<PAGE> 1
==============================================================================
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, 1999
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,
5,032,971 shares outstanding as of October 15, 1999.
==============================================================================
<PAGE> 2
PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of August 31 and February 28, 1999...............................1
Condensed Consolidated Statements of Operations
and Loss Per Share Information (Unaudited)for the
Three and Six Months Ended August 31, 1999 and 1998.................2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended August 31, 1999 and 1998...................3
Notes to Condensed Consolidated Financial Statements (Unaudited)......4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................9
Part II. Other Information
Item 1. Legal Proceedings.............................................22
Item 2. Changes in Securities.........................................22
Item 3. Defaults Upon Senior Securities...............................22
Item 4. Submission of Matters to a Vote of Security Holders...........23
Item 5. Other Information.............................................23
Item 6. Exhibits and Reports on Form 8-K..............................23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....23
Signature................................................................24
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
PRESIDENT CASINOS, INC. (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) August 31, Feb. 28,
1999 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 17,919 $ 17,110
Restricted cash................................ 2,997 3,095
Short-term investments......................... 275 275
Accounts receivable, net of allowance for
doubtful accounts of $293 and $357........... 1,279 2,588
Other current assets........................... 5,205 4,345
--------- ---------
Total current assets....................... 27,675 27,413
Property and equipment, net of accumulated
depreciation of $66,637 and $62,987............ 145,655 142,740
Other assets..................................... 2,094 2,705
--------- ---------
$175,424 $172,858
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt........... $ 35,798 $ 1,886
Accrued loan fee............................... 4,760 --
Other current liabilities...................... 25,114 25,337
--------- ---------
Total current liabilities.................. 65,672 27,223
Long-term debt:
Long-term debt, net of current maturities...... 105,467 135,813
Accrued loan fee............................... -- 3,566
--------- ---------
Total long-term liabilities................ 105,467 139,379
--------- ---------
Total liabilities.......................... 171,139 166,602
--------- ---------
Minority interests............................... 12,905 12,464
Commitments and contingencies.................... -- --
Stockholders' deficit:
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............................ (110,651) (108,239)
--------- ---------
Total stockholders' deficit................ (8,620) (6,208)
--------- ---------
$175,424 $172,858
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
1
<PAGE> 4
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,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise............ $ 46,257 $ 46,594 $ 93,793 $ 89,168
Food and beverage................... 6,458 6,107 12,634 11,588
Hotel............................... 2,252 2,379 4,263 4,602
Retail and other.................... 2,524 2,344 5,521 7,377
Less promotional allowances......... (4,788) (3,776) (9,153) (7,064)
--------- --------- --------- ---------
Net operating revenues............. 52,703 53,648 107,058 105,671
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise............ 28,031 25,985 56,291 51,604
Food and beverage................... 4,042 3,937 7,936 7,735
Hotel............................... 853 772 1,579 1,467
Retail and other.................... 742 740 1,505 1,447
Selling, general and administrative. 12,651 13,616 25,497 29,018
Depreciation and amortization....... 2,660 3,508 6,324 7,028
(Gain)/loss on sale of assets, net.. (6) 39 (2) 72
Development......................... 38 1,172 133 3,949
--------- --------- --------- ---------
Total operating costs and expenses. 49,011 49,769 99,263 102,320
--------- --------- --------- ---------
OPERATING INCOME .................... 3,692 3,879 7,795 3,351
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income..................... 165 174 296 333
Interest expense.................... (4,934) (5,022) (9,812) (10,004)
--------- --------- --------- ---------
Total other income (expense)....... (4,769) (4,848) (9,516) (9,671)
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTERESTS....... (1,077) (969) (1,721) (6,320)
Minority interests................... 359 400 691 769
--------- --------- --------- ---------
NET LOSS............................. $ (1,436) $ (1,369) $ (2,412) $ (7,089)
========= ========= ========= =========
Basic and diluted net loss per share. $ (0.29) $ (0.27) $ (0.48) $ (1.41)
========= ========= ========= =========
Weighted average common and dilutive
potential shares outstanding........ 5,033 5,033 5,033 5,033
======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS
PRESIDENT CASINOS, INC. OF CASH FLOWS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Six Months Ended Aug. 31,
1999 1998
------ ------
<S> <C> <C>
Net cash provided by operating activities......... $ 5,960 $ 4,509
--------- ---------
Cash flows from investing activities:
Expenditures for property and equipment......... (4,060) (5,718)
Change in restricted cash....................... 98 994
Proceeds from sales of property and equipment... 129 84
Maturity of short-term investments.............. - 2,346
Other........................................... 87 --
--------- ---------
Net cash used in investing activities......... (3,746) (2,294)
--------- ---------
Cash flows from financing activities:
Repayment of notes payable...................... (251) (200)
Payments on capital lease obligations........... (904) (10)
Minority interest payment....................... (250) --
--------- ---------
Net cash used in financing activities......... (1,405) (210)
--------- ---------
Net increase in cash and cash equivalents......... 809 2,005
Cash and cash equivalents at beginning of period.. 17,110 19,278
--------- ---------
Cash and cash equivalents at end of period........ $ 17,919 $ 21,283
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 7,444 $ 8,270
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Assets acquired in exchange for debt............ $ 5,393 $ --
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. FINANCIAL STATEMENTS (UNAUDITED)
______________________________________________________________________________
(dollars in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts and operations of
President Casinos, Inc., its wholly-owned subsidiaries, a 95%-owned limited
partnership and a limited liability company in which the Company has a 100%
ownership interest and in which a wholly-owned entity of the Chairman of the
Board of the Company has preferred rights to certain cash flows (collectively,
the "Company" or "PCI"). All material inter-company balances and transactions
have been eliminated.
PCI develops, owns and operates riverboat and/or dockside gaming casinos
through its subsidiaries. The Company conducts riverboat and/or dockside
gaming operations in Davenport, Iowa; in Biloxi, Mississippi through its
wholly-owned subsidiary The President Riverboat Casino-Mississippi, Inc.
("President Mississippi"); and in St. Louis near the base of the Arch through
its wholly-owned subsidiary, President Riverboat Casino-Missouri, Inc.
("President Missouri"). The Davenport operations are managed by the Company's
wholly-owned subsidiary, President Riverboat Casino-Iowa, Inc. ("PRC Iowa"),
which is the general partner of the 95% Company-owned operating partnership,
The Connelly Group, L.P. ("TCG"). The Company also operates two nongaming
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 in Biloxi and
Davenport. The Broadwater Property in Biloxi was acquired by the Company in
July 1997 and is owned by the President Broadwater Hotel, LLC, a limited
liability corporation in which the Company has a 100% ownership interest.
TCG/Blackhawk, Inc., the owner of the Blackhawk Hotel in Davenport, is a
wholly-owned subsidiary of the Company.
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.
4
<PAGE> 7
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, 1999. Accordingly, footnote
disclosure which would substantially duplicate the disclosure in the audited
consolidated financial statements has been omitted in the accompanying
unaudited condensed consolidated financial statements.
Certain amounts for fiscal 1999 have been reclassified to conform with
fiscal 2000 financial statement presentation.
2. Property and Equipment
On August 10, 1999, the Company purchased "President Casino-Broadwater"
(formerly the "Biloxi Barge"), the dockside casino utilized at the Company's
Biloxi gaming operation. The Company had previously leased the "President
Casino-Broadwater" since June 1995 from its former owner, American Gaming and
Entertainment, Ltd. ("AGEL"). Under the terms of the agreement, the Company
purchased the "President Casino-Broadwater" for $6,393. In addition, in
connection with the consummation of the transaction, various lawsuits pending
among the Company, AGEL and various third parties related to the barge were
dismissed.
3. Insurance Proceeds
During the three-month period ended August 31, 1999, the St. Louis property
recorded $300 of revenue related to its business interruption insurance
policy. This policy insures the Company against the negative impact on
revenue from prolonged periods of high water levels on the Mississippi River
during the 18-month policy period.
On April 4, 1998, several river barges broke free of their towboat and
struck the Company's St. Louis casino, the "Admiral," resulting in the
severing of several of the vessel's mooring lines and boarding ramps. The
vessel sustained no hull or structural damage and minimal damage to its bow
apron. There were no reports of serious injuries to the approximate 2,300
guests and employees aboard.
The "Admiral" was closed to the public for 26 days, reopening on April 30,
1998. The Company spent approximately $2,714 in the six-month period ended
August 31, 1998, to repair the vessel, replace the boarding ramps and prepare
the "Admiral" to reopen. Insurance proceeds from the Company's hull and
business interruption coverages recorded in the six-month period ended August
31, 1998, were $3,900. Income from insurance proceeds in excess of the net
book value of destroyed assets was $3,616 and is reflected in the financial
statements as "Retail and Other" revenue. The insurance deductibles relating
to the hull and business interruption claims total $1,020. The insurance
claims have not been finalized and claims are being made against the owners of
the towboat to recover insurance deductibles and any damages not covered by or
in excess of the insurance. While the Company believes it has meritorious
claims against the owner of the towboat, there can be no guarantee that the
Company will be successful in recovering such costs.
5
<PAGE> 8
4. Long-Term Debt
Long-term debt as of August 31 and February 28, 1999 are summarized as
follows:
Aug. 31, Feb. 28,
1999 1999
------ ------
Senior Exchange notes, 13%, principal payments
of $25,000 due September 2000 and $50,000
due September 2001, net of discount of $404
and $524........................................... $ 74,596 $ 74,476
Secured Notes, 12%, principal payment of
$25,000 due September 2001, net of a gain
on modification of terms of $868 and $1,080........ 25,868 26,080
Broadwater Hotel note payable, variable interest
rate, 9.0% as of August 31, 1999, principal
payment due July 2000.............................. 30,000 30,000
Line of credit, prime plus 0.5%, combined
rate of 8.25% as of August 31, 1999................ 2,200 2,251
M/V "President Casino-Mississippi" note payable,
variable interest rate, 8.60% as of August 31,
1999, principal payments due quarterly of $100,
with a final payment of $2,000 in November 2002.... 3,200 3,400
"President Casino-Broadwater" note payable,
monthly combined principal and interest payments
of $290, balance of $3,652 due April 2000.......... 5,393 --
Capital lease obligations............................. 8 1,492
--------- ---------
Total long-term debt............................ 141,265 137,699
--------- ---------
Less current maturities:
Broadwater Hotel note payable........................ 30,000 --
M/V "President Casino-Mississippi" note payable...... 400 400
"President Casino-Broadwater" note payable........... 5,393 --
Capital lease obligations............................. 5 1,486
--------- ---------
Total current maturities........................ 35,798 1,886
--------- ---------
Long-term debt.............................. $105,467 $135,813
========= =========
Broadwater Hotel Note
In conjunction with the purchase of the Broadwater Property, President
Broadwater, L.L.C. ("PBLLC") 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,
PBLLC'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.
PBLLC 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, PBLLC is obligated to pay to the lender a
loan fee in the amount of $7,000 which will be fully earned and nonrefundable
when the Indebtedness is repaid. As of August 31, 1999, the Company has
accrued $4,760 of this loan fee.
6
<PAGE> 9
"President Casino-Broadwater" Barge Note
In connection with the purchase of "President Casino-Broadwater" (formerly
the "Biloxi Barge"), the Company paid $1,000 at closing and will make monthly
combined interest and principal payments of $290 through April 15, 2000, at
which time a balloon payment of $3,652 will be due.
5. Commitments and Contingent Liabilities
As discussed in Note 2 above, on August 10, 1999, the Company executed a
purchase agreement for the "President Casino-Broadwater." As a part of the
purchase agreement, "American Gaming & Entertainment, Ltd. v. President
Mississippi Charter Corporation and President Riverboat Casino-Mississippi,
Inc." and various other lawsuits were dismissed.
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.
6. Segment Information
Management reviews the results of operations and analyzes certain assets and
additions to property and equipment based on its three geographic gaming
operations and its leasing operation. The Biloxi Properties consists of the
Biloxi casino and Broadwater Property; the Davenport Properties consists of
the Davenport casino and the Blackhawk Hotel; and the St. Louis Properties
consists of the St. Louis casino and Gateway Riverboat Cruises.
