<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997
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, $.06 par value,
5,032,826 shares outstanding as of October 9, 1997.
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PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Part I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of August 31 and February 28, 1997.............................1
Condensed Consolidated Statements of Operations
and Loss Per Share Information (Unaudited) for the
Three and Six Months Ended August 31, 1997 and 1996...............2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended August 31, 1997 and 1996.................3
Notes to Condensed Consolidated Financial Statements................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................7
Part II. Other Information
Item 1. Legal Proceedings...........................................15
Item 2. Changes in Securities.......................................15
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............................17
Signature..............................................................18
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
PRESIDENT CASINOS, INC. (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Aug. 31, Feb. 28,
1997 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 26,156 $ 25,115
Restricted cash................................ 5,168 --
Short-term investments......................... 600 600
Accounts receivable, net of allowance for
doubtful accounts of $366 and $393........... 1,151 982
Other current assets........................... 6,694 8,172
--------- ---------
Total current assets....................... 39,769 34,869
Property and equipment, net of accumulated
depreciation of $52,362 and $45,851............ 153,093 117,163
Other assets..................................... 3,069 3,872
--------- ---------
$195,931 $155,904
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........... $ 5,580 $ 1,772
Other current liabilities...................... 29,080 25,284
--------- ---------
Total current liabilities.................. 34,660 27,056
Long-term debt, net of current maturities........ 131,273 104,862
--------- ---------
Total liabilities.......................... 165,933 131,918
--------- ---------
Minority interest................................ 10,505 265
Commitments and contingencies.................... -- --
Stockholders' equity:
Preferred Stock, none issued and outstanding... -- --
Common Stock, 5,033 shares issued
and outstanding.............................. 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (82,538) (78,310)
--------- ---------
Total stockholders' equity................. 19,493 23,721
--------- ---------
$195,931 $155,904
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
PRESIDENT CASINOS, INC. AND LOSS PER SHARE INFORMATION (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands, except share data) Three Months Six Months
Ended Aug. 31, Ended Aug. 31,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise............. $ 44,146 $ 42,715 $ 86,608 $ 87,876
Food and beverage.................... 5,513 5,035 10,412 9,990
Hotel................................ 1,199 505 1,551 891
Retail and other..................... 1,603 2,330 3,181 4,585
Less promotional allowances.......... (3,411) (3,063) (6,570) (6,227)
--------- --------- --------- ---------
Net operating revenues.............. 49,050 47,522 95,182 97,115
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise............. 25,792 24,902 50,432 50,714
Food and beverage.................... 3,610 3,370 6,909 6,422
Hotel................................ 384 169 529 333
Retail and other..................... 568 482 977 946
Selling, general and administrative.. 12,366 13,218 24,818 26,096
Depreciation and amortization........ 3,669 3,933 7,423 7,934
Gain on sale of assets, net.......... (481) (960) (470) (976)
Development.......................... 327 364 1,197 598
--------- --------- --------- ---------
Total operating costs and expenses.. 46,235 45,478 91,815 92,067
--------- --------- --------- ---------
OPERATING INCOME...................... 2,815 2,044 3,367 5,048
Interest expense, net................. (3,941) (3,454) (7,354) (7,006)
--------- --------- --------- ---------
LOSS BEFORE AND MINORITY INTEREST..... (1,126) (1,410) (3,987) (1,958)
Minority interest..................... 222 85 240 162
--------- --------- --------- ---------
NET LOSS.............................. $ (1,348) $ (1,495) $ (4,227) $ (2,120)
========= ========= ========= =========
Net loss per common and
common equivalent share.............. $ (0.27) $ (0.30) $ (0.84) $ (0.42)
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding....... 5,033 5,033 5,033 5,033
====== ====== ====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Six Months Ended Aug. 31,
1997 1996
------ ------
<S> <C> <C>
Net cash provided by operating activities......... $ 7,012 $ 5,367
-------- ---------
Cash flows from investing activities:
Expenditures for property and equipment......... (31,648) (5,301)
Changes in restricted cash...................... (5,168) --
Proceeds from the sale of property and equipment 996 11,444
Purchase of lease options....................... -- (2,050)
Maturity of short-term investments.............. -- 408
Other........................................... (59) --
--------- ---------
Net cash provided by (used in)
investing activities........................ (35,879) 4,501
--------- ---------
Cash flows from financing activities:
Proceeds from notes payable..................... 30,000 --
Proceeds from a capital lease refund............ 108 --
Repayment of notes payable...................... (200) (200)
Payments on capital lease obligations........... -- (613)
--------- ---------
Net cash provided by (used in)
financing activities........................ 29,908 (813)
--------- ---------
Net increase in cash and cash equivalents......... 1,041 9,055
Cash and cash equivalents at beginning of period.. 25,115 19,756
--------- ---------
Cash and cash equivalents at end of period........ $ 26,156 $ 28,811
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 6,826 $ 6,942
========= =========
Cash paid for income taxes, net
of amounts recovered.......................... $ -- $ (59)
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Issuance of Class B Unit of L.L.C............... $ 10,000 $ --
========= =========
Related party notes and interest thereon
applied against purchase of Biloxi Property... $ 2,016 $ --
========= =========
Assets acquired under capital leases............ $ 156 $ --
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
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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 ("TCG"). 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
that include the Broadwater Property that was acquired in July 1997. See
Notes 2 and 3. 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 included in the Company's Annual Report on
Form 10-K for the period ending February 28, 1997. Accordingly, footnote
disclosure which would substantially duplicate the disclosure in the audited
consolidated financial statements has been omitted.
All share information has been adjusted to reflect a one-for-six reverse
stock split which was effective August 8, 1997 and reduced the outstanding
shares of common stock from 30,194,700 to approximately 5,032,450 shares and
increased the par value of the Company's common stock from $.01 to $.06 per
share.
Certain amounts for fiscal 1997 have been reclassified to conform with
fiscal 1998 financial statement presentation.
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2. PROPERTY, PLANT AND EQUIPMENT
On July 24, 1997, the Company acquired certain real estate and improvements
from a wholly-owned entity of John E. Connelly, Chairman, Chief Executive
Officer and principal stockholder of the Company located on the Gulf Coast in
Biloxi, Mississippi for $40,500. See Note 3. The property comprises
approximately 260 acres and includes a marina, two hotels and an adjacent 18-
hole golf course (collectively, the "Broadwater Property"). The following
purchase price allocation is based upon the preliminary valuation of an
independent appraisal performed:
Land and land held for future development... $ 40,732
Machinery and equipment..................... 156
---------
$ 40,888
=========
The marina is currently the site of the Company's casino operations in
Biloxi and had been leased by the Company under a long-term lease agreement.
3. MINORITY INTEREST AND LONG-TERM DEBT
Minority Interest
To effectuate the acquisition of the Broadwater Property as discussed in
Note 2, the Company entered into a Redemption Agreement dated as of July 22,
1997 (the "Redemption Agreement") by and among J. Edward Connelly Associates,
Inc., a company controlled by Mr. Connelly ("JECA"), Broadwater Hotel, Inc., a
wholly-owned subsidiary of the Company ("BHI"), and President Broadwater
Hotel, L.L.C., a limited liability company formed by JECA and BHI for purposes
of the transaction (the "LLC").
BH Acquisition Corporation ("BH"), a company wholly-owned by Mr. Connelly,
was the sole owner of the Broadwater Property. Prior to the closing of the
transactions, JECA, the successor by merger to BH became the sole owner of the
Broadwater Property. In connection with the formation of the LLC, JECA
transferred its interest in the Broadwater Property to the LLC as a capital
contribution in exchange for the sole outstanding membership interest in the
LLC. Pursuant to the Redemption Agreement, BHI made a capital contribution of
$5,000 to the LLC in exchange for the Class A Unit of the LLC as described in
the Amended and Restated Limited Liability Company Operating Agreement of the
LLC (the "Amended Operating Agreement"). The Class A Unit affords BHI control
of the LLC. Simultaneously with BHI's acquisition of the Class A Unit, the
LLC redeemed JECA's existing membership interest in the LLC in exchange for
(i) the cash payment by the LLC to JECA of $28,484, (ii) redemption of the
$2,016 debt owed by BH to the Company and (iii) the issuance by the LLC to
JECA of the Class B Unit of the LLC as described in the Amended Operating
Agreement.
