hereto and made a part hereof, together with all buildings
and other improvements situate thereon as of the date of this Lease
Agreement (including, without limitation, the pier structures now
situate thereon), and together with all appurtenances thereto
(including, without limitation, the easements appurtenant thereto
granted and created by that certain Cross Easement Agreement
dated the 25th day of September, 1989, as recorded in the
9
<PAGE>
Department of Records in and for the city of Philadelphia in Deed
Book FHS 1540, at page 321 on January 22, 1990 and the
easements appurtenant thereto granted and created by that certain
Easement Agreement dated as of the 14th day of December, 1993
and recorded in the Department of Records in and for the city of
Philadelphia, at Deed Book VCS 548, Page 509, on December 29,
1993), and all other easements, rights of way and other rights and
benefits relating to the aforesaid tract or piece of land.
6. Pursuant to the terms of the First Amendment, Tenant has the right to
continue the Preliminary Term of the Lease in the following manner:
The Tenant shall have the right to continue the Preliminary Term of the
Lease for up to a maximum of five (5) successive additional periods as
hereinafter described. If Tenant does not exercise its right to continue the
Preliminary Term of the Lease through the "First Preliminary Term Extension"
(as hereinafter defined), then the Preliminary Term of the Lease shall expire
on December 31, 1996. In order to continue the Preliminary Term of the Lease
for the First Preliminary Term Extension (as hereinafter defined), Tenant must
exercise its right to continue the Preliminary Term for the First Preliminary
Term Extension, in writing, on or before December 1, 1996.
a. The first of such continuations of the Preliminary Term beyond the
December 31, 1996 termination date of the Lease shall be a continuation of the
Preliminary Term for a period of one (1) year commencing on January 1, 1997
and expiring on December 31, 1997 (the "First Preliminary Term Extension").
If Tenant elects to exercise its right to continue the Preliminary Term for
the First Preliminary Term Extension, such continuation by Tenant must occur
on or before December 1, 1996.
b. The second of such continuations of the Preliminary Term shall be a
continuation of the Preliminary Term for a period of six (6) months commencing
upon the expiration of the First Preliminary Term Extension (the "Second
Preliminary Term Extension"). In order to continue the Preliminary Term for
the Second Preliminary Term Extension, Tenant must exercise the continuation
of the Preliminary Term for the Second Preliminary Term Extension, in writing,
no later than thirty (30) days prior to the expiration of the First
Preliminary Term Extension.
c. The third of such continuations of the Preliminary Term shall be a
continuation of the Preliminary Term for a period of six (6) months commencing
upon the expiration of the Second Preliminary Terms Extension (the "Third
Preliminary Term Extension"). In order to continue the Preliminary Term for
the Third Preliminary Term Extension, Tenant must exercise the continuation of
the Preliminary Term for the Third Preliminary Term Extension, in writing, no
later than thirty (30) days prior to the expiration of the Second Preliminary
Term Extension.
d. The fourth of such continuations of the Preliminary Term shall be a
continuation of the Preliminary Term for a period of six (6) months commencing
upon the expiration of the Third Preliminary Term Extension (the "Fourth
10
<PAGE>
Preliminary Term Extension"). In order to continue the Preliminary Term for
the Fourth Preliminary Term Extension, Tenant must exercise the continuation
of the Preliminary Term for the Fourth Preliminary Term Extension, in writing,
no later than thirty (30) days prior to the expiration of the Third
Preliminary Term Extension.
e. The fifth of such continuations of the Preliminary Term shall be a
continuation of the Preliminary Term for a period of six (6) months commencing
upon the expiration of the Fourth Preliminary Term Extension (the "Fifth
Preliminary Term Extension"). In order to continue the Preliminary Term for
the Fifth Preliminary Term Extension, Tenant must exercise the continuation of
the Preliminary Term for the Fifth Preliminary Term Extension, in writing, no
later than thirty (30) days prior to the expiration of the Fourth Preliminary
Term Extension.
f. The First Preliminary Term Extension, the Second Preliminary Term
Extension, the Third Preliminary Term Extension, the Fourth Preliminary Term
Extension, and the Fifth Preliminary Term Extension are collectively called
the "Preliminary Term Extension Periods".
g. Notwithstanding any provision to the contrary set forth elsewhere in
the Lease Agreement, Tenant shall not be deemed to have failed timely to have
given notice to Landlord with respect to Tenant's continuation of the
Preliminary Term of the Lease for any of the Preliminary Term Extension
Periods unless Landlord shall have given to Tenant written notice ("Reminder
Notice") that the last date by which Tenant is permitted to give to Landlord a
notice to continue the Preliminary Term of the Lease for the next of the
Preliminary Term Extension Periods has passed without such notice having been
given, and unless Tenant thereafter fails to give to Landlord the notice of
the continuation of the Preliminary Term of the Lease for the next of the
Preliminary Term Extension Periods within ten (10) days after the date on
which Landlord has given the Reminder Notice to Tenant.
7. The remaining terms and conditions of the Lease are unchanged.
8. No provision in this Memorandum of Lease shall be deemed to modify or
amend the provisions of the Lease or the First Amendment.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement as
of the day and year first above written.
WITNESS LANDLORD:
By: Delaware Avenue
Development Corporation
Partner
/s/ Thomas J. Kelly /s/ Mark Mendelson
________________________ By :_________________________
President
________________________
________________________ By: Delaware-Washington
Corporation - Partner
/s/ Mark Mendelson /s/ Thomas J. Kelly
________________________ By:_______________________
President
WITNESS: TENANT:
President Riverboat Casino-
PHILADELPHIA, INC.
/s/ Mark Mendelson BY: /s/ John S. Aylsworth
_______________________ ____________________
President
_______________________
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COMMONWEALTH OF PENNSYLVANIA :
: SS:
COUNTY OF Philadelphia :
On July 31, 1996, BEFORE ME, a Notary Public in and for said County and
Sate, personally appeared Mark Mendelson, known to me or satisfactorily proven
to be the President of Delaware Avenue Development Corporation, and who
acknowledged that he, as such President executed the foregoing Memorandum of
First Amendment to Lease Agreement for the purposes therein contained.
My Commission Expires: Dec. 20, 1999
/s/ Mary Ann McMasters
__________________________
Notary
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COMMONWEALTH OF PENNSYLVANIA :
: SS:
COUNTY OF Philadelphia :
On July 31, 1996, BEFORE ME, a Notary Public in and for said County and
Sate, personally appeared Thomas J. Kelly, known to me or satisfactorily
proven to be the President of Delaware-Washington Corporation, and who
acknowledged that he, as such President executed the foregoing Memorandum of
First Amendment to Lease Agreement for the purposes therein contained.
My Commission Expires: Dec. 20, 1999
/s/ Mary Ann McMasters
__________________________
Notary Public
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COMMONWEALTH OF PENNSYLVANIA :
: SS:
COUNTY OF Philadelphia :
On July 31, 1996, BEFORE ME, a Notary Public in and for said County and
Sate, personally appeared John S. Aylsworth, known to me or satisfactorily
proven to be the Vice-President of President Riverboat Casino-Philadelphia,
Inc., and who acknowledged that he, as such Vice-President executed the
foregoing Memorandum of First Amendment to Lease Agreement for the purposes
therein contained.
My Commission Expires: Dec. 20, 1999
/s/ Mary Ann McMasters
__________________________
Notary Public
15
SECOND AMENDMENT TO LEASE AGREEMENT
BETWEEN
LIBERTY LANDING ASSOCIATES
and
PRC-PHILADELPHIA, INC.
1
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TABLE OF CONTENTS
1. Premises...........................................................4
2. Term...............................................................5
3. Rent...............................................................5
4. Taxes and Other Impositions........................................8
5. Insurance.........................................................10
6. Waiver of Subrogation.............................................11
7. Care, Improvement and Restoration of the Premises.................11
8. Landlord's Right of Entry.........................................12
9. Fire and Other Casualty...........................................13
10. Net Lease.........................................................13
11. Utility Charges...................................................13
12. No Services by Landlord...........................................13
13. Governmental Regulations..........................................14
14. Use of Premises...................................................14
15. Environmental Matters.............................................15
16. Mechanics' Liens, etc.............................................16
17. Indemnification and Release of Landlord...........................17
18. Quiet Enjoyment...................................................18
19. Condemnation......................................................18
20. Assignment and Subletting.........................................19
21. Curing Tenant's Defaults..........................................20
22. Condition of Title and of Premises................................20
23. Surrender.........................................................20
24. Defaults - Remedies...............................................21
25. Grace Period and Notice of Default................................23
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26. Brokers..........................................................23
27. Captions.........................................................24
28. Entire Agreement.................................................24
29. Interpretation...................................................24
30. Memorandum of Lease..............................................24
31. Consent..........................................................24
32. Representations and Warranties of Landlord.......................24
33. Time Periods.....................................................25
34. Right of First Refusal...........................................25
35. Release..........................................................26
36. Leasehold Mortgages..............................................26
37. Landlord's Joinder...............................................30
38. Estoppel Certificates............................................31
39. Notices..........................................................32
40. Attornment.......................................................33
41. Partial Invalidity...............................................33
42. Counterparts.....................................................33
43. PLC Agreement....................................................34
44. Exclusive Efforts................................................34
45. Efforts to Agreement to Cooperate and Assist.....................34
46. Definitions......................................................34
47. Option to Purchase...............................................37
48. Amendment and Restatement of Lease Agreement.....................41
Exhibit "A"
First Amendment to Corporate Guaranty
3
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SECOND AMENDMENT TO LEASE AGREEMENT
-----------------------------------
THIS SECOND AMENDMENT TO LEASE AGREEMENT is made as of the 31st day of July,
1996, by and between LIBERTY LANDING ASSOCIATES, a Pennsylvania general
partnership ("Landlord") and PRC-PHILADELPHIA, INC., a Pennsylvania
corporation ("Tenant")
WITNESSETH:
----------
WHEREAS, Landlord and Tenant have entered into that certain Lease
Agreement dated December 14, 1993 (the "Lease Agreement"), which Lease
Agreement set forth the terms and conditions of Tenant's leasing of Landlord's
real property situate in Philadelphia, Pennsylvania; and
WHEREAS, Landlord and Tenant have entered into that certain First
Amendment to Lease Agreement dated July 31, 1996 (the "First Amendment to
Lease Agreement"), which First Amendment to Lease Agreement amended certain of
the terms and conditions of the Lease Agreement by extending the Preliminary
Term for up to three (3) years on the terms and conditions as more fully set
forth therein; and
WHEREAS, Landlord and Tenant desire to amend the Lease Agreement in
accordance with the terms and conditions of this Second Amendment to Lease
Agreement such that, upon the "Principal Term Commencement Date" (as
hereinafter defined), the terms and conditions of this Second Amendment to
Lease Agreement shall amend, restate, replace and supersede the terms and
conditions of the Lease Agreement and the First Amendment to Lease Agreement.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, do covenant and agree as follows:
1. Premises.
(a) Landlord does hereby demise and let the Premises unto Tenant, and
Tenant does hereby hire and lease the Premises from Landlord, for the term and
upon the conditions and covenants set forth herein.
(b) The "Premises" shall mean all that certain lot or piece of ground
situate in the 1st Ward of the City of Philadelphia described according to a
Survey and Plan of Property made for Sheet Metal Workers' Local No. 19 by
William E. Barton, Land Surveyor, No. 786A dated September 9, 1993, last
revised September 28, 1993, as more fully described by metes and bounds on
Exhibit "A" attached hereto and made a part hereof, together with all
buildings and other improvements situate thereon as of the date of the Lease
Agreement and on the date of this Second Amendment to Lease Agreement
(including, without limitation, the pier structures now situate thereon), and
together with all appurtenances thereto (including, without limitation, the
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easements appurtenant thereto granted and created by that certain Cross
Easement Agreement dated the 25th day of September, 1989, as recorded in the
Department of Records in and for the City of Philadelphia in Deed Book FHS
1540, at page 321 on January 22, 1990 and the easements appurtenant thereto
granted and created by that certain Easement Agreement dated as of the 14th
day of December, 1993 as recorded in the Department of Records in and for the
City of Philadelphia in Deed Book VCS 548, at page 509 on December 29, 1993
and all other easements, rights of way and other rights and benefits relating
to the aforesaid tract or piece of land, and together with all rights, title
and interest of Landlord in and to any land lying in the bed of any street,
opened or proposed, adjoining the aforesaid tract or piece of land.
2. Term.
(a) Principal Term. Tenant shall have the right, at Tenant's sole
option, to cause the principal term ("Principal Term") of this Lease to
commence by Tenant (as Optionee under the terms of that certain Option
Agreement dated July 31, 1996 between Landlord and Tenant, said Option
Agreement being hereinafter called the "Option Agreement") giving written
notice (the "Principal Term Commencement Notice") to Landlord (as Optionor)
that Tenant has exercised the Option to amend the Lease Agreement pursuant to
the terms of the Option Agreement. If Tenant gives a Principal Term
Commencement Notice to Landlord, the Principal Term shall commence on the
"Principal Term Commencement Date" which shall be thirty (30) days after the
date on which Tenant has given to Landlord the Principal Term Commencement
Notice; provided that such Principal Term Commencement Date shall occur on the
first day of the next following month after thirty (30) days have elapsed from
the giving of the Principal Term Commencement Notice. For example, if Tenant
delivers the Principal Term Commencement Notice on February 15, 1998, then the
Principal Term Commencement Date shall occur on April 1, 1998. The Principal
Term shall end on the date which is ten (10) years from the Principal Term
Commencement Date.
(b) Extension Options. (i) Provided that Tenant is not then in
default of its obligations under this Lease (subject to the notice of default
and cure provisions set forth in Section 25 below), Tenant shall have the
right, at Tenant's sole option, to extend the Principal Term for five
successive periods ("Extension Periods") of five years each, upon the same
terms, provisions and conditions as are in effect during the Principal Term.
If Tenant desires to extend the Principal Term for an Extension Period, Tenant
may do so only by giving written notice thereof to Landlord ("Extension
Notice") at least 12 months prior to the date on which the preceding Principal
Term or Extension Period would otherwise end.
3. Rent.
(a) Rent During the Principal Term. From and after the Principal
Term Commencement Date and continuing through the Principal Term and any
Extension Periods, Tenant shall pay to Landlord rent ("Principal Term Rent")
as follows:
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(A) If no gambling facility is operating on the Premises, Tenant
shall pay to Landlord annual rent in the amount of Three Million Five Hundred
Thousand Dollars ($3,500,000.00) per year.
(B) If and for so long as there is no more than a single license
in effect for the operation of a gambling facility on the Premises, the Tenant
shall pay to the Landlord as annual rental the greater of (i) an amount equal
to 4.5% of the annual Net Gaming Win (as defined below) derived from the
Premises; or (ii) the sum of Three Million Five Hundred Thousand Dollars
($3,500,000.00).
(C) If and for so long as there are two or more licenses in
effect for the operation of gambling facilities on the Premises, the Tenant
shall continue to pay Landlord the annual rent as set forth in Paragraph
3(a)(B) above, and the New Gaming Company (as hereinafter defined) as a
sublessee, licensee or other occupant of the Premises, shall pay to the
Landlord as annual rental the greater of (i) an amount equal to 4.5% of the
annual Net Gaming Win derived from the Premises; or (ii) the sum of Three
Million Five Hundred Thousand Dollars ($3,500,000.00). With respect to a
second gambling facility located on the Premises and operated by New Gaming
Company, any annual percentage rent payments agreed upon by Tenant and New
Gaming Company which are in excess of 4.5% of the annual Net Gaming Win for
the second gaming site on the Premises, plus any annual fixed rent payments
for the second gambling facility on the Premises which are in excess of Three
Million Five Hundred Thousand Dollars ($3,500,000.00), shall be paid directly
to and belong exclusively to Tenant at the time such payments are paid.
(D) The portion of the Principal Term Rent payable pursuant to
clause (ii) of subsection 3(a)(B) and clause (ii) of subsection 3(a)(C) is
herein called the "Fixed Rent". The portion of the Principal Term Rent
payable pursuant to clause (i) of subsection 3(a)(B) and clause (i) of
subsection 3(a)(C) is herein called "Percentage Rent".
(E) The Fixed Rent shall be payable by the Tenant to the Landlord
in monthly installments on the first day of each month, in advance, commencing
on the Principal Term Commencement Date; and the Percentage Rent shall be paid
(within thirty (30) days after the end of the quarter) at such time as the
"Net Gaming Win" (as hereinafter defined) for each quarter of a Lease Year
exceeds the sum of $19,444,445.00. To the extent that the Net Gaming Win is
less than $19,444,445.00 in any quarter, then a credit for such quarter shall
be carried over to future quarters Percentage Rent only within that Lease
Year. No credits for Percentage Rent shall be carried forward beyond the then
current Lease Year. An example of the calculation is attached as Schedule
3(a)(E).