The Company's reportable segments, other than the leasing operation, are
similar in operations, but have distinct and separate regional markets. The
Company had no inter-segment sales and accounts for transfers of property and
inventory at its net book value at the time of such transfer.
The Company evaluates performance based on EBITDA. EBITDA is earnings
before interest, taxes, depreciation and amortization expense.
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 performance. The Company
believes that this disclosure enhances the understanding of the financial
performance of a company with substantial interest, depreciation and
amortization.
7
<PAGE> 10
<TABLE>
<CAPTION>
Three Months Six Months
Ended August 31, Ended August 31,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Biloxi Properties................... $ 15,999 $ 15,629 $ 31,341 $ 30,011
Davenport Properties................ 20,036 20,518 40,971 41,891
St. Louis Properties................ 16,276 16,772 32,926 33,040
--------- --------- --------- ---------
Gaming and ancillary operations..... 52,311 52,919 105,238 104,942
Leasing Operation................... 392 729 1,820 729
--------- --------- --------- ---------
Net operating revenues......... $ 52,703 $ 53,648 $107,058 $105,671
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended August 31, Ended August 31,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
EBITDA (before development and
impairment expenses and gain/loss
on sale of property and equipment):
Biloxi Properties................... $ 1,904 $ 2,619 $ 3,875 $ 4,206
Davenport Properties................ 3,896 5,070 7,413 9,806
St. Louis Properties................ 1,704 2,118 3,818 2,813
--------- --------- --------- ---------
Gaming and ancillary operations..... 7,504 9,807 15,106 16,825
Leasing Operation................... 55 204 1,312 146
--------- --------- --------- ---------
Operations EBITDA................. 7,559 10,011 16,418 16,971
OTHER COSTS AND EXPENSES:
Corporate expense................... 1,175 1,413 2,168 2,571
Development expense................. 38 1,172 133 3,949
Depreciation and amortization....... 2,660 3,508 6,324 7,028
Loss on sale of assets.............. (6) 39 (2) 72
Other expense, net.................. 4,769 4,848 9,516 9,671
--------- --------- --------- ---------
Total other costs and expenses... 8,636 10,980 18,139 23,291
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST.............. (1,077) (969) (1,721) (6,320)
Minority interest................... 359 400 691 769
--------- --------- --------- ---------
NET LOSS............................. $ (1,436) $ (1,369) $ (2,412) $ (7,089)
========= ========= ========= =========
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
Aug. 31, Feb. 28,
1999 1999
------ ------
<S> <C> <C>
Property and Equipment
Biloxi Properties..................... $ 55,789 $ 49,251
Davenport Properties.................. 23,090 24,239
St. Louis Properties.................. 37,526 39,624
--------- ---------
Gaming and ancillary operations.... 116,405 113,114
Leasing Operations.................... 27,555 28,572
--------- ---------
Operating Assets.................... 143,960 141,686
Corporate Assets...................... 70 88
Development Assets.................... 1,625 966
--------- ---------
Net Property and Equipment........ $145,655 $142,740
========= =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended August 31,
1999 1998
------ ------
<S> <C> <C>
Additions to Property and Equipment:
Biloxi Properties..................... $ 7,322 $ 1,457
Davenport Properties.................. 924 937
St. Louis Properties.................. 540 1,497
--------- ---------
Gaming and ancillary operations.... 8,786 3,891
Leasing Operations.................... -- 1,111
--------- ---------
Operations' Assets.................. 8,786 5,002
Corporate Assets...................... 8 8
Development Assets.................... 659 708
--------- ---------
$ 9,453 $ 5,718
========= =========
</TABLE>
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
this report.
Overview
The Company's operating results are affected by a number of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the results of pursuing various development
opportunities 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. The Company's
operating results are not significantly affected by seasonality.
9
<PAGE> 12
--Competition
Intensified competition for patrons continues to occur at each of the
Company's properties.
Since gaming began in Biloxi in August 1992, there has been steadily
increasing competition along the Mississippi Gulf Coast, in nearby New Orleans
and elsewhere in Louisiana and Mississippi. Several large hotel/casino
complexes have been built in recent years with the largest single resort in
the area opening in March 1999 in Biloxi. There are currently twelve casinos
operating on the Mississippi Gulf Coast. See "Potential Growth Opportunities"
regarding a master plan for a destination resort the Company is developing in
Biloxi, Mississippi.
Within a 45-mile radius of the Quad Cities, the Company's Davenport, Iowa
operation competes with three other casino operations, one of which is located
directly across the Mississippi River in Illinois. Expansion and increased
marketing by these competitors continues to escalate, resulting in increased
promotional and marketing costs for the Company's Davenport operation. One of
the competing Iowa casinos added gaming space, a new hotel and other amenities
in September 1998. On September 23, 1999, the Davenport property received
approval from the Iowa Racing & Gaming Commission to expand its casino by
increasing the number of slot machines on its floor from its current level of
925 machines to 1,200. Management has plans to implement this increase over
the next one to two years.
Competition is intense in the St. Louis, Missouri market area. There are
presently five other casino companies operating eight casinos in the market
area. Two of these are Illinois casino companies operating single casino
vessels on the Mississippi River, one directly across the Mississippi from the
"Admiral" and the second 20 miles upriver. There are three Missouri casino
companies, each of which operates two casino vessels approximately 20 miles
west of St. Louis on the Missouri River.
--Regulatory Matters
Differences in gaming regulations in the St. Louis market between Illinois
and Missouri operators have given competitive advantages/disadvantages to the
various operators. Missouri regulations formerly did not require vessels to
actually cruise, however, simulated cruising requirements were imposed which
restricted entry to a vessel to a 45-minute period every two hours. Those
competitors having two casino vessels could alternate hourly boarding times
and provide virtually continuous boarding for their guests. Thus, they had a
distinct competitive advantage over the Company, which has only one vessel,
the "Admiral." Illinois casino vessels were formerly required to cruise,
thereby limiting ingress and egress to their casinos. On June 25, 1999,
legislation was enacted eliminating the Illinois boarding restrictions and the
cruising requirements. This change immediately gave the Illinois operations
an advantage over the Missouri operations as Illinois patrons could enter and
exit the vessel at any time. However, this advantage was negated on August
16, 1999, when the Missouri Gaming Commission allowed "continuous boarding" by
establishing a temporary pilot program eliminating the boarding restrictions
for the "Admiral" and other casinos in eastern Missouri. This change to
"continuous boarding" has also enabled the "Admiral" to compete more
effectively with the Missouri operators who have two adjacent casino vessels.
At this time, the Missouri Gaming Commission has not given any indication as
to the length of the pilot program or as to whether it will become permanent.
Other Missouri regulations limit the loss per cruise per passenger by
limiting the amount of chips or tokens a guest may purchase during each two-
hour gaming session to $500. The lack of a statutory loss limit on Illinois
10
<PAGE> 13
casinos allows them to attract higher stake players; additionally, their
guests are not burdened with the administrative requirements related to the
loss limits. Any easing of the loss limits in Missouri would be expected to
have a positive impact on the Company's St. Louis operation.
In Iowa, an excursion gaming boat must operate at least one excursion each
day for 100 days during the April 1 through October 31 excursion season.
Excursions must last a minimum of two hours. While an excursion gaming boat
is docked, passengers may embark or disembark at any time. As discussed
above, Illinois boats were required to cruise until June 1999 when such
cruising requirements were eliminated. The Company believes that the
elimination of cruising requirements in Illinois will have a negative impact
on the Davenport operations since the competitor directly across the
Mississippi River in Rock Island, Illinois is no longer required to cruise.
The elimination of the cruising requirements provides the Rock Island casino
an opportunity to expand its operation beyond its current capacities.
In July 1996, the U.S. Congress enacted a law establishing a National Gaming
Impact and Policy Commission to conduct a comprehensive study of the social
and economic impacts of gaming in the United States and make recommendations
for changes to the policies governing gaming that the Commission may deem
appropriate. A report was issued by the Commission in June 1999 making 13
specific recommendations. While at this time it is too early to predict the
effect of the Commission's report on the Company, the addition of a federal
level of regulation and taxes, or state laws implementing the report's
recommendations, could have a material adverse impact on the Company's future
financial condition and results of operations.
--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. Although the Company
was not forced to suspend its St. Louis operations during either of the six-
month periods ending August 31, 1999 or 1998 as a result of adverse weather
conditions, high waters caused reduced parking and a general public perception
of diminished access to the casino which combined to negatively impact revenue
during the periods. In addition, the Biloxi property was closed for 6 days
from September 25 to October 1, 1998, during Hurricane Georges.
--St. Louis Barge Accident
On April 4, 1998, the "Admiral" was struck by runaway river barges which
resulted in the severing of several of the vessel's mooring lines and boarding
ramps. Although the boarding ramps were lost and significant costs were
incurred returning the "Admiral" to its mooring site, the vessel sustained no
hull or structural damage and minimal damage to its bow apron. There were no
reports of serious injuries to the approximately 2,300 guests and employees
aboard. The "Admiral" was closed to the public for 26 days, reopening on
April 30, 1998. The Company maintains property, liability and business
interruption insurance which minimized the financial impact of the accident.
The deductible that applied against these policies was $1.0 million. The
Company, in conjunction with its various insurance carriers, is pursuing the
owners of the towboat that were involved in the accident to recover any
uninsured losses.
11
<PAGE> 14
--Potential Growth Opportunities
Biloxi, Mississippi
On July 24, 1997, the Company, through a newly created subsidiary, President
Broadwater Hotel, LLC ("PBLLC"), purchased for $40.5 million certain real
estate and improvements located on the Gulf Coast in Biloxi, Mississippi from
an entity which was wholly-owned by John E. Connelly, Chairman, Chief
Executive Officer and principal stockholder of the Company. The property
comprises approximately 260 acres and includes two hotels, a 138-slip marina
and the adjacent 18-hole Sun Golf Course (collectively, the "Broadwater
Property"). The marina is currently the site of the Company's casino
operations in Biloxi and was formerly leased by the Company under a long-term
lease agreement. The Company invested $5.0 million in PBLLC. PBLLC financed
the purchase with $30.0 million of outside financing and issued a $10.0
million membership interest to the seller.
In conjunction with the purchase of the Broadwater Property, PBLLC borrowed
the sum of $30.0 million 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, PBLLC'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 membership interest grows at the same rate. The
accrued balance of the membership account and unpaid growth as of August 31,
1999 was $11.9 million and is included in minority interest. Cash payments
relating to this minority interest have totaled $0.2 million since its
inception.
PBLLC 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, PBLLC is obligated to pay to the lender a loan
fee in the amount of $7.0 million which will be fully earned and nonrefundable
when the Indebtedness is repaid. As of August 31, 1999, the accrued loan fee
of $4.8 million is included in the Company's short-term liabilities.
The Company is currently developing a master plan for the Broadwater
Property and believes that this site is ideal for the development of
"Destination Broadwater," a full-scale luxury destination resort offering an
array of entertainment attractions in addition to gaming. Destination
Broadwater is planned to be an integrated entertainment resort situated in a
village setting partially surrounded by water. The plans for the resort will
feature a village which will include a cluster of casinos, hotels,
restaurants, theaters and other entertainment attractions. Management
believes that with its beachfront location and contiguous golf course, the
property is the prime site for such a development in the rapidly growing Gulf
Coast market.
In January 1999, the Company received the approval of the Mississippi
Department of Marine Resources ("DMR") for development of a full-scale
destination resort. This is the first of three permit approvals required of
the Joint Permit Application submitted in August 1998 to the DMR, the U.S.
Army Corps of Engineers and the Mississippi Department of Environment Quality.
The Company is currently performing environmental impact studies. The two
remaining permit approvals are still pending.
In March 1999, to facilitate its proposed master plan development, the
Company entered into contracts with the State of Mississippi and the owners of
Deer Island to purchase for $15.0 million and convey title to the island to
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<PAGE> 15
the State of Mississippi. Deer Island encompasses approximately 500 acres and
is located just offshore of Biloxi, Mississippi. It is primarily a wilderness
which the state would preserve for use by the people of Mississippi. This
transaction completes another essential step towards securing the necessary
agreements and approvals from the State of Mississippi for the Company's
"Destination Broadwater" development plans. The purchase and conveyance of
the title are contingent on the occurrence of various events, including the
issuance to the Company of all required federal, state and local permits and
the issuance by the State of Mississippi of the tidelands and fast lands
leases and casino license necessary for development of Destination Broadwater.