The LLC is obligated to redeem the Class B Unit from JECA for a redemption
price of $10,000 (the "Redemption Price") on the date on which the
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<PAGE> 8
Indebtedness (as hereinafter defined) is fully and finally discharged and the
mortgage securing the Indebtedness is released. In addition, the Class B Unit
entitles JECA to a priority return based on a percentage per annum equal to
the greater of (i) 8.75% or (ii) 4.0% plus LIBOR, as defined by the Redemption
Agreement.
Long-term Debt
In order to finance the LLC's redemption of JECA's existing membership
interest, the LLC borrowed the sum of $30,000 from a third party lender,
evidenced by a non-recourse promissory note (the "Indebtedness"). Except as
set forth in the promissory note and related security documents, the LLC's
obligations under the Indebtedness are nonrecourse and are secured by the
Broadwater Property, its improvements and leases thereon. The Indebtedness
bears interest at a variable rate per annum equal to the greater of (i) 8.75%
or (ii) 4% plus the LIBOR 30-day rate.
The LLC is obligated under the Indebtedness to make monthly payments of
interest accruing under the Indebtedness, and to repay the Indebtedness in
full on July 22, 2000. In addition, the LLC is obligated pay to the lender a
loan fee in the amount of $7,000 (the "Loan Fee") which will be fully earned
and nonrefundable when the Indebtedness is repaid; provided, however, that if
the Indebtedness is repaid in full on or before September 30, 1998, then the
Loan Fee will be reduced to $5,500.
Pursuant to LLC's loan agreements, all of LLC's cash and future revenues are
deposited to lockboxes that are controlled by the lender. Expenditures from
the lockboxes are limited to the operating expenses, capital improvements and
debt service of LLC as defined by such agreements. Accordingly, the cash and
cash equivalents of LLC have been classified as restricted cash.
4. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is from time to time a 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's subsidiaries.
5. SUBSEQUENT EVENT
In September 1997, the Company further modified its lease and option
agreements for its lease rights to 18 acres of river front property in the
Penn's Landing area of Philadelphia, Pennsylvania. Pursuant to the second
modification of the lease agreement, the Company remitted $1,200 for the
second preliminary term extension for the period from January 1, 1998 through
September 30, 1998. This term extension may be extended at the election of
the Company through December 31, 1997 on a month to month basis for $100 per
month beginning October 1997. The Company also extended its right to secure
additional option periods through December 31, 2000. The remaining terms and
conditions of the agreements were substantially unchanged.
6
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and the notes thereto included elsewhere in
the report.
Overview
On July 24, 1997, the Company purchased for $40.5 million certain real
estate and improvements located on the Gulf Coast in Biloxi, Mississippi from
an entity which is wholly-owned by John E. Connelly, Chairman, Chief Executive
Officer and principal stockholder of the Company. The property comprises
approximately 260 acres and includes the Broadwater Resort and the Broadwater
Tower, the 138-slip Broadwater Marina and the adjacent 18-hole Sun Golf Course
(collectively, the "Broadwater Property"). The Broadwater Marina is currently
the site of the Company's casino operations in Biloxi and had been leased by
the Company under a long-term lease agreement. The Company invested $5.0
million in President Broadwater Hotel, LLC, which owns the Broadwater
Property. This entity financed the purchase with $30.0 million of outside
financing and issued a $10.0 million membership interest (the Class B Unit)
to the seller. Such financing is non-recourse to the Company.
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
development 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.
--Competition
Intensified competition for patrons continues to occur at each of the
Company's properties.
Within a 25-mile radius of the Quad Cities, the Company's Davenport
operation competes with three other casino operations. Expansion and
increased marketing by these competitors continues to escalate causing
increased operating costs.
Competition continues to expand in the St. Louis market with the March 1997
opening of two new casinos in Maryland Heights, a suburb twenty miles west of
the Company's St. Louis operations.
--Regulatory Matters
The Company temporarily removed its casino vessel, "The President," from
service in Davenport (from November 12, 1995 to April 3, 1996) for its Coast
Guard mandated five-year hull inspection and to make certain improvements to
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<PAGE> 10
the facility. During such period, the Company temporarily replaced "The
President" with a smaller vessel, "The President Casino-Mississippi", thereby
reducing Davenport's gaming square footage from approximately 37,000 square
feet to 21,000 square feet for 34 days during the three-month period ended May
31, 1996.
--Weather Conditions
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. The Davenport casino
operations were temporarily suspended for thirteen days during April 1997, as
a result of flooding on the Mississippi River. Also as a result of flood
conditions, the Company temporarily suspended operations aboard "The Admiral"
in St. Louis for three days in May and eight days in June of 1996. Although
the Company was not forced to suspend its St. Louis operations during the six-
month period ended August 31, 1997, high waters caused reduced parking and a
general public perception of diminished access to the casino which combined to
negatively impact revenue during the period.
Results of Operations
The following table highlights the results of operations for the Company's
gaming and non-gaming cruise operating subsidiaries. Certain
reclassifications have been made to fiscal year 1997 to conform to the fiscal
1998 presentation (dollars in millions).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Biloxi, Mississippi
Operating revenues................. $ 10.5 $ 11.8 $ 21.3 $ 23.1
Income (loss) from operations...... $ (0.5) $ 0.2 $ (0.4) $ 0.1
EBITDA (a)......................... $ 0.2 $ 0.9 $ 1.1 $ 1.5
EBITDA margin...................... 1.9% 7.6% 5.2% 6.5%
Davenport, Iowa
Operating revenues................. $ 18.7 $ 17.0 $ 35.1 $ 34.0
Income from operations............. $ 3.7 $ 3.0 $ 5.2 $ 6.3
EBITDA (a)......................... $ 4.7 $ 4.0 $ 7.3 $ 8.2
EBITDA margin...................... 25.1% 23.5% 20.8% 24.1%
St. Louis, Missouri
Operating revenues................. $ 17.5 $ 16.4 $ 35.2 $ 35.5
Income (loss) from operations...... $ 0.9 $ (0.6) $ 2.3 $ 0.8
EBITDA (a)......................... $ 2.3 $ 0.6 $ 4.9 $ 3.3
EBITDA margin...................... 13.1% 3.7% 13.9% 9.3%
</TABLE>
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(a) "EBITDA" consists of earnings from operations before income taxes,
depreciation and amortization for each of the operating subsidiaries.
However, it does not include corporate operating expenses. EBITDA should not
be construed as an alternative to operating income as an indicator of the
Company's operating performance, or as an alternative to cash flows from
operational activities as a measure of liquidity. The Company has presented
EBITDA solely as a supplemental disclosure to facilitate a more complete
analysis of the Company's financial position. The Company believes that this
disclosure enhances the understanding of the financial performance of a
company with substantial depreciation and amortization.
Three-Month Period Ended August 31, 1997 Compared to the
Three-Month Period Ended August 31, 1996
Operating revenues. The Company generated consolidated operating revenues
of $49.1 million during the three-month period ended August 31, 1997 compared
to $47.5 million during the three-month period ended August 31, 1996, an
increase of $1.6 million or 3.4%. The Davenport and St. Louis gaming
operations experienced an increase in operating revenues. Davenport
benefitted by the completion of various construction projects that limited
access to the casino during the prior year's three-month period. St. Louis's
revenues increased over the flood impacted prior year's three-month period.
These increases were partially offset by a decrease in operating revenue at
the Biloxi operations. Additionally, a non-gaming subsidiary experienced a
$1.0 million decrease in charter revenues as a result of the sale of two of
the Company's vessels that in the prior year had been under charter.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) increased to $4.9
million during the three-month period ended August 31, 1997, from $4.8 million
during the three-month period ended August 31, 1996, an increase of $0.1
million or 2.1%. The increase was substantially attributable to $1.1 million
revenue contributed by the Broadwater Property, which was acquired in July
1997, offset by the $1.0 million decrease in charter revenues during the
three-month period ended August 31, 1997, as discussed above.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $25.8 million during the three-month
period ended August 31, 1997, compared to $24.9 million during the three-month
period ended August 31, 1996, an increase of $0.9 million or 3.6%. The
increase was primarily attributable to promotional expenses at the Davenport
operation and a proportional increase in gaming tax as a result of the
increase in gaming revenues. These were offset, in part, by ongoing
operational efficiencies experienced at all three properties. As a percentage
of gaming revenues, gaming and gaming cruise costs were 58.4% during the
three-month period ended August 31, 1997, compared to 58.3% during the three-
month period ended August 31, 1996.
