==============================================================================
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 November 30, 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.
------------------------------------------------------
(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
----------------------------------------------------
Address of principal executive offices-Zip Code
314-622-3000
----------------------------------------------------
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 January 14, 1997.
==============================================================================
<PAGE>
PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of November 30 and February 29, 1996...........................1
Condensed Consolidated Statements of Operations
and Loss Per Share Information (Unaudited) for the
Three and Nine Months Ended November 30, 1996 and 1995............3
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended November 30, 1996 and 1995..............4
Notes to Condensed Consolidated Financial Statements................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................7
Part II. Other Information
Item 1. Legal Proceedings...........................................15
Item 2. Changes in Securities.......................................16
Item 3. Defaults Upon Senior Securities.............................16
Item 4. Submission of Matters to a Vote of Security Holders.........16
Item 5. Other Information...........................................16
Item 6. Exhibits and Reports on Form 8-K............................16
Signature..............................................................17
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
PRESIDENT CASINOS, INC. (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Nov. 30, Feb. 29,
Notes 1996 1996
----- -------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 28,012 $ 19,756
Short-term investments......................... 600 1,008
Receivables, net of allowance for doubtful
accounts of $384 and $424, respectively...... 1,071 1,943
Inventories.................................... 1,646 1,233
Prepaid expenses and other current assets...... 3,184 3,177
--------- ---------
Total current assets....................... 34,513 27,117
--------- ---------
Property and Equipment, net of accumulated
depreciation of $43,115 and $39,125...........2 120,075 135,630
--------- ---------
Other Assets:
Deferred financing costs....................... 2,298 2,858
Note receivable from related party............. 2,000 2,000
Lease options.................................. 2,168 --
Other assets................................... 549 419
--------- ---------
Total other assets......................... 7,015 5,277
--------- ---------
$161,603 $168,024
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
(Continued)
1
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
PRESIDENT CASINOS, INC. (UNAUDITED) (CONTINUED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands, except share data) Nov. 30, Feb. 29,
Notes 1996 1996
----- -------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt........... $ 4,023 $ 1,769
Accounts payable............................... 3,061 3,981
Accrued payroll and benefits................... 7,845 6,349
Other accrued expenses......................... 14,629 17,304
--------- ---------
Total current liabilities.................. 29,558 29,403
--------- ---------
Long-Term Liabilities:
Notes payable and capital lease obligations.... 102,633 105,677
Other liabilities.............................. 336 405
--------- ---------
Total long-term liabilities................ 102,969 106,082
--------- ---------
Total liabilities.......................... 132,527 135,485
--------- ---------
Commitments and Contingent Liabilities..........3 -- --
Minority Interest................................ 265 33
Stockholders' Equity:
Preferred Stock, $.01 par value per share;
10,000,000 shares authorized; none
issued and outstanding....................... -- --
Common Stock, $.01 par value per share;
100,000,000 shares authorized; 30,194,700
shares issued and outstanding............... 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (73,220) (69,525)
--------- ---------
Total stockholders' equity................. 28,811 32,506
--------- ---------
$161,603 $168,024
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
PRESIDENT CASINOS, INC. AND LOSS PER SHARE INFORMATION (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands, except share data) Three Months Nine Months
Ended Nov. 30, Ended Nov. 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise............. $ 42,843 $ 43,764 $130,719 $134,506
Food and beverage.................... 5,162 4,501 15,152 12,747
Hotel, retail and other.............. 1,821 3,245 7,297 8,976
Less promotional allowances.......... (3,298) (2,524) (9,525) (7,265)
--------- --------- --------- ---------
Net operating revenues.............. 46,528 48,986 143,643 148,964
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise............. 25,323 25,843 76,037 76,454
Food and beverage.................... 3,417 3,122 9,839 8,909
Hotel, retail and other.............. 632 586 1,911 1,717
Selling, general and administrative.. 12,227 13,403 38,721 40,093
Depreciation and amortization........ 3,716 4,304 11,650 12,264
Gain on sale of assets, net.........2 (444) (1) (1,420) (1)
Impairment of long-lived assets...... -- -- -- 11,000
Pre-opening expenses................. 110 -- 310 --
--------- --------- --------- ---------
Total operating costs and expenses.. 44,981 47,257 137,048 150,436
--------- --------- --------- ---------
OPERATING INCOME (LOSS) FROM
CONSOLIDATED SUBSIDIARIES............ 1,547 1,729 6,595 (1,472)
Equity loss in unconsolidated entities -- -- -- 1,175
--------- --------- --------- ---------
OPERATING INCOME (LOSS)............... 1,547 1,729 6,595 (2,647)
Interest expense, net................. 3,326 3,578 10,332 11,159
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST................ (1,779) (1,849) (3,737) (13,806)
Income tax benefit.................... 275 279 275 2,803
Minority interest..................... (70) -- (232) --
--------- --------- --------- ---------
NET LOSS.............................. $ (1,574) $ (1,570) $ (3,694) $(11,003)
========= ========= ========= =========
Net loss per common and
common equivalent share.............. $ (0.05) $ (0.05) $ (0.12) $ (0.36)
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding....... 30,195 30,195 30,195 30,195
====== ====== ====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Nine Months Ended Nov. 30,
1996 1995
------ ------
<S> <C> <C>
Net cash provided by operating activities......... $ 5,714 $ 10,484
Cash flows from investing activities:
Expenditures for property and equipment.......... (8,469) (13,683)
Proceeds from the sale of property and equipment. 13,794 18,791
Investment in unconsolidated entities............ -- (180)
Purchase of lease options........................ (2,169) (113)
Purchase of short-term investments............... -- (799)
Maturity of short-term investments............... 408 --
--------- ---------
Net cash provided by investing activities..... 3,564 4,016
--------- ---------
Cash flows from financing activities:
Repayment of notes payable...................... (300) (9,901)
Payments on capital lease obligations........... (722) (756)
--------- ---------
Net cash used in financing activities......... (1,022) (10,657)
--------- ---------
Net increase in cash and cash equivalents......... 8,256 3,843
Cash and cash equivalents at beginning of period.. 19,756 24,715
--------- ---------
Cash and cash equivalents at end of period........ $ 28,012 $ 28,558
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest............................ $ 13,459 $ 12,528
========= =========
Cash paid for income taxes, net
of amounts recovered............................ $ (1,184) $ 1,550
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Assets acquired under capital leases.............. $ -- $ 2,867
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<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 Annual Report on Form 10-K for the period ending
February 29, 1996. 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.
2. 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 $12,037. The Company recognized a gain of $999 as a result of this
transaction.
5
<PAGE>
During October 1996, the Company sold the "Riverclub Restaurant" barge and
certain nongaming equipment for an aggregate purchase price of $2,350. The
Company recognized a gain of $392 as a result of this transaction.
3. 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. ("President-
Missouri") 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 contained substantially identical claims alleging
that the defendants fraudulently marketed and operated casino video poker
machines and electronic slot machines, and asserted 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.," were consolidated into a single action, and 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
their motion to dismiss the complaint. In September 1996, the plaintiffs in
"Schreier" filed with the court an amended complaint. In December 1996, a
status conference was held at which the court ordered all previous motions
withdrawn without prejudice and granted leave for the plaintiffs ("Poulos,"
"Ahern" and "Schreier") to file a consolidated amended complaint by February
17, 1997. 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.
6
<PAGE>
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 operations of
"The Admiral" 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.
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.
7
<PAGE>
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 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 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, the Company is reviewing
various options regarding its Biloxi operations that include, but are not
limited to, the sale of its lease rights. During the second quarter, a letter
of intent with Primadonna Resorts, Inc. was signed to sell the Biloxi lease
rights. Subsequently Primadonna elected not to go forward with the
transaction.
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 during the prior fiscal year (from May 11 to
June 21, 1995). The construction of ramps during the current period limited,
to some extent, the negative impact of the flood.
In December 1996, the Company modified and exercised its option agreement to
secure the lease rights to 18 acres of riverfront property on Delaware Avenue
in the Penn's Landing area of Pennsylvania for the period January 1, 1997
through December 31, 1997. This property is located in close proximity to
downtown Philadelphia and all major highways. If gaming is approved in
Pennsylvania, this site would be a premier location for two riverboat casino
operations. Pursuant to the modified option agreement, the Company remitted
its $1.2 million payment. The modified agreement also calls for additional
payments if an authorized state-wide voter referendum on the legalization of
full scale riverboat gaming in Philadelphia County, Pennsylvania is placed on
the ballot during calendar 1997 or a new gaming company is obtained for the
8
<PAGE>
second gaming site at the location. These payments will not exceed $2.1
million. The Company also has the right to secure the lease rights to this
property for four additional six month option periods beginning January 1,
1998.