(F) If the Landlord is required to obtain a license ("Landlord
Gambling License") to permit the operation by Tenant of a gambling facility on
the Premises by reason of the inclusion of the provision in this Lease
Agreement for the payment of Percentage Rent based upon the Net Gaming Win,
and if the Landlord does not obtain a Landlord Gambling License prior to or
contemporaneously with such time as Tenant obtains a gaming license or obtains
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<PAGE>
a finding of suitability for a gaming license (if a finding of suitability is
required under Pennsylvania law), whichever first occurs, then the obligation
of the Tenant to pay Percentage Rent shall be deferred for so long as the
Premises are used (or are intended to be used) for the operation of a gambling
facility until such time, if any, as Landlord obtains the required Landlord
Gambling License. At such time, if any, as Landlord obtains the Landlord
Gaming License, the deferred and accrued Percentage Rent shall be then payable
to Landlord. If Landlord is required to obtain a Landlord Gambling License,
Landlord agrees that it will use diligent efforts to obtain the Landlord
Gambling License. If Landlord is not able to obtain a Landlord Gambling
License, Landlord may assign its interest in this Lease to an entity which has
or can obtain a Landlord Gambling License within a reasonable period of time
(but in no event in excess of six months). If Tenant is unable to obtain a
license and other approvals (collectively, "Tenant's Gambling License") to
permit the operation by Tenant of a gambling facility on the Premises, and
such failure to obtain the Tenant's Gambling License is for reasons beyond the
reasonable control of Tenant, then Tenant shall have the right to cancel this
Lease by giving written notice to Landlord within sixty (60) days after Tenant
receives a written notification from the applicable government authority that
Tenant will not receive the Tenant's Gambling License.
(G) The term "Net Gaming Win" shall mean the total of all cash
and property (including checks received and collected) received from the
operation of one or more gambling facilities (as the result of gambling
activities on the Premises, but excluding all proceeds from admissions
revenues), minus the total of all cash paid out to patrons as winnings, with
no deductions for taxes or other operating expenses.
(H) The term "gambling facility" shall mean a gambling casino
whether located on a boat, barge or otherwise on or about the Premises.
(I) Within thirty (30) days following each month of each Lease
Year, Tenant shall mail to Landlord a statement showing the Net Gaming Win
derived from the Premises during the preceding month.
(J) If at any time during the Principal Term the Premises are not
used for the operation of any gambling facility, then during such period of
time, the term "Net Gaming Win" shall be deemed replaced in this Lease
Agreement with the term "Gross Receipts" for the purpose of computing
Percentage Rent. The term "Gross Receipts" shall mean the aggregate of all
gross sales from all business conducted upon or from the Premises. Such sales
shall include, but shall not be limited to, the amounts received from the sale
of goods, wares, warranties and merchandise and for repairs or other services
performed on or from the Premises, together with the amount of all orders
taken or received at the Premises, whether such orders be filled therefrom or
elsewhere, and shall include sales made from vending devices and amusement
devices in or about the Premises. Cash refunds to purchasers or allowances
made on merchandise claimed to be defective or unsatisfactory shall be
deducted from Gross Receipts to the extent that same were previously included
in Gross Receipts; and there shall be deducted from Gross Receipts the sales
price of merchandise returned by customers for exchange, provided that the
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sales price of merchandise delivered to the customer in exchange shall be
included in Gross Receipts. Gross Receipts shall not include any sales, use
or gross receipts tax imposed by any federal, state, municipal, or other
governmental authority directly on sales and which must be paid by Tenant,
whether or not collected from its customers. No franchise or capital stock
tax and no income, occupation or similar tax or license fee based upon income,
sales or profits shall be deducted from Gross Receipts.
(K) Tenant shall retain all relevant records necessary for
determining Net Gaming Win and Gross Receipts for at least three (3) years.
The Landlord may cause an audit to be made of Tenant's records pertaining to
the determination of Net Gaming Win and Gross Receipts. Such records shall be
available at Tenant's main business office during normal business hours upon
at least 10 days prior written notice by Landlord. Said audit shall be at the
expense of Landlord unless the same shall indicate that Tenant has underpaid
Percentage Rent for the period of the audit by an amount in excess of three
percent (3%), in which event the Tenant shall bear the reasonable expense of
said audit. All records furnished Landlord shall be confidential except that
Landlord may furnish copies to any actual or potential lender or purchaser of
the Landlord or of all or part of the Premises.
(L) The term "New Gaming Company" shall mean an entity, other
than Tenant or a Tenant Affiliate, which obtains a gaming license for a
portion of the Premises and which utilizes (as a sublessee, licensee or other
occupant) a portion of the Premises as a gambling facility. New Gaming
Company shall not include any person or entity engaged in any manner by Tenant
or a Tenant Affiliate to manage or operate a gambling facility for which
Tenant or a Tenant Affiliate is the authorized gaming licensee.
4. Taxes and Other Impositions.
(a) Impositions During the Principal Term. Tenant shall pay
throughout the Principal Term, as additional rent hereunder, at least thirty
(30) days before any fine, penalty, interest or cost may be added thereto for
the non-payment thereof, but in any event by the due date thereof, the
following (all of which are herein collectively called "impositions"):
(i) all levies, taxes (including payments required to be made in
lieu of taxes), assessments, water and sewer rents and charges, liens, license
and permit fees, and charges for public utilities imposed, assessed or charged
on or with respect to the Premises by any federal, state, municipal or other
authority ("Governmental Authority") or under any law, ordinance, or
regulation of any Governmental Authority ("Law");
(ii) any assessments, charges, levies or other impositions
imposed, assessed or charged on or with respect to the Premises pursuant to
the terms and provisions of any agreement, covenant, easement, restriction,
declaration or other matter now of record (all such terms and provisions
referred to in this subsection (ii) being herein collectively called "Recorded
Agreement"); and
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(iii) all other charges, imposts or burdens of whatsoever kind
and nature, whether or not particularized by. name, and whether general or
special, ordinary or extraordinary, foreseen or unforeseen, which at any time
during the term of this Lease may be created, levied, assessed, confirmed,
adjudged, imposed or charged upon or with respect to the Premises or any
improvements made thereto, or on any part of the foregoing or any
appurtenances thereto, or upon or with respect to this Lease or the rent paid
or payable hereunder or amounts paid or payable by any subtenants or other
occupants of the Premises, or upon or with respect to the leasing, operation,
use or occupancy of the Premises, or upon or with respect to this transaction
or any documents to which Tenant is a party or successor in interest, or
against Landlord because of Landlord's estate or interest in this Lease or the
Premises, by any Governmental Authority, or under any Law, including, among
others, all special tax bills and general, special or other assessments and
liens or charges made on local or general improvements or under any
governmental or public power or authority whatsoever and transit taxes, taxes
based upon gross receipts of rent or sales taxes applicable to the gross
receipt of rent, and personal property taxes imposed upon the fixtures,
machinery, equipment, apparatus, appurtenances, furniture and other personal
property used in connection with the Premises.
Notwithstanding the foregoing, if any imposition shall be created, levied,
assessed, adjudged, imposed, charged, or become a lien with respect to a
period of time which commences before or ends after the commencement and
expiration dates, respectively, of the Principal Term, then Tenant shall only
be required to pay that proportion of such imposition which is equal to the
proportion of said period which falls within the Principal Term, except that
if any imposition is levied or assessed with respect to a period of time which
commences before or ends after the commencement and expiration dates,
respectively, of the Principal Term, but is due and payable in whole or in
part during the Principal Term, Tenant shall be required to pay all
installments of such imposition which are payable during the Principal Term.
If Tenant is permitted to pay (by the assessing and collecting authorities or
entities and by the holders of any mortgages or other liens upon the Premises)
and elects to pay any imposition in installments, Tenant shall nevertheless
pay all unpaid installments thereof prior to the expiration or sooner
termination of the Principal Term, whether or not such installments are then
due or payable. The term "impositions", shall not include any net income or
excess profits taxes assessed against Landlord, or any corporation capital
stock and franchise taxes imposed upon Landlord and shall not include the
current City of Philadelphia Business Privilege Tax; provided, however, that,
if at any time prior to the expiration of the Principal Term or any Extended
Period, any net income tax, assessment, levy or charge shall be imposed upon
Landlord or the Premises in lieu of any other tax or other charge included in
clause (i) or clause (iii) of this subsection 4(b), and shall be measured by
or based upon net income or profits derived from real estate (as distinguished
from net income or profits generally), then such new tax, assessment, levy or
charge shall be included in "impositions" to the extent that such new tax,
assessment, levy or charge would be payable if the Premises were the only
property of Landlord subject thereto and the income and profits received by
Landlord from the Premises were the only income and profits of Landlord.
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(c) Use and Occupancy Tax. Tenant shall pay, through the Principal
Term, the Philadelphia Realty Use and Occupancy Tax to the extent that the
same shall be due and payable pursuant to the provisions of applicable law.
(d) Contest. Tenant shall furnish Landlord, by the due date thereof,
evidence of the payment of all impositions. Tenant may, without postponement
of payment, bring proceedings for contesting the validity or amount of any
imposition, or to recover payments therefor, and Tenant agrees to save
Landlord harmless from all costs and expenses in connection therewith.
Landlord shall cooperate with Tenant with respect to such proceedings to the
extent required by applicable law, but all costs, fees and expenses incurred
in connection with such proceedings shall be borne by Tenant. Tenant will
give Landlord written notice of Tenant's intention to make any such contest.
5. Insurance.
(a) Insurance During Principal Term.
(i) Tenant, at Tenant's sole cost and expense, shall maintain and
keep in effect throughout the Principal Term:
(A) Insurance against loss or damage to any buildings
hereafter constructed on the Premises by fire and such other casualties as may
be included in extended risk coverage insurance, in an amount equal to the
full insurable value of such buildings (but subject to such deductible sums as
Tenant shall reasonably designate); and
(B) Insurance against claims for personal injury (including
death) and property damage under a policy or policies of comprehensive general
liability insurance, with limits not less than Five Million Dollars
($5,000,000.00) in respect of personal injury (including bodily injury and
death) and One Million Dollars ($1,000,000.00) for property damage.
(ii) The policies of insurance described in subsection 5(a)(i)(A)
above shall name Tenant as the insured party, and, in addition, may contain a
standard mortgagee endorsement in favor of the holder of any leasehold
mortgage on Tenant's estate in the Premises. The policies of insurance
described in subsection 5(a)(i)(B) above shall name Landlord and Tenant as
the insured parties.
(b) Requirements. The insurance required by this Section 5 shall be
maintained, at Tenant's option, either by separate policies or by blanket
policies (provided that all requirements of this Section 5 shall be complied
with in respect of such blanket policies and that such blanket policies shall
provide that the coverage thereunder for the Premises and occurrences in, on
or about the Premises shall not be diminished by occurrences elsewhere). Such
policies applicable to the Premises shall be issued by insurers of recognized
responsibility licensed to do business in Pennsylvania and having a Best's
rating of A+Vll or higher. Tenant shall deliver to Landlord certificates of
the insurance carrier certifying that each policy required to be maintained
has been issued and is in effect and the duration thereof (herein called a
"certificate"). At least thirty (30) days before any policy shall expire,
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Tenant shall deliver to Landlord a replacement certificate and at least ten
(10) days prior to the date that, the premium on any policy shall become due
and payable, Landlord shall be furnished with satisfactory evidence of its
payment.
(c) Evidence of Payment. It Tenant shall fail, refuse or neglect to
obtain such insurance or maintain it, Landlord shall have the right, at
Landlord's option, to purchase such insurance and to pay the premiums thereon
or to pay the premiums on insurance which Tenant should have paid for. All
such payments made by Landlord shall be recoverable by Landlord from Tenant on
demand as additional rent hereunder, together with interest at the Effective
Rate (as defined below), from the respective dates of Landlord's making of the
payments.
6. Waiver of Subrogation. Each of the parties hereto hereby releases the
other, to the extent of each party's insurance coverage, from any and all
liability for any loss or damage which may be inflicted upon the property of
such party even if such loss or damage shall be brought about by the fault or
negligence of the other party, its agents or employees; provided, however,
that this release shall be effective only with respect to loss or damage
occurring during such time as the appropriate policy of insurance shall
contain a clause to the effect that this release shall not affect said policy
or the right of the insured to recover thereunder. If any policy does not
permit such a release, and if the party to benefit therefrom requests that
such a waiver be obtained, the other party agrees to obtain an endorsement to
its insurance policies permitting such waiver of subrogation if it is
available and if such policies do not provide therefor. If an additional
premium is charged for such waiver, the party benefiting therefrom, if it
desires to have the waiver, agrees to pay to the other the amount of such
additional premium promptly upon being billed therefor.
7. Care, Improvement and Restoration of the Premises.
(a) Improvements Upon the Premises.
(i) Prior to the Tenant's delivery of the Principal Term
Commencement Notice, Tenant shall not demolish, remove, alter or construct any
buildings, signs, roadways, driveways, parking areas, piers, pier structures,
or other improvements (all such items being herein called "Improvements") on
the Premises and/or otherwise alter the condition of the Premises or any
Improvements thereon without the prior written consent of Landlord, which
consent Landlord agrees not unreasonably to withhold or delay.
(ii) From and after the Tenant's delivery of the Principal Term
Commencement Notice, Tenant may, at any time and from time to time and without
the prior consent of Landlord, demolish, remove, alter, construct or
reconstruct any Improvements upon the Premises and/or otherwise alter the
condition of the Premises or any Improvements on the Premises. Title to any
Improvements which may be placed in or upon or affixed to the Premises by, for
or under Tenant, shall remain in Tenant during the Principal Term, and any
Extension Period as to which Tenant has given an Extension Notice, and Tenant
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alone shall be entitled to claim depreciation therefor during such period of
time. At the end of the Principal Term and all Extension Periods as to which
Tenant has given an Extension Notice, Tenant may, at its option, either leave
all Improvements upon the Premises or remove from the Premises any
Improvements placed or constructed thereon by Tenant (provided that Tenant
shall repair or restore any damage to the Premises and the Improvements not
removed caused by such removal).
(b) Maintenance and Repair During the Principal Term. Tenant shall,
throughout the Principal Term, at its sole cost and expense: (i) take care of
the buildings, sidewalks, parking areas, curbs, access ways and the other
Improvements now or hereafter located upon the Premises, and keep them in a
state of order, condition and repair adequate for Tenant's required or
intended use thereof, and in substantial compliance with the terms and
provisions of any Recorded Agreement; and promptly at Tenant's own cost and
expense make all repairs necessary to maintain such state of order, condition,
repair and compliance, whether such repairs be interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or
unforeseen; and (ii) keep and maintain all portions of the Premises in a clean
and orderly condition, free of accumulation of dirt, rubbish, snow and ice.
(c) Restoration of Fire Damage. If (i) the buildings or other
Improvements on the Premises shall be damaged or destroyed by fire or other
casualty at any time during the Principal Term, and (ii) Tenant has not
elected to exercise its right to terminate this Lease Agreement, if
applicable, pursuant to the terms of Paragraph 9 hereof, then Tenant, at
Tenant's sole cost and expense, shall promptly and diligently proceed either
(a) to repair, rebuild or replace such buildings and other Improvements, so as
to restore the Premises substantially similar to the condition in which they
were immediately prior to such damage or destruction; or (b) to clear the
debris and damaged portions and restore the Premises and Improvements to a
condition adequate for Tenant's required or intended use thereof.
8. Landlord's Right of Entry
(a) Tenant agrees to permit Landlord and the authorized
representatives of Landlord to enter the Premises at all reasonable times
during business hours for the purpose of inspecting them, including, without
limitation, the performance of reasonable tests, samplings, or other
investigations to satisfy itself that Tenant has complied with the provisions
of this Lease, and making any necessary repairs thereto and performing any
work therein that may be necessary by reason of Tenant's failure to make such
repairs or perform any such work required of Tenant under this Lease. Nothing
herein shall imply any duty upon the part of Landlord to make any such
inspection, testing, sampling or investigation at the Premises or to do any
such work which under any provision of this Lease Tenant may be required to
perform and the performance thereof by Landlord shall not constitute a waiver
of Tenant's default in failing to perform it. Landlord shall not be liable for
inconvenience, annoyance, disturbance or other damage to Tenant by reason of
making such repairs or the performance of such work in the Premises or on
account of bringing materials, supplies and equipment into or through the
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Premises during the course thereof and the obligations of Tenant under this
Lease shall not thereby be affected and the cost of each of such repairs or
the performance of such work shall be payable by Tenant to Landlord pursuant
to and in accordance with Section 21 hereof. Landlord also shall have the
right to enter the Premises at all reasonable times during business hours to
exhibit the Premises to any prospective purchaser or mortgagee thereof.
(b) Notwithstanding the provisions of subsection 8(a) above to the
contrary, Landlord's right to enter upon the Premises shall be subject to any
restrictions, limitations and provisions set forth in applicable laws and
governmental regulations (including, without limitation, laws and governmental
regulations of the United States Coast Guard and laws and governmental
regulations governing gambling facilities).