The Company's consolidated selling, general and administrative expenses were
$12.4 million during the three-month period ended August 31, 1997, compared to
$13.2 million for the three-month period ended August 31, 1996, a decrease of
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<PAGE> 12
$0.8 million or 6.1%. As a percentage of consolidated revenues, selling,
general and administrative expenses decreased to 25.3% during the three-month
period ended August 31, 1997 from 27.8% during the three-month period ended
August 31, 1996. The decreases were primarily attributable to two factors.
The St. Louis property successfully challenged a tax assessment and reduced
its current and potentially its future annual taxes by $0.6 million.
Accordingly, the Company recorded $0.2 million of savings related to this
quarter and recorded income of $0.6 million related to refunds and to the
relief of prior period accruals. The second key reduction in costs related to
the acquisition of the Broadwater Property which eliminated, on a consolidated
basis, the marina lease expense Biloxi casino. The reduction in expense was
$0.3 million for this three-month period and will reduce future quarterly
expenses by approximately $0.7 million.
Depreciation and amortization expenses were $3.7 million during the three-
month period ended August 31, 1997, compared to $3.9 million during the three-
month period ended August 31, 1996, a decrease of $0.2 million. The decrease
is primarily attributable to the sale of two vessels in the prior year.
Development costs during the three-month period ended August 31, 1997 were
$0.3 million compared to $0.4 million during the three-month period ended
August 31, 1996, a decrease of $0.1 million. The decrease was primarily
related to a decrease in development activities in St. Louis related to the
development of a second vessel, which was subsequently suspended, offset by
the amortization of the Philadelphia lease option.
Operating income. As a result of the foregoing items, the Company had
operating income of $2.8 million during the three-month period ended August
31, 1997, compared to $2.0 million during the three-month period ended August
31, 1996.
Interest expense, net. The Company incurred net interest expense of $3.9
million during the three-month period ended August 31, 1997, compared to $3.5
million during the three-month period ended August 31, 1996, an increase of
$0.4 million or 11.4%. The increase was attributable to an additional $30.0
million of debt incurred by the Company in conjunction with the purchase of
the Broadwater Property in July 1997.
Minority interest expense was $0.2 million during the three-month period
ended August 31, 1997, compared to $0.1 million during the three-month period
ended August 31, 1996, an increase of $0.1 million. The increase is primarily
attributable to financing the acquisition of the Broadwater Property within
the current quarter. Such related minority interest expense for a full
quarter will be approximately $0.2 million.
Net loss. The Company incurred a net loss of $1.3 million during the three-
month period ended August 31, 1997, compared to a net loss of $1.5 million
during the three-month period ended August 31, 1996.
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<PAGE> 13
Six-Month Period Ended August 31, 1997 Compared to the
Six-Month Period Ended August 31, 1996
Operating revenues. The Company generated consolidated operating revenues
of $95.2 million during the six-month period ended August 31, 1997 compared to
$97.1 million during the six-month period ended August 31, 1996, a decrease of
$1.9 million or 2.0%. On a consolidated basis, the three gaming properties
experienced a decrease in revenue $1.0 million. Additionally, a non-gaming
subsidiary experienced a $2.1 million decrease in charter revenues as a result
of the sale of two of the Company's vessels that in the prior year had been
under charter. This was partially offset by $1.1 million revenue contributed
by the Broadwater Property, which was acquired in July 1997.
Operating revenues from the Company's Davenport operations were positively
affected by an increase in market share (excluding the period that operations
were suspended) for the six-month period ended August 31, 1997 compared to the
six month-period ended August 31, 1996. This was offset, in part, by flood
conditions which caused the temporary suspension of operations for thirteen
days during April 1997. During the six-month period ended August 31, 1996,
the Davenport operations were negatively affected by construction which
adversely affected parking and ingress to the casino (which construction was
substantially completed in fiscal 1997) and by the substitution of a smaller
vessel for one month of the first quarter.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) were $8.6 million
during the six-month period ended August 31, 1997, compared to $9.2 million
during the six-month period ended August 31, 1996, a decrease of $0.6 million
or 6.5%. The decrease largely attributable to a $2.1 million decrease in
charter revenues as a result of the sale of the two vessels discussed above.
This was partially offset by $1.1 million revenue contributed by the
Broadwater Property, which were acquired in July 1997, and $0.5 million of
business interruption insurance proceeds related to the temporary suspension
of operations in St. Louis during the prior year that was recognized in the
three-month period ended May 31, 1997.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $50.4 million during the six-month
period ended August 31, 1997, compared to $50.7 million during the six-month
period ended August 31, 1996, a decrease of $0.3 million or 0.1%. As a
percentage of gaming revenues, gaming and gaming cruise costs increased to
58.2% during the six-month period ended August 31, 1997 from 57.7% during the
six-month period ended August 31, 1996. This decrease in gaming margin was
primarily attributable to increases in gaming costs at the Davenport property.
The Company's consolidated selling, general and administrative expenses were
$24.8 million during the six-month period ended August 31, 1997, compared to
$26.1 million during the six-month period ended August 31, 1996, a decrease of
$1.3 million or 5.0%. As a percentage of consolidated revenues, selling,
general and administrative expenses decreased to 26.1% during the six-month
period ended August 31, 1997, from 27.3% during the six-month period ended
11
<PAGE> 14
August 31, 1996. The decreases are primarily attributable to two factors.
The St. Louis property successfully challenged a tax assessment and reduced
its current and future annual taxes by $0.6 million, until such time as a
different tax assessment is made. Accordingly, the Company recorded $0.3
million of savings related to the six-month period ended August 31, 1997 and
recorded income of $0.7 million related to refunds and to the relief of prior
period accruals. The second key reduction in costs related to the acquisition
of the Broadwater Property which has eliminated, on a consolidated basis, the
marina lease expense. This savings was $0.3 million for the six-month period
ended August 31, 1997 and will reduce future quarterly expenses by $0.7
million.
During the six-month period ended August 31, 1997, the Company recognized a
net gain on the sale and disposal of assets of $0.5 million. This gain was
primarily related to the sale of a vessel which the Company did not intend to
use in future operations. During the six-month period ended August 31, 1996,
the Company recognized a net gain on the sale and disposal of assets of $1.0
million. This gain was primarily related to the exercise of a purchase option
by the charterer of one of the Company's casino vessels.
Depreciation and amortization expenses were $7.4 million during the six-
month period ended August 31, 1997, compared to $7.9 million during the six-
month period ended August 31, 1996, a decrease of $0.5 million or 6.3%. The
decrease is primarily attributable to the sale of two vessels in the prior
year.
During the six-month period ended August 31, 1997, the Company incurred
development costs of $1.2 million primarily related to the Company's lease
option in Philadelphia, Pennsylvania and other potential gaming jurisdictions.
During the six-month period ended August 31, 1996, the Company incurred
development costs of $0.6 million related to the proposed application and
implementation of the second gaming vessel in St. Louis.
Operating income. As a result of the items discussed above, the Company had
operating income of $3.4 million during the six-month period ended August 31,
1997, compared to operating income of $5.0 million during the six-month period
ended August 31, 1996.
Interest expense, net. The Company incurred net interest expense of $7.4
million during the six-month period ended August 31, 1997, compared to $7.0
million during the six-month period ended August 31, 1996, an increase of $0.4
million or 5.7%. The increase was attributable to an additional $30.0 million
of debt incurred by the Company in conjunction with the purchase of the
Broadwater Property in July 1997.
Minority interest expense was $0.2 million for both the six-month periods
ended August 31, 1997 and 1996. This expense will increase significantly
during the remainder of this year and future years due to the acquisition of
the Broadwater Property in late July 1997. The Broadwater-related minority
interest expense for a full quarter will be approximately $0.2 million.
12
<PAGE> 15
Net loss. The Company incurred a net loss of $4.2 during the six-month
period ended August 31, 1997, compared to a net loss of $2.1 million during
the six-month period ended August 31, 1996.
Liquidity and Capital Resources.
The Company meets its working capital requirements from a combination of
internally generated sources including cash from operations and the sale or
charter of assets no longer utilized in the Company's operations.
The Company requires approximately $9.0 million of cash in order to fund
daily operations. As of August 31, 1997, the Company had approximately $17.8
million in non-restricted cash and short-term investments available in excess
of the approximately $9.0 million to fund operations. 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
fiscal 1998 expenditures or seek other sources of financing. The Company may
be limited in its ability to raise cash through additional financing.