New York City, New York
The Company pursued a gaming license for a "cruise-to-nowhere" operation in
New York City utilizing the "President Casino New Yorker." In January 1998,
the Company submitted a gaming application to the New York City Gambling
Commission and in April 1998 received notification that the Commission was not
prepared to issue a provisional license which would have allowed the Company
to start operations. The Company incurred $2.5 million in costs pursuing a
New York City license during the six-month period ending August 31, 1998.
Results of Operations
The results of operations for the three-month and six-month periods ended
August 31, 1999 and 1998 include the gaming results for the Company's
operations in Davenport, Iowa, Biloxi, Mississippi and St. Louis, Missouri and
of much lesser significance, the non-gaming operations for Davenport (the
Blackhawk Hotel), Biloxi (the Broadwater Property) and St. Louis (Gateway
Riverboat Cruises).
The following table highlights the results of the Company's operations.
Three Months Ended Six Months Ended
August 31, August 31,
1999 1998 1999 1998
------ ------ ------ ------
(in millions)
Davenport, Iowa Operations
Operating revenues................. $ 20.0 $ 20.5 $ 41.0 $ 41.9
Operating income................... 2.8 3.9 5.2 7.5
Biloxi, Mississippi Operations
Operating revenues................. 16.0 15.6 31.3 30.0
Operating income................... 1.8 2.0 3.1 2.9
St. Louis, Missouri Operations
Operating revenues................. 16.3 16.8 32.9 33.0
Operating income................... 0.6 0.8 1.3 0.1
Corporate Leasing Operations
Operating revenues................. 0.4 0.7 1.8 0.7
Operating income (loss)............ (0.3) (0.2) 0.5 (0.6)
Corporate Administrative and
Development expense................ (1.2) (2.6) (2.3) (6.5)
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<PAGE> 16
The following table highlights certain supplemental measures of the
Company's financial performance.
Three Months Ended Six Months Ended
August 31, August 31,
1999 1998 1999 1998
------ ------ ------ ------
(dollars in millions)
Davenport, Iowa Operations
EBITDA............................. $ 3.9 $ 5.1 $ 7.4 $ 9.8
EBITDA margin...................... 19.5% 24.9% 18.0% 23.4%
Biloxi, Mississippi Operations
EBITDA............................. $ 1.9 $ 2.6 $ 3.9 $ 4.2
EBITDA margin...................... 11.9% 16.7% 12.5% 14.0%
St. Louis, Missouri Operations
EBITDA............................. $ 1.7 $ 2.1 $ 3.8 $ 2.8
EBITDA margin...................... 10.4% 12.5% 11.6% 8.5%
Corporate Leasing Operations
EBITDA............................. $ 0.1 $ 0.2 $ 1.3 $ 0.1
Corporate Administrative and
Development
EBITDA............................. $ (1.2) $ (2.6) $ (2.3) $ (6.5)
"EBITDA" consists of earnings from operations before interest, income taxes,
depreciation and amortization. For the purposes of this presentation, EBITDA
margin is calculated as EBITDA divided by operating revenue.
EBITDA and EBITDA margin are not determined in accordance with generally
accepted accounting principles. Since not all companies calculate these
measures in the same manner, the Company's EBITDA measures may not be
comparable to similarly titled measures reported by other companies.
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 performance. The Company
believes that this disclosure enhances the understanding of the financial
performance of a company with substantial interest, depreciation and
amortization.
Three-Month Period Ended August 31, 1999 Compared to the
Three-Month Period Ended August 31, 1998
Operating revenues. The Company generated consolidated operating revenues
of $52.7 million during the three-month period ended August 31, 1999 compared
to $53.6 million during the three-month period ended August 31, 1998, a
decrease of $0.9 million or 1.7%.
The Company's Biloxi operation experienced an increase in operating revenue
of $0.4 million, offset by the Company's St. Louis and Davenport operations,
each of which experienced decreases in operating revenues of $0.5 million.
Additionally, the Company's leasing operation experienced a decrease in
revenues of $0.3 million.
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<PAGE> 17
Gaming revenues for the Company's Biloxi operations were positively affected
by an increase in the overall gaming market on the Gulf Coast and the
Company's increased promotional efforts. The Company's Davenport and St.
Louis operations experienced decreases in gaming revenue as a result of
Illinois enacting legislation effective June 26, 1999 eliminating the cruising
requirements and therefore allowing for continuous boarding. On August 16,
1999, continuous boarding became effective in eastern Missouri. As a result,
the Company believes St. Louis operations were at a competitive disadvantage
for 51 days during the three-month period ended August 31, 1999. In addition,
the Davenport decrease is attributable to the previously described expansion
of a competing Iowa casino.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) decreased to $6.4
million during the three-month period ended August 31, 1999, from $7.1 million
during the three-month period ended August 31, 1998, a decrease of $0.7
million, or 9.9%. The decrease was primarily attributable to: (i) a decrease
in charter revenue of $0.3 million as a result of a charter agreement ending
in June of 1999 and (ii) an increase in promotional allowances at all three
properties in response to the competitive pressures in the markets.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $28.0 million during the three-month
period ended August 31, 1999, compared to $26.0 million during the three-month
period ended August 31, 1998, an increase of $2.0 million, or 7.7%. The St.
Louis operations experienced an increase of $0.5 million in gaming costs which
was primarily the result of promotions implemented to reduce the impact of
continuous boarding in Illinois. The Davenport operations experienced an
increase of $0.5 million in gaming and gaming cruise costs primarily as a
result of the additional costs associated with offering a new slot product and
an increase in complimentary items. The Biloxi operations experienced an
increase in gaming costs of $1.0 million primarily as a result of increased
promotional costs. As a percentage of gaming revenues, gaming and gaming
cruise costs increased to 60.6% during the three-month period ended August 31,
1999 from 55.8% during the three-month period ended August 31, 1998.
The Company's consolidated selling, general and administrative expenses were
$12.7 million during the three-month period ended August 31, 1999, compared to
$13.6 million for the three-month period ended August 31, 1998, a decrease of
$0.9 million or 6.6%. The decrease in selling, general and administrative
expenses is primarily due to: (i) a decrease of $0.4 million as a result of
the resolution of a property tax assessment at the St. Louis operations and
(ii) a decrease of $0.2 million on the Corporate Leasing operations as a
result of prior year costs incurred preparing the "New Yorker" for the charter
to a third party that began July 1998. As a percentage of consolidated
revenues, selling, general and administrative expenses decreased to 24.0%
during the three-month period ended August 31, 1999 from 25.4% during the
three-month period ended August 31, 1998.
Depreciation and amortization expenses were $2.7 million during the three-
month period ended August 31, 1999, compared to $3.5 million during the three-
month period ended August 31, 1998, a decrease of $0.8 million, or 22.9%.
Development costs were less than $0.1 million during the three-month period
ended August 31, 1999 compared to $1.2 million during the three-month period
ended August 31, 1998. The decrease was the result of $0.4 million the
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<PAGE> 18
Company incurred pursuing a gaming license in New York City and $0.7 million
related to the Company's investment in the Philadelphia lease option during
the prior year three-month period. No comparable expenses were incurred
during the three-month period ended August 31, 1999.
Operating income/loss. As a result of the foregoing items, the Company had
operating income of $3.7 million during the three-month period ended August
31, 1999, compared to $3.9 million during the three-month period ended August
31, 1998.
Interest expense, net. The Company incurred net interest expense of $4.8
million during each of the three-month periods ended August 31, 1999 and 1998.
Minority interest expense. The Company incurred $0.4 million minority
interest expense for the each three-month period ended August 31, 1999 and
1998, respectively.
Net loss. The Company incurred a net loss of $1.4 million during both
three-month periods ended August 31, 1999 and 1998.
Six-Month Period Ended August 31, 1999 Compared to the
Six-Month Period Ended August 31, 1998
Operating revenues. The Company generated consolidated operating revenues
of $107.0 million during the six-month period ended August 31, 1999 compared
to $105.7 million during the six-month period ended August 31, 1998, an
increase of $1.3 million or 1.2%.
The Company's Biloxi and Corporate Leasing operations experienced increases
in operating revenues, offset by the Company's Davenport operations which
experienced a decrease in operating revenues. The Company's St. Louis
operations contributed consistent revenue for both six-month periods ended
August 31.
The Biloxi operation's $1.3 million increase in revenues over the prior year
resulted from a $1.5 million increase in casino revenues and a $0.2 million
decrease from the hotel operations. The increase in casino revenues is
primarily the result of the growth in the Gulf Coast market over the
comparable six-month period ended August 31, 1998 and the Company's increased
promotional efforts. The Corporate Leasing operation had nearly four months
of charter revenue during the six-month period ended August 31, 1999, compared
to two months of charter revenue for the six-month period ended August 31,
1998, contributing a $1.1 million increase in revenue.
The Company's Davenport operations experienced a decrease in operating
revenues primarily as a result of a decrease in market share which the Company
believes has resulted from the previously described expansion of a competing
Iowa casino.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) decreased to $13.3
million during the six-month period ended August 31, 1999, from $16.5 million
during the six-month period ended August 31, 1998, a decrease of $3.2 million,
or 19.4%. The decrease is primarily attributable to the inclusion of $0.3
million in insurance proceeds for the six-month period ended August 31, 1999,
compared to $3.6 million in insurance proceeds in revenue for the six-month
period ended August 31, 1998.
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<PAGE> 19
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $56.3 million during the six-month
period ended August 31, 1999, compared to $51.6 million during the six-month
period ended August 31, 1998, an increase of $4.7 million or 9.1%. Gaming
costs increased $1.6 million at both the Davenport and St. Louis operations
and increased $1.4 million at the Biloxi operations. The increase at all
three properties is primarily the result of increased promotional costs. The
increase in Davenport is also the result of the introduction of wide area
progressive slot machines and their related rental cost in the current year.
As a percentage of gaming revenues, gaming and gaming cruise costs increased
to 60.0% during the six-month period ended August 31, 1999, from 57.9% during
the six-month period ended August 31, 1998.
The Company's consolidated selling, general and administrative expenses were
$25.5 million during the six-month period ended August 31, 1999, compared to
$29.0 million for the six-month period ended August 31, 1998, a decrease of
$3.5 million or 12.1%. The St. Louis operations decrease of $2.8 million is
primarily from costs incurred as a result of the "Admiral" accident which
occurred in the six-month period ended August 31, 1998, and the favorable
resolution of a property tax assessment during the six-month period ended
August 31, 1999. As a percentage of consolidated revenues, selling, general
and administrative expenses decreased to 23.8% during the six-month period
ended August 31, 1999 from 27.5% during the six-month period ended August 31,
1998. The decrease in selling, general and administrative expenses as a
percent of revenue is primarily attributable to the hull repair costs and the
continuing fixed costs at the St. Louis operations during the 26-day temporary
suspension of operations in April 1998.
Depreciation and amortization expenses were $6.3 million during the six-
month period ended August 31, 1999, compared to $7.0 million during the six-
month period ended August 31, 1998, a decrease of $0.7 million, or 10.0%.
Development costs during the six-month period ended August 31, 1999 were
$0.1 million compared to $3.9 million during the six-month period ended August
31, 1998, a decrease of $3.8 million. The decrease was primarily related to
$2.5 million the Company incurred pursuing a gaming license in New York City
during the six-month period ended August 31, 1998 and $1.3 million related to
the Company's investment in the Philadelphia lease option during the prior
year six-month period.
Operating income. As a result of the foregoing items, the Company had
operating income of $7.8 during the six-month period ended August 31, 1999 and
$3.4 million during the six-month period ended August 31, 1998.
Interest expense, net. The Company incurred net interest expense of $9.5
million during the six-month period ended August 31, 1999, compared to $9.7
million during the six-month period ended August 31, 1998, a decrease of $0.2
million, or 2.0%.
Minority interest expense. The Company incurred $0.7 million minority
interest expense for the six-month period ended August 31, 1999, compared to
$0.8 million for the six-month period ended August 31, 1998.
Net loss. The Company incurred a net loss of $2.4 million during the six-
month period ended August 31, 1999, compared to a net loss of $7.1 million
during the six-month period ended August 31, 1998.