Results of Operations
Three-Month Period Ended November 30, 1996 Compared to the
Three-Month Period Ended November 30, 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 Nine Months Ended
November 30, November 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Biloxi, Mississippi
Operating revenues................. $ 10.4 $ 9.6 $ 33.5 $ 29.0
Loss from operations............... $ (1.3) $ (1.7) $ (1.2) $ (2.1)
EBITDA (a)......................... $ (0.6) $ (1.0) $ 0.9 $ 0.1
EBITDA margin...................... N/A N/A 2.7% --
Davenport, Iowa
Operating revenues................. $ 16.4 $ 16.2 $ 50.4 $ 56.9
Income from operations............. $ 2.7 $ 3.0 $ 8.9 $ 13.8
EBITDA (a)......................... $ 3.7 $ 4.1 $ 11.9 $ 17.2
EBITDA margin...................... 22.6% 25.3% 23.6% 30.2%
St. Louis, Missouri
Operating revenues................. $ 18.2 $ 21.0 $ 53.8 $ 58.3
Income from operations............. $ 1.3 $ 2.5 $ 2.1 $ 5.9
EBITDA (a)......................... $ 2.5 $ 3.9 $ 5.8 $ 9.8
EBITDA margin...................... 13.7% 18.6% 10.8% 16.8%
</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
9
<PAGE>
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 $46.5 million during the three-month period ended November 30, 1996,
compared to $49.0 million during the three-month period ended November 30,
1995, a decrease of $2.5 million or 5.1%. Operating revenue increases from
the Company's Biloxi and Davenport properties were offset by the decreases at
the St. Louis property and charter fees from third parties. The St. Louis
decrease is primarily attributable to an overall decrease of 3.7% of gaming
revenue in the St. Louis market and a 1.2% loss of the Company's market share.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) decreased to $3.7
million during the three-month period ended November 30, 1996, from $5.2
million during the three-month period ended November 30, 1995, a decrease of
$1.5 million or 28.9%. During the three-month period ended November 30, 1995,
the Company recorded insurance proceeds of $0.8 million. The three-month
period ended November 30, 1996 included a $0.6 million decrease in charter
revenues primarily resulting from the sale of the "Diamond Jo," one of the
Company's vessels that had been under charter.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $25.3 million during the three-month
period ended November 30, 1996, compared to $25.8 million during the three-
month period ended November 30, 1995, a decrease of $0.5 million or 1.9%. As
a percentage of gaming revenues, gaming and gaming cruise costs increased to
59.1% during the three-month period ended November 30, 1996 from 58.9% during
the three-month period ended November 30, 1995.
The Company's consolidated selling, general and administrative expenses were
$12.2 million during the three-month period ended November 30, 1996, compared
to $13.4 million during the three-month period ended November 30, 1995, a
decrease of $1.2 million or 9.0%. Such decrease was primarily attributable to
reductions in corporate overhead and development costs. As a percentage of
consolidated revenues, selling, general and administrative expenses decreased
to 26.2% during the three-month period ended November 30, 1996 from 27.3%
during the three-month period ended November 30, 1995.
During the three-month period ended November 30, 1996, the Company
recognized a net gain on the sale and disposal of assets of $0.4 million.
Depreciation and amortization expenses were $3.7 million during the three-
month period ended November 30, 1996, compared to $4.3 million during the
three-month period ended November 30, 1995, a decrease of $0.6 million or
14.0%. 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
10
<PAGE>
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 November
30, 1996, the Company incurred pre-opening costs of $0.1 million relating to
the application and proposed implementation of the second vessel. There can
be no assurance that such will be approved, that the Company will be able to
obtain all other permits and licenses necessary to operate the second vessel
or that economic feasibility will continue to justify a second vessel.
Operating income. As a result of the items discussed above, the Company had
operating income of $1.5 million during the three-month period ended November
30, 1996, compared to $1.7 million during the three-month period ended
November 30, 1995.
Interest expense, net. The Company incurred net interest expense of $3.3
million during the three-month period ended November 30, 1996, compared to
$3.6 million during the three-month period ended November 30, 1995, a decrease
of $0.3 million or 8.3%. Such decrease was attributable 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 primarily attributable 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, the Company continues to maintain a valuation
allowance for the full value of its deferred tax assets. During the three-
month period ended November 30, 1996, the Company recognized a $0.3 million
tax benefit relating to a state tax refund. During the three-month period
ended November 30, 1995 the Company recognized a $0.3 million tax benefit.
Net loss. The Company incurred a net loss of $1.6 million during the three-
month period ended November 30, 1996, compared to a net loss of $1.6 million
during the three-month period ended November 30, 1995.
11
<PAGE>
Nine-Month Period Ended November 30, 1996 Compared to the
Nine-Month Period Ended November 30, 1995
Operating revenues. The Company generated consolidated operating revenues
of $143.6 million during the nine-month period ended November 30, 1996
compared to $149.0 million during the nine-month period ended November 30,
1995, a decrease of $5.4 million or 3.6%. 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 Coast Guard's
mandated five-year hull inspection of "The President." During both nine-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/flooding conditions adversely affected the parking
availability for casino patrons and caused the Company to close 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.
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 nine-month periods the mix was significantly different.
During the nine-month period ended November 30, 1995, the Company recorded
business interruption and other insurance proceeds of $3.3 million. The nine-
month period ended November 30, 1996 had no business interruption proceeds but
did include a $1.6 million increase in charter revenues generated by the
leases of the "Majestic Star" and the "Diamond Jo." Revenue increases in food
and beverage were offset by an increase in promotional allowances.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $76.0 million during the nine-month
period ended November 30, 1996, compared to $76.5 million during the nine-
month period ended November 30, 1995, a decrease of $0.5 million or 0.7%. As
a percentage of gaming revenues, gaming and gaming cruise costs increased to
58.1% during the nine-month period ended November 30, 1996 from 56.9% during
the nine-month period ended November 30, 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
$38.7 million during the nine-month period ended November 30, 1996, compared
to $40.1 million during the nine-month period ended November 30, 1995, a
decrease of $1.4 million or 3.5%. 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
12
<PAGE>
"Gold Coast" barge used at the Biloxi property, which commenced in June 1995.
As a percentage of consolidated revenues, selling, general and administrative
expenses remained constant at 26.9% during the nine-month periods ended
November 30, 1996 and 1995.
During the nine-month period ended November 30, 1996, the Company recognized
a net gain on the sale and disposal of assets of $1.4 million. This gain was
primarily related to the exercise of a purchase option by the charterer of the
Company's casino vessel, the "Diamond Jo."
Depreciation and amortization expenses were $11.7 million during the nine-
month period ended November 30, 1996, compared to $12.3 million during the
nine-month period ended November 30, 1995, a decrease of $0.6 million or 4.9%.
This decrease was primarily attributable to the sale of various assets
partially offset by the additional depreciation expense related to placing the
"Majestic Star" in service at the beginning of its charter in May 1996.
During the nine-month period ended November 30, 1995, the Company wrote-down
$11.0 million of long-lived assets related to reevaluated development
projects. There was no comparable expense during the nine-month period ended
November 30, 1996.
The Company incurred a $1.2 million loss in unconsolidated entities during
the nine-month period ended November 30, 1995, primarily related to the write-
off of the Company's Gary, Indiana investment. There was no comparable
expense during the nine-month period ended November 30, 1996.
During the nine-month period ended November 30, 1996, the Company incurred
pre-opening costs of $0.3 million relating to the application and proposed
implementation of the second vessel in St. Louis.
Operating income (loss). As a result of the items discussed above, the
Company had operating income of $6.6 million during the nine-month period
ended November 30, 1996, compared to a loss of $2.6 million during the nine-
month period ended November 30, 1995.
Interest expense, net. The Company incurred net interest expense of $10.3
million during the nine-month period ended November 30, 1996, compared to
$11.2 million during the nine-month period ended November 30, 1995, a decrease
of $0.9 million or 8.0%. Such decrease was attributable to the early
retirement of various debt instruments.