Pursuant to LLC's loan agreements, all of LLC's cash and future revenues are
deposited to lockboxes that are controlled by the lender. Expenditures from
the lockboxes are limited to the operating expenses, capital improvements and
debt service of LLC as defined by such agreements.
Investing activities of the Company used $35.9 million of cash during the
six-month period ended August 31, 1997, compared to the $4.5 million provided
by investing activities during the six-month period ended August 31, 1996.
During the six-month period ended August 31, 1997, the Company spent $33.7
primarily on the acquisition of the Broadwater Property, offset by the receipt
of $1.0 million of proceeds primarily from the sale of two vessels that the
Company did not intend to use in future operations. During the six-month
period ended August 31, 1996, $11.4 million of proceeds from the sale of a
vessel were partially offset by $5.3 million for expenditures for property and
equipment and $2.0 million related to the purchase of certain lease options in
Philadelphia.
During the six-month period ended August 31, 1997, the Company made $0.2
million of principal payments, compared to $0.8 million during the six-month
period ended August 31, 1996. During the six-month period ended August 31,
1996, the principal payments included $0.6 million on capital lease
obligations of which no comparable payments were made during the six-month
period ended August 31, 1997.
The indenture governing the Company's Senior Notes due 2001 (the
"Indenture"), restricts the ability of PCI, TCG and PCI's wholly-owned
subsidiaries which are guarantors of the Senior Notes due 2001 (collectively,
the "Guarantors"), among other things, to dispose of or create liens on
13
<PAGE> 16
certain assets, to make certain investments and to pay dividends. Under the
Indenture, the Guarantors have the ability to seek to borrow additional funds
of $15.0 million. The Indenture also provides that the Guarantors must use
cash proceeds from the sale of certain assets within 180 days to either (i)
permanently reduce certain indebtedness or (ii) contract with an unrelated
third party to make investments or capital expenditures or to acquire long-
term tangible assets, in each case, in gaming and related businesses (provided
any such investment is substantially complete in 270 days). The Company
intends to utilize all such proceeds in accordance with the Indenture. In the
event such proceeds are not so utilized, the Company must make an offer to all
holders of Senior Notes to repurchase at par value an aggregate principal
amount of Senior Notes equal to the amount by which such proceeds exceeds $5.0
million. The Company does not believe that the unutilized proceeds will
exceed $5.0 million. Only certain provisions of the Indenture apply to PCI's
consolidated entities which do not guarantee the Senior Notes due 2001.
During the remainder of fiscal 1998, the Company intends to make investments
in property, plant and equipment at its current operations approximating $1.8
million.
In September 1997, the Company further modified its lease and option
agreements for its lease rights to 18 acres of river front property in the
Penn's Landing area of Philadelphia, Pennsylvania. Pursuant to the second
modification of the lease agreement, the Company remitted $1.2 million for the
second preliminary term extension for the period from January 1, 1998 through
September 30, 1998. This term extension may be extended at the election of
the Company through December 31, 1997 on a month to month basis for $.1
million per month beginning in October 1997. The Company also extended its
right to secure additional option periods through December 31, 2000. The
remaining terms and conditions of the agreements were substantially unchanged.
In the event the Company identifies a potential growth opportunity, project
financing will be required. Capital investments may include all or some of
the following: acquisition and development of land; acquisition of vessels and
lease options on land and other facilities; and construction of vessels and
other facilities in anticipation of the approval of gaming operations in
potential new jurisdictions. In connection with development activities
relating to potential jurisdictions, the Company also makes expenditures for
professional services which are expensed as incurred. The Company's financing
requirements would depend upon actual development costs, the amounts and
timing of such expenditures, the amount of available cash flow from operations
and the availability of other financing arrangements.
In such case, the Company could pursue a number of alternatives to avail
itself of additional capital, including borrowing additional funds either
directly or on a stand-alone project basis, financing through lease
agreements, selling equity securities and selling assets 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
14
<PAGE> 17
operate gaming in other potential jurisdictions it will be able to raise
sufficient capital to pursue its strategic plan.
The Company has a $4.0 million outstanding term note payable that is
collateralized by a boat and various equipment with a net book value of $8.5
million. The note contains a covenant whereby the Company must maintain a
minimum net worth of $20.0 million during fiscal 1998. The Company's net
worth is currently below $20.0 million. During the three-month period ended
August 31, 1997, the Company received a waiver of the covenant through
February 28, 1998. Since the fair market value of the vessel is in excess of
the outstanding note balance, management believes that the Company will be
able to renegotiate the terms, buy down a portion of the note or refinance the
loan at such time as the waiver terminates.
Forward Looking Statements
The statements contained herein include forward-looking statements based on
management's current expectations of the Company's future performance.
Predictions relating to future performance are inherently uncertain and
subject to a number of risks. Consequently, the Company's actual results
could differ materially from the expectations expressed in the preceding
paragraphs. Factors that could cause the Company's actual results to differ
materially from the expected results include, among other things: the
intensely competitive nature of the riverboat and dockside casino gaming
industry; increases in the number of competitors in the markets in which the
Company operates; the seasonality of the riverboat and dockside casino gaming
industry in certain markets in which the Company operates; the susceptibility
of the Company's operating results to floods, adverse weather conditions and
natural disasters; the risk that jurisdictions in which the Company proposes
to operate do not enact legislation permitting riverboat or dockside casino
gaming or do not enact such legislation in a timely manner; changes in
governmental regulations governing the Company's activities and other risks
detailed in the Company's filings with the Securities and Exchange Commission.
Part II. Other Information
Item 1. Legal Proceedings
Information with respect to legal proceedings to which the Company is a
party is disclosed in Note 4 of Notes to Condensed Consolidated Financial
Statements included in Part I of this report and is incorporated herein by
reference.
Item 2. Changes in Securities
Effective August 8, 1997, the Company amended its Amended Certificate of
Incorporation to effect a one-for-six reverse stock split, pursuant to which
the number of outstanding shares of Common Stock of the Company was reduced
from 30,194,700 to approximately 5,032,450 and the par value of the Company's
Common Stock was increased from $0.01 per share to $0.06 per share.
15
<PAGE> 18
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual stockholders' meeting on July 23, 1997. The
following matters were voted upon at the meeting:
1. Election of one Class II Director:
Votes Cast
-----------------------------
Against or
Name of Director Elected For Withheld
------------------------ ------------- --------------
Terrence L. Wirginis 4,473,340 200,973
Name of Each Other Director Whose Term of
Office as Director Continues After the Meeting
----------------------------------------------
John E. Connelly
John S. Aylsworth
Karl G. Andren
2. Proposal to approve an amendment to the Amended Certificate of
Incorporation of the Company in order to enable the Company to effect
a one-for-six reverse stock split and an increase in the par value of
the Company's Common Stock from $0.01 to $0.06 per share:
Votes Cast
-----------------------------
Against or
For Withheld
------------- --------------
4,414,416 259,897
3. Proposal to adopt the President Casinos, Inc. 1997 Stock Option Plan:
Votes Cast
-----------------------------
Against or
For Withheld
------------- --------------
3,999,169 632,933
There were 42,211 broker non-votes with regard to the matters voted upon
at the meeting.
Item 5. Other Information
Not applicable.
16
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On August 6, 1997, the Company filed a Current Report on Form 8-K
dated July 24, 1997, reporting under Item 2 that the Company
completed the acquisition for approximately $40.5 million of certain
real estate and improvements located on the Gulf Coast in Biloxi,
Mississippi from J. Edward Connelly Associates, Inc., a Pennsylvania
corporation ("JECA"), pursuant to the terms of a Redemption Agreement
dated as of July 22, 1997 by and among JECA, Broadwater Hotel, Inc.,
a Mississippi corporation and the wholly-owned subsidiary of the
Company ("BHI"), and President Broadwater Hotel, L.L.C., a
Mississippi limited liability company formed by JECA and BHI for
purposes of the transaction. JECA is controlled by John E. Connelly,
the Chairman of the Board of the Company and the beneficial owner of
approximately 32% of the Company's outstanding common stock.
On October 8, 1997, the Company filed Amendment No. 1 to Current
Report on Form 8-K/A dated July 24, 1997, reporting under Item 7 the
financial statements of the business acquired discussed in the above
paragraph.
(a) Exhibits
See Exhibit Index.