(c) Notwithstanding the provisions of subsection 8(a) above to the
contrary, Landlord's right to enter upon any boat or other vessel located
within or adjacent to the Premises shall be subject to the further limitation
that Landlord must give to Tenant at least 48 hours prior written notice of
Landlord's intention to enter such boat or other vessel and Landlord may do so
only accompanied by a representative of Tenant (and Tenant agrees to make such
representative available) and only to determine if Tenant is in breach of any
of its obligation under this Lease.
9. Fire and Other Casualty. In the event of any casualty to the
Premises, there shall be no abatement of Fixed Rent (and the obligation to pay
Percentage Rent shall continue to apply but only to the extent of the amount
recovered by Tenant under the terms of the Tenant s business interruption
insurance coverage). In the event that Tenant is unable to obtain business
interruption insurance (after making good faith efforts to do so), then the
Percentage Rent shall be abated.
10. Net Lease. It is the intention of the parties hereto that during the
Principal Term this Lease is a "net lease" and that Landlord shall during the
Principal Term receive the rent hereinabove provided as net income from the
Premises, not diminished by (a) any imposition during the Principal Term
notwithstanding any changes in the method of taxation or raising, levying or
assessing any imposition, or any changes in the name of any imposition, or (b)
any expenses or charges required to be paid during the Principal Term to
maintain the Premises, other than payments under any mortgage now existing or
hereafter created by Landlord.
11. Utility Charges. Tenant shall be solely responsible for and shall
promptly pay all costs and charges for the connection and use of water and
sewer services and all costs and charges for the connection and use of gas,
steam, heat, light, electricity, power, telephone and any other utility or
service used or consumed in or servicing the Premises during the Principal
Term.
12. No Services by Landlord. Landlord is not and shall not be required
to render any services of any kind to Tenant.
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13. Governmental Regulations. Tenant shall throughout the Principal
Term, at Tenant's sole cost and expense, promptly comply in all material
respects with all laws and ordinances and notices, orders, rules, regulations
and requirements of all federal, state and municipal governments and
appropriate departments, commissions, boards and officers thereof, and
notices, orders, rules and regulations of the National Board of Fire
Underwriters, or any other body now or hereafter Constituted exercising
similar functions, and the requirements of each Recorded Agreement, relating
to all or any part of the Premises, exterior as well as interior, foreseen or
unforeseen, ordinary as well as extraordinary, structural as well as non-
structural, or to the use or manner of use of the Premises or to the
sidewalks, parking areas, curbs and access ways within the Premises. Without
limiting the generality of the foregoing, Tenant shall keep in force at all
times during the Principal Term all licenses, consents and permits necessary
for the lawful use of the Premises and Tenant shall pay all personal property
taxes, license fees, and other taxes which are or may be assessed, levied or
imposed upon Tenant in connection with Tenant's operation of its business upon
the Premises. Tenant shall during the Principal Term observe and comply with
the requirements of all policies of liability, fire and other policies of
insurance in force with respect to the Premises. Notwithstanding the
foregoing provisions of this Section 13, Tenant shall not be obligated to
comply with any of the laws, ordinances, notices, orders, rules, regulations
and requirements specified above to the extent that the need for such
compliance has been created by the acts or omissions of Landlord, of any
partner in Landlord, or of any party which is affiliated with Landlord or any
partner in Landlord, or any of their agents or employees occurring after the
date of the execution of the Lease Agreement.
14. Use of Premises.
(a) Principal Term Gambling Use. If and to the extent that
applicable law permits the operation of a gambling facility at the Premises
and if and to the extent (after the use of diligent efforts to obtain a
license) the Tenant has obtained a license to operate a gambling facility at
the Premises, then for a period of ten years from the commencement of the
Principal Term (but only for so long as Tenant may lawfully do so and Tenant's
license to do so remains in effect), Tenant shall continuously cause the
Premises to be used for the operation of a gambling facility and related
operations and for no other uses. The purpose of this continuous operation
covenant is to maximize the Net Gaming Win for the purpose of the computation
of Percentage Rent.
(b) Other Uses. If and to the extent the operation of a gambling
facility is not permitted by applicable law at the Premises during the
Principal Term, or if after the use of diligent efforts the Tenant has not
obtained or retained a license for the operation of a gambling facility on the
Premises, and/or at any time after the expiration of ten years after the
commencement of the Principal Term, the Tenant may use the Premises for any
lawful purpose.
(c) Compliance With Law. The Premises shall not be used for any
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purpose during the Principal Term which is not in substantial compliance with
the requirements of all applicable laws, ordinances, rules, regulations and
requirements of all federal, state and municipal governments and the
applicable provisions of any Recorded Agreement.
15. Environmental Matters.
(a) Tenant shall, throughout the Principal Term, conduct Tenant's
operations and activities at the Premises in substantial compliance with all
applicable federal, state and municipal statutes, ordinances, regulations,
orders, directives or other requirements of law or common law concerning: (A)
the generation, use, handling, treatment, storage, transportation, release,
disposal, remediation or presence of any material including Solid Waste or
Hazardous Substances in, on, under, from or connected with operations and
activities at the Premises; (B) the emission of any air pollutant; (C) the
presence or discharge of any Pollutant in, on or under the Premises or into
surface or groundwater; (D) storage tanks and related facilities and
connections (herein collectively called "Environmental Statutes"). Tenant
shall, throughout the Principal Term, obtain and maintain all permits,
licenses or approvals for the conduct of Tenant's operations and activities at
the Premises as required by Environmental Statutes; and Tenant shall at all
times comply with the terms and conditions of such permits, licenses and
approvals.
(b) Tenant shall, throughout the Principal Term, provide to Landlord
copies of the following, forthwith after each shall have been prepared by,
submitted to or received by Tenant: (A) all applications submitted to any
governmental agency relating to any Environmental Statute with respect to the
Premises ; (B) all notifications, registrations, records, reports or other
documents submitted to any governmental agency relating to any Environmental
Statute with respect to the Premises; (C) all permits, licenses and approvals,
and amendments or modifications thereof, obtained by Tenant under any
Environmental Statute with respect to the Premises; and (D) any notice of
violation, summons, order, complaint, or notice of investigation, received by
Tenant relating to any Environmental Statute with respect to the Premises.
(c) Tenant shall, throughout the Principal Term, not cause the use,
generation, handling or storage of Hazardous Substances or Solid Waste in, on
or under the Premises, except: (A) construction materials (except for asbestos
containing materials, polychloride biphenyl and urea formaldehyde), office
equipment, furnishings and supplies, and office maintenance materials that are
or contain Hazardous Substances may be used, generated, handled or stored on
the Premises, provided such is incident to and reasonably necessary for the
construction, operation or maintenance of the Premises and is in material
compliance with applicable laws, (B) reasonable quantities of the Hazardous
Substances may be used, handled or stored on the Premises if such activity is
incident to the retail sale of such on the Premises, provided such are
packaged, labeled, stored or used in accordance with applicable laws and (C)
Solid Wastes may be generated and stored temporarily on the Premises provided
such activities are performed in material compliance with applicable law and
such Solid Wastes are lawfully removed promptly after they are generated.
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Tenant shall not, during the Principal Term, cause the release of Hazardous
Substances or Solid Waste in, on or under the Premises, except as provided in
the previous sentence or as specifically provided for in and performed in
material compliance with a permit, license or approval obtained from a
governmental agency.
(d) Tenant shall, throughout the Principal Term, comply in all
material respects with all applicable laws and regulations concerning the
installation by Tenant of any storage tank, whether above or underground, at
the Premises. Upon termination of this Lease, Landlord shall have the option
of requiring that Tenant, at Tenant's sole cost and expense, perform tests
relating to and/or remove any storage tank installed by Tenant and associated
contaminated material.
(e) Tenant hereby agrees to indemnify, defend and hold harmless
Landlord of, from and against any and all expense, loss, damage or liability
of any kind suffered by Landlord by reason of Tenant's breach of any of the
provisions of this Section 15.
(f) For the purposes of this Section 15, the terms listed below shall
be defined as they are defined in the provisions of law listed below and the
regulations promulgated pursuant thereto as amended from time to time or in
future federal legislation or in corresponding present or future provisions of
law or regulation in the state where the Premises are located.
(A) air pollutant - 42 U.S.C. Section 7602(g).
(B) discharge of pollutant - 33 U.S.C. Section 1362(12).
(C) release - 42 U.S.C. Section 9601(22).
(D) storage - 42 U.S.C. Section G903(33), without limitation
as to the material involved.
(E) disposal - 42 U.S. C. Section 6903 (3), without
limitation as to the material involved.
(F) Solid Waste - 42 U.S.C. Section 6903(27).
(i) The provisions of this Section 15 shall not be construed as
limiting in any respect the covenants and obligations of Tenant under Sections
13 and 14 hereof.
16. Mechanics' Liens, etc.
(a) Tenant will not during the Principal Term create or permit to be
created or remain any lien, encumbrance or charge levied an account of any
imposition or any mechanic's, laborer's or materialmen's lien which might be
or become a lien, encumbrance or charge upon the Premises or any part thereof
or the income therefrom, having any priority or preference over or ranking on
a parity with the estate, rights and interest of Landlord in the Premises or
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any part thereof or the income therefrom, and Tenant will not suffer any other
matter or thing whereby the estate, rights and interest of Landlord in the
Premises or any part thereof might be impaired; provided that any mechanic's,
laborer's or materialmen's lien may be discharged in accordance with
subsection 16(b).
(b) If at any time during the Principal Term any mechanic's,
laborer's or materialmen's lien shall be filed against the Premises by reason
of work performed by or at the direction of Tenant, Tenant, within sixty (60)
days after notice of the filing thereof, will cause it to be discharged of
record by payment, bond, order of a court of competent jurisdiction or
otherwise. If Tenant shall fail to cause such lien to be discharged within
the period aforesaid, then in addition to any other right or remedy, Landlord
may, but shall not be obligated to, discharge it either by paying the amount
claimed to be due or by procuring the discharge of such lien by deposit or by
bonding proceedings, and in any such event, Landlord shall be entitled, if
Landlord so elects, to compel the prosecution of any action for the
foreclosure of such lien by the lienor and to pay the amount of the judgment
in favor of the lienor with interest, costs and allowances. Any amount so
paid by Landlord and all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon at the Effective Rate from the
respective dates of Landlord's making of the payments and incurring of the
costs and expenses, shall constitute additional rent payable by Tenant under
this Lease and shall be paid by Tenant to Landlord on demand.
(c) Nothing in this Lease contained shall be deemed or construed in
any way as constituting the consent or request of Landlord, express or implied
by inference or otherwise, to any contractor, subcontractor, laborer or
materialman for the performance of any labor or the furnishing of any
materials for any specific alteration, addition, improvement or repair to the
Premises or any part thereof. Nothing in this Lease or in any other document
executed by Landlord shall be construed to constitute an acknowledgment that
any work done or material provided by any contractor, subcontractor or
materialman of Tenant was done or provided for the immediate use and benefit
of Landlord.
(d) Prior to the making of any alterations, additions or
improvements to the Premises which would give rise to a claim for a mechanic's
lien, Tenant shall cause to be filed in the Office of the Prothonotary of
Philadelphia County a Waiver of Mechanic's and Materialmen's Liens in proper
statutory form.
17. Indemnification.
(a) Indemnification. Tenant agrees to indemnify and save harmless
Landlord from and against any and all claims by or on behalf of any person or
persons, firm or firms, corporation or corporations, arising from the
occupancy, conduct, operation or management of the Premises by Tenant during
the Principal Term and by any party during the Principal Term; or from any
work or thing whatsoever done or which was not done in and on the Premises
during the Principal Term; or arising from any breach or default on the part
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of Tenant during the Principal Term in the performance of any covenant or
agreement on the part of Tenant to be performed pursuant to the terms of this
Lease; or arising during the Principal Term from any act, neglect or
negligence of Tenant, or any of its agents, contractors, servants, employees,
subtenants or licensees; or arising from any accident, injury or damage
whatsoever caused to any person, firm or corporation, occurring during the
Principal Term, in or about the Premises; and from and against all costs,
expenses and liabilities incurred in connection with any such claim or action
or proceeding brought thereon (including without limitation the fees of
attorneys, investigators and experts) and in case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant upon notice from
Landlord covenants at Tenant's cost and expense to resist or defend such
action or proceeding or to cause it to be resisted or defended by an insurer.
Notwithstanding the foregoing, the obligations of Tenant pursuant to this
subsection 17(a) shall not apply to any claims resulting from the negligence
of Landlord upon or relating to the Premises and occurring subsequent to the
execution of the Lease Agreement dated December 14, 1993.
(b) Release. Landlord, its principals, agents, employees and
contractors, shall not be liable for, and Tenant hereby releases Landlord, its
principals, agents, employees and contractors from, all claims for loss of
life, personal injury or damage to property or business sustained during the
Principal Term by Tenant or any person claiming by, through or under Tenant
resulting from fire, accident, occurrence or condition in or upon the Premises
or any part thereof including, but not limited to, any such claims for loss of
life, personal injury or damage resulting from defect, latent or otherwise, in
the Premises, any defect in or any failure of any equipment, machinery,
utilities, appliances or apparatus in the Premises, falling of fixtures or
other items, leakage of water, snow or ice, broken glass, or any other event
whatsoever; excluding, however, any claims resulting from the negligence of
Landlord upon the Premises occurring subsequent to the execution of the Lease
Agreement dated December 14, 1993.
18. Quiet Enjoyment. Tenant, upon paying the rent, additional rent and
other charges herein provided for and observing and keeping all covenants,
agreements and conditions of this Lease on its part to be kept, shall quietly
have and enjoy the Premises during the term of this Lease without hindrance or
molestation by anyone claiming by or through Landlord, subject, however, to
the exceptions, reservations and conditions of this Lease.
19. Condemnation.
(a) If all of the Premises is taken or condemned during the Principal
Term for a public or quasi-public use ("Taken") this Lease Agreement shall
terminate as of the day title to the condemned real estate vests in the
condemnor. If a portion of the Premises is Taken during the Principal Term
and the balance thereof is not reasonably suitable for the operation of a
gambling facility thereon, Tenant shall have the right at Tenant's sole
option, of terminating this Lease Agreement as of the day title to the
condemned real estate vests in the condemnor. If this Lease Agreement shall
terminate pursuant to the preceding provisions of this subsection 19(a), the
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rent provided to be paid by Tenant to Landlord pursuant to this Lease
Agreement shall be apportioned and paid in full by Tenant to Landlord to the
date of termination, and neither Landlord nor Tenant shall thereafter have any
liability under this Lease Agreement.
(b) If only a portion of the Premises is Taken and Tenant does not
(or does not have the right to) terminate this Lease Agreement pursuant to the
provisions of subsection 19(a), then Tenant shall (to the extent only of
condemnation awards paid to Tenant for such purpose) restore the Improvements
then existing on the Premises to a condition as nearly comparable as
reasonably possible to the condition and size thereof immediately prior to the
date on which the Premises is Taken; and there shall be an equitable abatement
of Fixed Rent according to the value of the Premises before and after the
Premises is Taken. In the event that Landlord and Tenant are unable to agree
upon the amount of abatement of Fixed Rent, either party may submit the issue
for arbitration pursuant to the rules then obtaining of the American
Arbitration Association and the determination or award rendered by the
arbitrators shall be final, conclusive and binding upon Landlord and Tenant
and not subject to appeal; and judgment thereon may be entered in any court of
competent jurisdiction.
(c) If all or any portion of the Premises is Taken during the
Principal Term, each of Landlord and Tenant may make a claim for its own award
as its interests may appear.
20. Assignment and Subletting.
(a) Tenant shall not during the Principal Term assign this Lease
Agreement or sublet the entire Premises without first obtaining the prior
written consent of Landlord which consent Landlord agrees not unreasonably to
withhold or delay; provided, however, that Tenant shall have the right during
the Principal Term to assign this Lease Agreement and/or to sublet the entire
Premises without the prior consent of Landlord to any Tenant Affiliate and/or
to any entity which acquires substantially all of the business of Tenant.
Tenant shall have the right, without the prior consent of Landlord, effective
from and after the commencement of the Principal Term, to sublet a portion of
the Premises to a second gambling facility operator and, if and to the extent
the operation of a gambling facility is not permitted at the Premises, to
sublet portion(s) of the Premises to various users. In the event of any
assignment of this Lease or subletting of the Premises made with or without
Landlord's consent, Tenant shall, nevertheless, remain liable for the
performance of all of the terms, conditions and covenants of this Lease and
Tenant shall cause any assignee to execute and deliver to Landlord an
assumption of liability agreement, including an assumption by the assignee of
all of the obligations of Tenant and the assignee's ratification of and
agreement to be bound by all the provisions of this Lease. Notwithstanding
anything to the contrary set forth in the preceding sentence, in the event
that a New Gaming Company occupies a portion of the Premises for use as a
gambling facility, the Landlord agrees to look solely to New Gaming Company
and its guarantor, if any, with respect to the Percentage Rent and/or Fixed
Rent due and owing by New Gaming Company for its gambling facility at the
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Premises. It being the stated intention of the Landlord and Tenant that
neither the Tenant nor its guarantor shall have any liability to Landlord for
any Percentage Rent and/or Fixed Rent arising from or related to New Gaming
Company's use or operation of a gambling facility located at the Premises.