During the nine-month period ended November 30, 1996, the Company recognized
a $0.3 million tax benefit relating to a state tax refund. During the nine-
month period ended November 30, 1995 the Company recognized a $2.8 million tax
benefit.
Net loss. The Company incurred a net loss of $3.7 million during the nine-
month period ended November 30, 1996, compared to a net loss of $11.0 million
during the nine-month period ended November 30, 1995.
13
<PAGE>
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 November 30, 1996, the Company had approximately
$28.6 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 $3.6 million of cash proceeds
during the nine-month period ended November 30, 1996, compared to $4.0 million
during the nine-month period ended November 30, 1995. During the nine-month
period ended November 30, 1996, $13.8 million of proceeds from the sale of the
"Diamond Jo" and other assets was partially offset by $8.5 million for
expenditures for property and equipment and $2.2 million related to the
purchase of certain lease options in Philadelphia.
During the nine-month period ended November 30, 1996, the Company made $1.0
million of principal payments, compared to $10.7 million during the nine-month
period ended November 30, 1995, primarily related to the early extinguishment
of debt.
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 $15.0 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). 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 December 31, 1996,
approximately $3.3 million of excess cash proceeds must be utilized by the end
of January 1997 and an additional $2.5 million by the end of April 1997.
In the event the Company identifies a potential growth opportunity, project
financing will be required. Capital investments may include all or some of
14
<PAGE>
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 an
additional $15.0 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.
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 3 of Notes to Condensed Consolidated Financial
Statements included in Part I of this report and is incorporated herein by
reference.
15
<PAGE>
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this report are listed on Index to
Exhibits accompanying the report.
(b) Reports on Form 8-K
On October 24, 1996, the Company filed a Current Report on Form
8-K, dated October 23, 1996, reporting under Item 5 that its proposed
sale to Primadonna Resorts, Inc. of leasehold rights at the
Broadwater Marina in Biloxi, Mississippi, had been terminated.
16
<PAGE>
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: January 14, 1997 /s/ James A. Zweifel
-----------------------------
James A. Zweifel
Duly Authorized Officer and
Principal Financial Officer
17
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT NO.
10.1 Asset Purchase Agreement dated October 14, 1996, by and between
President Riverboat Casino-New York, Inc. and Southern Illinois
Riverboat/Casino Cruises, Inc.
10.2 Modification to Option Agreement dated December 12, 1996, by and
between Liberty Landing Associates and President Riverboat Casino-
Philadelphia, Inc.
10.3 1996 President Casinos, Inc. Amended and Restated Stock Option Plan.
27 Financial Data Schedule for the nine months ended November 30, 1996,
as required under EDGAR.
18
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 14th day of October, 1996 by and between President Riverboat Casino-
New York, Inc., a Delaware corporation (the "Seller"), and Southern Illinois
Riverboat/Casino Cruises, Inc., an Illinois corporation (the "Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of the vessel known as "The River Club
Floating Restaurant Barge", the superstructure and all accessoried
appurtenances and improvements thereto, all furniture, fixtures and equipment
installed thereon as of the date of this Agreement and two (2) ramps to be
selected by Buyer prior to the Closing (as hereinafter defined) from the list
attached as Schedule 1.1 hereto (collectively, the "Vessel").
WHEREAS, Buyer desires to purchase the Vessel from Seller and Seller
desires to sell the Vessel to Buyer; and
WHEREAS, the parties hereto desire to set forth the terms and conditions
of such sale and purchase.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Sale and Purchase of Vessel.
1.1 Sale and Purchase. At the Closing, Seller shall sell and
transfer to Buyer, and Buyer shall purchase from Seller, the Vessel free and
clear of all claims, liens, pledges, options, charges, encumbrances, security
interests, agreements, and any interest thereon, or penalties, fines,
sanctions, assessments and obligations, or claims of any kind (including
without limitation, any inchoate liens created by operation of maritime law)
arising out of any transaction or occurrence occurring prior to the Closing
(each a "Lien").
1.2. No Assumption of Liabilities. Buyer does not hereby and shall
not assume or in any way undertake to pay, perform, satisfy, discharge, or
become responsible for any liabilities or obligations of Seller and Seller
agrees to pay and satisfy when due those liabilities and obligations of
Seller, which, if not paid or satisfied, could result in a liability to Buyer.
2. Purchase Price: Title.
2.1. Purchase Price. The purchase price to be paid by Buyer to
<PAGE>
Seller for the Vessel (the "Purchase Price") shall be Two Million Three
Hundred and Fifty Thousand and no/100 Dollars ($2,350,000) plus applicable
taxes (as defined in Section 12.10), and shall be paid as follows:
(a) Upon the complete execution of this Agreement, Buyer shall
deliver to Seller, by cash or wire transfer of same-day funds, a deposit in
the sum of Two Hundred and Fifty Thousand and no/100 Dollars ($250,000) (the
"Deposit"); and
(b) At Closing, Buyer shall deliver to Seller, by cash or wire
transfer of same-day funds, the sum of Two Million One Hundred Thousand and
no/100 Dollars ($2,100,000) plus applicable taxes (as defined in Section
12.10) (the "Balance").
2.2. Title. Seller shall deliver the Vessel to Buyer on the
Closing Date (as hereinafter defined) free and clear of all Liens. If any
Liens exist at the time of Closing, then at Buyer's option, Seller shall apply
the Purchase Price in satisfaction of such liens, or Buyer may elect an
abatement of the Purchase Price in the amount of such Liens. Notwithstanding
the foregoing, if Seller disputes the validity of any Lien existing at the
time of Closing, then Seller may deposit with buyer's attorney ("Escrow
Agent") a surety bond or other immediately available funds in full amount of
any such alleged Lien to be held in escrow by Escrow Agent until Buyer
receives directions for the disposition of such proceeds from (i) Seller and
the party or parties with whom Seller is in dispute, or (ii) a Court having
jurisdiction over such matters.
3. Delivery of Vessel.
3.1. Delivery of Vessel. At Closing, the Vessel shall be delivered
to Buyer at the Vessel's docking site as of the date of this Agreement in
South Roxana, Illinois in the same condition as at the time of execution of
this Agreement, reasonable wear and tear excepted. Upon delivery, Buyer shall
(i) execute a Certificate of Acceptance in the form of attached hereto as
Exhibit 3.1 and (ii) either immediately remove the Vessel from its docking
site or assume the docking site lease obligations of Seller on a going forward
basis (without any liability for any sums due by Seller for the docking of the
Vessel prior to closing) in order to continue to store the Vessel at the
docking site.
3.2. Damage Prior to Closing.
If the Vessel suffers any damage prior to Closing, reasonable
wear and tear excepted, the cost of repair of any such damage to the Vessel
(the "Cost") shall be reasonably determined by a person or entity of
recognized qualification selected by Buyer, and with respect to any such
damage:
(i) If the Cost is not greater than $100,000.00, then
Buyer shall proceed to Closing in accordance with the terms of this Agreement
2
<PAGE>
with the right to set-off the Cost from the Purchase Price.
(ii) If the Cost is greater than $100,000.00, then Buyer
may terminate this Agreement by giving notice of such termination to Seller.
(iii) Notwithstanding the foregoing, if the Vessel
becomes a total or constructive total loss (as determined by Seller's insurer)
before Closing, this Agreement shall immediately terminate without the need
for any further act by any party, and any and all insurance proceeds payable
by Seller's insurer shall be the property of Seller.
In the event that this Agreement is terminated pursuant to this Section
3.2(a), neither party shall have any further obligation to the other party
other than Seller's obligation to return the Deposit.
3.3. Risk of Loss
(a) The risk of loss of and damage to the Vessel at all times
up to and including Closing shall be on Seller. Seller shall provide prompt
written notice to Buyer of any damage to the Vessel.
(b) The risk of loss of and damage to the Vessel at all times
from and after Closing shall be on Buyer.
4. Inspection.
4.1. Inspection. Prior to Closing, Buyer shall be permitted full
access to the Vessel in order to conduct such inspections thereof as Buyer may
reasonably request.