17
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
President Casinos, Inc.
--------------------------
(Registrant)
Date: October 10, 1997 /s/ James A. Zweifel
--------------------------
James A. Zweifel
Duly Authorized Officer and
Principal Financial Officer
18
<PAGE> 21
EXHIBIT INDEX
---------------
EXHIBIT NO. DESCRIPTION
3.1 Amended By-Laws.
10.1 Modification to First Amendment to Lease Agreement, dated
September 12, 1997, by and between Liberty Landing Associates
and President Riverboat Casino-Philadelphia, Inc.
10.2 Second Modification to Option Agreement, dated September 12,
1997, by and between Liberty Landing Associates and President
Riverboat Casino-Philadelphia, Inc.
27 Financial Data Schedule for the six-month period ended August
31, 1997, as required under EDGAR.
EXHIBIT 3.1
AMENDED BY-LAWS
OF
PRESIDENT CASINO, INC.
ARTICLE I
OFFICES AND RECORDS
Section 1.1. Delaware Office. The principal office of the Corporation in
the State of Delaware shall be located in the City of Wilmington, County of
New Castle, and the name and address of its registered agent is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
Section 1.2. Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
Section 1.3. Books and Records. The books and records of the Corporation
may be kept outside the State of Delaware at such place or places as may from
time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on such date, and at such place and time, as may be
fixed by resolution of the Board of Directors.
Section 2.2. Special Meeting. Subject to the rights of the holders of any
series of stock having a preference over the Common Stock of the Corporation
as to dividends or upon liquidation ("Preferred Stock") with respect to such
series of Preferred Stock, special meetings of the stockholders may be called
only by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies (the "Whole Board").
Section 2.3. Place of Meeting. The Board of Directors, the Chairman of the
Board or the President, as the case may be, may designate the place of meeting
for any annual meeting or for any special meeting of the stockholders called
by the Board of Directors, the Chairman of the Board or the President. If no
designation is so made, or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the Corporation.
Section 2.4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered by the Corporation not less than ten
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<PAGE> 23
(10) days nor more than sixty (60) days before the date of the meeting,
either personally or by mail, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with postage thereon prepaid, addressed to
each stockholder at their address as it appears on the stock transfer books of
the Corporation. Such further notice shall be given as may be required by
law. Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Meetings may be held without notice if all
stockholders entitled to vote are present, or if notice is waived by those not
present in accordance with Section 6.4 of these By-Laws. Any previously
scheduled meeting of the stockholders may be postponed by resolution of the
Board of Directors upon public notice given prior to the date previously
scheduled for such meeting of stockholders.
Section 2.5. Quorum and Adjournment. Except as otherwise provided by law
or by the Certificate of Incorporation, the holders of a majority of the
outstanding shares of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting as a class,
the holders of a majority of the shares of such class or series shall
constitute a quorum of such class or series for the transaction of such
business. The Chairman of the meeting or a majority of the shares so
represented may adjourn the meeting from time to time, whether or not there is
such a quorum. No notice of the time and place of adjourned meetings need be
given except as required by law. The stockholders present at a duly called
meeting at which a quorum is presented may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 2.6. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder, or by his duly
authorized attorney-in-fact. Such proxy must be filed with the Secretary of
the Corporation or his representative at or before the time of the meeting.
Section 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1)Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a)pursuant to the Corporation's notice of meeting, (b)by or
at the direction of the Board of Directors or (c)by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this By-Law, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this By-Law.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this By-Law, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice
2
<PAGE> 24
shall be delivered to the Secretary at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first made
by the Corporation. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (b) as to any other business
that the stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and the name and address of such beneficial owner and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of
this By-Law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying
the size of the increased Board of Directors made by the Corporation at least
70 days prior to the first anniversary of the preceding year's annual meeting,
a stockholder's notice required by this By-Law shall also be considered
timely, but only with respect to nominees for any new positions created by
such increase, if it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on
the 10th day following the day on which such public announcement is made by
the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant
to the Corporation's notice of meeting (a) by or at the direction of the Board
of Directors or (b) by any stockholder of the Corporation who is a stockholder
of record at the time of giving of notice provided for in this By-Law, who
shall be entitled to vote at the meeting and who complies with the notice
procedures set forth in this By-Law. Nominations by stockholders of persons
3
<PAGE> 25
for election to the Board of Directors may be made at such a special meeting
of stockholders if the stockholder's notice required by paragraph (A)(2) of
this By-Law shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting and of
the nominees proposed by the Board of Directors to be elected at such meeting.
(C) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this By-Law shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-Law. Except as otherwise provided by law,
the Certificate of Incorporation or these By-Laws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance with
the procedures set forth in this By-Law and, if any proposed nomination or
business is not in compliance with this By-Law, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 of 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
By-Law. Nothing in this By-Law shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
Section 2.8. Procedure for Election of Directors. Election of directors at
all meeting of the stockholders at which directors are to be elected shall be
by ballot, and, subject to the rights of the holders of any class or series of
Preferred Stock to elect additional directors under specified circumstances, a
plurality of the votes cast thereat shall elect directors. Except as
otherwise provided by law, the Certificate of Incorporation, or these By-Laws,
in all matters other than the election of directors, the affirmative vote of
the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the matter shall be the act of the
stockholders.
Section 2.9. Inspectors of Elections: Opening and Closing the Polls. The
Board of Directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees,
4
<PAGE> 26
agents or representatives of the Corporation, to act at the meetings of
stockholders and make a written report thereof. One or more persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate has been appointed to act or is able to act at a
meeting of stockholders, the Chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or
her duties, shall take and sign an oath faithfully to execute the duties of
inspectors with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by law.
The Chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at a meeting.
Section 2.10. No Action by Written Consent. Subject to the rights of the
holders of any series of Preferred Stock with respect to such series of
Preferred Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special
meeting of the stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
Section 2.11. Transactions With Interested Stockholders. The Corporation
will not enter into any material transaction with any executive officer,
director or with any Beneficial Owner (as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Act")) who owns more than 5%
of the issued and outstanding common stock of the Corporation or any Affiliate
(as defined in Rule 12b-2 under the General Rules and Regulations of the Act)
of such Beneficial Owner unless each such transaction has first been approved
by the Corporation's Board of Directors and by all of the Corporation's
independent directors. This Bylaw shall not apply to any issuance or purchase
of the Corporation's capital stock by the Corporation from an Affiliate. This
Bylaw may only be amended by the majority vote of the Corporation's Board of
Directors and by the unanimous vote of all of the Corporation's independent
directors.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these By-Laws expressly conferred
upon it, the Board of Directors may exercise all such powers of the
Corporation and do all such acts and things as are not by statute or by the
Certificate of Incorporation or by these By-Laws required to be exercised or
done by the stockholders.
Section 3.2. Number, Tenure and Qualifications. Subject to the rights of
the holders of any series of Preferred Stock to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by at least sixty-six and
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<PAGE> 27
two-thirds percent (66 2/3%) of the Whole Board. The directors, other than
those who may be elected by the holders of any series of Preferred Stock under
specified circumstances, shall be divided, with respect to the time for which
they severally hold office, into three classes, as nearly equal in size as
possible, with the term of office of the third class to expire at the next
meeting of stockholders, the term of office of the first class to expire at
the following annual meeting of stockholders and the term of office of the
second class to expire two years next following the annual meeting of
stockholders, with each director to hold office until his or her successor
shall have been duly elected and qualified. At each meeting of stockholders,
(i) directors elected to succeed those directors whose terms then expire shall
be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election, with each director to hold
office until his or her successor shall have been duly elected and qualified,
and (ii) if authorized by a resolution of the Board of Directors, directors
may be elected to fill any vacancy on the Board of Directors, regardless of
how such vacancy shall have been created.
Section 3.3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this By-Law immediately after, and at
the same place as, the annual meeting of stockholders. The Board of Directors
may, by resolution, provide the time and place for the holding of additional
regular meetings without other notice than such resolution.
Section 3.4. Special Meetings. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the Chief
Operating Officer, the President (if any) or a majority of the directors then
in office. The person or persons authorized to call special meetings of the
Board of Directors may fix the place and time of the meetings.
Section 3.5. Notice. Notice of any special meeting of directors shall be
given to each director at his business or residence in writing by mail,
private delivery service, telegram, facsimile transmission, or by telephone.