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<PAGE> 20
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 $7.7 million of cash in order to fund
daily operations. As of August 31, 1999, the Company had approximately $10.5
million in non-restricted cash and short-term investments in excess of the
required $7.7 million. The Company is heavily dependant on cash generated
from operations to continue to operate as planned in its existing
jurisdictions and to fund capital expenditures. To the extent cash generated
from operations is less than anticipated, the Company may be required to
curtail certain planned fiscal 2000 expenditures or seek other sources of
financing. The Company may be limited in its ability to raise cash through
additional financing.
As reflected in the balance sheet as of August 31, 1999, the Company has
"current maturities of long-term debt" amounting to $35.8 million. The $35.8
million includes: (i) $30.0 million Broadwater Hotel note payable which was
previously classified in long-term debt and is due July 2000, (ii) the newly
acquired $5.4 million "President Casino-Broadwater" barge note due in $0.3
million monthly installments with a balloon payment of $3.6 million due April
15, 2000, and (iii) $0.4 million from a term note mortgaged by the M/V
"President Casino-Mississippi." The $4.8 million accrued loan fee related to
the Broadwater Hotel note was also previously classified as long-term and will
accrue to $7.0 million by the July 2000 due date.
Cash generated from operations during the normal course of business will not
be enough to make all required payments under the note payable obligations.
Management is pursuing various strategic financing alternatives in order to
fund these obligations. The Company is working with recognized financial
advisors in the gaming industry to pursue various strategic alternatives,
including the restructuring and refinancing of outstanding debt obligations
and/or the sale of assets. Management believes that there is significant
intrinsic value in the casino, hotel, development and other properties owned
by the Company. Management also believes that the Company will be successful
in funding its debt obligations on a timely basis through one or more of the
strategic alternatives being considered.
The Company experienced a net cash decrease from investing activities of
$3.7 million during the six-month period ended August 31, 1999 compared to a
decrease of $2.3 million during the six-month period ended August 31, 1998.
The net cash decrease from investing activities during both periods resulted
primarily from expenditures on property and equipment. During the six-month
period ended August 31, 1999, the Company had fixed asset additions of
approximately $9.5 million, of which, $5.4 million was a non-cash addition in
exchange for debt. The Company spent approximately $1.9 million, $0.5 million
and $0.9 million at the Company's Biloxi, St. Louis and Davenport operations,
respectively. Additionally, the Company spent $0.7 million in conjunction
with the potential development of the Broadwater Property into a multi-casino
destination resort.
The Company has a $3.2 million outstanding term note payable that is
collateralized by "President Casino-Mississippi" and various equipment with a
net book value of $8.5 million. The Company made $0.2 million of principal
payments during both six-month periods ended August 31, 1999 and 1998 on the
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<PAGE> 21
term note. The note contains a covenant whereby the Company is required to
maintain a minimum net worth of $40.0 million. Although the Company's net
worth is currently below $40.0 million, the Company received a waiver of the
covenant through September 30, 2000. Management believes that the Company
will be able to either renegotiate the terms, pay down a portion of the note
or refinance the loan at such time as the waiver terminates.
TCG, the Company's 95%-owned partnership, maintains a $2.5 million line of
credit of which $0.3 million is unused, provided by Firstar Bank, N.A. The
line of credit reduces by $0.9 million each March 31 and expires September 30,
2000. The line of credit is available exclusively to TCG. Distributions from
TCG to its general partner are limited by its partnership agreement.
On August 10, 1999, the Company purchased "President Casino-Broadwater"
(formerly the "Biloxi Barge"), the dockside casino utilized at the Company's
Biloxi gaming operation. The Company had previously leased the "President
Casino-Broadwater" since June 1995 from its former owner, American Gaming and
Entertainment, Ltd. ("AGEL"). Under the terms of the agreement, the Company
purchased the "President Casino-Broadwater" for $5.0 million plus the
remaining amounts from the current charter. The Company paid $1.0 million at
closing and will pay $0.3 million monthly through April 15, 2000, at which
time the balance of the purchase price will be due. The Company currently
anticipates it will be able to fund the barge purchase from either bank
financing or a combination of its existing cash and future cash flows.
In conjunction with the purchase of the Broadwater Property, President
Broadwater Hotel, L.L.C. ("PBLLC") borrowed the sum of $30.0 million 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, PBLLC'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. PBLLC 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, PBLLC is obligated to pay to the lender a loan fee in the
amount of $7.0 million which will be fully earned and nonrefundable when the
Indebtedness is repaid. As of August 31, 1999, the Company has accrued $4.8
million of this loan fee.
In addition to the aforementioned note, PBLLC is obligated to redeem the
minority interest owned by a company controlled by Mr. Connelly for a
redemption price of $10.0 million on the date on which the above mentioned
debt is fully and finally discharged and the mortgage securing that debt is
released. Mr. Connelly is also entitled 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. Through August 31, 1999, the
Company has expensed $2.0 million of this priority return of which it has paid
$0.2 million since inception.
Project financing will be required for any potential growth opportunity.
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
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<PAGE> 22
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
operate gaming in other potential jurisdictions it will be able to raise
sufficient capital to pursue its strategic plan.
--Year 2000
Background
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, information
technology ("IT") such as date-sensitive computer software as well as non-IT
systems, such as equipment containing micro-controllers or other embedded
technology may recognize a date using "00" as the year 1900 rather than the
year 2000. This is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
Risk Factors
Date-sensitive IT and non-IT systems and equipment are utilized throughout
the Company's properties. As such, the Company is exposed to the risk that
Year 2000 problems could disrupt operations at the affected properties and
have a material adverse impact upon the Company's operating results.
The Company is also exposed to the risk of possible failure of IT and non-IT
systems external to the Company's operations. These External Risk Factors
arise from the fact that the Company's operations, like most businesses,
depend upon numerous other private, public and governmental entities. While
these External Risk Factors are not the Company's responsibility and the
remediation of these factors is beyond the Company's control, the Company is
attempting to monitor these risks and form such contingency plans as the
Company deems necessary. As a result of these External Risk Factors, the
Company may be materially and adversely impacted even if the Company's own IT
and non-IT systems and equipment are Year 2000 compliant. The most
significant of these External Risk Factors are as follows:
*One or more of the Company's suppliers could experience Year 2000 problems
that impact the ability of the suppliers to provide goods and services
required in the operation of the Company's properties. The Company believes
that the impact of such a potential disruption would be limited due to the
availability of alternative suppliers, but the Company cannot be sure that
such a disruption would not have an adverse impact on the Company's
operations.
*One or more of the Company's utility providers (including electric, natural
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<PAGE> 23
gas, water, sewer, garbage collection and similar services) could experience
Year 2000 problems that impact the ability of the utility to provide the
service. Furthermore, the Company could be adversely impacted if disruption
of utility services occurred in any of the Company's key customer markets, as
this could impact the customary flow of visitors from the affected market.
*The possible disruption of banking services due to Year 2000 problems could
impair the Company's daily banking operations including the deposit of monies
and processing of checks. Furthermore, customer's credit card processing and
access to cash via automated teller machines could also be disrupted.
The Company is not in the position to determine whether the External Risk
Factors will have a material adverse impact on the Company's operating
results. While the Company is developing contingency plans with respect to
identified risk factors, the nature of many External Risk Factors is such that
the Company does not believe a viable alternative would be available.
Consequently, the occurrence of any of the previously listed disruptions
could, depending upon the severity and duration of the disruption, have a
material adverse impact on the Company's operating results.
Approach
The Company has established a task force to coordinate the Company's
response to the Year 2000. This task force reports to the Company's Executive
Vice President and Chief Financial Officer. The Company is implementing a
Year 2000 compliance program at the Company's properties. The program
consists of the following phases:
Phase 1. Compilation of an inventory of IT and non-IT systems that may be
sensitive to the Year 2000 problem.
Phase 2. Identification and prioritization of the critical systems from the
systems inventory compiled in Phase 1 and inquiries of third parties with whom
the Company does significant business (i.e. vendors and suppliers) as to the
state of their Year 2000 readiness.
Phase 3. Analysis of critical systems to determine which systems are not
Year 2000 compliant and evaluation of the costs to repair or replace those
systems.
Phase 4. Repair or replace noncompliant systems and testing of those
systems for which a representation as to Year 2000 compliance has not been
received or for which a representation was received but has not been
confirmed.
Status
All phases are substantially complete. Based upon the analysis conducted to
date, the Company believes all of the major critical systems at the Company's
properties are currently compliant.
Costs
The Company has incurred approximately $0.3 million as of August 31, 1999.
The majority of this cost relates to the acquisition of new computer hardware
to replace the systems noted above and the purchase of new software to replace
non-compliant software. These costs will be capitalized and depreciated over
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<PAGE> 24
their expected useful lives. To the extent existing hardware or software is
replaced, the Company will recognize a loss currently for the undepreciated
balance. This loss is included in the above cost estimate. Furthermore, all
costs related to software modification, as well as all costs associated with
the Company's administration of the Company's Year 2000 project, are being
expensed as incurred and are likewise included in the cost estimated above.
Quantitative and Qualitative Disclosures About Market Risk
Although the majority of debt carries a fixed interest rate, the Company is
exposed to interest rate risk with respect to the variable-rate debt
maintained.
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 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; risk that jurisdictions in which the
Company operates or jurisdictions in close proximity in which the Company
operates enact legislation that effect the Company's current operations; 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 5 of Notes to Condensed Consolidated Financial
Statements included in Part I of this report and is incorporated herein by
reference.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
22
<PAGE> 25
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual stockholders' meeting on August 10, 1999. The
following matters were voted upon at the meeting:
1. Election of two Class I Directors:
Votes Cast
-----------------------------
Name of Director Elected For Withheld
------------------------ ------------- --------------
Karl G. Andren 4,339,690 269,167
Royal P. Walker, Jr. 4,337,403 271,454
Name of Each Other Director Whose Term of
Office as Director Continues After the Meeting
----------------------------------------------
John E. Connelly
John S. Aylsworth
Terrence L. Wirginis
2. Motion to adjourn the stockholders' meeting until August 23, 1999, to
allow further solicitation of proxies:
Votes Cast
-----------------------------
For Withheld
------------- --------------
3,977,887 630,843
The Company reconvened its annual stockholders' meeting on August 23, 1999.
The following matter was voted upon at that meeting:
1. Proposal to adopt the 1999 Incentive Stock Plan of President
Casinos, Inc.:
Votes Cast
--------------------------------------------
For Against Withheld
------------- ------------- --------------
2,506,401 723,936 32,415
There were 1,404,962 broker non-votes with regard to the matter voted
upon at the meeting.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this report are listed on Index to
Exhibits accompanying this report.
(b) Reports on Form 8-K
Not applicable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Although the majority of debt carries a fixed interest rate, the
Company is exposed to interest rate risk with respect to the variable-rate
debt maintained.
23
<PAGE> 26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
President Casinos, Inc.
-----------------------------
(Registrant)
Date: October 15, 1999 /s/ James A. Zweifel
-----------------------------
James A. Zweifel
Executive Vice President and
Chief Financial Officer
24
<PAGE> 27
INDEX TO EXHIBITS
-----------------
EXHIBIT NO.
10.1 Sale Agreement dated July 2, 1999, by and between The President
Riverboat Casino-Mississippi, Inc., President Casinos, Inc. and
President Mississippi Charter Corp., on the one hand, and
American Gaming & Entertainment, Ltd., AmGam Associates ("AmGam"),
American Gaming & Resorts of Mississippi, Inc. ("AGRM"), the
Committee for the Unsecured Creditors of AmGam, the Committee for
the Unsecured Creditors of AGRM, International Game Technology,
Inc.("IGT"), and Shamrock Holdings Group, Inc. (formerly known as
Bennett Holdings Group, Inc.) ("Shamrock" and collectively with
AGEL, AmGam, AGRM, the Committee for the Unsecured Creditors of
AmGam, the Committee for the Unsecured Creditors of AGRM and IGT,
the "AGEL Group"), on the other hand.
10.2 Promissory Note dated August 10, 1999, from The President
Riverboat Casino-Mississippi, Inc. to American Gaming &
Entertainment, Ltd.