5. Indemnification.
5.1. Indemnification.
(a) Seller shall defend, indemnify, save and keep harmless
Buyer and its parent, affiliates, successors, and assigns, officers,
employees, directors and agents from and against all liabilities, demands,
claims, actions or causes of action, regulatory, legislative or judicial
proceedings or investigations, assessments, levies, losses, fines, penalties,
damages, costs and expenses, including, without limitation, reasonable
attorneys', accountants', investigators', and experts' fees and expenses
("Damages"), sustained or incurred by any of them resulting from or arising
out of or by virtue of (1) any inaccuracy in or breach of any representation
and warranty made by Seller in this Agreement or in any closing document
delivered to Buyer in connection with this Agreement; (2) any breach by Seller
of, or failure by Seller to comply with, any of its covenants or obligations
under this Agreement (including, without limitation, its obligations under
this Section 5.1(a)); (3) the failure to discharge when due any Lien, except
any Lien caused by an act or omission of Buyer; or (4) any claims arising or
accruing prior to Closing and not caused by acts or omissions of Buyer.
3
<PAGE>
Seller shall advance any amounts payable to Buyer. Seller shall advance any
amounts payable to Buyer hereunder as such amounts are incurred.
(b) Buyer shall defend, indemnify, save and keep harmless
Seller and its parent, affiliates, successors, and assigns, officers,
employees, directors and agents from and against all Damages sustained or
incurred by any of them resulting from or arising out of or by virtue of (1)
any inaccuracy in or breach of any representation and warranty made by Buyer
in this Agreement or in any closing document delivered to Seller in connection
with this Agreement; (2) any breach by Buyer of, or failure by Buyer to comply
with, any of its covenants or obligations under this Agreement (including,
without limitation, its obligations under this Section 5.1(b)); (3) the
failure to discharge when due any claims, liens, pledges, options, charges,
encumbrances, security interests, agreements, and any interest thereon, or
penalties, fines, sanctions, assessments and obligations, or claims of any
kind (including without limitation, any inchoate liens created by operation of
maritime law) arising out of the acts or omissions of Buyer; (4) any claims
related to the Vessel accruing after Closing by parties other than the Seller
and not caused by the acts or omissions of Seller; or (5) any claims arising
out of Buyer's inspection of the Vessel prior to Closing. Buyer shall advance
any amounts payable to Seller hereunder as such amounts are incurred.
6. Closing.
6.1. The closing of the transactions contemplated hereby (the
"Closing") shall take place on October 17, 1996 (the "Closing Date") subject
to the conditions set forth in Sections 9 and 10 hereof at 203 Ferry Street,
Metropolis, Illinois (or at such other place as the parties may agree upon in
writing). In the event the Closing shall not have taken place by October 17,
1996, then either party may terminate this Agreement by written notice to the
other, and upon any such termination, neither party shall have any liability
or continuing rights or obligations of any kind under or arising out of this
Agreement other than any (i) rights, obligations or liabilities under Sections
5.1, 12.1 and 12.16 hereof (which provisions shall remain in full force and
effect) or (ii) liabilities from a breach of this Agreement prior to its
termination; provided, further, that subject to the terms of this Section 6.1,
Seller shall return the Deposit to Buyer.
7. Representations and Warranties of the Seller. Seller represents,
warrants and agrees as follows (which representations and warranties shall be
true as of the date hereof and as of the Closing Date):
7.1. Ownership of Vessel. Seller is the sole owner of the Vessel,
free and clear of any and all Liens. The sale of the Vessel shall be made
subject to the following warranty, which shall be included in the Bill of Sale
conveying title to the Vessel:
It is specifically understood and agreed between Buyer and Seller that
Seller makes NO WARRANTY of any kind whatsoever (except as to title of
the Vessel as set forth below), said sale being made "as is, where is,"
4
<PAGE>
without any warranty whatsoever, express or implied, as to the design,
condition, merchantability or seaworthiness of, or as to the fitness of
the vessel for any particular purpose or any particular trade. Said
sale is made however with full warranty of title and Seller agrees to
indemnify, save harmless and defend Buyer from and against any and all
mortgages and judgments, and any and all liens or encumbrances,
including but not limited to asserted and unasserted claims and liens
for wages, maintenance and cure, repairs, supplies, towage, salvage,
use of dry-dock or marine railway or other necessities, provided that
any such mortgages, judgments, liens or encumbrances shall arise (i)
from acts or events occurring prior to Closing (as defined in that
certain Asset Purchase Agreement between Buyer and Seller) and (ii)
from Seller's acts or omissions occurring prior to the date of Closing.
7.2. Formation, Power, Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Seller has the requisite power and authority to enter into and
to perform this Agreement and all other agreements, certificates and documents
executed or delivered, or to be executed or delivered, by it in connection
herewith (collectively, with this Agreement, the "Seller Documents"). The
execution, delivery and performance of the Seller Documents by Seller have
been duly authorized. On the Closing Date, Seller will have the full right,
power and authority to sell, assign, transfer and deliver the Vessel as
provided in this Agreement and such delivery will convey to Buyer lawful,
valid and marketable title to the Vessel purchased, free and clear of any and
all Liens.
7.3. Valid and Binding Obligations. The Seller Documents executed
and delivered, or to be executed and delivered, by Seller constitute the valid
and binding obligations of Seller enforceable against Seller in accordance
with their respective 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).
7.4. Conflicts; Consents of Third Parties. The execution, delivery
and performance of the Seller Documents by Seller will not (a) conflict with
the organizational documents 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 Seller or any of Seller's assets are bound; (b) constitute
a violation by Seller of any law or regulation applicable to Seller or any of
Seller's assets; or (c) result in the creation of any Lien upon the Vessel.
Except as 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 Seller in connection with the execution,
delivery and performance of the Seller Documents.
5
<PAGE>
7.5. Condition of Vessel. Buyer acknowledges the Vessel is being
sold "as is." Except for the representations and warranties set forth in this
Section 7, no representations or warranties, expressed or implied, are, or
have been, made by Seller or any representative or agent of Seller regarding
the condition of the Vessel or otherwise. Buyer acknowledges that it has
independently evaluated the Vessel 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.
8. Representations and Warranties of the Buyer. Buyer represents,
warrants and agrees as follows (which representations and warranties shall be
true as of the date of satisfaction of the condition set forth in Section 9.6
and as of the Closing Date):
8.1. Formation; Power; Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Illinois. Buyer has the requisite power and authority to enter into and to
perform this Agreement and all other agreements, certificates and documents
executed or delivered, or to be executed or delivered, by Buyer in connection
herewith (collectively, with this Agreement, the "Buyer Documents"). The
execution, delivery, and performance of the Buyer Documents by Buyer have been
duly authorized.
8.2. Valid and Binding Obligations. The Buyer Documents executed
and delivered, or to be executed and delivered, by Buyer constitute the valid
and binding obligations of Buyer enforceable against Buyer in accordance with
their respective 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).
8.3. Conflicts; Consents of Third Parties. The execution, delivery
and performance of the Buyer Documents by Buyer will not (a) conflict with the
organizational documents or Bylaws 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 Buyer or any of Buyer's assets are bound; or (b) constitute
a violation by Buyer of any law or regulation applicable to Buyer or any of
Buyer's assets. Except as 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 Buyer in
connection with the execution, delivery and performance of the Buyer
Documents.
6
<PAGE>
9. Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions (any
of which may be waived in writing by Buyer):
9.1. Truth of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement (including any Schedule
and Exhibit originally delivered pursuant hereto without regard to any
amendment) shall be true and correct in all materials respects on and as of
the Closing Date with the same effect as though such representations and
warranties were made on and as of such date.
9.2. 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 have been duly performed in all material respects.
9.3. No Injunction. No injunction or restraining order shall be in
effect restraining or prohibiting any of the transactions contemplated hereby.
10. Conditions to the Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated hereby 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):
10.1. Truth of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement (including any Schedule
and Exhibit originally delivered pursuant hereto without regard to any
amendment) 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.
10.2. 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.
10.3. No Injunction. No injunction or restraining order shall be
in effect restraining or prohibiting any of the transactions contemplated
hereby.