If mailed, such notice shall be deemed adequately delivered when deposited in
the United States mail so addressed, with postage thereon prepaid, at least
five (5) days before such meeting. If by private delivery service, such
notice shall be deemed adequately delivered when delivered to the private
delivery service at least two (2) days before such meeting. If by telegram,
such notice shall be deemed adequately delivered when the telegram is
delivered to the telegraph company at least twenty-four (24) hours before such
meeting. If by facsimile transmission, such notice shall be deemed adequately
delivered when the notice is transmitted at least twenty-four (24) hours
before such meeting. If by telephone, the notice shall be given at least
twelve (12) hours prior to the time set for the meeting. Any one or more or
any combination of such methods of delivery may be used. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice of (or in any waiver of
notice of) such meeting, except for amendments to these By-Laws, as provided
under Section 8.1. A meeting may be held at any time without notice if all
the directors are present of if those not present waive notice of the meeting
in accordance with Section 6.4 of these By-Laws.
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<PAGE> 28
Section 3.6. Action by Consent of Board of Directors. Any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 3.7. Conference Telephone Meetings. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Section 3.8. Quorum. Subject to Section 3.9, a whole number of directors
equal to at least a majority of the Whole Board shall constitute a quorum for
the transaction of business, but if at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of the directors present
may adjourn the meeting from time to time without further notice. The act of
the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. The directors present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a
quorum.
Section 3.9. Vacancies. Subject to the rights of the holders of any series
of Preferred Stock with respect to such series of Preferred Stock, and unless
the Board of Directors otherwise determines, vacancies resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
and newly created directorships resulting from any increase in the authorized
number of directors, may be filled only by the affirmative vote of a majority
of the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which they have been elected expires and until such director's successor shall
have been duly elected and qualified. No decrease in the number of authorized
directors constituting the Whole Board shall shorten the term of any incumbent
director.
Section 3.10. Executive and Other Committees. The Board of Directors may,
by resolution adopted by a majority of the Whole Board, designate an Executive
Committee to exercise, subject to applicable provisions of law, all the powers
of the Board of Directors in the management of the business and affairs of the
Corporation when the Board of Directors is not in session, including without
limitation the power to declare dividends and to authorize the issuance of the
Corporation's capital stock, and may, by resolution similarly adopted,
designate one or more other committees. The Executive Committee and each such
other committee shall consist of two or more directors of the Corporation.
The Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, other than the Executive
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<PAGE> 29
Committee (the powers of which are expressly provided for herein), may to the
extent permitted by law exercise such powers and shall have such
responsibilities as shall be specified in the designating resolution or as
customarily appertaining thereto. In the absence or disqualification of any
member of such committee or committees, the member or members thereof present
at any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
Each committee shall keep written minutes of its proceedings and shall report
such proceedings to the Board of Directors when required.
A majority of any committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Section 3.5 of these By-Laws. The Board of Directors
shall have power at any time to fill vacancies in, to change the membership
of, or to dissolve any such committee. Nothing herein shall be deemed to
prevent the Board of Directors from appointing one or more committees
consisting in whole or in part of persons who are not directors of the
Corporation; provided, however, that no such committee shall have or may
exercise any authority of the Board of Directors.
Section 3.11. Removal. Subject to the rights of the holders of any series
of Preferred Stock with respect to such series of Preferred Stock, any
director, or the entire Board of Directors, may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of at
least 80 percent of the voting power of all of the then outstanding shares of
Voting Stock, voting together as a single class.
Section 3.12. Records. The Board of Directors shall cause to be kept a
record containing the minutes of the proceedings of the meetings of the Board
of Directors and of the stockholders, appropriate stock books and registers
and such books of records and accounts as may be necessary for the proper
conduct of the business of the Corporation.
Section 3.13. Compensation. Unless otherwise restricted by the Certificate
of Incorporation or these By-laws, the Board of Directors shall have the
authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
Section 4.1. Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board, a Vice Chairman of the Board (if one shall
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<PAGE> 30
have been elected by the Board of Directors), a Secretary, a Treasurer, and
such other officers (including, without limitation, a President) as the Board
of Directors from time to time may deem proper. The Chairman of the Board
shall be chosen from among the directors. All officers chosen by the Board of
Directors shall each have such powers and duties as generally pertain to their
respective offices, subject to the specific provisions of this ARTICLE IV.
Such officers shall also have such powers and duties as from time to time may
be conferred by the Board of Directors or by any Committee thereof. The Board
of Directors may from time to time elect, or the Chief Executive Officer may
appoint, such other officers (including one or more Assistant Vice President,
Assistant Secretaries, and Assistant Treasurers) and such agents, as may be
necessary or desirable for the conduct of the business of the Corporation.
Such other officers and agents shall have such duties and shall hold their
offices for such terms as shall be provided in these By-Laws or as may be
prescribed by the Board of Directors or by the Chief Executive Officer.
Section 4.2. Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Each officer
shall hold office until his or her successor shall have been duly elected and
shall have qualified or until his or her death or until he or she shall
resign, but any officer may be removed from office at any time by the
affirmative vote of a majority of the Whole Board or, except in the case of an
officer or agent elected by the Board of Directors, by the Chief Executive
Officer. Such removal shall be without prejudice to the contractual rights,
if any, of the person so removed.
Section 4.3. Chairman of the Board. The Chairman of the Board shall,
unless otherwise determined by the Board, be the chief executive officer and
shall have the primary responsibility for and the general control and
management of all of the business and affairs of the Corporation, under the
direction of the Board of Directors. He shall have power to select and
appoint all necessary officers and employees of the Corporation except such
officers as under these By-Laws are to be elected by the Board of Directors,
to remove all appointed officers or employees whenever he shall deem
necessary, and to make new appointments to fill the vacancies. He shall have
the power of suspension from office for cause of any elected officer, which
shall be forthwith declared in writing to the Board of Directors. Whenever in
his opinion it may be necessary, he shall define the duties of any officer or
employee of the Corporation which are not prescribed in these By-Laws or by
resolution of the Board of Directors. He shall have such other authority and
shall perform such other duties as may be assigned to him by the Board of
Directors. He shall preside at meetings of the stockholders and of the
directors.
Section 4.4. Vice Chairman of the Board. The Vice Chairman of the Board
(if one shall have been elected by the Board of Directors) shall have such
authority and perform such duties relative to the business and affairs of the
Corporation as may be delegated to him by the Board of Directors or the Chief
9
<PAGE> 31
Executive Officer. In the absence of the Chairman of the Board, the Vice
Chairman of the Board shall preside at meetings of the stockholders and of the
directors.
Section 4.5. President. The President (if one shall have been elected by
the Board of Directors) shall have such powers and discharge such duties as
may be assigned to him from time to time by the Board of Directors, the
Chairman of the Board or the senior officer to whom he reports.
Section 4.6. Vice President. Each Vice President (including each Assistant
Vice President, Executive Vice President, or Senior Vice President, if any)
shall have such powers and discharge such duties as may be assigned to him
from time to time by the Board of Directors, the Chairman of the Board, the
President or the senior officer to whom he reports. An Executive Vice
President may be designed as Chief Operating Officer.
Section 4.7. Secretary. The Secretary shall keep or cause to be kept in
one or more books provided for that purpose, the minutes of all meetings of
the Board of Directors, the committees of the Board of Directors and the
stockholders; he or she shall see that all notices are duly given in
accordance with the provisions of these By-Laws and as required by law; he or
she shall be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal; he or she shall see
that the books, reports, statements, certificates and other documents and
records required by law to be kept and filed are properly kept and filed; and
in general, he or she shall perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the Board of Directors or the Chairman of the Board.
Section 4.8. Chief Financial Officer. The Chief Financial Officer (if one
shall have been elected by the Board of Directors) shall be a Vice President
and act in an executive financial capacity. He or she shall assist the
Chairman of the Board, the Vice Chairman of the Board and any Executive Vice
President in the general supervision of the Corporation's financial policies
and affairs.
Section 4.9. Treasurer. The Treasurer shall exercise general supervision
over the receipt, custody and disbursement of corporate funds. The Treasurer
shall cause the funds of the Corporation to be deposited in such banks as may
be authorized by the Board of Directors, or in such banks as may be designated
as depositories in the manner provided by resolution of the Board of
Directors. He or she shall have such further powers and duties and shall be
subject to such directions as may be granted or imposed upon him from time to
time by the Board of Directors or the Chief Executive Officer. The Board of
Directors or the Chief Executive Officer may appoint one or more Assistant
Treasurers.