10.3 Security Agreement, dated August 10, 1999, between The President
Riverboat Casino-Mississippi, Inc. and American Gaming &
Entertainment, Ltd.
10.4 Preferred Ship Mortgage dated August 10, 1999, granting by The
President Riverboat Casino-Mississippi, Inc., to and in favor of
American Gaming & Entertainment, Ltd.
10.5 Guaranty Agreement dated August 10, 1999, made by The President
Riverboat Casino-Mississippi, Inc., in favor of American Gaming &
Entertainment, Ltd.
10.6 President Casinos, Inc. 1999 Incentive Stock Plan.
27 Financial Data Schedule for the six-months ended August 31, 1999,
as required under EDGAR.
- ----------------------
25
EXHIBIT 10.1
SALE AGREEMENT
THIS SALE AGREEMENT (this "Agreement") is entered into on July 2, 1999, by
and between The President Riverboat Casino-Mississippi, Inc., a Mississippi
corporation ("Purchaser"), President Casinos, Inc. and President Mississippi
Charter Corporation (collectively with Purchaser and President Casinos, Inc.,
the "President Group"), on the one hand, and American Gaming & Entertainment,
Ltd. ("AGEL") , AmGam Associates ("AmGam"), American Gaming & Resorts of
Mississippi, Inc. ("AGRM"), the Committee for the Unsecured Creditors of
AmGam, the Committee for the Unsecured Creditors of AGRM, International Game
Technology, Inc. ("IGT"), and Shamrock Holdings Group, Inc. (formerly known as
Bennett Holdings Group, Inc.) ("Shamrock" and collectively with AGEL, AmGam,
AGRM, the Committee for the Unsecured Creditors of AmGam, the Committee for
the Unsecured Creditors of AGRM and IGT, the "AGEL Group"), on the other hand.
WITNESSETH:
WHEREAS, AGEL is the record owner of the Gold Coast Casino Barge, Coast
Guard Registration No. 995650 (the "Barge");
WHEREAS, AGEL and the remaining members of the AGEL Group desire to sell the
Barge to Purchaser, and Purchaser desires to purchase the Barge, upon the
terms and conditions described herein;
WHEREAS, the AGEL Group and the President Group desire to settle certain
litigation and other claims between them and their Affiliates (as defined
below);
WHEREAS, the AGEL Group and the President Group desire to obtain approval of
this Agreement by the United States Bankruptcy Court for the Southern District
of Mississippi prior to the effective date of the transfer of the Barge.
WHEREAS, Shamrock's execution of this Agreement and the other Transaction
Documents (as defined below) including, without limitation, the release of its
liens upon and security interest in the Barge, is subject to the approval of
the New York Bankruptcy Court (defined below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following designated
meanings:
Affiliate means, with respect to any Person, any other Person that directly
or indirectly controls, is controlled by, or is under a common control with
such first Person, where the term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
<PAGE> 29
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract, or otherwise. In the case of Purchaser, the term Affiliate
includes, without limitation, President Casinos, Inc., President Riverboat
Casinos, Inc. and President Mississippi Charter Corporation.
Breeden means Richard C. Breeden, in his capacity as duly appointed chapter
11 trustee of the substantially consolidated bankruptcy estates of The Bennett
Funding Group, Inc., Bennett Receivables Corporation, Bennett Receivables
Corporation II, Bennett Management & Development Corporation, et al.
Business Day means any day other than a Saturday, a Sunday or a day on which
commercial banks in the State of Mississippi are authorized or required by law
to close.
Charter means the lease of the Barge dated February 17, 1995 between
American Gaming & Entertainment, Ltd., as Owner, and President Mississippi
Charter Corporation, as Charterer, and all amendments thereto.
Closing Date means the Business Day following the date that all of the
following have been entered and become final or if appealed, no stay pending
appeal has been granted as of the time of closing or, if a stay has been
granted, it has been dissolved: (a) the Order; (b) the Mississippi Bankruptcy
Court's order represented by Exhibit L hereto; and (c) the New York Bankruptcy
Court's orders granting the motion of Shamrock attached hereto as part of
Exhibit I.
Mississippi Bankruptcy Court means the United States Bankruptcy Court for
the Southern District of Mississippi, Biloxi Division.
New York Bankruptcy Court means the United States Bankruptcy Court for the
Northern District of New York.
Order means the order of the Mississippi Bankruptcy Court authorizing the
transfer of the Barge to the Purchaser free and clear of all liens, claims and
interests and approving the Transaction Documents, substantially in the form
attached hereto as part of Exhibit H.
Payment Agent means Rimmer, Rawlings, MacInnis & Hedglin, 210 E. Capitol
Street, Jackson, MS 39201.
Person means any natural person, firm, partnership, association,
corporation, company, trust, entity, public body or government.
Slot Machines means the 616 slot machines manufactured by IGT, sold by IGT
to AmGam in 1994, and then acquired by President Mississippi Charter
Corporation by order of the Bankruptcy Court dated September 21, 1995.
Transaction Document means any of this Agreement, any Exhibit to this
Agreement, or any other document executed and delivered by a member of the
AGEL Group and the President Group, or any of them, in connection with the
consummation of the transactions contemplated hereby.
2
<PAGE> 30
ARTICLE 2
PURCHASE AND SALE OF THE BARGE AND SLOT MACHINES
2.1 Sale of the Barge. Subject to the terms and conditions of this
Agreement, AGEL and the other members of the AGEL Group agree to sell, convey,
assign and transfer all of their right, title and interest, if any, to
Purchaser, and Purchaser agrees to purchase and accept, the Barge, including
all furniture, fixtures and equipment located on the Barge and belonging to
AGEL or any other member of the AGEL Group on the date hereof. On the Closing
Date, the parties shall execute and deliver a Bill of Sale in the form
attached hereto as Exhibit A. Purchaser is purchasing the Barge on an "as is,
where is" "with all faults" basis, with no warranties as to the physical
condition of the Barge or any of its contents.
2.2 Purchase Price for the Barge. The purchase price (the "Purchase
Price") for the Barge is SIX MILLION, EIGHT HUNDRED, TWENTY-SEVEN THOUSAND
FIVE HUNDRED AND NO/100 DOLLARS ($6,827,500.00) (subject to reduction as set
forth in paragraph 2.2(b) below), which shall be paid by Purchaser as follows:
(a) On the Closing Date, the President Group will cause Purchaser to
deliver to the Payment Agent, by wire transfer or certified check, the amount
of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00).
(b) On the Closing Date, the President Group will cause Purchaser to
deliver to the Payment Agent a promissory note, in the form attached hereto as
Exhibit B (the "Promissory Note"), in the amount of FIVE MILLION EIGHT
HUNDRED, TWENTY-SEVEN THOUSAND FIVE HUNDRED AND NO/100 DOLLARS
($5,827,500.00). The amount of the Promissory Note shall be reduced on the
Closing Date, on a dollar-for-dollar basis, by the amount of any Charter
payments made by Purchaser for any Charter period after July 31, 1999.
It is understood and agreed by the parties hereto that the Purchase Price was
calculated as the sum of $5,000,000, plus all payments under the Charter that
have not been made as of the Closing.
2.3 Security and collateral. As security for its obligations under the
Promissory Note, Purchaser shall deliver to the AGEL Group on the Closing Date
the following documents:
(a) A security agreement, in the form attached hereto as Exhibit C;
(b) A preferred ship mortgage, in the form attached hereto as Exhibit D;
and
(c) A guaranty agreement, in the form attached hereto as Exhibit E,
pursuant to which President Casinos, Inc. will guarantee the obligations of
The President Riverboat Casino-Mississippi, Inc. under the Promissory Note.
2.4 Termination of the Charter. On the Closing Date, the Charter will be
canceled, without any further acts of the parties. On the Closing Date, the
President Group shall deliver to the AGEL Group an agreement, in the form
attached hereto as Exhibit F, pursuant to which President Mississippi Charter
3
<PAGE> 31
Corporation consents to such cancellation.
2.5 Settlement of the sale price of the Slot Machines. On or before the
Closing Date, the AGEL Group (other than Shamrock, AGRM and the Committee for
the Unsecured Creditors of AGRM, which claim no interest in the Slot Machines)
shall execute a Cross Receipt, in the form attached hereto as Exhibit G,
pursuant to which the AGEL Group (other than Shamrock, AGRM and the Committee
for the Unsecured Creditors of AGRM, which claim no interest in the Slot
Machines) will certify that Purchaser has satisfied all of the obligations of
Purchaser and its Affiliates with respect to the purchase of the Slot
Machines.
2.6 Final payment for the Slot Machines. Upon execution and delivery of
the Cross Receipt, Purchaser will deliver to the Payment Agent, by wire
transfer or certified check, the amount of NINE HUNDRED THOUSAND DOLLARS
($900,000.00), representing the final installment payment of the purchase
price of the Slot Machines.
ARTICLE 3
ACTIONS TO BE TAKEN UPON EXECUTION OF THIS AGREEMENT
3.1 Execution of pleadings to be filed in the Bankruptcy Courts and other
filings. Upon execution of this Agreement, the parties will execute and
deliver the following documents, each of which will be transmitted as promptly
as practicable for filing in the Bankruptcy Courts designated and at the
Securities and Exchange Commission:
(a) Each party will execute and deliver the Joint Motion to approve Sale
Agreement for filing in the Mississippi Bankruptcy Court, substantially in the
form attached hereto as Exhibit H;
(b) Shamrock will execute and deliver a motion, substantially in the form
attached hereto as part of Exhibit I, for approval of Shamrock's agreement to
the transactions set forth herein and for approval of Shamrock's execution of
the Sale Agreement and the other Transaction Documents, and will deliver such
motion for filing in the New York Bankruptcy Court;
(c) Each party will execute and deliver the Joint Motion to expedite
approval of Sale Agreement for filing in the Mississippi Bankruptcy Court, in
the form attached hereto as Exhibit J;
(d) IGT will execute and deliver the Withdrawal of Objection to Approval
of Settlement originally filed by IGT in the Adversary Proceeding No. 97-0868
entitled "AmGam Associates, a Ms. General Partnership d/b/a Gold Shore Casino
and Official Unsecured Creditors' Committee v. President Mississippi Charter
Corporation and President Riverboat Casino-Mississippi, Inc.," for filing in
the Mississippi Bankruptcy Court in the form attached hereto as Exhibit K;
(e) AGEL will file with the Securities and Exchange Commission an
information statement with respect to the transactions contemplated by this
Agreement.
4
<PAGE> 32
3.2 Filing of order to approve Slot Machine settlement. AGEL, the
President Group, AmGam, the Committee for the Unsecured Creditors of AmGam and
IGT will also immediately submit to the Mississippi Bankruptcy Court an Order
Approving Settlement and Judgment of Dismissal with Prejudice in Adversary
Proceeding No.97-0868, entitled "AmGam Associates, a Ms. General Partnership
d/b/a Gold Shore Casino and Official Unsecured Creditors' Committee v.
President Mississippi Charter Corporation and President Riverboat Casino-
Mississippi, Inc.," in the form attached hereto as Exhibit L.
3.3 Best efforts. Each party agrees to go forward in good faith and use
its reasonable best efforts to obtain the approval of the Mississippi
Bankruptcy Court to the pleadings represented by Exhibits H, J and K as
expeditiously as possible and to obtain the approval of the New York
Bankruptcy Court of the Shamrock pleading represented by part of Exhibit I as
expeditiously as possible.
ARTICLE 4
THE CLOSING
4.1 The Closing. The closing of the transactions provided for in this
Agreement (the "Closing") shall be at 10:00 a.m. Central Daylight Time on the
Closing Date. The Closing will be held at the offices of Phelps Dunbar,
L.L.P., 400 Poydras Street, 30th Floor, New Orleans, Louisiana.