11. Transaction at Closing.
11.1. Documents to be Delivered and Actions to be Taken by Seller.
At the Closing (or as otherwise required) Seller shall deliver to Buyer the
following:
11.1.1. A copy of resolutions of Seller authorizing the
execution, delivery and performance of the Seller Documents by Seller and a
certificate of an authorized officer of Seller dated the Closing Date that
such resolutions were duly adopted, are in full force and effect and have not
been amended or modified;
7
<PAGE>
11.1.2. A Bill of Sale with respect to the Vessel; and
11.2 Documents to be Delivered and Actions to be Taken by Buyer.
As the Closing, Buyer shall deliver to Seller the following:
11.2.1. The Balance in accordance with Section 2.1(b) hereof,
plus all Taxes (as defined in Section 12.10) payable to Buyer in accordance
with Section 12.10 hereof;
11.2.2. A copy of resolutions of Buyer authorizing the
execution, delivery and performance of the Buyer Documents by Buyer and a
certificate of an authorized member of Buyer dated the Closing Date, that such
resolutions were duly adopted, are in full force and effect and have not been
amended or modified; and
12. Miscellaneous.
12.1. Remedies: Liquidated Damages.
(a) In the event of a material breach by Buyer of its
obligations hereunder, Seller may pursue any remedy or remedies which may be
available to Seller under applicable law, including the right to specific
performance of this Agreement; provided, however, that Seller shall in no
event be entitled to consequential damages unless Buyer's breach is found to
be willful.
(b) In the event of a material breach by Seller of its
obligations hereunder, Seller shall return to Buyer the Deposit and Buyer may
pursue any remedy or remedies which may be available to Buyer under applicable
law, including the right to specific performance of this Agreement; provided,
however, that Buyer shall in no event be entitled to consequential damages
unless Seller's breach is found to be willful.
12.2. Governing Law. The laws of the State of Illinois shall
govern the construction, interpretation, performance and enforcement of this
Agreement.
12.3. Captions. The captions used herein are for reference
purposes only, and shall not in any way affect the meaning or interpretation
of this Agreement.
12.4. Expenses. Except as specifically set forth herein to the
contrary, 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.
12.5. Notices. Any notice or other communications required or
permitted hereunder shall be considered given when delivered, if delivered in
person, by facsimile, mailed by registered or certified mail, postage prepaid,
8
<PAGE>
or sent by recognized overnight delivery service, addressed as follows:
If to Seller:
President Riverboat Casino - New York, Inc.
c/o President Casinos, Inc.
800 North First Street
St. Louis, Missouri 63102
with a copy to:
Henry Gusky, Esquire
Sable, Makoroff & Gusky
7th Floor, Frick Building
Pittsburgh, PA 15219
(412) 471-4996
(412) 281-2859
If to Buyer:
Southern Illinois Riverboat/Casino Cruises, Inc.
c/o Players International, Inc.
1300 Atlantic Avenue, Suite 800
Atlantic City, NJ 08401
Phone: (609) 449-7777
Fax: (609) 340-8165
Attention: Howard Goldberg
with a copy to:
Players Services, Inc.
1300 Atlantic Avenue, Suite 800
Atlantic City, NJ 08401
Phone: (609) 449-7777
Fax: (609) 449-7765
Attention: Patrick Madamba, Jr.
Either party hereto may change its address for receiving notices and other
communications under this Agreement by giving the other party hereto
appropriate written notice in accordance with the provisions of this section.
12.6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
12.7. 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.
9
<PAGE>
12.8. 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.
12.9. No 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.
12.10. Transfer Taxes. The Buyer shall pay to Seller at Closing in
cash or wire transfer of same-day funds, any and all state and local sales,
use, transfer and other similar taxes and fees payable in connection with the
sale, transfer and assignment of the Vessel from Seller to Buyer pursuant to
this Agreement.
12.11. Knowledge. Where any representation or warranty contained
in this Agreement is expressly qualified with reference to knowledge, the
parties hereto confirm that they have made due and diligent inquiry as to the
matters that are the subject of such representation or warranty.
12.12. Joint Participation. Buyer has participated in the drafting
if this entire Agreement and expressly acknowledges such joint participation,
to avoid application of any rule construing contractual language against the
party which drafted the language.
12.13. Time of Essence. Time shall me of the essence with respect
to performance of all obligations under this Agreement.
12.14. Further Assurances. Each party covenants and agrees to
perform such further acts and execute such additional instruments as may be
reasonably necessary to accomplish the objectives of this Agreement.
12.15. Attorneys' Fees. In the event that either party hereto
violates or breaches the terms of this Agreement and the other party hereto
engages legal counsel for purposes of enforcing its rights and remedies
hereunder or otherwise protecting its interests in connection with this
Agreement, said nondefaulting party, in addition to all other relief to which
it may be entitled, shall also be entitled, in the event it prevails against
the breaching party, to recover all of the reasonable costs and expenses it
incurs in enforcing this Agreement and protecting its interests, including its
reasonable attorneys' fees and costs.
12.16. No Assignment. This Agreement may not be assigned by
operation of law or otherwise by any of the parties hereto without prior
written consent of the other party. For the purposes of this Section 12.16,
Seller shall be deemed to have given its consent to any assignment of Buyer's
rights under this Agreement to any wholly owned or controlled subsidiary of
Buyer.
10
<PAGE>
12.17. Broker's or Finder's Fees. Upon receipt by Seller of the
full amount of the Purchase Price and upon completion of the Closing as
provided herein, Seller shall be liable to pay a broker's commission to
Coastal Passenger Vessels, Ltd., LLP d/b/a Coastal Marine. Except as set
forth in the immediately preceding sentence, Seller warrants and represents
that there are no brokers or agents involved in this transaction on behalf of
Seller. Seller agrees to indemnify and hold harmless Buyer against and from
any claim by any and every broker or agent claiming through Seller.
Upon completion of the Closing as provided herein, Buyer shall be
liable to pay a broker's commission to J.S. Productions, Inc. Except as set
forth in the immediately preceding sentence, Buyer warrants and represents
that there are no brokers or agents involved in this transaction on behalf of
Buyer. Buyer agrees to indemnify and hold harmless Seller against and from
any claim by any and every broker or agent claiming through Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first above written.
ATTEST: SOUTHERN ILLINOIS RIVERBOAT/
CASINO CRUISES, INC.
By: /s/ Patrick Madamba, Jr. By: /s/ Howard Goldberg
- ---------------------------------- ----------------------------------
Patrick Madamba, Jr. Howard Goldberg, President
ATTEST: PRESIDENT RIVERBOAT CASINO-
NEW YORK, INC.
By: /s/ Chris Bernotas By: /s/ Ralph J. Vaclavik
- ---------------------------------- ----------------------------------
Chris Bernotas Ralph J. Vaclavik, VP-Finance
11
<PAGE>
The following is a summary of all omitted Exhibits and Schedules to the
Asset Purchase Agreement. The Company hereby agrees to furnish supplementally
to the Commission a copy of any omitted Exhibit or Schedule upon the request
of the Commission.
Exhibit 3.1 Certificate of Acceptance
Schedule 1.1 Ramps
MODIFICATION TO OPTION AGREEMENT
THIS MODIFICATION TO OPTION AGREEMENT (the "Modification to Option
Agreement"), made this 12th day of December, 1996, by and between LIBERTY
LANDING ASSOCIATES, a Pennsylvania general partnership ("Optionor"), and
PRESIDENT RIVERBOAT CASINO-PHILADELPHIA, INC., a Pennsylvania corporation, its
designee or assignee ("Optionee").
WITNESSETH:
WHEREAS, Optionor and Optionee have entered into that certain Option
Agreement dated July 31, 1996 (the "Option Agreement"); and
WHEREAS, Optionor and Optionee desire to modify the payment terms under
the Option Agreement for Base Payments due from Optionee to Optionor in the
year 1997, in order to make available funds to promote and market the Premises
for gaming and development.
NOW, THEREFORE, in consideration of the sum of TEN AND 00/100 DOLLARS
($10.00), 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. All
capitalized terms not defined herein shall have the meaning given to such
terms in the Option Agreement.
2. Paragraph 6a of the Option Agreement is hereby modified and amended to
add the following language to the end of existing Paragraph 6a of the
Option Agreement:
"In consideration of the current political uncertainty regarding the
legalization of gaming in the Commonwealth of Pennsylvania, and
notwithstanding anything to the contrary contained in Paragraph 6a
hereinabove, the total amount of all of the monthly Base Payments payable in
the calendar year 1997 shall be payable by Optionee to Optionor in the
following manner:
(i) on or before December 31, 1996, Optionee shall pay to Optionor the sum of
ONE MILLION TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($1,200,000.00) Also, at
such time as Optionee pays to Optionor the $1,200,000.00, Optionor shall
contemporaneously provide a payment credit to Optionee in the amount of ONE
MILLION AND 00/100 DOLLARS ($1,000,000.00) as a credit against the monthly
Base Payments due from Optionee to Optionor in the calendar year 1997.