(b) A transfer in any transaction of fifty percent (50%) or more of
the stock of Tenant shall be deemed an assignment of this Lease.
(c) At least fifteen (15) days prior to any proposed subletting or
assignment which, pursuant to the provisions of subsection 20(a) above,
requires the consent of Landlord, Tenant shall submit to Landlord a statement
seeking Landlord's consent and containing the name and address of the proposed
subtenant or assignee, the terms of the proposed sublease or assignment
(including the proposed date for possession for such subtenant or assignee)
and such financial and other information with respect to the proposed
subtenant as Landlord reasonably may request.
21. Curing Tenant's Defaults. Subject to the provisions of Section 25,
below, requiring Landlord to give to Tenant written notice of Tenant's default
and an opportunity to cure such default (but not subject thereto in the event
of an emergency situation), if Tenant shall be in default in the performance
of any of its obligations under this Lease Agreement, Landlord may (but shall
not be obligated to do so), in addition to any other rights it may have in law
or equity or under this Lease, cure such default on behalf of Tenant, and
Tenant shall reimburse Landlord upon demand for any reasonable sums actually
paid or reasonable costs actually incurred by Landlord in curing such default
(including, without limitation, reasonable attorneys' fees and court costs),
together with interest at the Effective Rate from the respective dates of
Landlord's making of the payments and incurring of the costs on all sums
advanced by Landlord as aforesaid, which sums and costs together with interest
thereon shall be deemed additional rent payable hereunder.
22. Condition of Title and of Premises. Tenant agrees that the Premises,
the title thereto, all encumbrances thereon, the Recorded Agreement, the
zoning thereof, the street or streets, sidewalks, parking areas, curbs and
access ways adjoining them, any surface and subsurface conditions thereof, and
the permitted uses and restrictions on the uses thereof, have been examined
by, and/or are known to, Tenant; and Tenant accepts the Premises without
representation, covenant or warranty, express or implied, in fact or in law,
by Landlord and without recourse to Landlord, as to the title to the Premises,
the encumbrances thereon, the Recorded Agreement, the zoning of the Premises,
the street or streets, sidewalks, parking areas, curbs and access ways
adjoining the Premises, any surface or subsurface conditions thereof, the
nature, condition or usability thereof or the use or uses to which the
Premises or any part thereof may be put and any restrictions on the uses of
the Premises.
23. Surrender. Subject to the provisions of subsection 7(a)(ii) above,
Tenant agrees at the expiration or earlier termination of this Lease Agreement
promptly to yield up, in the same condition in which they are required to be
kept throughout the Principal Term, the Premises and all improvements,
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alterations and additions thereto.
24. Defaults - Remedies. Subject to the provisions of Section 25, below,
(i) in the event Tenant shall at any time be in default in the payment of rent
herein reserved, or of any other sum required to be paid by Tenant under this
Lease, or in the performance of or compliance with any of the terms,
covenants, conditions or provisions of this Lease; or (ii) in the event Tenant
shall commence any proceeding seeking to have an order for relief entered on
its behalf as a debtor under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking the appointment of a receiver,
trustee, custodian or other similar official for all (or substantially all) of
its assets; or (iii) in the event in any involuntary proceeding Tenant is
adjudicated a bankrupt (and such adjudication is not reversed within 120 days
of its initial declaration); then and in addition to any other rights or
remedies Landlord may have under this Lease and at law and in equity, Landlord
shall have the following rights:
(a) Subject to the terms of Section 35 hereof, to enter the Premises
and without further demand or notice proceed to levy the rent and/or other
charges herein payable as rent, and Tenant shall pay all costs and officers,
commissions, including watchmen's wages and sums chargeable to Landlord, and
further including the five percent (5%) chargeable by the Act of Assembly as
commissions to the constable or other person making the levy, and in such case
all costs, officers, commissions and other charges shall immediately attach
and become part of the claim of Landlord for rent, and any tender of rent
without said costs, commissions and charges made, after the issuance of a
warrant of distress, shall not be sufficient to satisfy the claim of Landlord.
(b) To re-enter the Premises and remove all persons and all or any
property therefrom, either by summary dispossess proceedings or by any
suitable action or proceeding at law, and repossess and enjoy the Premises,
together with all additions, alterations and improvements. Upon recovering
possession of the Premises by reason of or based upon or arising out of a
default on the part of Tenant, Landlord may, at Landlord's option, either
terminate this Lease or make such alterations and repairs as may be necessary
in order to relet the Premises or any part or parts thereof, either in
Landlord's name or otherwise, for a term or terms which may at Landlord's
option be less than or exceed the period which would otherwise have
constituted the balance of the term of this Lease and at such rent or rents
and upon such other terms and conditions as in Landlord's reasonable
discretion may seem advisable and to such person or persons as may in
Landlord's reasonable discretion seem best; upon each such reletting all rents
received by Landlord from such reletting shall be applied: first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorney's fees and all costs of such alterations
and repairs; third, to the payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in payment of future
rent as it may become due and payable hereunder. If such rentals received
from such reletting during any month shall be less than that to be paid during
that month by Tenant hereunder, Tenant shall pay any such deficiency to
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Landlord. Such deficiency shall be calculated and paid monthly. No such re-
entry or taking possession of the Premises or the making of alterations and/or
improvements thereto or the reletting thereof shall be construed as an
election on the part of Landlord to terminate this Lease unless written notice
of such intention be given to Tenant. Landlord agrees to use reasonable
efforts to mitigate its damages in the event of a default by Tenant under this
Lease Agreement; provided however, that Landlord shall in no event be liable
in any way whatsoever for failure to relet the Premises or, in the event that
the Premises or any part or parts thereof are relet, for failure to collect
the rent thereof under such reletting. Following the occurrence and
continuation of an event of default after notice and the expiration of the
applicable cure period and upon Landlord's lawful re-entry onto the Premises,
Tenant, for Tenant and Tenant's successors and assigns, hereby irrevocably
constitutes and appoints Landlord Tenant's and their agent to collect the
rents due and to become due under all subleases of the Premises or any parts
thereof without in any way affecting Tenant's obligation to pay any unpaid
balance of rent due or to become due hereunder. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach.
(c) To terminate this Lease and the term hereby created. Upon such
termination, Landlord shall be entitled to recover an amount equal to all of
the Fixed Rent reserved for the balance of the Principal Term; subject,
however, to the affirmative obligation of Landlord to use reasonable efforts
to mitigate its loss and damages resulting from its termination of this Lease
and the term hereby created.
(d) No right or remedy herein conferred upon or reserved to Landlord
is intended to be exclusive of any other right or remedy herein or by law
provided but each shall be cumulative and in addition to every other right or
remedy given herein or now or hereafter existing at law or in equity or by
statute.
(e) No waiver by Landlord of any breach by Tenant of any of Tenant's
obligations, agreements 'or covenants herein shall be a waiver of any
subsequent breach or of any obligation, agreement or covenant, nor shall any
forbearance by Landlord to seek a remedy for any breach by Tenant be a waiver
by Landlord of any rights and remedies with respect to such or any subsequent
breach.
(f) In the event of any default by Tenant of any of its obligations
under this Lease, Tenant shall immediately pay to Landlord, upon demand, an
amount equal to all reasonable attorney's fees and court costs incurred by
Landlord in enforcing its rights and remedies under this Lease, whether or not
an administrative and/or judicial action is commenced by Landlord against
Tenant by reason of such default.
(g) The parties recognize that no adequate remedy at law may exist
for a breach by Tenant of its obligations under this Lease. Accordingly,
either Landlord or Tenant may obtain specific performance of any provision of
this Lease. Neither such right nor its exercise shall limit any other
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remedies which Landlord may have against Tenant or which Tenant may have
against Landlord for a breach of this Lease.
(h) If Tenant shall at any time during the Principal Term fail to pay
any installment of the Principal Term Rent and if such failure shall continue
beyond the applicable grace period specified in subsection 25 (a) below, then
from and after the expiration of such grace period and until such sum is paid
to Landlord, interest shall accrue (such interest being payable as rent
hereunder) on the delinquent amount at the Effective Rate.
25. Grace Period and Notice of Default.
(a) Notwithstanding any provision to the contrary set forth elsewhere
in this Lease Agreement, Landlord agrees that Tenant will not be deemed to be
in default of any of its obligations under this Lease, that no event of
default shall have occurred under the Lease and that Landlord will not
exercise any, right or remedy provided for in this Lease or allowed by law
because of any default by Tenant of any of its obligations under this Lease
Agreement or because of any failure by Tenant to perform any of its
obligations under this Lease Agreement, unless and until Landlord shall have
first given written notice thereof to Tenant, and Tenant, within a period of
fifteen (15) days thereafter shall have failed to pay the sum or sums due if
the failure consists of the failure to pay money, or if the failure consists
of something other than the failure to pay money, Tenant shall have failed,
within thirty (30) days thereafter to cure the failure, or if such failure
cannot reasonably be cured within 30 days, to begin the correction thereof or
thereafter fails actively and diligently in good faith to proceed with and
continue the correction thereof until it shall be fully corrected.
(b) Notwithstanding any provision to the contrary set forth elsewhere
in this Lease Agreement, Tenant shall not be deemed to have failed timely to
have given the Principal Term Commencement Notice to Landlord or an Extension
Notice to Landlord unless Landlord shall have given to Tenant written notice
("Reminder Notice"); that the last date by which Tenant is permitted to give
to Landlord the Principal Term Commencement Notice and/or the Extension Notice
has passed without such notice having been given, and unless Tenant fails to
give to Landlord the Principal Term Commencement Notice or the Extension
Notice (whichever is applicable) within ten (10) days after the date on which
Landlord has given the Reminder Notice to Tenant.
26. Brokers.
(a) Landlord agrees to indemnify, defend and save and hold harmless
Tenant of and from any liability for any brokerage commission payable to any
real estate broker with which Landlord dealt in connection with this Second
Amendment to Lease Agreement.
(b) Tenant agrees to indemnify, defend and save and hold harmless
Landlord of and from any liability for any brokerage commission payable to any
real estate broker with which Tenant dealt in connection with this Second
Amendment to Lease Agreement.
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27. Captions. The captions in this Lease are for convenience only and
are not a part of this Lease and are not in any way define, limit, describe or
amplify the terms and provisions of this Lease or the scope or intent thereof.
28. Entire Agreement. This Lease represents the entire agreement between
Landlord and Tenant and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the subject matter
hereof. This Lease shall not be modified in any manner except by an
instrument in writing executed by the parties.
29. Interpretation. The masculine (or neuter) pronoun, singular number
shall include the masculine, feminine and neuter genders and the singular and
plural number. Without limitation of the provisions of this Lease which
expressly or impliedly survive the expiration or termination of this Lease,
Landlord and Tenant agree that all provisions of this Lease in which Landlord
or Tenant has agreed to indemnify the other, and the provisions of Section 15,
shall survive such expiration and termination.
30. Memorandum of Lease. Landlord and Tenant agree to execute,
acknowledge and cause to be recorded, promptly after the execution of this
Second Amendment to Lease Agreement, a Memorandum of this Second Amendment to
Lease Agreement in proper statutory form. All recording charges for the
recording of the Memorandum of the Second Amendment to Lease Agreement shall
be paid by Tenant. It is the opinion of the Tenant that no Realty Transfer
Taxes due or payable to the Commonwealth of Pennsylvania or to City of
Philadelphia or the School District of Philadelphia by reason of the execution
and delivery of this Second Amendment to Lease Agreement and/or the execution,
delivery and recording of the Memorandum of Second Amendment to Lease
Agreement. However, if and to the extent that any realty transfer tax is
payable to the Commonwealth of Pennsylvania and/or to the City of Philadelphia
or the School District of the City of Philadelphia by reason of the execution
and delivery of this Second Amendment to Lease Agreement and/or the execution,
delivery and recording of the Memorandum of Second Amendment to Lease
Agreement, Tenant shall pay all such realty transfer taxes.
31. Consent. Whenever pursuant to the terms of this Lease Agreement the
consent or approval of Landlord or Tenant is required, the party whose consent
or approval is required hereby agrees not unreasonably withhold or delay such
consent or approval.
32. Representations and Warranties of Landlord. Landlord makes the
following representations and warranties to Tenant:
(a) Landlord has not received a written notice which remains
uncorrected stating that any portion of the, Premises is in violation of any
law, ordinance or regulation of any governmental authority ("Violation").
(b) There is no pending (or to the knowledge of Landlord, threatened)
action, suit or proceeding, against or affecting title to, or the use of, the
Premises, in any court or before or by any federal, state, county or municipal
department, commission, board, bureau or agency or other governmental
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instrumentality.
(c) Landlord has not received (i) a written notice of any
investigation of the Premises or any potential liability of the Landlord
pursuant to any Environmental Laws or, (ii) a written notice that all or any
portion of the Premises has been Taken (or is proposed to be Taken).
(d) There is no proceeding pending for an increase or decrease in the
assessed valuation of all or any portion of the Premises for real estate tax
purposes.
(e) No portion of the Premises is the subject of any abatement,
reduction, deferral or "roll back" with regard to real estate taxes, nor any
other agreement or arrangement whereby the Premises may be subject to the
imposition of real estate taxes after the date of this Lease Agreement on
account of periods of time prior to the date of this Lease Agreement.
33. Time Periods. In computing any period of time pursuant to this Lease
Agreement, the day of the act or event from which the designated period of
time will run shall not be included. Any time period provided in this Lease
Agreement which shall end on a Saturday, Sunday or holiday shall extend to the
next full business day. The term "business day" shall mean any day which is
not a Saturday, Sunday or holiday. The term "holiday" shall mean a day other
than a Saturday or Sunday on which banks in the Commonwealth of Pennsylvania
are or may elect to be closed.
34. Right of First Refusal.
(a) Landlord shall not at any time during the Principal Term sell or
convey or agree to sell or convey all or any portion of the Premises without
first having complied with the requirements of this Section 34.
(b) If Landlord shall desire to sell or convey all or any portion or
portions of the Premises during the Principal Term, Landlord shall obtain from
a third party a bona fide arms-length written offer (the "Offer") , acceptable
to Landlord, to purchase the portion or portions of the Premises (such portion
or portions being herein, called the "Subject Premises") which Landlord
desires to sell or convey; and Landlord shall submit a written copy of the
Offer to Tenant and shall give Tenant thirty (30) days within which to elect
to meet the Offer and purchase the Subject Premises. If Tenant elects to meet
the Offer and purchase the Subject Premises Tenant shall give to Landlord
written notice thereof within the aforementioned 30 day period ("Acceptance
Notice") and closing shall be held within ninety (90) days after the date of
the Acceptance Notice, whereupon Landlord shall convey the Subject Premises to
Tenant. At closing Landlord shall deliver to Tenant a special warranty deed,
sufficient to convey to Tenant fee simple title to the Subject Premises free
and clear of all liens, restrictions and encumbrances, except for the liens,
restrictions and encumbrances subject to which the Subject Premises were to be
conveyed to the party making the Offer. Landlord and Tenant shall each pay
one-half of all transfer and documentary stamp taxes on or in connection with
such conveyance unless the Offer provided otherwise, in which event such taxes
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shall be paid in accordance with the terms of the Offer.
(c) This right of first refusal shall continue throughout the
Principal Term as to all portions of the Premises until such time as such
portions shall have been sold by Landlord to any party making the Offer. In
the event Tenant shall not elect to meet any Offer within the aforementioned
30 day period, Landlord may thereafter sell the Subject Premises which are the
subject of the Offer only to the party making the Offer and only in accordance
with the terms thereof or on terms more beneficial to Landlord.
(d) To prevent Landlord from defeating the rights of Tenant under
this Section 34, Landlord agrees that Landlord will at no time accept an offer
to purchase all or any portion of the Premises together with any other
property.
35. Release. Landlord hereby waives and releases all rights of
distraint, levy and attachment to any items of personal property installed or
placed by Tenant or by any subtenant of Tenant on the Premises. Although the
foregoing waiver and release shall be self-operative without the necessity for
any further instrument or document, Landlord hereby agrees at any time during
the Principal Term, without limiting the effectiveness of the foregoing waiver
and release, to furnish Tenant and/or Tenant's sublessees, or any vendor or
other supplier under a conditional sale, chattel mortgage or other security
arrangement, any holder of reserved title or any holder of a security
interest, upon written request from time to time, waivers of Landlord's rights
of distraint, levy or attachment on any such items and exempting the same from
distraint, levy, attachment or recourse.