4.2 Actions to be taken at the Closing. At the Closing, the parties shall
deliver to each other the Transaction Documents provided for in Article 2
hereof. In addition, the following Transaction Documents shall be delivered
and, as to the documents specified in paragraphs (e), (f) and (a), below,
would be recorded or filed, as applicable, by the Purchaser in the order
specified:
(a) Shamrock shall deliver to Purchaser two Satisfactions of Preferred
Ship Mortgage, in the form attached hereto as Exhibit M, which shall be
immediately transmitted for filing with the United States Coast Guard as well
as such other documents (including, without limitation, appropriate UCC
termination statements) as Purchaser may reasonably require to reflect AGEL's
transfer of title to the Barge free of Shamrock's liens;
(b) Purchaser shall deliver to the AGEL Group certified resolutions
adopted by the Boards of Directors of President Casinos, Inc., President
Mississippi Charter Corporation and President Riverboat Casino-Mississippi,
Inc. in the forms attached hereto as Exhibits N, O and P, respectively;
(c) AGEL shall deliver to Purchaser a certificate, dated as of the
Closing Date, in the form attached hereto as Exhibit Q;
(d) Purchaser shall deliver to the AGEL Group a certificate, dated as of
the Closing Date, in the form attached hereto as Exhibit R;
(e) Purchaser shall execute Uniform Commercial Code forms 1 ("UCC 1"), in
the form attached hereto as Exhibit S, which shall be immediately transmitted
for filing in the appropriate jurisdictions, as well as such other documents
5
<PAGE> 33
as the AGEL Group may reasonably require to perfect the security interest
granted to AGEL by Purchaser;
(f) AGEL and Purchaser shall execute Coast Guard Form 1258, in the form
attached hereto as Exhibit T, which shall be immediately transmitted for
filing in the records of the United States Coast Guard;
(g) All of the parties hereto shall execute and deliver the Agreement of
Compromise, Settlement and Release, in the form attached hereto as Exhibit U;
(h) AGEL and Purchaser shall execute and deliver a letter, in the form
attached hereto as Exhibit V, requesting that the arbitration proceeding
between them currently being conducted by the American Arbitration
Association, be dismissed, which letter shall be immediately transmitted to
the appropriate office of the American Arbitration Association;
(i) All members of the AGEL Group except Shamrock shall execute and
deliver the Joint Motion and Order to Dismiss President Mississippi Charter
Corporation and President Riverboat Casino-Mississippi, Inc. as defendants in
Adversary Proceeding No.97-01010 entitled "International Gaming Technology v.
AmGam Associates, a Mississippi General Partnership d/b/a Goldshore Casino,
American Gaming & Entertainment, Limited d/b/a Gold Shore Casino, American
Gaming of Biloxi, Inc., Gamma of Mississippi, Inc., American Gaming & Resorts
of Mississippi, Inc., President Mississippi Charter Corporation and President
Riverboat Casino-Mississippi, Inc.," in the form attached hereto as Exhibit W,
which Joint Motion shall be transmitted immediately to the Mississippi
Bankruptcy Court for filing;
(j) IGT shall execute and deliver a Motion to Dismiss the Adversary
Proceeding No.98-05095 entitled "International Gaming Technology v. President
Casinos, Inc., President Mississippi Charter Corporation, President Riverboat
Casino-Mississippi, Inc., and President Riverboat Casino, Inc.," in the form
attached hereto as Exhibit X, which Motion to Dismiss shall be transmitted
immediately to the Mississippi Bankruptcy Court for filing;
(k) The members of the AGEL Group that are parties to the litigation
described in this paragraph shall execute and deliver a Motion to Dismiss
President Mississippi Charter Corporation, President Riverboat Casinos, Inc.,
and The President Riverboat Casino-Mississippi, Inc. as defendants in the
Adversary Proceeding Nos.95-1001 and 95-1002 entitled "The Official Committee
of Unsecured Creditors of AmGam Associates and the Official Committee of
Unsecured Creditors of American Gaming and Resorts of Mississippi, LTD v.
American Gaming & Entertainment, Ltd, Bennett Holdings Inc., Bennett
Management and Development Co., President Mississippi Charter Corporation;
President Riverboat Casinos, Inc., and President Riverboat Casino-Mississippi,
Inc.," in the form attached hereto as Exhibit Y, which Motion to Dismiss shall
be immediately transmitted to the Bankruptcy Court for filing;
(l) Purchaser and its Affiliate shall execute and deliver a Motion to
Dismiss the appeal of Purchaser and President Mississippi Charter Corporation
from an order rendered by the Mississippi Bankruptcy Court in Adversary
Proceedings Nos. 95-1001 and 95-1002, filed by President Mississippi Charter
Corporation and President Riverboat Casino-Mississippi, Inc. in the United
6
<PAGE> 34
States District Court for the Southern District of Mississippi (1:99cv154 RG
and 1:99cv153 GR), in the form attached hereto as Exhibit Z, which Motion to
Dismiss shall be transmitted immediately to the United States District Court
for the Southern District of Mississippi for filing; and
(m) Purchaser and AGEL shall execute and deliver a Joint Motion
withdrawing Purchaser's pending motion in the Mississippi Bankruptcy Court
styled "Motion for a Declaration that Contractual Right of First Refusal in
Post Petition Contract is Enforceable" and AGEL's objection to such motion, in
the form attached hereto as Exhibit AA.
In addition, Purchaser and the members of the AGEL Group shall execute and
deliver such other documents, certificates and instruments that are required
by the Mississippi Bankruptcy Court or the New York Bankruptcy Court or that
are otherwise necessary to consummate the transactions contemplated hereby.
4.3 Best efforts. Each party agrees to go forward in good faith and use
its reasonable best efforts to obtain the approval of the Mississippi
Bankruptcy Court and the United States District Court for the Southern
District of Mississippi of the pleadings contemplated by Exhibits W, X, Y, Z
and AA as expeditiously as possible.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PRESIDENT GROUP
To induce the AGEL Group to enter into this Agreement and the transactions
contemplated hereby, each member of the President Group represents and
warrants to the AGEL Group as of the date hereof and as of the Closing Date as
follows:
5.1 Organization of Purchaser. Each member of the President Group is a
corporation duly formed, validly existing and in good standing under the laws
of the state of its incorporation and has full power and authority to own and
operate its business as it is now being conducted, and to own and use its
properties and assets and, upon receipt of approval by the Mississippi Gaming
Commission, Purchaser will have full power and authority to acquire, own and
use the Barge.
5.2 Authorization, Execution and Delivery. Each member of the President
Group has the power and authority to enter into this Agreement and the
Transaction Documents to which it is or will be a party and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance by each member of the President Group of this Agreement and the
Transaction Documents to which each member of the President Group is or will
be a party and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all requisite action by such member.
This Agreement has been duly executed and delivered by each member of the
President Group and, upon due execution and delivery by each such member (to
the extent it is a party thereto) each Transaction Document will constitute,
the valid and binding obligation of such member, enforceable against such
member in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium, or other
7
<PAGE> 35
laws affecting creditors' rights generally and by general equitable principles
(whether arising in a proceeding in equity or otherwise) and, with respect to
the Preferred Ship Mortgage attached hereto as Exhibit D, except to the extent
that the Barge is not a vessel under the law governing creation, perfection
and enforceability of such mortgage.
5.3 No Conflict or Violation. Neither the execution and delivery of this
Agreement and the Transaction Documents to which each member of the President
Group is or will be a party nor the consummation of the transactions
contemplated hereby and thereby will (i) result in any conflict with or breach
or violation of or default under the Articles of Incorporation or Bylaws of
any member of the President Group, (ii) conflict with or result in the breach
or violation of any law, regulation, writ, injunction or decree of any court
or governmental instrumentality applicable to any member of the President
Group, or (iii) constitute a breach of any agreement to which any member of
the President Group is a party or by which any member of the President Group
is bound.
5.4 Litigation, et cetera. There are no actions, suits or proceedings at
law or equity, pending or to the knowledge of the President Group, threatened
against, affecting or able to affect the President Group's ability to
consummate the transactions contemplated hereby, at law or in equity, or
before by any governmental agency or instrumentality or pending before any
arbitrator of any kind.
5.5 Lien and Security Interest on Barge and all other collateral. Upon
entry of the Order and after the Closing and proper filing of the Transaction
Documents with the appropriate authorities, AGEL will hold a lien and security
interest on the Barge and all other collateral identified in the Security
Agreement attached hereto as Exhibit C that is, to the same extent that the
Order effects AGEL's transfer of title to Purchaser free and clear of all
other liens, claims, encumbrances and interests, first in priority over any
and all other liens or security interests, and in any event first in priority
over any and all liens or security interests created by the President Group or
caused by actions or inaction of the President Group, except to the extent
that the Barge would not be considered a vessel under the law governing
creation, perfection and enforceability of the Mortgage attached hereto as
Exhibit D.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF AGEL
To induce Purchaser to enter into this Agreement and the transactions
contemplated hereby, AGEL represents and warrants to Purchaser as of the date
hereof and as of the Closing Date as follows:
6.1 Authorization, Execution and Delivery. AGEL has the power and
authority to enter into this Agreement and the Transaction Documents to which
it is or will be a party and to carry out the transactions contemplated hereby
and thereby. Subject to the written consents of Shamrock and Breeden
constituting the holders of a majority of the shares of outstanding voting
stock of AGEL and subject to the approval of the New York Bankruptcy court of
8
<PAGE> 36
such consents, (a) the execution, delivery and performance by AGEL of this
Agreement and the Transaction Documents to which AGEL is or will be a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite action by AGEL, and (b) this Agreement
has been duly executed and delivered by AGEL and constitutes, and upon due
execution and delivery by AGEL to the extent a party thereto each other
Transaction Document will constitute, the valid and binding obligation of
AGEL, enforceable against AGEL in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, or other laws affecting creditors' rights generally and by general
equitable principles (whether arising in a proceeding in equity or otherwise).
6.2 No Conflict or Violation. Neither the execution and delivery of this
Agreement and the Transaction Documents to which AGEL is or will be a party
nor the consummation of the transactions contemplated hereby and thereby will
(i) result in any conflict with or breach or violation of or default under the
Articles of Incorporation or Bylaws of AGEL, (ii) conflict with or result in
the breach or violation of any law, regulation, writ, injunction or decree of
any court or governmental instrumentality applicable to AGEL, or (iii)
constitute a breach of any agreement to which AGEL is a party or by which AGEL
is bound.
6.3 Litigation, et cetera. Except for the pending avoidance action syled
Official Committee of Unsecured Creditors v. American Gaming and
Entertainment, Ltd., et al., Adv. Proc. No. 95-1001 SEG and Adv. Proc. No. 95-
1002 SEG, there are no actions, suits or proceedings at law or equity, pending
or to the knowledge of AGEL, threatened against, affecting or able to affect
AGEL's ability to consummate the transactions contemplated hereby, at law or
in equity, or before by any governmental agency or instrumentality or pending
before any arbitrator of any kind.
6.4 Consents and Approvals. Other than the approval of the New York
Bankruptcy Court of the written consents of Shamrock and Breeden and the
filing of a definitive information statement with the United States Securities
and Exchange Commission referred to in Section 3.1(e) above, no consent,
approval, license, permit, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required to be obtained or made by or with respect to AGEL in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
6.5 Title to Barge. On the Closing Date, AGEL will transfer the Barge,
free and clear of all liens and encumbrances pursuant to the Order except for
any liens created by the President Group or caused to be created by actions or
inaction of the President Group. As soon as practicable after the date
hereof, the AGEL Group will serve and deliver notice of the filing of the
Joint Motion attached hereto as Exhibit H to all parties to whom such notice
is required to be delivered in order to make the foregoing representation and
warranty accurate as of the Closing Date. Subject to the provisions of
Section 9.9 hereof, upon the execution and delivery of the Bill of Sale
attached hereto as Exhibit A, Purchaser will have valid and enforceable title
to the Barge, free and clear of all liens or encumbrances except for the liens
created hereunder and for any liens created by the President Group or caused
9
<PAGE> 37
to be created by actions or inaction of the President Group. AGEL has no
actual knowledge of any unrecorded or undisclosed legal or equitable interest
in the Barge owned or claimed by any Person other than AGEL, other than those
claims made in the bankruptcy cases of AmGam and AGRM, which claims and/or
encumbrances will be transferred from the Barge to the proceeds of the sale by
the Order.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to each party's obligations to close. The respective
obligations of the AGEL Group and Purchaser to consummate at the Closing the
transactions contemplated by this Agreement are subject to satisfaction of the
following conditions as of the Closing:
(a) The execution of this Agreement and the consummation of the
transactions contemplated herein shall have been approved by the Mississippi
Bankruptcy Court pursuant to its Order which has become final and non-
appealable and has not been stayed.