Optionor shall utilize the amount of the above referenced credit as a
contribution to the Optionee's marketing fund for the marketing and promotion
of the legalization of gaming at the Premises. Optionee will consult with
Optionor regarding the spending of any funds in the Optionee's marketing fund
established for the promotion of legalization of gaming at the Premises, and
<PAGE>
Optionee and Optionor shall jointly approve the marketing budget to be
utilized for the advancement of the Referendum (as hereinafter defined) and
for the approval of full scale casino gambling on riverboats in the
Commonwealth of Pennsylvania; and
(ii) in addition to the $1,2000,000.00 payment due by Optionee on or before
December 31, 1996 as referenced hereinabove, Optionee shall be obligated to
pay to Optionor an additional payment of ONE MILLION ONE HUNDRED TWENTY-FOUR
THOUSAND DOLLARS ($1,124,000.00) if, and only if: (1) during 1997 the
Legislature of the Commonwealth of Pennsylvania enacts, and the Governor of
Pennsylvania signs into law (or the legislation otherwise becomes law without
the Governor's signature), a statue or other legislation which authorizes a
state-wide voter referendum (the "Referendum") on the legalization of full
scale riverboat casino gaming in the Commonwealth of Pennsylvania (which
Referendum shall specifically address the question of proposed legislation to
be enacted in the Commonwealth of Pennsylvania to legalize full scale casino
gambling on riverboats, to be conducted on riverboats whether such vessels be
cruising on a body of water located in or directly adjacent to the
Commonwealth of Pennsylvania or while such vessel is standing at dockside,
said riverboats to be located in the Commonwealth of Pennsylvania generally
and specifically in Philadelphia County, Pennsylvania); and (2) during 1997,
the Referendum is placed on the ballot for approval or rejection by a
statewide vote of all citizens of the Commonwealth of Pennsylvania entitled to
vote. If during 1997 the Referendum is placed on the ballot for approval or
rejection by a statewide vote of all citizens of the Commonwealth of
Pennsylvania entitled to vote, then Optionee shall pay to Optionor the
additional payment of $1,124,000.00 within thirty (30) days of the occurrence
of the date the Referendum is voted on in 1997. If during 1997 the Referendum
is not placed on the ballot for approval or rejection by a statewide vote of
all citizens of the Commonwealth of Pennsylvania entitled to vote, then no
additional Base Payments (other than the initial payment of $1,2000,000 set
forth in (i) above) shall be due and owing from Optionee to Optionor for the
year 1997.
The $1,200,000.00 payment due by no later than December 31, 1996 as set
forth in (i) above, and the $1,124,000.00 payment (which payment shall only be
due if, during 1997, the Referendum is placed on the ballot for approval or
rejection by a statewide vote of all citizens of the Commonwealth of
Pennsylvania entitled to vote) shall be deemed to be payment in full by
Optionee of the total amount of all monthly Base Payments due from Optionee to
Optionor in 1997. Commencing in January 10, 1998, the monthly Base Payments
in the amount of $277,000.00 shall thereafter be payable in accordance with
the terms and conditions of the Option agreement."
3. Optionor agrees that it will act in good faith and use its best efforts
to actively solicit contributions and actively contact appropriate
persons in order to promote the adoption of the Referendum in
Pennsylvania and the passage of such Referendum by the voters of
Pennsylvania, and Optionor agrees that all funds solicited and/or
obtained by Optionor for such cause shall be solicited for and shall be
2
<PAGE>
contributed to the organization known as "Pennsylvania for Economic
Growth".
4. Paragraph 9 of the Option Agreement is hereby amended by adding the
following words after the word "Agreement" (and prior to the sentence
which begins with the word "Thereafter") on the 32nd line of Paragraph 9
of the Option Agreement:
", and in the event that a New Gaming Company is obtained for the second
gaming site at the Premises for a purchase price equal to or in excess of
$4,124,000.00 and the $1,124,000.00 referenced in subparagraph (ii) of the
Modification to Option Agreement has not yet been paid to Optionor or
Optionee, then (a) the sum of $1,124,000.00 due and owing to Optionor under
the terms of subparagraph (ii) of the Modification to Option Agreement shall
concurrently be paid to Optionor from the sums received from the New Gaming
Company for the second gaming site, (b) Optionee agrees that it will also
reimburse Optionor for the $1,000,000.00 credit received from Optionor
pursuant to the terms of subparagraph (i) of the Modification of Option
Agreement, and (c) following the reimbursement to Optionor of the
$1,000,000.00 credit as previously received from Optionor pursuant to the
terms of said subparagraph (i) of this Modification of Option Agreement,
Optionee and Optionor shall equally split any initial payment amount which
Optionee receives from the New Gaming Company which is in excess of
$4,124,000.00 (being the $2,000,000.00 reimbursed to Optionee, and the
$1,124,000.00 and the $1,000,000.00 to be paid to Optionor). Notwithstanding
the preceding two sentences, in the sole event that the New Gaming Company is
obtained for the second gaming site at the Premises for a purchase price of
less than $4,124,000.00 and the $1,124,000.00 payment referenced in
subparagraph (ii) and the $1,000,000.00 credit referenced in subparagraph (i)
of the Modification to Option Agreement has not yet been paid to Optionor by
Optionee, then the net purchase price received from the New Gaming Company for
the second gaming site at the Premises shall be split equally between Optionee
and Optionor. In the event that we sell for less than $4,124,000.00 and the
$1,124,000.00 payment has been previously paid, then the Optionor's share of
the split will be a maximum of $1,000,000.00.
The sentence beginning with the word "Thereafter" on the 32nd line of
Paragraph 9 of the Option Agreement is hereby deleted from Paragraph 9 of the
Option Agreement.
5. Except as specifically set forth herein, the terms and conditions of the
Option Agreement shall remain in full force and effect.
3
<PAGE>
WITNESS the due execution hereof on the day and year first above written.
LIBERTY LANDING ASSOCIATES
Delaware Avenue Development
Corporation, Partner
By: /s/ Mark Mendelson, President
------------------------------------
Delaware-Washington Corporation,
Partner
By: /s/ Thomas J. Kelley, President
------------------------------------
PRESIDENT RIVERBOAT CASINO-
PHILADELPHIA, INC.
By: /s/ James A. Zweifel
------------------------------------
4
1996 PRESIDENT CASINOS, INC.
AMENDED AND RESTATED
STOCK OPTION PLAN
1. Purpose.
The purpose of the 1996 President Casinos, Inc. Amended and Restated Stock
Option Plan (the "Plan") is to further the earnings of President Casinos, Inc.
(the "Company"). The Plan provides for the award of long-term incentives to
those directors, officers and other key executives who make substantial
contributions to the Company by their loyalty, industry and invention. The
Company intends that the Plan will facilitate securing, retaining and
motivating directors and management employees of high caliber and potential.
2. Administration.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). Each
member of the Committee shall be (1) a "non-employee director" as contemplated
by Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Act"),
and (2) an "outside director" as contemplated by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Without limiting the
foregoing, the Committee shall have full and final authority in its discretion
to construe and interpret the provisions of the Plan and to decide all
questions of fact arising in its application; to determine the directors and
employees to whom awards shall be made under the Plan; to determine the type
of awards to be made and the amount, size and terms of each such award; to
determine the time when awards shall be granted; and to make all other
determinations necessary or advisable for the administration of the Plan.
3. Stock Subject to the Plan.
The shares that may be issued under the Plan shall not exceed in the
aggregate more than Three Million One Hundred Fifty Thousand (3,150,000)
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock"). Such shares may be authorized and unissued shares or treasury
shares. Except as otherwise provided herein, any shares subject to an option
or right which for any reason expires or is terminated unexercised as to such
shares shall again be available under the Plan.