36. Leasehold Mortgages. Tenant and every successor and assign of Tenant
is hereby given the right (exercisable at any time and from time to time
during the Principal Term) by Landlord, to mortgage their interests in this
Lease, under one or more leasehold mortgages) to parties who are not Tenant
Affiliates and who are institutional-type lenders (including, without
limitation, banks, savings and loan associations, insurance companies and
mortgage investments trusts), and to assign this Lease, and all subleases), as
collateral security for such leasehold mortgages), upon the condition that all
rights acquired under such leasehold mortgages) shall be subject to each and
all of the covenants, conditions and restrictions set forth in this Lease
Agreement, and to all rights and interests of Landlord in this Lease
Agreement, none of which covenants, conditions or restrictions is or shall be
waived by Landlord by reason of the right given to Tenant to mortgage Tenant's
interest in this Lease Agreement, except as expressly provided in this Section
36. If Tenant desires to mortgage its interest under this Lease to a
leasehold mortgagee who is not an institutional type investor then, as long as
such proposed leasehold mortgagee is not a Tenant Affiliate, the Landlord
agrees not unreasonably to withhold or delay its approval of such leasehold
mortgagee. If Tenant and/or Tenant's successors and assigns shall mortgage
this leasehold and if the holder of any such leasehold mortgage shall send to
Landlord notice specifying the name and address of such holder and the
pertinent recording data with respect to its leasehold mortgage, and if such
holder shall have been approved by Landlord as aforesaid, then Landlord agrees
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that the following provisions shall apply to each leasehold mortgage with
respect to which such conditions are met (each being herein called a
"Leasehold Mortgage"), so long as such Leasehold Mortgage shall remain
unsatisfied of record or until notice of satisfaction of such Leasehold
Mortgage is given by the holder to Landlord:
(a) There shall be no cancellation, surrender or modification of this
Lease Agreement by joint action of Landlord and Tenant without the prior
consent in writing of the holder of the Leasehold Mortgage, and no merger
shall result from the acquisition by, or devolution upon, any one entity of
the fee and leasehold estates in the Premises.
(b) Landlord shall, upon serving Tenant with any notice of default or
other notice provided for in this Lease Agreement, simultaneously serve a copy
of such notice upon the holder of the Leasehold Mortgage; and no such notice
to Tenant shall be effective unless a copy of such notice is also served on
the holder of the Leasehold Mortgage. The holder of the Leasehold Mortgage
shall thereupon have the same period, after service of such notice upon it, to
remedy or cause to be remedied the defaults complained of, and Landlord shall
accept such performance by or at the instigation of the holder of the
Leasehold Mortgage as if the same had been done by Tenant.
(c) If any default by Tenant shall occur which, pursuant to any
provision of this Lease Agreement or law, entitles Landlord to terminate this
Lease Agreement, and if, before the expiration of ten (10) days from the date
of service of notice of termination upon the holder of the Leasehold Mortgage,
such holder shall have notified Landlord of its desire to nullify such notice
and shall have paid to Landlord all minimum Rent and other payments provided
for in this Lease to which are then in default, and shall have complied (or
shall have commenced the work of complying) with all of the other obligations
of Tenant under this Lease which are then in default, and shall prosecute the
same to completion with reasonable diligence, then in such event Landlord
shall not be entitled to terminate this Lease and any notice of termination
theretofore given shall be void and of no effect; and in the event that the
holder of more than one Leasehold Mortgage shall desire so to act, the holder
of the Leasehold Mortgage which is prior in lien shall have the prior right so
to act.
(d) If any default by Tenant shall occur which, pursuant to any
provision of this Lease Agreement or law, entitles Landlord to terminate this
Lease Agreement, and Landlord elects to terminate this Lease Agreement, the
holder of the Leasehold Mortgage shall not only have the right to nullify any
notice of termination by curing such default, as aforesaid, but shall also
have the right to postpone and extend the specified date for the termination
of this Lease Agreement as fixed by Landlord in Landlord's notice of
termination, for a period of not more than four (4) months, provided that such
holder shall within ten (10) days of the notice of termination cure or cause
to be cured any then existing monetary defaults and meanwhile pay the rent,
additional rent and comply with and perform all of the other terms, conditions
and provisions of this Lease on Tenant's part to be complied with and
performed, and provided further that the holder of the Leasehold Mortgage
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shall forthwith take steps to acquire or sell Tenant's interest in this Lease
Agreement by foreclosure of the Leasehold Mortgage or otherwise and shall
prosecute the same to completion with due diligence. If at the end of said
four (4) month period the holder of the Leasehold Mortgage shall be actively
engaged in steps to acquire or sell Tenant's interest in this Lease Agreement
and shall have given notice thereof to Landlord, the time for the holder to
comply with the provisions of this subparagraph (d) shall be extended for such
period as shall be reasonably necessary to complete such steps with reasonable
diligence and continuity; provided, however, that such extension shall not
exceed sixty (60) days.
(e) Landlord agrees that in the event of any termination of this
Lease Agreement or of any New Lease made pursuant to this subparagraph (e)
prior to its stated expiration date for any reason whatsoever (including,
without limitation, by operation of law or the rejection of this Lease
Agreement or any New Lease by Tenant as debtor in possession or any trustee of
Tenant in any bankruptcy, reorganization, arrangement or similar proceeding),
Landlord shall enter into a new lease ("New Lease") of the Premises with the
holder of the Leasehold Mortgage (or its nominee) or, if there be more than
one Leasehold Mortgage, then with the holder entitled under subparagraph (e)
(iii) (or its nominee) , for the remainder of the Term of this Lease,
effective as of the date of such termination, at the rent and upon the same
terms, provisions, covenants and agreements as contained in this Lease
Agreement (including without limitation all renewal options and/or rights of
first refusal), and subject only to the same conditions of title as this Lease
Agreement is subject to on the date of the execution hereof and to others
created pursuant to other Paragraphs of this Lease, and to the rights, if any,
of any parties then in possession of any part of the Premises, provided:
(i) The holder (or its nominee) shall make request upon Landlord
for such New Lease and shall enter into the New Lease within sixty (60) days
after the date on which the holder has received written notice of the
occurrence of such termination.
(ii) The holder (or its nominee) shall pay to Landlord at the
time of the execution and delivery of the New Lease all sums which would at
the time of the execution and delivery of the New Lease be due pursuant to
this Lease Agreement but for such termination, less the net income received by
Landlord subsequent to the date of termination of this Lease Agreement
pursuant to subparagraph (v) (C) below and prior to the execution and delivery
of the New Lease.
(iii) If more than one holder makes request upon Landlord in
accordance with the provisions of this subparagraph (e) , the New Lease shall
be delivered to the holder requesting such New Lease whose Leasehold Mortgage
is prior in lien and prior in estate, and the request of the holder of any
Leasehold Mortgage which is subordinate in lien shall be void and of no force
and effect.
(iv) Upon the execution and delivery of the New Lease, all
subleases which theretofore may have been assigned and transferred to Landlord
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shall thereupon be assigned and transferred (without recourse) by Landlord to
the Tenant under the New Lease; and the Tenant under the New Lease shall have
the benefit of all of the right, title, interest, powers and privileges of
Tenant under this Lease Agreement in and to the Premises, including
specifically assignment of Landlord's interest in and to any then existing
sublease where the sublessee may have attorned to Landlord and which, at the
time of cancellation or termination of this Lease Agreement, was prior in
right to the lien of the holder of the Leasehold Mortgage or which by separate
agreement or by its terms had been granted non-disturber privileges pursuant
to the provisions of this Lease Agreement; and Landlord hereby agrees that,
with respect to any such sublease so assigned, Landlord will not modify or
amend any of the terms or provisions thereof, during the period between the
expiration or termination of this Lease Agreement and the execution and
delivery of the New Lease.
(v) Following the termination of this Lease Agreement or any New
Lease and until the right of the holders of all Leasehold Mortgages to enter
into a New Lease shall have expired without any New Lease having been
executed:
(A) Landlord shall not alter or in any way demolish the
buildings or other improvements situate on the Premises; and, during said
period, Landlord shall not remove, replace or change any furniture,
furnishing, fixtures or equipment located on the Premises.
(B) Landlord shall not terminate any sublease or the rights
of any subtenant under such sublease unless such subtenant shall be in default
under such sublease.
(C) Landlord shall receive all base rent and other payments
due from subtenants as agent of the holders of all Leasehold Mortgages and
shall deposit such rents and payments in a separate and segregated in trust
for the Premises but Landlord may withdraw such sums, from time to time, to
pay any rent due Landlord and any necessary operating expenses and carrying
charges of the Premises; and, upon the execution and delivery of the New
Lease, Landlord shall account and release to the tenant under the New Lease
for the balance, if any, of the base rent, additional rent and other payments
made under the subleases.
(f) The holder of the Leasehold Mortgage shall be given notice of any
arbitration proceedings by the parties hereto, and shall have the right to
intervene therein and be made a party to such proceedings; and the parties
hereto do hereby consent to such intervention. In the event that the holder
of the Leasehold Mortgage shall not elect to intervene or become a party to
such proceedings, the holder of the Leasehold Mortgage shall receive notice
of, and a copy of any award or decision made in said arbitration proceedings.
(g) Landlord shall, upon request, execute, acknowledge and deliver to
the holder of the Leasehold Mortgage an agreement prepared at the sole cost
and expense of Tenant, in form reasonably satisfactory to such holder, between
Landlord, Tenant and the holder, agreeing to all of the provisions of this
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Section 36.
(h) If Tenant shall fail timely to deliver an Extension Notice, the
holder of the Leasehold Mortgage which is first in lien shall nevertheless
have the right to deliver such Extension Notice provided that it does so not
later than thirty (30) days after Landlord has given the Reminder Notice that
Tenant has failed to timely deliver such Extension Notice.
(i) Landlord shall not sell, assign, transfer, convey or in any
manner alienate or dispose of title to, or any interest in, any portion of the
Premises or in this Lease Agreement without specific provision that such sale,
assignment, conveyance or other alienation or disposition is and shall be
subject to all of the rights of Tenant as provided in this Lease Agreement and
to the holder of the Leasehold Mortgage.
(j) No payment made to Landlord by the holder of the Leasehold
Mortgage shall constitute agreement that such payment was, in fact, due under
the terms of this Lease Agreement; and the holder of the Leasehold Mortgage
having made any payment to Landlord pursuant to Landlord's wrongful, improper
or mistaken notice or demand shall be entitled to the return of any such
payment.
(k) The making of a Leasehold Mortgage shall not be deemed to
constitute an assignment of this Lease Agreement or of the leasehold estate
hereby created, nor shall the holder of any Leasehold Mortgage, as such, be
deemed an assignee of this Lease Agreement or of the leasehold estate hereby
created so as to require such holder, as the holder of the Leasehold Mortgage,
to assume the performance of any of the terms, covenants or conditions on the
part of Tenant to be performed under this Lease Agreement; but the purchaser
at any sale of this Lease Agreement and of the leasehold estate hereby created
in any proceedings for the foreclosure of any Leasehold Mortgage, or the
assignment of this Lease Agreement and of the leasehold estate hereby created
under any instrument of assignment in lieu of foreclosure of any Leasehold
Mortgage, shall be deemed to be an assignee of this Lease Agreement and of the
leasehold estate hereby created.
(l) This Lease may be assigned to any party without Landlord's
consent as a result of a foreclosure of the Leasehold Mortgage or as the
result of a deed or assignment in lieu of foreclosure of a Leasehold Mortgage.
(m) No holder of a Leasehold Mortgage shall have any personal
liability for performance of Tenant's obligations under this Lease unless and
until such holder acquires title to Tenant's leasehold estate or assumes
possession of the Premises.
37. Landlord's Joinder. Landlord agrees, upon all reasonable requests
from Tenant: (a) to join with Tenant in any and all applications and consents
for permits, authorization, consents and/or other governmental approvals
(including, without limitation, reclassification of the Premises pursuant to
the Zoning Code; the issuance of Variances, Special Exceptions, or
Certificates; the issuance of building permits and approvals; the issuance of
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certificates of occupancy); and (b) to join with Tenant in any grants of
easements or dedications or conveyances for electricity, telephone, gas,
water, sewer and other public utilities and facilities and in any dedications
of streets and in any agreements for use and development of the Premises, as
Tenant or any governmental authority may require for the use and development
of the Premises; and Landlord agrees to execute such applications, consents
and other documents as may be required in order to effectuate the foregoing.
Landlord shall not be required to incur any cost or expense in connection with
any of such applications, easement, grants, consents or proceedings. Landlord
agrees that neither Landlord nor any of the partners in Landlord, nor any of
the shareholders of the partners in Landlord, will contest or object to any of
the applications and consents for permits, authorizations, consents and/or
governmental approvals referred to above in this Section 37. Notwithstanding
the foregoing provisions of this Section 37, Tenant shall not, prior to the
giving by Tenant of a Principal Term Commencement Notice, apply for any
reclassification of the Premises pursuant to the applicable Zoning Code
without the prior written approval of Landlord, which approval Landlord agrees
not unreasonably to withhold or delay.
38. Estoppel Certificates.
(a) Upon not less than fifteen (15) days prior notice by Tenant to
Landlord, Landlord shall execute, acknowledge and deliver to Tenant and/or to
any mortgagee, purchaser, or sublessee of Tenant (or any prospective
mortgagee, purchaser, or sublessee) a statement in writing certifying:
(i) That this Lease is unmodified and is in full force and effect
(or if there have been modifications, that the same is in full force and
effect as modified, and getting forth the modifications);
(ii) The dates to which rent and charges payable by Tenant under
this Lease Agreement have been paid;
(iii) Whether or not there is any existing default by Tenant or
notice of default served by Landlord upon Tenant and stating the nature of any
such defaults; and
(iv) The commencement and ending dates of the Principal Term of
this Lease.
(b) Upon not less than fifteen (15) days prior notice by Landlord to
Tenant, Tenant shall execute, acknowledge and deliver to Landlord and/or to
any mortgagee or purchaser of Landlord (or any prospective mortgagee or
purchaser) a statement in writing certifying:
(i) That this Lease is unmodified and is in full force and effect
(or if there have been modifications, that the same is in full force and
effect as modified, and setting forth the modifications);
(ii) The dates to which rent and charges payable by Tenant under
this Lease Agreement have been paid;
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(iii) Whether or not there is any existing default by Landlord or
notice of default served by Tenant upon Landlord and stating the nature of any
such defaults; and
(iv) The commencement and ending dates of the Principal Term of
this Lease.
(c) It is intended that each such statement delivered pursuant to
this Section 37 may be relied upon by any existing or prospective mortgagee,
purchaser, assignee or sublessee.
(d) If the party required to deliver an estoppel certificate pursuant
to the provisions of this Section 38 shall incur any reasonable costs and
expenses (including reasonable attorneys' fees) in preparing or delivering the
estoppel certificate, the party requesting the estoppel certificate shall
reimburse the party issuing the estoppel certificate an amount equal to such
reasonable costs and expenses (including reasonable attorneys' fees).
39. Notices. All notices under this Lease Agreement shall be in writing
and shall be sent by: (i) United States registered or certified mail, return
receipt requested; postage prepaid; (ii) by nationally recognized overnight
courier (such as Federal Express), all charges prepaid; or (iii) by facsimile
transmission (with a same day confirmation copy sent by first-class mail);
addressed as follows:
If intended for Landlord:
Liberty Landing Associates
c/o Thomas Kelley and Mark Mendelson
Local Union #19
1301 S. Columbus Blvd.
Philadelphia, PA 19147
FAX: (215) 952-0250
if intended for Tenant:
c/o President Riverboat Casinos, Inc.
802 N. First Street
St. Louis, MO 63102
Attention: John Aylsworth, Esquire
FAX: (314) 622-3049
with a copy to:
Henry Gusky, Esquire
Sable, Makoroff & Gusky
7th Floor Frick Building
Pittsburgh, PA 15219
Henry F. Miller, Esquire
Wolf, Block, Schorr and Solis-Cohen
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Twelfth Floor Packard Building
Philadelphia, Pennsylvania 19102
FAX: (215) 977-2346
and/or to such other addresses and/or fax number of which Landlord or Tenant
shall have given notice as herein provided. All such notices shall be deemed
to have been sufficiently given for all purposes hereof on the date of the
receipt thereof; and may be given on behalf of either party by its counsel.