Section 4.10. Removal. Any officer elected by the Board of Directors may
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<PAGE> 32
be removed by a majority of the members of the Whole Board whenever, in their
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of his
or her successor, his or her death , his or her resignation or his or her
removal, whichever event shall first occur, except as otherwise provided in an
employment contract or under an employee deferred compensation plan.
Section 4.11. Vacancies. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1. Stock Certificates and Transfers. The interest of each
stockholder of the Corporation shall be evidenced by certificates for shares
of stock in such form as the appropriate officers of the Corporation may from
time to time prescribe. The shares of the stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof in person or
by his or her attorney, upon surrender for cancellation of certificates for at
least the same number of shares, with an assignment and power of transfer
endorsed thereon or attached thereto, duly executed, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require.
The certificates of stock shall be signed, counter-signed and registered in
such manner as the Board of Directors may by resolution prescribe, which
resolution may permit all or any of the signatures on such certificates to be
in facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate has ceased to
be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Certificates. No certificate for
shares of stock in the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen, except on production of such
evidence of such loss, destruction or theft and on delivery to the Corporation
of a bond of indemnity in such amount, upon such terms and secured by such
surety, as the Board of Directors or any financial officer may in its or his
or her discretion require.
Section 5.3 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
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<PAGE> 33
purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 5.4. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of March and end of the last day of February of each year.
Section 6.2. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and the
Certificate of Incorporation.
Section 6.3. Seal. The corporate seal shall have inscribed thereon the
words "Corporate Seal" and around the margin thereof the words "President
Casino, Inc."
Section 6.4. Waiver of Notice. Whenever any notice is required to be given
to any stockholder or director of the Corporation under the provisions of the
General Corporation Law of the State of Delaware or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the stockholders need be
specified in any waiver of notice of such meeting.
Section 6.5. Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall
be the duty of the Board of Directors to cause such audit to be made annually.
Section 6.6. Resignations. Any director or any officer, whether elected or
appointed, may resign at any time by giving written notice of such resignation
on the Chief Executive Officer, the President (if any), or the Secretary, and
such resignation shall be deemed to be effective as of the close of business
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<PAGE> 34
on the date said notice is received by the Chief Executive Officer, the
President (if any), or the Secretary, or at such later time as is specified
therein. No formal action shall be required of the Board of Directors or the
stockholders to make any such resignation effective.
Section 6.7. Gender. Whenever the personal pronoun he, she or its is used
herein, it shall mean an appropriate gender.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
Section 7.1. Contracts. Except as otherwise required by law, the
Certificate of Incorporation or these By-Laws, any contracts or other
instrument may be executed and delivered in the name and on the behalf of the
Corporation by such officer or officers (including any assistant officer) of
the Corporation as the Board of Directors may from time to time direct. Such
authority may be general or confined to specific instances as the Board of
Directors may determine. The Chairman of the Board, the Vice Chairman of the
Board (if any), the President (if any) or any Vice President may execute
bonds, contracts, deeds, leases and other instruments to be made or executed
for or on behalf of the Corporation. Subject to any restrictions imposed by
the Board of Directors or the Chairman of the Board, the Vice Chairman of the
Board (if any), the President (if any) or any Vice President of the
Corporation may delegate contractual power to others under his jurisdiction,
it being understood, however, that any such delegation of power shall not
relieve such officer of responsibility with respect to the exercise of such
delegated power.
Section 7.2. Proxies. Unless otherwise provided by resolution adopted by
the Board of Directors, the Chairman of the Board, the Vice Chairman of the
Board (if any), the President (if any) or any Vice President may from time to
time appoint an attorney or attorneys or agent or agents of the Corporation,
in the name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation, any of whose stock or other securities may be held
by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing, in the name of
the Corporation as such holder, to any action by such other corporation, and
may instruct the person or persons so appointed as to the manner of casting
such votes or giving such consent, and may execute or cause to be executed in
the name and on behalf of the Corporation and under its corporate seal or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.1. Indemnification. The Corporation shall indemnify the officers
and directors of the Corporation and hold them harmless to the fullest extent
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<PAGE> 35
permitted by the provisions of the Delaware General Corporation Law. In the
event that the Delaware General Corporation Law is amended to authorize
corporation action further eliminating or limiting the personal liability of
directors and officers, then the liability of a director or officer of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware Corporation Law, as so amended.
Section 8.2. Advancement of Expenses. The Corporation shall pay the
expenses incurred by an officer or director in defending any civil criminal,
administrative, or investigative action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it be ultimately determined that he or she is not entitled to be
indemnified by the Corporation as authorized by the Delaware General
Corporation Law.
Section 8.3. Limitation of Liability. To the fullest extent permitted by
law, a director shall have no personal liability to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any amendment to or repeal of this Article VIII shall not adversely affect any
right or protection of a director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
Section 8.4. Repeal. Any repeal or modification of the foregoing
paragraphs by the stockholders of the Corporation shall not adversely affect
any right or protection of a director or officer of the Corporation existing
at the time of such repeal or modification.
Section 8.5. Indemnification Of Employees and Agents. The Corporation may,
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification and to the advancement of expenses to any employee
or agent of the Corporation to the fullest extent of the provisions of this
Article VIII with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 9.1. Amendments. The Board of Directors shall have the power to
make, amend, alter, change or repeal the By-laws (except in so far as the By-
laws adopted by the stockholders shall otherwise provide). Any By-law made by
the Board of Directors under the powers conferred hereby may be amended,
altered, changed or repealed by the Board of Directors or by the stockholders.
Notwithstanding the foregoing or anything contained in the Certificate of
Incorporation to the contrary, Sections 2.7, 2.8 and 2.10 of Article II,
Sections 3.2 and 3.9 of Article III, Article VIII and Article IX of the By-
laws shall not be amended, altered, changed or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all shares of
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<PAGE> 36
the Corporation's outstanding capital stock, voting together as a single
class, unless such amendment, alteration, change or repeal has previously been
expressly approved by the Board of Directors by the affirmative vote or
consent of at least sixty-six and two-thirds percent (66-2/3%) of the number
of Directors then in office.
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the Certificate of Incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new By-laws be contained in
the notice of such special meeting. If the power to adopt, amend or repeal
By-laws is conferred upon the Board of Directors by the Certificate of
Incorporation, it shall not divest or limit the power of the stockholders to
adopt, amend or repeal By-laws.
15
EXHIBIT 10.1
MODIFICATION TO FIRST AMENDMENT TO LEASE AGREEMENT
THIS MODIFICATION TO FIRST AMENDMENT TO LEASE AGREEMENT, made this 12th
day of September, 1997, by and between LIBERTY LANDING ASSOCIATES, a
Pennsylvania general partnership ("Landlord"), and PRESIDENT RIVERBOAT CASINO-
PHILADELPHIA, INC., a Pennsylvania corporation, its designee or assignee
("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have entered into that certain First
Amendment to Lease Agreement dated July 31, 1996 (the "First Amendment to
Lease Agreement"); and
WHEREAS, Landlord and Tenant desire to modify certain of the extension
periods under the First Amendment to Lease Agreement.
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 First Amendment to Lease Agreement. The parties hereto
acknowledge that under the terms of the First Modification to Option Agreement
dated December 12, 1996, Optionee has previously extended the Term of the
Option for the First Extension Period from January 1, 1997 through December
31, 1997.
2. Paragraph 2b and Paragraph 2e of the First Amendment to Lease Agreement
are hereby modified and amended in the following manner:
(i) the Second Preliminary Term Extension Period referenced in Paragraph
2b of the First Amendment to Lease Agreement is now to be for an initial
period of nine (9) months commencing on January 1, 1998 and expiring on
September 30, 1998. Additionally, the Second Preliminary Term Extension may
thereafter be further extended by Tenant for the months of October, November
and December, 1998, in accordance with the terms and conditions of the Second
Modification to Option Agreement dated of even date herewith. Therefore, if
extended by Tenant pursuant to the terms of the Second Modification to Option
Agreement, the Second Preliminary Term Extension will expire on December 31,
1998.