4. Eligibility to Receive Awards.
Persons eligible to receive awards under the Plan shall be limited to those
full-time officers and other key executive full-time employees of the Company
who are in positions in which their decisions, actions and counsel will have a
significant impact upon the profitability and success of the Company, as well
as its directors. Directors of the Company who are not otherwise officers or
employees of the Company shall receive an award of Thirty Thousand (30,000)
Non-Qualified Stock Options (defined below) at the commencement of service as
a director, which award shall vest fifty (50%) percent on the date of grant
and twenty-five (25%) percent on the first and second anniversaries of grant
if each director is then serving as a director. If a person who has received
an award of options as a director of the Company pursuant to the preceding
sentence is not serving as a director of the Company on the first or second
anniversary of grant of such options, then any such options that have not
previously vested shall be forfeited by that person. Any person who has been
awarded options as a director of the Company shall not be awarded options as
director of the Company at any later time if such person again commences
service as a director of the Company, regardless of whether the options that
were previously awarded vested or were forfeited. A participant in the Plan
shall not be entitled to receive an award for more than 500,000 Options in any
given Plan year.
5. Form of Awards.
Awards may be made from time to time by the Committee in the form of stock
options to purchase shares of Common Stock, stock appreciation rights or any
combination thereof. Stock options may be options which are intended to
qualify as incentive stock options within the meaning of Section 422 of the
Code, or any substitute thereto ("Incentive Stock Options"), or options which
are not intended to so qualify ("Non-Qualified Stock Options").
6. Stock Options.
Stock options for the purchase of Common Stock shall be evidenced by written
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time, which shall contain in substance the following
terms and conditions:
(a) Type of Option. Each option agreement shall identify the options
represented thereby as Incentive Stock Options or Non-Qualified Stock Options,
as the case may be.
(b) Option Price. The purchase price of stock subject to an option
shall be the Fair Market Value of the stock at the time of grant. Fair Market
Value of Common Stock shall mean, for any particular date, (i) for any period
during with the Common Stock shall not be listed for trading on a national
securities exchange, but when the Common Stock is authorized as a Nasdaq
National Market security, the last transaction price per share as quoted by
The Nasdaq Stock Market (the "Nasdaq"), (ii) for any period during which the
Common Stock shall not be listed for trading on a national securities exchange
or authorized as a Nasdaq National Market security, the closing bid price as
reported by the Nasdaq, (iii) for any period during which the Common Stock
shall be listed for trading on a national securities exchange, the closing
price per share of Common Stock on such exchange as of the close of such
trading day or (iv) the market price per share of Common Stock as determined
by a nationally recognized investment banking firm selected by the Board of
Directors in the event neither (i), (ii) nor (iii) above shall be applicable.
If Fair Market Value is to be determined as of a day when the securities
2
<PAGE>
markets are not open, the Fair Market Value on that day shall be the Fair
Market Value on the preceding day when the markets were open.
(c) Exercise Term. Each option agreement shall state the period or
periods of time within which the option may be exercised, in whole or in part,
which shall be such period or periods of time as may be determined by the
Committee, provided that no option shall be exercisable after ten (10) years
from the date of grant thereof. The Committee may, in its discretion, provide
in the option agreement circumstances under which the option shall become
immediately exercisable, and may, notwithstanding the foregoing, accelerate
the exercisability of any option at any time.
(d) Payment of Shares. The purchase price of the shares with respect to
which an option is exercised shall be payable in full at the time of exercise
in cash, Common Stock at Fair Market Value, or a combination thereof, as the
Committee may determine and subject to such terms and conditions prescribed by
the Committee for such purpose.
(e) Rights Upon Termination of Employment. Unless otherwise determined
by the Committee and set forth in the option agreement, in the event that an
optionee ceases to be an employee or director of the Company for any cause
other than retirement by a full-time employee of the Company after age 60,
death or disability, or for any other reason specified in the option award,
the options shall terminate at the time of termination. In the event that an
optionee retires, dies or becomes disabled prior to the expiration of his or
her option and without having fully exercised his or her option, the optionee
or the Permitted Transferee (as defined in Section 6(f) hereof), as the case
may be, or his or her successor shall have the right to exercise the option
during its term within a period of twelve (12) months after termination of
employment due to death or disability to the extent that the option was
exercisable at the time of termination, or within such other period, and
subject to such terms and conditions, as may be specified by the Committee.
(f) Nontransferability. Each option agreement shall state that the
option is not transferable by the participant other than by will or the laws
of descent and distribution; provided, however, the Committee may, in its sole
discretion, authorize all or a portion of a Non-Qualified Stock Option granted
or to be granted to an optionee to be on terms which permit transfer by such
optionee to a Permitted Transferee, provided that (i) there may be no
consideration for any such transfer, (ii) the stock option agreement pursuant
to which such options are granted must be approved by the Committee, and must
expressly provide for transferability in a manner consistent with this Section
or the Committee must approve any such proposed transfer, (iii) subsequent
transfers of transferred Non-Qualified Stock Options shall be prohibited
except those (x) by will or the laws of descent and distribution or (y) to any
other Permitted Transferee of the optionee, and (iv) the optionee shall remain
subject to withholding taxes upon exercise of the Non-Qualified Stock Option
by a Permitted Transferee. Following transfer, any such Non-Qualified Stock
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. The Company shall have no
3
<PAGE>
obligation to provide a Permitted Transferee with notice of the early
termination of a Non-Qualified Stock Option. Permitted Transferee shall mean
either (i) the spouse, children or grandchildren of the optionee ("Immediate
Family Members"), (ii) a trust or trusts for the exclusive benefit of the
Immediate Family Members or (iii) a partnership in which such Immediate Family
Members are the only partners. Options granted under the Plan to an optionee
shall be exercisable, during the optionee's lifetime, only by the optionee or
a Permitted Transferee, as the case may be. In the event of the death of an
optionee, exercise shall be made only:
(i) By the Permitted Transferee, the executor or administrator of
the estate of the deceased optionee or the person or persons to whom the
optionee's rights under the Option Agreement shall pass by will or the laws of
descent and distribution; and
(ii) To the extent that the deceased optionee or the Permitted
Transferee, as the case may be, was entitled thereto at the date of the
optionee's death; provided, however, that any otherwise applicable six-month
holding period shall not be required for exercise by an executor or
administrator of the estate of a deceased optionee who was subject to Section
16 of the Act.
(g) Incentive Stock Options. In the case of an Incentive Stock Option,
each option agreement shall contain such other terms, conditions and
provisions as the Board determines necessary or desirable in order to qualify
such option as a tax favored option (within the meaning of Section 422 of the
Code, or any amendment or substitute thereof or regulation thereunder)
including, without limitation, the following:
(i) The purchase price of stock subject to an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of such stock on
the date the option is granted;
(ii) The aggregate Fair Market Value (determined as of the time the
option is granted) of the stock with respect to the which Incentive Stock
Options are exercisable for the first time by any employee during any calendar
year (under all plans of the Company) shall not exceed One Hundred Thousand
($100,000.00) Dollars; and
(iii) No Incentive Stock Option shall be granted to any employee if
at the time the option is granted the individual owns stock possessing more
than ten (10%) percent of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporations, unless at the
time such option is granted the option price is at least one hundred ten
(110%) percent of the Fair Market Value of the stock subject to the option and
such option by its terms is not exercisable after the expiration of five (5)
years from the date of grant.
7. Stock Appreciation Rights.
4
<PAGE>
Stock appreciation rights shall be evidenced by written stock appreciation
rights agreements in such form not inconsistent with this Plan as the
Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
(a) Award. Stock appreciation rights shall entitle the grantee, subject
to such terms and conditions determined by the Committee, to receive upon
exercise thereof all or a portion of the excess of (i) the Fair Market Value
of a specified number of shares of the Common Stock at the time of exercise
over (ii) a specified price which shall not be less than one hundred (100%)
percent of the Fair Market Value of the stock at the time the right is
granted, provided that the maximum value of any stock appreciation right shall
be limited to the exercise price of the tandem option with respect to which it
is issued. Stock appreciation rights may only be granted in tandem with and
at the same time as a Non-Qualified Stock Option. A stock appreciation right
or applicable portion thereof (i) shall be exercisable only at the same time
and to the same extent as and (ii) shall terminate and no longer be
exercisable upon the termination or immediately after the exercise of the
tandem Non-Qualified Stock Option or applicable portion thereof.
(b) Termination of Employment. Unless otherwise determined by the
Committee and set forth in the Award Agreement, stock appreciation rights will
be exercisable only during the grantee's employment by the Company except that
a stock appreciation right shall be exercisable for twelve (12) months after
the grantee's employment is terminated by reason of retirement after age 60,
death or disability.
(c) Payment. Upon exercise of a stock appreciation right, payment shall
be made in the form of Common Stock at Fair Market Value on the date of
exercise, in cash or in a combination thereof, as the Committee may determine.