40. Attornment.
(a) In the event of a termination of the Principal Term or Tenant's
rights and privileges under this Lease Agreement prior to the expiration date
of the Principal Term for any reason whatsoever (including, without
limitation, termination by reason of a default by Tenant of any of its
obligations under this Lease Agreement), Landlord covenants that with respect
to the period of time commencing as of the date of termination and ending as
of the date on which the Principal Term would have expired but for such early
termination: (i) Tenant's sublessees shall not be disturbed in their
possession of the Premises in accordance with the terms and conditions of
their respective subleases, except for such cause as would entitle Tenant to
terminate any such sublessee's sublease; (ii) each such sublease, if then in
existence, shall continue with the same force and effect as if Landlord, as
lessor, and the sublessee, as lessee, had entered into a lease containing the
same terms, covenants and conditions as those contained in the sublease; and
(iii) Landlord shall accept the attornment of any such sublessee as lessee to
Landlord.
(b) Landlord agrees, without limiting the effectiveness of the
covenants and agreements set forth in subsection 40(a), on request by Tenant
or any sublessee from time to time, promptly to execute, acknowledge and
deliver all such instruments or documents as may be requested by Tenant or any
sublessee in confirmation of the provisions set forth in subsection 40(a).
(c) Landlord agrees that Landlord shall send during the Principal
Term to any sublessee whose name and address is furnished to Landlord copies
of any notices of default to Tenant concurrently with the notices sent to
Tenant; and any such sublessee shall have the right, but shall not be
obligated, to cure or remedy any such default within the period provided in
this Lease Agreement and Landlord agrees to accept such performance on the
part of any such sublessee as though the same had been done and performed by
Tenant.
41. Partial Invalidity. If any term, covenant or condition of this Lease
Agreement shall be invalid or unenforceable, the remaining provisions of this
Lease Agreement shall not be affected thereby; and each term, covenant and
condition of this Lease Agreement shall be. valid and shall be enforced to the
extent permitted by law.
42. Counterparts. This Lease Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
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party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Lease Agreement shall be binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected thereon as the
signatories,
43. PLC Agreement. Landlord has assigned to Tenant all of Landlord's
rights, title and interest in, to and under that certain Master Agreement to
Lease dated September 25, 1989 between Philadelphia Port Corporation and
Landlord ("PLC Agreement") leasehold estate in certain parcels of real
property described therein (the "PLC Parcel"). If Tenant elects to cause the
Principal Term to commence, Tenant may, at that time, at its option:
discontinue making further payments of the PLC Option Consideration and/or of
any other sum due under the PLC Agreement and permit the PLC Agreement to
lapse; or continue to make payments under the PLC Agreement and continue the
PLC Agreement in effect; or exercise its right to enter into a Lease for the
PLC Parcel (in which event Tenant shall, to the extent required by the
landlord of the PLC Parcel be obligated to pay all lump sum rental payments
due under the PLC Agreement as of the date on which Tenant executes the Lease
for the PLC Parcel). Tenant shall have no obligation to Landlord to continue
making payments of the PLC Option Consideration or any other sum due and
payable under the PLC Agreement. If Tenant does not cause the Principal Term
to commence, then Tenant shall, if requested by Landlord, reassign to Landlord
all of the rights, title and interest of Tenant in, to and under the PLC
Agreement.
44. Exclusive Efforts. Tenant agrees that throughout the Principal Term:
(a) Tenant shall use diligent efforts to obtain licenses for the
operation of gambling facilities at the Premises; and
(b) Neither Tenant nor any Tenant Affiliate will obtain (or endeavor
to obtain) a license for the operation of a gambling facility, nor will Tenant
nor any Tenant Affiliate operate a gambling facility, anywhere in the City of
Philadelphia, other than at the Premises.
45. Efforts to Cooperate and Assist.
(a) Each of Landlord and Tenant agrees, during the Principal Term to
use diligent efforts to obtain a second license to permit the operation of a
second gambling facility at the Premises.
(b) Landlord agrees to cooperate with Tenant, and to assist Tenant
(all at Tenant's sole cost and expense), in Tenant's efforts to obtain a
license to permit the operation of gambling facilities at the Premises.
46. Definitions.
(a) "Acceptance Notice". The term "Acceptance Notice', shall have in
this Lease the meaning designated in subsection 34(b) above.
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(b) "business day". The term "business day" shall have in this Lease
the meaning designated in subsection 33 above.
(c) "certificate". The term "certificate" shall have in this Lease
the meaning designated in subsection 5(b) above.
(d) "Effective Rate". The term "Effective Rate" is used in this
Lease to mean the rate of interest per annum which is equal to the lower of
(i) four percent (4%) in excess of the Prime Rate in effect from time to time
(such Effective Rate to be changed on each date on which the Prime Rate is
changed), and (ii) the highest legal rate of interest permitted by applicable
law to be charged by Landlord to Tenant.
(e) "Environmental Statutes". The term "Environmental Statutes"
shall have in this Lease the meaning designated in subsection 15 (a) above.
(f) "Extension Notice". The term "Extension Notice" shall have in
this Lease the meaning designated in subsection 2(b)(i) above.
(g) "Extension Periods". The term "Extension Periods" shall have in
this Lease the meaning designated in subsection 2(b)(i) above.
(h) "Fixed Rent". The term "Fixed Rent" shall have in this Lease the
meaning designated in subsection 3 (a) (D) above.
(i) "Gambling facility". The term "gambling facility" shall have in
this Lease the meaning designated in subsection 3(a)(H) above.
(j) "Governmental Authority". The term "Governmental Authority"
shall have in this Lease the meaning designated in subsection 4(b)(i) above.
(k) "Gross Receipts". The term "Gross Receipts" shall have in this
Lease the meaning designated in subsection 3(a)(J)(i) above.
(l) "Hazardous Substances". The term "Hazardous Substances" is used
in this Lease to mean "hazardous substances" within the meaning of the federal
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601-9657, as amended by the Superfund Amendments and
Reauthorization Act of 1986, Public Law No. 99-499, 100 STAT 1613 (October 16,
1986), "regulated substances" within the meaning of Title I of the federal
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6991-6991 (i) , and
any substances listed under any pertinent state definitions.
(m) "holiday". The term "holiday" shall have in this Lease the
meaning designated in subsection 33 above.
(n) "imposition". The term "imposition" shall have in this Lease the
meaning designated in Section 4 above.
(o) "Improvements". The term "Improvements shall have in this Lease
the meaning designated in subsection 7(a) (i) above.
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(p) "Landlord". The term "Landlord" is used in this Lease to include
the Landlord named above and any subsequent owner of the Premises, as well as
their respective heirs, personal representatives, successors and assigns, each
of whom shall have the same rights, remedies, powers, authorities and
privileges as he would have had he originally signed this Lease as Landlord.
(q) "Landlord Gambling License". The term "Landlord Gambling
License,, shall have in this Lease the meaning designated in subsection
3.(a)(F) above.
(r) "Law". The term "Law" shall have in this Lease the meaning
designated in subsection 4(b)(i) above.
(s) "Lease Year". The term "Lease Year" shall have in this Lease the
meaning designated in subsection 3(a)(A) above.
(t) "Leasehold Mortgage". The term "Leasehold Mortgage" shall have
in this Lease the meaning designated in Section 36 above.
(u) "Net Gaming Win". The term "Net Gaming Win" shall have in this
Lease the meaning designated in subsection 3(a)(G) above.
(v) "New Lease". The term "New Lease" shall have in this Lease the
meaning designated in subsection 36(e) above.
(w) "Offer". The term "Offer" shall have in this Lease the meaning
designated in subsection 34(b) above.
(x) "Option Agreement". The term "Option Agreement" shall have in
this Lease the meaning designated in Subsection 2(a) above.
(y) "Percentage Rent". The term "Percentage Rent" shall have in this
Lease the meaning designated in subsection 3(a)(C) above.
(z) "Premises". The term "Premises" shall have in this Lease the
meaning designated in subsection 1(b) above.
(aa) "Principal Commencement Notice". The term "Principal Term
Commencement Notice" shall have in this Lease the meaning
designated in subsection 2(a) above.
(bb) "Prime Rate". The term "Prime Rate" is used in this Lease to
mean the rate of interest announced from time to time as its "Prime Rate" or
"base rate" by such national or state chartered bank in the United States of
America as shall be designated from time to time by Landlord.
(cc) "Principal Term". The term "Principal Term" shall have in this
Lease the meaning designated in subsection 2(a) above.
(dd) "Principal Term Rent". The term "Principal Term Rent" shall
have in this Lease the meaning designated in subsection 3(a) above.
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(ee) "Recorded Agreement". The term "Recorded Agreement" shall have
in this Lease the meaning designated in subsection 4(b)(ii) above.
(ff) "Reminder Notice". The term "Reminder Notice,, shall have in
this Lease the meaning designated in subsection 25(b) above.
(gg) "Second Installment". The term "Second Installment" shall have
in this Lease the meaning designated in subsection 3(a) above.
(hh) "Subject Premises". The term "Subject Premises" shall have in
this Lease the meaning designated in subsection 34(b) above.
(ii) "Sublease". The term "Sublease" shall have in this Lease the
meaning designated in subsection 20(d) above.
(jj) "Subrent". The term "Subrent" shall have in this Lease the
meaning designated in subsection 20(d) above.
(kk) "Taken". The term "Taken" shall have in this Lease the meaning
designated in subsection 19(a) above.
(ll) "Tenant". The term "Tenant" is used in this Lease to include
the entity named above as Tenant as well as its successors and assigns, each
of whom shall be under the same obligations, liabilities and disabilities and
have only such rights, privileges and powers as he would have possessed had he
originally signed this Lease as Tenant.
(mm) "Tenant Affiliate". The term "Tenant Affiliate" is used in this
Lease to mean any entity, corporate or otherwise, that directly or indirectly
(through one or more intermediaries) controls or is controlled by, or is under
common control with, Tenant.
(nn) "Third Party". The term "Third Party" shall have in this Lease
the meaning designated in subsection 20(d) above.
(oo) "Violation". The term "Violation" shall have in this Lease the
meaning designated in subsection 32(a) above.
47. Option to Purchase. If Landlord is required to obtain a Landlord
Gambling License to permit the operation by Tenant of a gambling facility on
the Premises for any reason whatsoever (not limited to the circumstances
described in subsection 3(a)(F) above), and if Landlord (or the entity to
which Landlord has assigned this Lease pursuant to paragraph 3(f) hereof) does
not obtain the Landlord Gambling License on or prior to such time as Tenant or
contemporaneously with such time as Tenant obtains a gaming license or obtains
a finding of suitability for a gaming license (if a finding of suitability is
required under Pennsylvania law), whichever first occurs, then Tenant shall
thereafter have the option ("Option") to purchase the Premises by giving
notice to Landlord of the exercise of the Option. Upon the exercise by Tenant
of the Option, this Lease Agreement and the notice of Tenant's exercise of the
option shall constitute an agreement of sale and purchase between Landlord and
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Tenant, whereby Landlord shall agree to sell and Tenant shall agree to
purchase the Premises upon the following terms and conditions:
(a) The purchase price ("Purchase Price") to be paid by Tenant to
Landlord for the Leased Premises shall be the Fair Market Value of the
Premises (determined as specified below) as of the Closing Date. The Purchase
Price shall be paid at Closing (as defined below), by wire transfer of funds
to Landlord's account.
(b) The closing and settlement ("Closing") of the sale and purchase
of the Premises pursuant to this Section 47 shall occur (the date on which
Closing is to occur being herein called the "Closing Date") on the date
specified by written notice from Tenant to Landlord (which date shall be no
later than 90 days after the date on which Tenant has given to Landlord
written notice of the exercise by Tenant of the Option). If the Closing Date
specified by Tenant will occur after the date specified in this Lease
Paragraph for the expiration of the Principal Term and if Tenant has not
caused the Principal Term to commence Lease, then the Principal Term shall
continue until the Closing Date.
(c) Landlord shall, at Closing, convey to Tenant fee simple title to
the Leased Premises by delivery of Landlord's special warranty deed, duly
executed and acknowledged by Landlord and in proper form for recording. Title
to the Leased Premises shall be good and marketable and shall be free and
clear of all liens, restrictions, easements, encroachments, title company
objections, or other title encumbrances, except for the title exceptions set
forth on the Leasehold Policy of Title Insurance issued to Tenant by
Commonwealth Land Title Insurance Company simultaneously with the execution of
this Lease Agreement, and except for any additional encumbrances as shall be
created by Tenant; and title to Premises shall be insurable as aforesaid at
ordinary rates by the Commonwealth Land Title Insurance Company pursuant to an
American Land Title Association Owner's Policy of Title Insurance - 1970-Form
B (revised November 17, 1970 and November 17, 1984).
(d) At Closing Tenant shall pay all realty transfer taxes.
(e) The tender of an executed Deed by Landlord and the tender by
Tenant of the Purchase Price at Closing are hereby mutually waived; but
nothing herein contained shall be construed as a wavier of Landlord's
obligation to deliver the Deed and/or of the concurrent obligation of Tenant
to pay the Purchase Price at Closing.
(f) (i) The "Fair Market Value of the Premises" shall be the amount
agreed upon by Landlord and Tenant. if Landlord and Tenant are unable to agree
upon the Fair Market Value of the Premises within 30 days after the date
(which may be prior to the exercise of the Options) on which Tenant shall have
requested that Landlord and Tenant attempt to agree upon the amount thereof,
then Landlord and Tenant shall submit the determination of the Fair Market
Value of the Premises to arbitration by a panel of three independent real
estate appraisers located in the City of Philadelphia (who shall be members of
the American Institute of Real Estate Appraisers (or an equivalent
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organization), and who shall be persons who have not acted in any capacity for
either Landlord or Tenant) , one of whom shall be selected by Landlord, one of
whom shall be selected by Tenant, and one of whom shall be selected by the two
appraisers selected by Landlord and Tenant. If the two appraisers selected by
Landlord and Tenant are unable to agree upon the third appraiser, either
Landlord or Tenant, by giving ten (10) days notice to the other, may apply to
the then President of the Real Estate Board of Philadelphia County (or
comparable entity if the Real Estate Board of Philadelphia is not then in
existence) for the selection of the third appraiser who meets the
qualifications stated in this paragraph. Within thirty (30) days after the
appointment of the appraisers (i) Landlord shall submit to the appraisers the
lowest amount Landlord is willing to accept as the Fair Market Value of the
Premises (determined as set forth below) (together with any supporting data
which Landlord believes is relevant); and (ii) Tenant shall submit to the
appraisers the highest amount Tenant is willing to pay as the Fair Market
Value of the Premises (determined as set forth below in this subsection 2(c))
(together with any supporting data which Tenant believes is relevant). Within
thirty (30) days following the receipt from Landlord and Tenant of such
information; (i) if the designations of Fair Market Value of the Premises by
Landlord and by Tenant are within five percent (5%) of each other, then the
Fair Market Value of the Premises shall be deemed to be the average of the
Fair Market Values of the Premises designated by Landlord and Tenant; or (ii)
if the designations of Fair Market Value of the Premises by Landlord and
Tenant are not within five percent (5%) of each other, then the appraisers
shall determine which designation of Fair Market Value of the Premises, either
Landlord's or Tenant's, most closely reflects the Fair Market Value of the
Premises, taking into account the factors designated below. The determination
of the appraisers as to Fair Market Value of the Premises pursuant to the
provisions of the preceding sentence (it made pursuant to the provisions
thereof) shall be final and binding on Landlord and Tenant. If the
determination of Fair Market Value of the Premises is made pursuant to clause
(i) of the penultimate preceding sentence, then the costs and fees of the
appraisers shall be born equally by Landlord and Tenant; and if the
determination of Fair Market Value of the Premises is made pursuant to clause
(ii) of the penultimate preceding sentence, then the costs and fees of the
appraisers shall be born by the party whose statement of Fair Market Value of
the Premises is not used by the appraisers for the determination of the Fair
Market Value of the Premises.
(ii) The "Fair Market Value" of the Premises shall be determined
as of the Closing Date. The Fair Market Value of the Premises shall be
determined to reflect the gross purchase price that a ready, willing and able
Seller would accept and a ready, willing and able Buyer would pay for the
Premises for its highest and best permitted use in an arms-length transaction,
assuming that the Premises would be sold subject to the terms of this Lease
Agreement and assuming that the Principal Term had commenced, but without this
Section 47; provided, however, that if the determination of Fair Market Value
of the Premises is made pursuant to clause (ii) above, the appraisers shall
not take into account the fair market value of any improvements made to or
constructed upon the Premises by Tenant.
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48. Amendment and Restatement of Lease Agreement. This Second Amendment
to Lease Agreement, when effective, fully restates, amends, supersedes and
replaces all of the terms and conditions of the Lease Agreement dated
December 14, 1993 and the First Amendment to Lease Agreement dated July 31,
1996. This Second Amendment to Lease Agreement shall be effective immediately
upon the delivery of written notice by Tenant (as Optionee) to Landlord (as
Optionor) to the effect that Tenant has exercised its Option to amend the
Lease Agreement pursuant to the terms of the Option Agreement. On and from
the date on which this Second Amendment to Lease Agreement becomes effective,
all references herein to the Lease Agreement shall, unless otherwise expressly
stated, be a reference to the terms of this Second Amendment to Lease
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement
as of the day and year first above written.