(ii) the Fifth Preliminary Term Extension referenced in Paragraph 2e of
the Option Agreement is now to be for an initial period of six (6) months
(from January 1, 2000 to June 30, 2000); provided, however, that the Fifth
Preliminary Term Extension may thereafter be extended by Tenant for an
additional six (6) month period commencing on July 1, 2000 and ending on
<PAGE> 38
December 31, 2000 in accordance with the terms and conditions of the Second
Modification to Option Agreement dated of even date herewith. Therefore, if
extended by Tenant pursuant to the terms of the Second Modification to Option
Agreement, the Fifth Preliminary Term Extension will expire on December 31,
2000.
3. Except as specifically set forth herein, the terms and conditions of the
First Amendment to Lease Agreement shall remain in full force and effect.
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
-----------------------------------
Delaware-Washington Corporation, Partner
By: /s/ Thomas J. Kelly
-----------------------------------
PRESIDENT RIVERBOAT CASINO-
PHILADELPHIA, INC.
By: /s/ John S. Aylsworth
-----------------------------------
EXHIBIT 10.2
SECOND MODIFICATION TO OPTION AGREEMENT
THIS SECOND MODIFICATION TO OPTION AGREEMENT (the "Second Modification to
Option Agreement"), made this 12th day of September, 1997, 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 have entered into that certain
Modification to Option Agreement dated December 12, 1996 (the "First
Modification to 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, and to
modify certain other terms of the Option Agreement.
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. All references to the Option Agreement shall
include the terms of the First Modification to Option Agreement and this
Second Modification to Option Agreement. The parties hereto acknowledge that
under the terms of the First Modification to Option Agreement, Optionee has
previously extended the Term of the Option for the First Extension Period from
January 1, 1997 through December 31, 1997.
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:
"Notwithstanding anything to the contrary contained in this Paragraph 6a
or anywhere else in the Option Agreement, the total amount of all of the
monthly Base Payments payable by Optionee to Optionor for the period from
January 1, 1998 through September 30, 1998 shall be One Million Two Hundred
Thousand Dollars ($1,200,000.00) payable by Optionee to Optionor in the
following manner:
(i) on or before September 15, 1997, Optionee shall pay to Optionor the
sum of ONE MILLION TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($1,200,000.00).
The aforesaid $1,200,000.00 payment due by no later than September 15, 1997 as
set forth above, shall be deemed to be payment in full by Optionee of the
<PAGE> 40
total amount of all monthly Base Payments due from Optionee to Optionor for
the period from January 1, 1998 through September 30, 1998. In the event that
Optionee thereafter desires to extend the Term of the Option for the months of
October, November and December, 1998, then Optionee shall extend the Term of
the Option for each month by paying to Optionor a monthly Base Payment in the
amount of $100,000.00 for each month (payable on or before the 10th day of
each month) in accordance with the terms and conditions of the Option
Agreement."
3. Paragraph 5b and Paragraph 5e of the Option Agreement are hereby modified
and amended in the following manner:
(i) the Second Extension Period referenced in Paragraph 5b of the Option
Agreement is now to be for an initial period of nine (9) months commencing on
January 1, 1998 and expiring on September 30, 1998. The Total Base Payments
due for the Second Extension Period shall be the $1,200,000.00 payment
referenced in Paragraph 2 of this Second Modification to Option Agreement.
Additionally, the Second Extension Period may thereafter be further extended
by Optionee for each of the months of October, November and December, 1998, by
Optionee paying to Optionor a monthly Base Payment in the amount of
$100,000.00 for each month (payable on or before the 10th day of each month)
in accordance with the terms and conditions of the Option Agreement.
Therefore, if extended by Optionee pursuant to the terms hereof, the Second
Extension Period will expire on December 31, 1998.
(ii) the Fifth Extension Period referenced in Paragraph 5e of the Option
Agreement is now to be for an initial period of six (6) months (January 1,
2000 to June 30, 2000); provided, however, that the Fifth Extension Period may
thereafter be extended by Optionee for an additional six (6) month period
commencing on July 1, 2000 and ending on December 31, 2000 by Optionee paying
to Optionor the monthly Base Payments in the amount of $277,000.00 per month
(payable on or before the 10th day of each month) for each month during such
additional extension. Therefore, if extended by Optionee pursuant to the
terms hereof, the Fifth Extension Period will expire on December 31, 2000.
The First Amendment to Lease Agreement shall be concurrently amended to
reflect the inclusion of the above referenced new dates for the Fifth
Extension Period."
4. Paragraph 9 of the Option Agreement was previously amended in Paragraph 4
of the First Modification to Option Agreement. The terms of Paragraph 4 of
the First Modification to Option Agreement are hereby deleted. This Paragraph
4 of the Second Modification to Option Agreement shall supersede in all
respects the terms of Paragraph 4 of the First Modification to Option
Agreement.
Paragraph 9 of the Option Agreement is hereby amended to read as follows:
"It is the intention of the Optionor (as Landlord) and Optionee (as
Tenant) that Optionee is and shall continue to be the "Tenant" under the terms
of the Lease Agreement, First Amendment to Lease Agreement, Modification to
First Amendment to Lease Agreement, and the Second Amendment to Lease
Agreement. The Optionor (as Landlord) and Optionee (as Tenant) do
acknowledge, however, that the Premises may be capable of and are intended to
<PAGE> 41
be shared by two (2) separate licensed gaming facilities (in whatever
proportion of the Premises that Tenant and the New Gaming Company may agree
upon), and that the Premises may be capable of the development of a common
infrastructure containing two (2) separate licensed riverboat gaming
facilities. Following the execution of this Option Agreement and during the
pendency of any Option Periods, Optionee, on an exclusive basis with Optionor,
will attempt to market and enter into a separate option agreement (or other
agreement) with an entity desiring to operate a gaming facility on a site
located on the Premises (the "New Gaming Company") for such New Gaming Company
to sublease, sublicense, or otherwise occupy a second gaming site located on
the Premises. The New Gaming Company shall be subject to the approval of
Optionor and Optionee, which approval shall not be unreasonably conditioned,
delayed or withheld (and which approval shall be granted or denied, in
writing, within ten (10) days after written request). If Optionee or Optionor
succeeds in securing a New Gaming Company to execute an option agreement (or
other agreement) to sublease, sublicense, or otherwise occupy a second gaming
site on the Premises, the Option agreement (or other agreement) for the second
gaming site shall be entered into by the New Gaming Company and Optionee, and
such option agreement or other agreement will provide that the New Gaming
Company will make an initial up-front consideration payment to Optionee, the
sum of which shall be negotiated by Optionee. Optionee shall receive the
first One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00) from
the New Gaming Company's initial up-front consideration payment for the option
(or other agreement) for the second gaming site, which payment would reimburse
Optionee in full for the One Million Two Hundred Thousand and 00/100 Dollars
($1,200,000.00) consideration which Optionee has paid Optionor to enter into
this Second Modification to Option Agreement. Thereafter, Optionee agrees
that it will equally split with Optionor any initial payment amount which
Optionee negotiates and receives from new Gaming Company which is in excess of
One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00). The new
option agreement (or other agreement) to be entered into by Optionee with the
New Gaming Company (for the second gaming site) shall contain option periods
which shall run concurrently with the Option Periods as set forth in this
Option Agreement.
5. Except as specifically set forth herein, the terms and conditions of the
Option Agreement shall remain in full force and effect.
2
<PAGE> 42
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
-----------------------------------
Delaware-Washington Corporation, Partner
By: /s/ Thomas J. Kelly
-----------------------------------
PRESIDENT RIVERBOAT CASINO-
PHILADELPHIA, INC.
By: /s/ John S. Aylsworth
-----------------------------------
<TABLE> <S> <C>
<S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT
OF INCOME OF PRESIDENT CASINOS INC. FILED AS A PART OF THE QUARTERLY REPORT ON
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY
REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1997
<CASH> 31324
<SECURITIES> 600
<RECEIVABLES> 1517
<ALLOWANCES> 366
<INVENTORY> 1863
<CURRENT-ASSETS> 39769
<PP&E> 205455
<DEPRECIATION> 52362
<TOTAL-ASSETS> 195931
<CURRENT-LIABILITIES> 34660
<BONDS> 98965
0
0
<COMMON> 302
<OTHER-SE> 19191
<TOTAL-LIABILITY-AND-EQUITY> 195931
<SALES> 0
<TOTAL-REVENUES> 86608
<CGS> 0
<TOTAL-COSTS> 91814
<OTHER-EXPENSES> 240
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7354
<INCOME-PRETAX> (4227)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4227)
<EPS-PRIMARY> (.84)
<EPS-DILUTED> (.84)
</TABLE>