(d) Other Terms. Stock appreciation rights shall be granted in such
manner and such form, and subject to such additional terms and conditions as
the Committee in its sole discretion deems necessary or desirable, including,
without limitation, any limitations necessary in order to avoid any
insider-trading liability in connection with a stock appreciation right under
Section 16(b) of the Act.
8. General Restrictions.
(a) Listings, Registrations or Consents. Each award under the Plan
shall be subject to the requirement that if at any time the Committee shall
determine that (i) the listing, registration or qualification of the shares of
Common Stock subject or related thereto upon any securities exchange or under
any state or federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of shares of Common Stock is necessary or desirable
as a condition of or in connection with the granting of such award or the
issuance or purchase of shares of Common Stock thereunder, such award shall
not be consummated in whole or in part unless such listing, registration,
5
<PAGE>
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
(b) Rule 16b-3 Six-Month Limitations. To the extent required in order
to comply with Rule 16b-3 only, any equity security offered pursuant to the
Plan must be either (i) approved by the Board or the Committee or (ii) held
for at least six (6) months after the date of grant, and with respect to any
derivative security issued pursuant to the Plan, either (i) the issuance of
such derivative security was approved by the Board or the Committee or (ii) at
least six (6) months must elapse from time of acquisition of the derivative
security to the date of disposition of such derivative security (other than
upon exercise or conversion), or its underlying equity security. Terms used
in the preceding sentence shall, for the purposes of such sentence only, have
the meanings, if any, assigned or attributed to them under Rule 16b-3.
9. Single or Multiple Agreements.
Multiple forms of awards or combinations thereof may be evidenced by a
single agreement or multiple agreements, as determined by the Committee.
10. Rights of a Stockholder.
The recipient of any award under the Plan or any Permitted Transferee, as
the case may be, unless otherwise provided by the Plan, shall have no rights
as a stockholder with respect thereto unless and until the recipient becomes
entitled to receive certificates for shares of Common Stock.
11. Rights to Terminate Employment.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment of
the Company or affect any right which the Company may have to terminate the
employment of such participant.
12. Withholding.
The Company is hereby authorized to withhold from any award, from any
payment due or transfer made under any award, or under the Plan, or from any
compensation or other amount owing to a participant the amount (in cash,
shares of Common Stock or other securities, other awards or other property) of
any applicable withholding taxes in respect of an award, its exercise, or any
payment or transfer under an award or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. In addition, if provided in the
applicable award agreement and subject to the discretion of the Committee, at
the time of award exercise, participants may elect to satisfy any tax
withholding obligations that may arise upon award exercise by directing the
Company to withhold a number of shares of Common Stock otherwise deliverable
upon such exercise having a Fair Market Value equivalent to the amount of such
6
<PAGE>
obligation. In the case of any transfer by a participant of a Non-Qualified
Stock Option to a Permitted Transferee, such participant shall remain subject
to withholding taxes upon the exercise of the Non-Qualified Stock Option by
the Permitted Transferee.
13. Non-Assignability.
No award under the Plan shall be assignable or transferable by the recipient
thereof except by will or by the laws of descent and distribution or by such
other means as the Committee may approve. During the life of the recipient,
such award shall be exercisable only by such person or by such person's
guardian or legal representative.
14. Non-Uniform Determinations.
The Committee's determination under the Plan (including, without limitation,
determinations of the persons to receive awards, the form, amount and timing
of such awards, the terms and provisions of such awards and the agreements
evidencing same, and the establishment of values) need not be uniform and may
be made selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
15. Adjustments.
(a) In the event of any change in the outstanding stock of the Company,
by reason of a stock dividend or distribution, supplemental offering of
shares, recapitalization, merger, consolidation, split-up, combination,
exchange of shares or the like, the Committee may, in its discretion,
appropriately adjust the number of shares of Common Stock which may be issued
under the Plan.
(b) Notwithstanding anything to the contrary in this Plan, the number of
shares of Common Stock purchasable upon the exercise of the outstanding stock
options ("Options"), the option price and the terms of outstanding stock
appreciation rights ("SARs") shall be subject to adjustment from time to time
as provided in this paragraph 15.
(i) If the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
number of shares of Common Stock purchasable upon exercise of an Option or the
number of SARs shall be increased by multiplying such number of shares or SARs
by a fraction of which the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the day immediately preceding
the date of such distribution and the numerator shall be the sum of such
number of shares and the total number of shares constituting such dividend or
other distribution, such increase to become effective immediately after the
opening of business on the date following such distribution.
(ii) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the number of shares of
7
<PAGE>
Common Stock purchasable upon exercise of an Option or the number of SARs at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and,
conversely, if outstanding shares of Common Stock shall each be combined into
a smaller number of shares of Common Stock, the number of shares of Common
Stock purchasable upon exercise of an Option or the number of SARs at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately decreased, such increase or
decrease, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(iii) The reclassification of Common Stock into securities (other
than Common Stock) and/or cash and/or other consideration shall be deemed to
involve a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such reclassification
into the number or amount of securities and/or cash and/or other consideration
outstanding immediately thereafter and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, within the meaning of the clause 2 above.
(iv) The Committee may make such increases in the number of shares
of Common Stock purchasable upon exercise of an Option or the number of SARs,
in addition to those required by this subparagraph (b), as shall be determined
by the Company's Board of Directors to be advisable in order to avoid taxation
so far as practicable of any dividend of stock or stock rights or any event
treated as such for federal income tax purposes to the recipients.
(c) Whenever the number of shares of Common Stock purchasable upon
exercise of an Option or the number of SARs is adjusted as provided in this
paragraph 15, the option price in the case of an Option or the Clause 7(a)(ii)
specified price, in the case of SARs, shall be adjusted by a fraction in which
the numerator is equal to the number of shares of Common Stock purchasable or
SARs granted prior to the adjustment and the denominator is equal to the
number of shares of Common Stock purchasable or SARs granted after the
adjustment.
(d) For the purpose of this Paragraph 15, the term "Common Stock" shall
include any shares of the Company of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company and which is not subject to redemption by the Company.
16. Amendment.
The Committee may terminate or amend the Plan at any time, except without
shareholder approval, the Committee may not increase the maximum number of
shares which may be issued under the Plan (other than increases pursuant to
paragraph 15 hereof), extend the period during which any award may be
8
<PAGE>
exercised, extend the term of the Plan or change the minimum option price
(other than pursuant to paragraph 15 hereof). The termination or any
modification or amendment of the Plan shall not, without the consent of a
participant, affect his rights under an award previously granted.
17. Effect on Other Plans.
Participation in this Plan shall not affect an employee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided.
18. Duration of the Plan.
The Plan shall remain in effect until all awards under the Plan have been
satisfied by the issuance of shares, but no award shall be granted more than
ten years after the earlier of the date the Plan was first adopted by the
Company or was approved by the Company's stockholders.
19. Miscellaneous.
(a) Governing Law. Subject to the provisions of applicable federal law,
the Plan shall be administered, construed and enforced according to the
internal laws of the State of Delaware, excluding its conflict of law rules,
and applicable federal law and in courts situated in the State of Delaware.
(b) Severability. The invalidity of any particular clause, provision or
covenant herein shall not invalidate all or any part of the remainder of the
Plan, but such remainder shall be and remain valid in all respects as fully as
the law will permit.
Adopted November 14, 1996
by the Board of Directors of
President Casinos, Inc.
/s/ John E. Connelly
----------------------------
John E. Connelly, Chairman
9
<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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> NOV-30-1996
<CASH> 28012
<SECURITIES> 0
<RECEIVABLES> 1455
<ALLOWANCES> 384
<INVENTORY> 1646
<CURRENT-ASSETS> 34513
<PP&E> 163190
<DEPRECIATION> 43115
<TOTAL-ASSETS> 161603
<CURRENT-LIABILITIES> 29558
<BONDS> 98733
0
0
<COMMON> 302
<OTHER-SE> 28509
<TOTAL-LIABILITY-AND-EQUITY> 161603
<SALES> 0
<TOTAL-REVENUES> 143643
<CGS> 0
<TOTAL-COSTS> 137048
<OTHER-EXPENSES> 232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11173
<INCOME-PRETAX> (3737)
<INCOME-TAX> (275)
<INCOME-CONTINUING> (3694)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3694)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