WITNESS:
/s/ John S Aylsworth
_________________________________ By: DELAWARE AVENUE
DEVELOPMENT CORPORATION -
Partner
/s/ Mark Mendelson
By: _________________________
President
/s/ Mark Mendelson
__________________________________ By: DELAWARE WASHINGTON
CORPORATION - Partner
/s/Thomas J. Kelly
By: _________________________
President
TENANT:
/s/ Mark Mendelson
__________________________________ PRC-PHILADELPHIA, INC.
/s/ John S. Aylsworth
By: _________________________
V President
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MEMORANDUM OF SECOND AMENDMENT TO LEASE
-----------------------------------------
THIS MEMORANDUM OF SECOND AMENDMENT TO LEASE is made as of the 31st day of
July, 1996, by and between LIBERTY LANDING ASSOCIATES, a Pennsylvania general
partnership ("Landlord") and PRESIDENT RIVERBOAT CASINO-PHILADELPHIA, INC., a
Pennsylvania corporation ("Tenant"), pursuant to Section 2 of the Act of June
2, 1959, P.L. 454, 21 P.S. Section 405, et seq., and is a memorandum of the
Second Amendment to Lease Agreement dated July 31, 1996, (the "Second
Amendment"), which Second Amendment amends a Lease Agreement dated December
14, 1993 (the "Lease") between Landlord, as lessor, and Tenant, as lessee. As
required by the aforesaid statute, the following additional information is
hereby provided with respect to the Lease and the First Amendment:
1. The name and address of the Landlord set forth in the Lease is:
Liberty Landing Associates
c/o Sheet Metal Workers' Association Local Union No. 19
1301 S. Delaware Avenue
Philadelphia, PA 19147
2. The name and address of the Tenant set forth in the Lease is:
President Riverboat Casino-Philadelphia, Inc.
c/o President Casinos, Inc.
802 N. First Street
St. Louis, MO 63102
Attention: John Aylsworth,
Chief Operating Officer
3. The date of the Lease is December 14, 1993.
4. The date of the Second Amendment to Lease Agreement is July 31, 1996.
5. The description of the demised premises which is the subject of the Lease
and the Second Amendment is as follows:
The "Premises" shall mean all that certain lot or piece of ground
situate in the 1st Ward of the City of Philadelphia described
according to a Survey and Plan of Property made for Sheet Metal
Workers Local No. 19 by William E. Barton, Land Surveyor, No.
786A dated September 9, 1993, last revised September 28, 1993,
as more fully described by metes and bounds on Exhibit "A"
attached hereto and made a part hereof, together with all buildings
and other improvements situate thereon as of the date of this Lease
Agreement (including, without limitation, the pier structures now
situate thereon), and together with all appurtenances thereto
(including, without limitation, the easements appurtenant thereto
granted and created by that certain Cross Easement Agreement
dated the 25th day of September, 1989, as recorded in the
Department of Records in and for the city of Philadelphia in Deed
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Book FHS 1540, at page 321 on January 22, 1990 and the
easements appurtenant thereto granted and created by that certain
Easement Agreement dated as of the 14th day of December, 1993
and recorded in the Department of Records in and for the city of
Philadelphia, at Deed Book VCS 548, Page 509, on December 29,
1993), and all other easements, rights of way and other rights and
benefits relating to the aforesaid tract or piece of land.
6. The following are the full provisions in the Lease with regard to the
commencement of the Principal Term:
7. "Principal Term. Tenant shall have the right, at Tenant's sole option, to
cause the principal term ("Principal Term") of this Lease to commence by
Tenant (as Optionee under the terms of that certain Option Agreement dated
July 31, 1996 between Landlord and Tenant, said Option Agreement being
hereinafter called the "Option Agreement") giving written notice (the
"Principal Term Commencement Notice") to Landlord (as Optionor) that
Tenant has exercised the Option to amend the Lease Agreement pursuant to
the terms of the Option Agreement. If Tenant gives a Principal Term
Commencement Notice to Landlord, the Principal Term shall commence on the
"Principal Term Commencement Date" which shall be thirty (30) days after
the date on which Tenant has given to Landlord the Principal Term
Commencement Notice; provided that such Principal Term Commencement Date
shall occur on the first day of the next following month after thirty (30)
days have elapsed from the giving of the Principal Term Commencement
Notice. For example, if Tenant delivers the Principal Term Commencement
Notice on February 15, 1998, then the Principal Term Commencement Date
shall occur on April 1, 1998. The Principal Term shall end on the date
which is ten (10) years from the Principal Term Commencement Date."
8. The Lease grants to Tenant, under certain circumstances, the right, at
Tenant's sole option, to extend the Principal Term for five (5) successive
periods of five years each, upon the same terms, provisions and conditions
which are in effect during the Principal Term.
9. The Lease grants to Tenant an option to purchase the demised premises
under certain circumstances. The previous expiration date of the option
(being January 1, 1998) has been extended to include the Principal Term
and any extensions of the Principal Term in the event that the
circumstances giving rise to such option occur.
10. No provision in this Memorandum of Lease shall be deemed to modify or
amend the provisions of the Lease or the Second Amendment.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement
as of the day and year first above written.
WITNESS LANDLORD:
By: Delaware Avenue
Development Corporation
Partner
/s/ Thomas J. Kelly /s/ Mark Mendelson
________________________ By :_________________________
President
________________________
________________________ By: Delaware-Washington
Corporation - Partner
/s/ Mark Mendelson /s/ Thomas J. Kelly
________________________ By:___________________________
President
WITNESS: TENANT:
President Riverboat Casino-PHILADELPHIA, INC.
/s/ Mark Mendelson /s/ John S. Aylsworth
_______________________ BY:____________________________
V-President
_______________________
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COMMONWEALTH OF PENNSYLVANIA :
: SS:
COUNTY OF Philadelphia :
On July 31, 1996, BEFORE ME, a Notary Public in and for said County and
Sate, personally appeared Mark Mendelson, known to me or satisfactorily proven
to be the President of Delaware Avenue Development Corporation, and who
acknowledged that he, as such President executed the foregoing Memorandum of
First Amendment to Lease Agreement for the purposes therein contained.
My Commission Expires: Dec. 20, 1999
/s/ Mary Ann McMasters
__________________________
Notary
44
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COMMONWEALTH OF PENNSYLVANIA :
: SS:
COUNTY OF Philadelphia :
On July 31, 1996, BEFORE ME, a Notary Public in and for said County and
Sate, personally appeared Thomas J. Kelly, known to me or satisfactorily
proven to be the President of Delaware-Washington Corporation, and who
acknowledged that he, as such President executed the foregoing Memorandum of
First Amendment to Lease Agreement for the purposes therein contained.
My Commission Expires: Dec. 20, 1999
/s/ Mary Ann McMasters
__________________________
Notary Public
45
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COMMONWEALTH OF PENNSYLVANIA :
: SS:
COUNTY OF Philadelphia :
On July 31, 1996, BEFORE ME, a Notary Public in and for said County and
State, personally appeared John S. Aylsworth, known to me or satisfactorily
proven to be the Vice-President of President Riverboat Casino-Philadelphia,
Inc., and who acknowledged that he, as such Vice-President executed the
foregoing Memorandum of First Amendment to Lease Agreement for the purposes
therein contained.
My Commission Expires: Dec. 20, 1999
/s/ Mary Ann McMasters
__________________________
Notary Public
46
FIRST AMENDMENT TO CORPORATE GUARANTY
THIS FIRST AMENDMENT TO CORPORATE GUARANTY made this 31st day of July 1996,
by PRESIDENT CASINOS, INC., formerly known as PRESIDENT RIVERBOAT CASINOS,
INC. ("Guarantor").
WITNESSETH:
WHEREAS, Guarantor made and delivered to Liberty Landing Associates that
certain Corporate Guaranty dated December 14, 1993 (the "Guaranty") with
respect to that certain Lease Agreement dated December 14, 1993 (the "Lease");
and,
WHEREAS, Liberty Landing Associates ("Landlord"), and PRC-Philadelphia,
Inc. ("Tenant"), have agreed to amend the Lease by execution and delivery of
the First Amendment to Lease Agreement dated of even date herewith (the "First
Amendment"), and by the Second Amendment to Lease Agreement dated of even date
herewith (the "Second Amendment") (which Second Amendment shall go into full
force and effect in the event that Tenant exercises its option pursuant to the
terms of the Option Agreement dated of even date herewith) ; and
WHEREAS, Guarantor and Landlord desire to amend the Guaranty so as to
include within the scope of the Guaranty, (i) the obligations of PRC-
Philadelphia, Inc. under the terms of the First Amendment, and (ii) the
obligations of PRC-Philadelphia, Inc. under the terms of the Second Amendment
(in the event that Tenant exercises its option, as contained in the Option
Agreement dated of even date herewith, to amend the Lease so as to make the
Second Amendment in full force and effect).
NOW, THEREFORE, the Guarantor does hereby execute and deliver this First
Amendment to Corporate Guaranty, which amends the Guaranty as follows:
1. The foregoing preambles are incorporated herein by reference. All
references to the Lease as contained in the Guaranty shall now include and be
a reference to the First Amendment. Such references to the Lease shall also
be construed as a reference to the Second Amendment in the event that Tenant
exercises its option (as contained in the Option Agreement dated of even date
herewith) to amend the Lease so as to make the Second Amendment in full force
and effect.
2. All other terms and conditions of the Guaranty are hereby reaffirmed.
IN WITNESS WHEREOF, the Guarantor has caused this First Amendment to
Corporate Guaranty to be executed and delivered on the day and year first
above written.
1
<PAGE>
ATTEST: PRESIDENT CASINOS, INC.
/s/ James A. Zweifel /s/ John S. Aylsworth
__________________________ By:_________________________
2
<PAGE>
OPTION AGREEMENT
------------------
THIS OPTION AGREEMENT made this 31st day of July, 1996, by and between
Liberty Landing Associates, a Pennsylvania General Partnership, (hereinafter
"Optionor")
AND
President Riverboat Casino-Philadelphia, Inc., a Pennsylvania corporation,
its designee or assignee (hereinafter "Optionee").
W I T N E S S E T H:
WHEREAS, Optionor (as Landlord) and Optionee (as Tenant) have entered into
that certain Lease Agreement dated December 14, 1993 (the "Lease Agreement"),
which Lease Agreement sets forth the terms and conditions of the Optionee's
leasing of the Optionor's real property situate in Philadelphia, Pennsylvania
(said real property being more fully described in Exhibit "A" attached hereto
and made a part hereof, and said real property being hereinafter called the
"Premises"); and
WHEREAS, Optionor (as Landlord) and Optionee (as Tenant) have recorded a
Memorandum of Lease with respect to the terms and conditions of the Lease
Agreement, said Memorandum of Lease being recorded in the Deed Book VCS 458,
Page 125, as the same was amended by an Amendment thereto which is recorded as
a Corrective Memorandum of Lease in Deed Book VCS 546, Page 417 in the
Recorder's Office of Philadelphia County, Pennsylvania; and
WHEREAS, Optionor and Optionee executed and delivered a certain Letter
Agreement dated May 7, 1996 (the "Letter Agreement"), which Letter Agreement
outlined the terms and conditions of the Option as set forth in this Option
Agreement and for which Letter Agreement the Optionee paid to Optionor
consideration in the amount of Five Hundred Thousand Dollars ($500,000.00)
upon the execution of the Letter Agreement; and
WHEREAS, concurrently with the execution of this Option Agreement,
Optionor (as Landlord) and Optionee (as Tenant) have executed and delivered a
First Amendment to Lease Agreement pursuant to the terms of which the
"Preliminary Term" (as defined in said Lease Agreement) is extended in
accordance with the terms and conditions specified herein and in the First
Amendment to Lease Agreement; and
WHEREAS, Optionee is desirous of obtaining an option to amend the Lease
Agreement in accordance with the terms and conditions as hereinafter set
forth, such that the Lease Agreement shall, following the Optionee's exercise
of the option to amend the Lease Agreement, be in the form of the Second
Amendment to Lease Agreement as attached hereto and made a part hereof as
Exhibit "B", and Optionor is desirous of granting to Optionee such an option
1
<PAGE>
to amend the Lease Agreement. The option to amend the Lease (such amendment
of the Lease Agreement to be in accordance with the terms of the Second
Amendment in Lease Agreement) as granted by Optionor to Optionee pursuant to
the terms of this Option Agreement is hereinafter called the "Option".
NOW, THEREFORE, in consideration of the sum of Five Hundred Thousand
Dollars ($500,000.00) previously paid by Optionee to Optionor upon execution
and delivery of the Letter Agreement and in consideration of the sum of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) paid by
Optionee to Optionor upon the execution and delivery of this Option Agreement,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. The recitals set forth above are incorporated herein by reference.
2. As used in this Agreement, the following capitalized terms shall have the
meanings set forth below:
a. Corporate Guarantor. Corporate Guarantor shall mean President
Casinos, Inc., a Delaware Corporation. The Corporate Guarantor shall guaranty
PRC-Philadelphia, Inc.'s obligations under and pursuant to the terms of this
Option Agreement, the First Amendment to Lease Agreement, and the Second
Amendment to Lease Agreement; provided, however, that in the event a "New
Gaming Company", as defined in Paragraph 11 of this Agreement, enters into an
option agreement or other agreement (pursuant to the terms of Paragraph 9
hereof) and agrees to the terms of an option and/or sublease or other
occupancy agreement for a second gaming site on a portion of the Premises,
then the guaranty of the Corporate Guarantor shall apply expressly and solely
to the obligations of PRC-Philadelphia, Inc. (i) as the Tenant under the terms
of the First Amendment to Lease Agreement and the Second Amendment to Lease
Agreement, and (ii) as the Optionee under the terms of this Agreement. The
parent entity of the New Gaming Company shall guaranty the obligations of the
New Gaming Company with respect to (x) New Gaming Company's obligations under
the terms of the new option agreement or other agreement (as referenced in
Paragraph 9 hereof), and (y) New Gaming Company's obligations regarding the
use and occupancy of the portion of the Premises which are to be used by the
New Gaming Company. It being the intention of the parties that Liberty
Landing Associates, its successors and assigns, shall look solely to New
Gaming Company and its parent entity guarantor for the payment and performance
of the obligations of New Gaming Company regarding the new option agreement
and sublease referenced in Paragraph 9 hereof and regarding the obligations of
the New Gaming Company with respect to its use and occupancy of a second
gaming site located on the Premises.
b. First Amendment to Lease Agreement. First Amendment to Lease
Agreement shall mean the First Amendment to Lease Agreement dated of even date
herewith, which First Amendment to Lease Agreement shall be executed
concurrently with this Option Agreement. A Memorandum of the First Amendment
to Lease Agreement (in the form attached hereto as Exhibit "C") shall
concurrently herewith be executed by Landlord and Tenant and the Memorandum
2
<PAGE>
shall be recorded in the Recorder's Office of Philadelphia County,
Pennsylvania. The First Amendment to Lease Agreement shall extend the
"Preliminary Term" (as defined in the Lease Agreement) for a period of three
(3) years commencing on January 1, 1997; provided, however, that the extension
of the Preliminary Term shall be coterminous with the Option Periods as set
forth herein. For example, if Optionee exercises its right to continue the
Term of this Option for the "First Extension Period" (as defined in Paragraph5
hereof) and Optionee doesn't thereafter exercise its right to continue the
Term of the Option for the "Second Extension Period" (as defined in Paragraph
5 hereof), then, under such circumstances, the Preliminary Term would then
expire at the end of the First Extension Period, to wit, December 31, 1997.
Or, for that matter, if Optionee does not elect to exercise its right to
continue the Term of the Option for the "First Extension Period" (as defined
in Paragraph 5 hereof) by no later than December 1, 1996, the Preliminary Term
of the Lease Agreement would then expire on December 31, 1996.
c. New Gaming Company. New Gaming Company shall have the meaning
given to such term in Paragraph 11 of this Option Agreement.
d. Premises. Premises shall mean all that certain parcel of ground
situate in the First Ward of the City of Philadelphia, Pennsylvania, more
particularly described by metes and bounds on Exhibit "A" of the Lease
Agreement dated December 14, 1993 and described in paragraph 1(b) of the Lease
Agreement, and as also described in Exhibit "A" and in the First Amendment to
Lease Agreement and Second Amendment to Lease Agreement which are attached
hereto.
e. Second Amendment to Lease Agreement. Second Amendment to Lease
Agreement shall mean the Second Amendment to Lease Agreement which is attached
hereto and made a part hereof as Exhibit "B", which Second Amendment to Lease
Agreement amends the Lease Agreement dated December 14, 1993. Landlord and
Tenant shall execute the Second Amendment to Lease Agreement concurrently with
the execution and delivery of this Option Agreement. However, the terms of
the Second Amendment to Lease Agreement shall not be effective unless and
until Optionee exercises its Option to amend the Lease Agreement as set forth
herein. The Landlord and Tenant shall also concurrently herewith execute and
deliver a Memorandum of Second Amendment to Lease Agreement in the form
attached hereto as Exhibit "D". The Memorandum of Second Amendment to Lease
Agreement shall be recorded upon Optionee's exercise of the Option granted
herein. The parties hereto acknowledge that, because under the terms of the
Second Amendment to Lease Agreement the determination regarding when the
"Principal Term" commences cannot be finalized until such time as Optionee
actually exercises the Option granted to it herein, the Landlord and Tenant
shall, within five (5) days after Optionee's exercise of the Option, execute
and deliver a Commencement Date Agreement (in the form attached hereto as
Exhibit "E"), which Commencement Date Agreement shall confirm the exact
commencement date for the Principal Term of Lease Agreement, as amended.
f. Term. The Term of this Option shall be for a period commencing on
the date hereof and expiring on December 31, 1999; provided that Optionee must
3
<PAGE>
give Optionor the written notice(s) required to continue the Option in effect
for the First Extension Period, Second Extension Period, Third Extension
Period, Fourth Extension Period, and Fifth Extension Period in accordance with
the terms of Paragraph 5 hereof.