(b) The execution of this Agreement and the consummation of the
transactions contemplated herein by Shamrock shall have been approved by the
New York Bankruptcy Court pursuant to its Order which has become final and
non-appealable and has not been stayed.
7.2 The President Group's obligations to close. The obligations of the
President Group to close hereunder are subject to the satisfaction (or waiver
by the President Group) of the following conditions:
(a) The representations and warranties of AGEL contained herein shall be
true and correction in all material respects as of the date hereof and on and
as of the Closing Date as though made on and as of the Closing Date.
(b) Each member of the AGEL Group shall have performed and complied with
all covenants, agreements and conditions required to be performed or complied
with by it pursuant to this Agreement prior to or as of the Closing.
(c) Purchaser shall have received approval of the transactions
contemplated by this Agreement from the Mississippi Gaming Commission.
(d) The transactions contemplated by Exhibit L hereto shall be
consummated on or before the Closing Date.
(e) The Closing shall have occurred on or before August 13, 1999; unless
the orders described in Section 8.1(b) below are entered after July 26, 1999
but on or before August 16, 1999 as set forth in Section 8.1(b), in which case
the Closing shall have occurred on or before the Closing Date, as defined in
this Sale Agreement.
7.3 The AGEL Group's obligations to close. The obligations of the AGEL
Group to close hereunder are subject to the satisfaction (or waiver by the
AGEL Group) of the following conditions:
10
<PAGE> 38
(a) The representations and warranties of the President Group contained
herein shall be true and correct in all material respects as of the date
hereof and on and as of the Closing Date as though made on and as of the
Closing Date.
(b) Each member of the President Group shall have performed and complied
with all covenants, agreements and conditions required to be performed or
complied with by it pursuant to this Agreement prior to or as of the Closing.
(c) The Closing shall have occurred on or before September 30, 1999.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement and the transactions at the Closing
contemplated hereby may be terminated:
(a) by the mutual agreement of the AGEL Group and Purchaser;
(b) on or before the Closing Date, by Purchaser if there have not been
entered on or before July 26, 1999 (or, if the motions included in Exhibit I
are presented for hearing on July 22, 1999 but not approved until August 12,
1999, then on or before August 16, 1999) orders by both the Mississippi
Bankruptcy Court and the New York Bankruptcy Court approving the execution of
this Agreement and the consummation of the transactions contemplated herein;
or
(c) on or after September 30, 1999 by the AGEL Group if the Closing has
not occurred by such date, and there has been no breach of a covenant or
condition by the AGEL Group;
(d) on or after September 30, 1999 by the President Group if the Closing
has not occurred by such date, and there has been no breach of a covenant or
condition by the President Group;
provided, that no party may terminate this Agreement pursuant to 8.1(b),
8.1(c) or 8.1(d) if the failure of any condition in Sections 7.1, 7.2 or 7.3
to be satisfied results from the breach by such party or any covenant,
agreement, representation or warranty of such party contained in this
Agreement.
8.2 Effect of Termination. If this Agreement is terminated under Section
8.1, the transactions at the Closing contemplated hereby shall be terminated
without further action by any party, and upon such termination:
(a) If such termination occurs as a result of the President Group's
breach of any of its individual or collective obligations (i) described in
Sections 3.1, 3.2 or 3.3 of this Agreement or (ii) described in Sections 2.1,
2.2, 2.3, 2.4, 2.5, 2.6, 4.2 or 4.3 of this Agreement after the conditions to
Closing by the President Group described in Sections 7.1 and 7.2 of this
Agreement have been satisfied, then the President Group shall have no rights
or claims to extend the current term of the Charter or to purchase the Barge
11
<PAGE> 39
under any right of first refusal, and the President Group shall, within 30
days of such termination, execute and file such papers as are necessary to
withdraw and dismiss the arbitration proceeding referred to in Section 4.2(h),
the appeals referred to in Section 4.2(l) and the right-of-first-refusal
motion referred to in Section 4.2(m) of this Agreement.
(b) If such termination occurs as a result of (i) the AGEL Group's breach
of any of its individual or collective obligations (A) described in Sections
3.1, 3.2 or 3.3 of this Agreement or (B) described in Sections 2.1, 2.5, 4.2,
or 4.3 of this Agreement after the conditions to Closing by the AGEL Group
described in Sections 7.1 and 7.3 of this Agreement have been satisfied, or
(ii) Breeden's failure to (A) go forward in good faith and use his reasonable
best efforts to obtain the approval of the New York Bankruptcy Court to the
motion of Breeden included as part of Exhibit I or (B) following approval of
such motion, to execute the appropriate consents to authorize AGEL to
consummate the transaction contemplated by this Agreement or to execute
Exhibit U hereto, then President Mississippi Charter Corporation ("President
Charter") shall have the right (but only by notice delivered to the AGEL
Group), exercisable on or before October 30, 1999, to an option for a two-year
extension of the current term of the Charter and, only if such two-year option
is exercised and there exists no default by President Charter under the
Charter, for three successive one-year extensions thereafter, each
exercisable upon six months' notice to the AGEL Group, all at reasonable
monthly rental amounts, to be established, along with other necessary
extension terms, through arbitration in accordance with the rules of the
American Arbitration Association if AGEL and President Charter are unable
mutually to agree upon such rental amounts and other terms within 30 days of
such termination.
For the purposes of this Section 8.2, the term "breach" is intended to and
shall mean the willful failure or refusal in a material way of a party to this
Agreement to perform its obligations referred to above in this Section 8.2.
In addition, nothing contained herein shall relieve any party from liability
for any breach of any covenant or agreement in this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 Assignment. This Agreement and any of the rights or obligations
hereunder may not be assigned by Purchaser except to an Affiliate of
Purchaser, in which event Purchaser shall not be relieved of any of its
obligations hereunder. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. It is understood that, if the First
Amended Joint Plan of Liquidation for AmGam Associates and American Gaming and
Resorts of Mississippi, Inc., as filed with the Mississippi Bankruptcy Court
on May 24, 1999, as such plan may be amended from time to time, is approved by
the Mississippi Bankruptcy Court and Shamrock's execution of the plan and
agreement to its terms is approved by the New York Bankruptcy Court, then, all
of AGEL's rights hereunder and under all Transaction Documents including,
without limitation, Exhibits B, C, D and E hereto, shall be assigned by AGEL
to the liquidating trustee created under such plan.
12
<PAGE> 40
9.2 Notices. Unless otherwise provided herein, all notices and other
communications hereunder shall be in writing and shall be deemed to have been
sufficiently given or served for all purposes: (a) three (3) days after such
notice is deposited in the mail, if sent by registered or certified mail
(return receipt requested), (b) when delivered, if delivered personally or if
sent by overnight mail or overnight courier or if sent in any manner other
than as described in the preceding clause 9.2(a) or in the following clause
9.2(c), or (c) when transmitted, if sent by facsimile if a confirmation of
transmission is produced by the sending machine (and a copy of each facsimile
promptly shall be sent by ordinary mail), in each case to the parties at the
following addresses or facsimile numbers, or at such other address or
facsimile numbers as shall be specified by like notice:
If to the AGEL Group, to:
Robert A. Byrd, Esq.
Byrd & Wiser
P.O. Box 1939
Biloxi, MS 39533-1939
Telephone: (228) 432-8123
Facsimile: (228) 432-7029
Bobbie T. Shell, Esq.
Baker & Botts, L.L.P.
2001 Ross Ave., Ste. 700
Dallas, TX 75201
Telephone: (214) 953-6500
Facsimile: (214) 953-6503
Shamrock Holdings Group, Inc.
Two Clinton Square
Syracuse, New York 13202
Telephone: (315) 422-9000
Facsimile: (315) 422-9361
Attention: Richard C. Breeden
T. Glover Roberts, Esq.
Sheinfeld, Maley & Kay, P.C.
1700 Pacific Avenue, Suite 4400
Dallas, Texas 75201
Telephone: (214) 953-8019
Facsimile: (214) 953-8199
William S. Boyd, Esq.
P.O. Box 1326
Gulfport, MS 39502
Telephone: (228) 864-1915
Facsimile: (228) 864-1957
13
<PAGE> 41
John Hedglin, Esq.
Rimmer, Rawlings, MacInnis
& Hedglin
1290 Deposit Guaranty Plaza
Jackson, MS 39201
Telephone: (601) 969-1030
Facsimile: (601) 969-1040
Douglas S. Draper, Esq.
Heller, Draper, Hayden, Horn, L.L.C.
650 Poydras Street
Suite 2500
New Orleans, La. 70130-6103
Telephone: (504) 568-1888
Facsimile: (504) 522-0949
If to Purchaser:
The President Riverboat Casino-Mississippi, Inc.
802 North First Street
St. Louis, Missouri 63102
Telephone: (314) 622-3079
Facsimile: (314)
Attention: James A. Zweifel
with copies to:
James W. O'Mara
Phelps Dunbar, L.L.P.
Suite 500, SkyTel Centre
200 South Lamar Street
Jackson, Mississippi 39225
Telephone: (601) 352-2720
Facsimile: (601) 360-9777
and
Virginia Boulet
Phelps Dunbar, L.L.P.
400 Poydras Street, 30th Floor
New Orleans, Louisiana 70130
Telephone: (504) 584-9286
Facsimile: (504) 568-9130
9.3 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF MISSISSIPPI, EXCLUDING PROVISIONS OF
SUCH LAW REFERRING SUCH MATTERS TO THE LAW OF ANOTHER JURISDICTION. The
parties hereto mutually consent to the jurisdiction of the Mississippi
Bankruptcy Court and acknowledge that the Mississippi Bankruptcy Court shall
constitute the proper and convenient forum for the resolution of any actions
between the parties hereto concerning the subject matter hereof, and agree,
except for paragraph 8.2(b), that the Mississippi Bankruptcy Court shall be
the sole forum for the resolutions of any actions between the parties hereto
14
<PAGE> 42
concerning the subject matter hereof.
9.4 Entire Agreement; Amendments and Waivers. This Agreement, together
with all Exhibits hereto, constitutes the entire Agreement between the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein. No amendment,
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless expressly agreed to in writing by the
affected party.
9.5 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Telecopy signatures
shall be deemed valid and binding to the same extent as the original.
9.6 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
9.7 Headings; References. The headings of the several Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. Any reference herein to an Article or Section shall be deemed to
refer to the applicable Article or Section of this Agreement unless otherwise
expressly stated herein. Any reference to an Exhibit shall be deemed to refer
to the applicable Exhibit attached hereto, all such Exhibits being
incorporated herein and made a part hereof by this reference.
9.8 No Third-Party Beneficiaries. Except as set forth in Section 9.1
hereof, this Agreement is solely for the benefit of the parties hereto, their
respective successors and assigns permitted under this Agreement, and no
provisions of this Agreement shall be deemed to confer upon any other Persons
any remedy, claim, liability, reimbursement, cause of action or other right.
9.9 No Merger; Survival. The representations, warranties and agreements
contained in or made pursuant to this Agreement shall not merge, be
extinguished or otherwise affected by the Closing or the delivery and
execution of the Transaction Documents and all of such representations,
warranties and agreements shall survive the Closing and continue for a period
prescribed by applicable statutes of limitations. In response to any challenge
by anyone to the title of the Barge acquired by it pursuant to this Agreement,
Purchaser agrees (a) to immediately provide notice of such challenge to the
AGEL Group, which may, in its sole discretion, elect to cure the claimed
defect in Purchaser's title, and (b) vigorously and diligently to assert and
pursue to final order all claims and defenses available to it under the Order
15
<PAGE> 43
before claiming any breach of title warranty hereunder by AGEL.
9.10 Attorneys' Fees and Costs. If it becomes necessary for any party
hereto to file any action to enforce this Agreement or any provision contained
herein, the party prevailing in such action shall be entitled to recover from
the non-prevailing party reasonable attorneys' fees and court costs incurred
in such action.
IN WITNESS WHEREOF, this Agreement has been duly executed to be effective as
of the date first above written.
THE PRESIDENT RIVERBOAT CASINO-
MISSISSIPPI, INC.