3. The Optionor hereby grants an exclusive and irrevocable Option unto
the Optionee to amend the Lease Agreement such that, following the exercise of
the Option by Optionee, the terms and conditions of the Second Amendment to
Lease Agreement (as set forth in Exhibit B which is attached hereto and made a
part hereof) shall immediately become applicable and effective such that the
terms of the Second Amendment to Lease Agreement shall fully restate, amend,
supersede and replace the terms and conditions of the Lease Agreement and the
First Amendment to Lease Agreement.
4. This Option may be exercised by Optionee at any time during any of the
"Option Periods" (as defined in Paragraph 5 hereof) by depositing in the
United States mail, certified mail, postage prepaid, a written notice to
Optionor notifying it of Optionee's exercise of this Option. Such notice
shall be addressed to Optionor at the following addresses:
The Sheet Metal Workers
International Association
Local Union #19
c/o Mr. Thomas J. Kelly
President and Business Manager
1301 South Columbus Blvd.
Philadelphia, PA 19147
Liberty Landing Associates
c/o Mr. Thomas J. Kelly and
Mr. Mark Mendelson
1301 South Columbus Boulevard
Philadelphia, PA 19147
Delaware Avenue Development Corp.
c/o Mr. Mark Mendelson
541 Hamilton Street
Allentown, PA 18101
Delaware-Washington Corp.
c/o Mr. Thomas J. Kelly
1301 South Columbus Boulevard
Philadelphia, PA 19147
or such other then existing address as Optionor may hereafter notify Optionee
in writing (such notice from Optionor regarding a change of address shall
specifically refer to this Option Agreement). Any notice regarding the Option
Periods (as hereinafter defined) shall also be sent to Optionor at the above
addresses.
5. The Option granted herein shall have a Term commencing on the date
4
<PAGE>
hereof and expiring on December 31, 1999; provided that Optionee must give
Optionor the written notice(s) required to continue the Option in effect for
the First Extension Period, Second Extension Period, Third Extension Period,
Fourth Extension Period, and Fifth Extension Period in accordance with the
terms as hereinafter set forth. If Optionee does not exercise its right to
continue the Term of the Option through the "First Extension Period" (as
hereinafter defined), then the Term of this Option shall expire on December
31, 1996. If, thereafter, Optionee does not elect to continue the Option for
one or more of the Second Extension Period, Third Extension Period, Fourth
Extension Period, and Fifth Extension Period in accordance with the terms as
hereinafter set forth, the Option shall cease on the last day of the specific
Extension Period for which the Optionee had previously elected to continue the
Option. In order to continue the Term of the Option for the First Extension
Period, Optionee must exercise its right to continue the Term of the Option
for the First Extension Period, in writing, on or before December 1, 1996.
a. The first of such continuations of the Term of the Option shall be
a continuation of the Term of the Option for a period of one (1) year
commencing on January 1, 1997 and expiring on December 31, 1997 (the "First
Extension Period"). If Optionee elects to exercise its right to continue the
Term of this Option for the First Extension Period, with notice of such
continuation to occur on or before December 1, 1996, then the Optionee's
monthly Base Payment obligations (as referred to in Paragraph 6 hereof) shall
commence on January 1, 1997.
b. The second of such continuations of the Term of the Option shall
be a continuation of the Term of the Option for a period of six (6) months
commencing upon the expiration of the First Extension Period (the "Second
Extension Period"). In order to continue the Term of the Option for the
Second Extension Period, Optionee must exercise the continuation of the Option
for the Second Extension Period, in writing, no later than thirty (30) days
prior to the expiration of the First Extension Period.
c. The third of such continuations of the Term of the Option shall be
a continuation of the Term of the Option for a period of six (6) months
commencing upon the expiration of the Second Extension Period (the "Third
Extension Period"). In order to continue the Term of the Option for the Third
Extension Period, Optionee must exercise the continuation of the Option for
the Third Extension Period, in writing, no later than thirty (30) days prior
to the expiration of the Second Extension Period.
d. The fourth of such continuations of the Term of the Option shall
be a continuation of the Term of the Option for a period of six (6) months
commencing upon the expiration of the Third Extension Period (the "Fourth
Extension Period"). In order to continue the Term of the Option for the Fourth
Extension Period, Optionee must exercise the continuation of the Option for
the Fourth Extension Period, in writing, no later than thirty (30) days prior
to the expiration of the Third Extension Period.
e. The fifth of such continuations of the Term of the Option shall be
a continuation of the Term of the Option for a period of six (6) months
5
<PAGE>
commencing upon the expiration of the Fourth Extension Period (the "Fifth
Extension Period"). In order to continue the Term of the Option for the Fifth
Extension Period, Optionee must exercise the continuation of the Option for
the Fifth Extension Period, in writing, no later than thirty (30) days prior
to the expiration of the Fourth Extension Period.
f. The First Extension Period, the Second Extension Period, the Third
Extension Period, the Fourth Extension Period, and the Fifth Extension Period
are collectively called the "Option Periods".
g. Notwithstanding any provision to the contrary set forth elsewhere
in this Option Agreement, Optionee shall not be deemed to have failed timely
to have given notice to Optionor with respect to Optionee's continuation of
the Term of the Option for any of the Option Periods unless Optionor shall
have given to Optionee written notice ("Reminder Notice") that the last date
by which Optionee is permitted to give to Optionor a notice to continue the
Term of the Option for the next of the Option Periods has passed without such
notice having been given, and unless Optionee thereafter fails to give to
Optionor the notice of the continuation of the Term of the Option for the next
of the Option Periods within ten (10) days after the date on which Optionor
has given the Reminder Notice to Optionee.
6. a. In the event that Optionee exercises its right to continue the
Term of this Option for the First Extension Period and/or any of the
additional Option Periods as set forth in Paragraph 5 hereinabove, Optionee
shall pay to Optionor the sum of Two Hundred Seventy Seven Thousand Dollars
($277,000.00) per month (the "Base Payment") for each month for which the
Optionee has exercised its right to continue the Term of the Option. The Base
Payment shall be made by Optionee to Optionor on or before the 10th day of
each month during any of the Option Periods in which Optionee has continued
the Term of this Option. At such time as the Optionee exercises the Option,
then the monthly Base Payment of $277,000.00 shall thereafter cease effective
on the date of the exercise of the Option. Other than the above-described
Base Payments and "impositions" (as hereinafter defined) to be made during any
continuation of the Term of the Option, no additional consideration or
payments shall be due by Optionee to Optionor with respect to its exercise of
any of the five (5) continuations of the Term of the Option Periods as
described in Paragraph 5 hereinabove.
b. In the event that Optionee fails to timely pay such Base Payment
due and owing pursuant to Paragraph 6 hereof, Optionor agrees that Optionee
will not be deemed to be in default of any of its obligations under this
Option Agreement, that no event of default shall have occurred under the
Option Agreement and that Optionor will not exercise any right or remedy
provided for in this Option Agreement or allowed by law because of any default
by Optionee of any of its obligations under this Option Agreement or because
of any failure by Optionee to perform any of its obligations under this Option
Agreement, unless and until Optionor shall have first give written notice
thereof to Optionee, and Optionee, within a period of fifteen (15) days
thereafter shall have failed to pay the sum or sums due if the failure
consists of the failure to pay the Base Payment, or if the failure consists of
6
<PAGE>
the failure to pay an imposition pursuant to Paragraph 7 hereof, Optionee
shall have failed, within thirty (30) days thereafter to cure the failure by
paying such imposition.
7. In addition to the Two Hundred Seventy-Seven Thousand and 00/100
Dollar ($277,000.00) monthly Base Payment amount which Optionee must pay to
Optionor during each month for which Optionee has continued the Term of the
Option, Optionee shall also pay the "impositions" (as defined in the Lease
Agreement) with respect to the Premises during any month for which Optionee
has continued the Term of this Option, the payment of an impositions shall be
in accordance with and subject to the terms and conditions of the Lease
Agreement.
8. Optionor and Optionee each hereby warrant and represent to the other
that it has not contracted with any real estate broker or agent with regard to
this Option Agreement, the First Amendment to Lease Agreement, the Second
Amendment to Lease Agreement, or the transactions contemplated herein or
therein, and each of Optionor and Optionee therefore shall indemnify, defend
and hold the other party harmless from any claims made by any real estate
broker or agent claiming a commission through Optionor or Optionee.
9. It is intention of the Optionor (as Landlord) and Optionee (as Tenant)
that Optionee is and shall continue to be the "Tenant" under the terms of the
Lease Agreement, First Amendment to Lease Agreement and the Second Amendment
to Lease Agreement. The Optionor (as Landlord) and Optionee (as Tenant) do
acknowledge, however, that the Premises may be capable of and are intended to
be shared by two (2) separate licensed gaming facilities (in whatever
proportion of the Premises that Tenant and the New Gaming Company may agree
upon), and that the Premises may be capable of the development of a common
infrastructure containing two (2) separate licensed riverboat gaming
facilities. Following the execution of this Option Agreement and during the
pendency of any Option Periods, Optionee, on an exclusive basis with Optionor,
will attempt to market and enter into a separate option agreement (or other
agreement) with an entity desiring to operate a gaming facility on a site
located on the Premises (the "New Gaming Company") for such New Gaming Company
to sublease, sublicense, or otherwise occupy a second gaming site located on
the Premises. The New Gaming Company shall be subject to the approval of
Optionor and Optionee, which approval shall not be unreasonably conditioned,
delayed or withheld (and which approval shall be granted or denied, in
writing, within ten (10) days after written request). If Optionee or Optionor
succeeds in securing a New Gaming Company to execute an option agreement (or
other agreement) to sublease, sublicense, or otherwise occupy a second gaming
site on the Premises, the option agreement (or other agreement) for the second
gaming site shall be entered into by the New Gaming Company and Optionee, and
such option agreement or other agreement will provide that the New Gaming
Company will make an initial up-front consideration payment to Optionee, the
sum of which shall be negotiated by Optionee and Optionor. Optionee shall
receive the first Two Million and 00/100 Dollars ($2,000,000.00) from the New
Gaming Company's initial up-front consideration payment for the option (or
other agreement) for the second gaming site, which payment would reimburse
Optionee in full for the Two Million and 00/100 Dollars ($2,000,000.00)
7
<PAGE>
consideration which Optionee has paid Optionor to enter into the Letter
Agreement and this Option Agreement. Thereafter, Optionee agrees that it will
equally split with Optionor any initial payment amount which Optionee
negotiates and receives from New Gaming Company which is in excess of Two
Million and 00/100 Dollars ($2,000,000.00). The new option agreement (or
other agreement) to be entered into by Optionee with the New Gaming Company
(for the second gaming site) shall contain option periods which shall run
concurrently with the Option Periods as set forth in this Option Agreement.
10. The New Gaming Company, if it executes the new option agreement (or
other agreement) to sublease, sublicense, or otherwise occupy a second gaming
site on the Premises, shall also be obligated to pay negotiated monthly
payments to Optionee during the Option Periods. The monthly negotiated
payments (up to $277,000.00 per month) to be paid by the New Gaming Company
regarding its option agreement (or other agreement) for the second gaming site
on the Premises, plus complete reimbursement by New Gaming Company to Optionee
of all of Optionee's expenses relating to "impositions" (as referenced in
Paragraph 7 hereinabove) and all other fees and expenses paid by New Gaming
Company to Optionee, shall belong solely to Optionee and shall be partially
applied by Optionee to its monthly Base Payment obligations to Optionor under
the terms of Paragraph 6 of this Option Agreement. Any monthly payment amount
made by New Gaming Company to Optionee which is in excess of the sum total of
(i) Two Hundred Seventy-Seven Thousand and 00/100 Dollars ($277,000.00), plus
(ii) the complete reimbursement made by New Gaming Company to Optionee for
Optionee's expenses relating to any taxes, impositions and insurance (all of
which are referenced in Paragraphs 6 and 7 hereinabove), will be equally
divided between Optionee and Optionor.
11. This Option Agreement contains the entire understanding of the
parties hereto and there are no representations, warranties, covenants or
undertakings other than those expressly set forth herein. A modification or
waiver of any of the provisions of this Option Agreement shall be effective
only if made in writing and executed with the same formality as this Option
Agreement. The failure of either party to insist upon strict performance of
any of this provisions of this Option shall not be construed as a waiver of
any subsequent default of the same or similar nature. This Option Agreement
and all of its terms and conditions shall extend to and be binding upon the
parties hereto and their respective successors and assigns. This Option
Agreement may be assigned by Optionee without the prior consent of Optionor.
12. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania without regard to principles of
conflicts of law.
13. In the event that any provision of this Agreement shall be determined
by a Court of competent jurisdiction to be invalid or unenforceable, the
remaining terms and conditions of this Agreement shall continue in full force
and effect.
8
<PAGE>
WITNESS the due execution hereof on the day and year first above written.
ATTEST: OPTIONOR:
LIBERTY LANDING ASSOCIATES
By: Delaware Avenue Development Corporation,
Partner
/s/ Mark Mendelson, Sec. /s/ Mark Mendelson
_________________________ BY:____________________________________
President
ITS:___________________________________
By: Delaware-Washington Corporation -
Partner
/s/ Thomas J. Kelly /s/ Thomas J. Kelly
__________________________ BY:_____________________________________
President
ITS:____________________________________
ATTEST: OPTIONEE:
PRESIDENT RIVERBOAT
CASINO-PHILADELPHIA, INC.
BY:
/s/ James A. Zweifel /s/ John S. Aylsworth
______________________ BY:_____________________________________
Chief Operating Officer
ITS:____________________________________
9
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
)SS:
COUNTY OF Philadelphia )
On July 31, 1996, Before me, a Notary Public in and for said County and
State, personally appeared Mark Mendelson, known to me or satisfactorily
proven to be the President of Delaware Avenue Development Corporation, and
who acknowledged that he, as such President executed the foregoing Option
Agreement for the purposes therein contained.
/s/ Mary Ann McMasters
_______________________________________
Notary Public
10
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
)SS:
COUNTY OF Philadelphia )
On July 31, 1996, Before me, a Notary Public in and for said County and State,
personally appeared Thomas J. Kelly, known to me or satisfactorily proven to
be the President of Delaware-Washington Corporation, and who acknowledged that
he, as such President executed the foregoing Option Agreement for the purposes
therein contained.
/s/ Mary Ann McMasters
_______________________________________
Notary Public
11
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
)SS:
COUNTY OF Philadelphia )
On July 31, 1996, Before me, a Notary Public in and for said County and State,
personally appeared John Aylsworth, known to me or satisfactorily proven to be
the C.O.O. of President Riverboat Casino, Inc., and who acknowledged that he,
as such President executed the foregoing Option Agreement for the purposes
therein contained.
/s/ Mary Ann McMasters
_______________________________________
Notary Public
12
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT
OF INCOME OF PRESIDENT CASINOS INC. FILED AS A PART OF THE QUARTERLY REPORT ON
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY
REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> AUG-31-1996
<CASH> 28811
<SECURITIES> 600
<RECEIVABLES> 1205
<ALLOWANCES> 443
<INVENTORY> 1411
<CURRENT-ASSETS> 34985
<PP&E> 165406
<DEPRECIATION> 42933
<TOTAL-ASSETS> 164584
<CURRENT-LIABILITIES> 30939
<BONDS> 98653
0
0
<COMMON> 302
<OTHER-SE> 30272
<TOTAL-LIABILITY-AND-EQUITY> 164584
<SALES> 0
<TOTAL-REVENUES> 97115
<CGS> 0
<TOTAL-COSTS> 92067
<OTHER-EXPENSES> 162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7006
<INCOME-PRETAX> (2120)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2120)
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<CHANGES> 0
<NET-INCOME> (2120)
<EPS-PRIMARY> (.07)
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</TABLE>