By: /s/ James A. Zweifel
---------------------------------------
James A. Zweifel, Executive Vice
President and Chief Financial Officer
PRESIDENT CASINOS, INC.
By: /s/ James A. Zweifel
---------------------------------------
James A. Zweifel, Executive Vice
President and Chief Financial Officer
PRESIDENT MISSISSIPPI CHARTER
CORPORATION
By: /s/ James A. Zweifel
---------------------------------------
James A. Zweifel, Executive Vice
President and Chief Financial Officer
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: /s/ J. Douglas Wellington
---------------------------------------
J. Douglas Wellington, President & CEO
AMGAM ASSOCIATES
By: /s/ J. Douglas Wellington
---------------------------------------
J. Douglas Wellington, Management Comm.
16
<PAGE> 44
AMERICAN GAMING & RESORTS OF
MISSISSIPPI, INC.
By: /s/ J. Douglas Wellington
---------------------------------------
J. Douglas Wellington, President
COMMITTEE FOR THE UNSECURED
CREDITORS OF AMGAM
By: /s/ T. Glover Roberts
---------------------------------------
T. Glover Roberts
COMMITTEE FOR THE UNSECURED
CREDITORS OF AGRM
By: /s/ William S. Boyd
---------------------------------------
William S. Boyd, III
IGT INTERNATIONAL
By: /s/ Douglas S. Draper
---------------------------------------
It's Attorney-In-Fact
* SHAMROCK HOLDINGS GROUP, INC.
By: /s/ Richard C. Breeden
---------------------------------------
* Subject to approval of the United States
Bankruptcy Court for the Northern
District Of New York
17
<PAGE> 45
LIST OF EXHIBITS
Exhibit A: Bill of Sale
Exhibit B: Promissory Note
Exhibit C: Security Agreement
Exhibit D: Preferred Ship Mortgage
Exhibit E: Guaranty Agreement
Exhibit F: Consent of President Mississippi Charter Corporation ("Charter
Corporation") to the cancellation of the Charter Agreement dated
February 17, 1995 between Charter Corporation and AGEL
Exhibit G: Cross Receipt
Exhibit H: Joint Motion to approve Agreement of Sale to be filed in the
Mississippi Bankruptcy Court
Exhibit I: Motion to be filed in the New York Bankruptcy Court
Exhibit J: Joint Motion to expedite approval of Agreement of Sale to be
filed in the Mississippi Bankruptcy Court
Exhibit K: Withdrawal of Objection to Approval of Settlement originally
filed by IGT in the Adversary P No. 97-0868 entitled "AmGam
Associates, a Ms. General Partnership d/b/a Gold Shore Casino
and Official Unsecured Creditors' Committee v. President
Mississippi Charter Corporation and The President Riverboat
Casino-Mississippi, Inc."
Exhibit L: Order Approving Settlement and Judgment of Dismissal with
Prejudice in Adversary Proceeding No. 97-0868, entitled "AmGam
Associates, a Mississippi General Partnership d/b/a Goldshore
Casino and Official Unsecured Creditors' Committee v. President
Mississippi Charter Corporation and The President Riverboat
Casino-Mississippi, Inc."
Exhibit M: Satisfactions of Preferred Ship Mortgages
Exhibit N: Resolutions of the Board of Directors of President Casinos, Inc.
Exhibit O: Resolutions of the Board of Directors of President Mississippi
Charter Corporation
Exhibit P: Resolutions of the Board of Directors of The President Riverboat
Casino-Mississippi, Inc.
Exhibit Q: Closing certificate of AGEL
18
<PAGE> 46
Exhibit R: Closing certificate of Purchaser
Exhibit S: UCC Form 1's
Exhibit T: Coast Guard Form 1258
Exhibit U: Agreement of Compromise, Settlement and Release
Exhibit V: Joint letter to the American Arbitration Association
Exhibit W: Joint Motion and Order to Dismiss President Mississippi Charter
Corporation and The President Riverboat Casino-Mississippi, Inc.
as defendants from the Complaint in Adversary Proceeding No. 97-
01010, entitled "International Gaming Technology v. AmGam
Associates, a Mississippi General Partnership d/b/a Goldshore
Casino, American Gaming & Entertainment, Limited d/b/a Gold
Shore Casino, American Gaming of Biloxi, Inc., Gamma of
Mississippi, Inc., American Gaming & Resorts of Mississippi,
Inc., President Mississippi Charter Corporation and The
President Riverboat Casino-Mississippi, Inc."
Exhibit X: Motion to Dismiss the Complaint in adversary proceeding No. 98-
05095 entitled "International Gaming Technology v. President
Casinos, Inc., President Mississippi Charter Corporation, The
President Riverboat Casino-Mississippi, Inc., and President
Riverboat Casino, Inc."
Exhibit Y: Motion to Dismiss President Mississippi Charter Corporation;
President Riverboat Casinos, Inc., and The President Riverboat
Casino-Mississippi, Inc. as defendants in Adversary Proceedings
Nos. 95-1001 and 95-1002, entitled "The Official Committee of
Unsecured Creditors of AmGam Associates and the Official
Committee of Unsecured Creditors of American Gaming and Resorts
of Mississippi, LTD v. American Gaming & Entertainment, Ltd,
Bennett Holdings, Inc., Bennett Management and Development Co.,
President Mississippi Charter Corporation; President Riverboat
Casinos, Inc., and The President Riverboat Casino-Mississippi,
Inc."
Exhibit Z: Motion to Dismiss Appeal from an order rendered by the
Mississippi Bankruptcy Court in Adversary Proceedings 95-1001,
filed by President Mississippi Charter Corporation and The
President Riverboat Casino-Mississippi, Inc., in the United
States District Court for the Southern District of Mississippi
(1:99cv153 GR and 1:99cv154 GR)
Exhibit AA: Joint Motion withdrawing Purchaser's pending motion in the
Mississippi Bankruptcy Court styled "Motion for a Declaration
that Contractual Right of First Refusal in Post Petition
Contract is Enforceable" and AGEL's objection to such motion.
19
EXHIBIT 10.2
PROMISSORY NOTE
Borrower: Lender:
The President Riverboat Casino- American Gaming & Entertainment, Ltd.
Mississippi, Inc. One Woodland Avenue
802 North First Street Paramus, NJ 07652
St. Louis, Missouri 63102
==============================================================================
Principal Amount: Maturity Date of Note: Date of Note:
U.S. $5,827,500.00 April 15, 2000 August 10, 1999
PROMISE TO PAY. THE PRESIDENT RIVERBOAT CASINO-MISSISSIPPI, INC., a
Mississippi corporation ("Borrower"), promises to pay to the order of AMERICAN
GAMING & ENTERTAINMENT, LTD. ("Lender"), or its assigns, in lawful money of
the United States of America the sum of Five Million, Eight Hundred Twenty-
seven Thousand, Five Hundred and 00/100 Dollars (U.S. $5,827,500.00), plus
costs, interest, attorneys' fees and other expenses as set forth below (the
"Indebtedness").
SALE AGREEMENT. This Note is made and executed with reference to that certain
Sale Agreement among Borrower, Lender and certain other parties, dated July 2,
1999. All capitalized terms used in this Note (and not otherwise defined
herein) shall have the meanings defined in the Security Agreement and the
Preferred Ship Mortgage, dated of even date herewith and attached as exhibits
to the Sale Agreement.
NO INTEREST. The amount due under this Note shall not bear interest, except
as stated below.
PAYMENT OF PRINCIPAL. The principal amount due under this Note shall be
payable in monthly installments of $290,000 on the first day of each month
beginning on September 1, 1999, and continuing through March 1, 2000, plus
$145,000.00 on the first day of April 2000, and then the balance of all
outstanding principal shall be due and payable at maturity on April 15, 2000.
All payments shall be made to Rimmer, Rawlings, MacInnis & Hedglin, 210 E.
Capitol Street, Jackson, Mississippi, 39201, provided, however, that a
different place of payment may be designated by Lender, or its assigns.
PREPAYMENT. Borrower may prepay this Note in whole or in part at any time,
without penalty.
LATE CHARGE. If the Borrower fails to pay any payment under this Note in full
by the tenth day of the month in which the payment is due, Borrower agrees to
pay Lender a delinquency charge of 12% per annum on the amount of the
delinquent payment due or, if the maturity date of the note has been
accelerated, on the entire amount of the Indebtedness, from the time of the
delinquency until the delinquent amount is paid in full.
LENDER'S RIGHTS UPON DEFAULT. Upon the occurrence of and during the
<PAGE> 48
continuation of any Event of Default (as defined in the Preferred Ship
Mortgage delivered by Purchaser under the Sale Agreement), Lender shall have
all of the rights and remedies provided in the Security Agreement and
Preferred Ship Mortgage delivered by Purchaser under the Sale Agreement. If
an Event of Default occurs and is not cured within twenty (20) days thereof,
Lender shall have the right to accelerate the maturity of this Note and
declare the entire unpaid balance of the Indebtedness immediately due and
payable.
COLLATERAL. This Note is secured by security rights granted in that certain
Security Agreement and that certain Preferred Ship Mortgage, executed by
Borrower in favor of Lender of even date herewith.
ATTORNEYS' FEES. If Lender refers this Note to an attorney for collection, or
files suit against Borrower to collect this Note, or if Borrower files for
bankruptcy or other relief from creditors, Borrower agrees to pay Lender's
reasonable attorneys' fees, costs and expenses.
GOVERNING LAW. Borrower agrees that this Note and the loan evidenced hereby
shall be governed under the laws of the State of Mississippi.
CAPTION HEADINGS. Caption headings of the sections of this Note are for
convenience purposes only and are not to be used to interpret or to define
their provisions. In this Note, whenever the context so requires, the
singular includes the plural and the plural also includes the singular.
SEVERABILITY. If any provision of this Note is held to be invalid, illegal or
unenforceable by any court, that provision shall be deleted from this Note and
the balance of this Note shall be interpreted as if the deleted provision
never existed.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT
OF A COMPLETED COPY OF THE NOTE.
BORROWER: THE PRESIDENT RIVERBOAT CASINO-MISSISSIPPI, INC.
By: /s/ James A. Zweifel
---------------------------------------------
Name: James A. Zweifel
Title: Executive Vice President
and Chief Financial Officer
EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 10th day of August,
1999, is made between The President Riverboat Casino-Mississippi, Inc., a
Mississippi corporation ("Debtor"), and American Gaming & Entertainment, Ltd.,
a Delaware corporation ("Secured Party"), who agree as follows:
RECITALS
A. The Debtor is or will be indebted unto the Secured Party for a loan made
or to be made pursuant to the terms of that certain promissory note dated of
even date herewith in the aggregate principal amount of Five Million Eight
Hundred, Twenty-Seven Thousand Five Hundred and NO/100 ($5,827,500.00) made by
the Debtor payable to the order of the Secured Party (as it may from time to
time be amended, modified, supplemented, replaced, restated, renewed or
extended, the "Note").
B. In order to secure the full and punctual payment and performance of the
Indebtedness (as hereinafter defined), the Debtor has agreed to execute and
deliver this Agreement and to grant a continuing security interest in and to
the Collateral (as hereinafter defined).
AGREEMENT
ARTICLE 1
GENERAL TERMS
Section 1.1 Terms Defined Above or Elsewhere. As used in this Agreement,
the terms "Agreement", "Debtor", "Secured Party" and "Note" and shall have the
meanings indicated above.
Section 1.2 Certain Definitions. As used in this Agreement, the following
additional terms shall have the meanings indicated:
"Barge" means the GOLD COAST CASINO (U.S. Coast Guard Official Number
995650), and all improvements and structures from time to time thereon, and
all equipment and appurtenances from time to time thereon or thereof,
including without limitation all engines, machinery, masts, spars, boats,
cables, motors, tools, anchors, chains, booms, cranes, rigs, pumps, pipes,
tanks, tackle, rigging, supplies, fittings and all other property located
thereon, derived therefrom or used in connection therewith.
"Collateral" has the meaning set forth in Section 2.1 of this Agreement.
"Equipment" means (a) all "equipment" (as defined in the UCC) located on the
Barge, whether now owned or hereafter acquired by the Debtor, together with
all additions, accessories, parts, attachments, special tools and accessions
now and hereafter affixed thereto or used in connection therewith, and all
replacements thereof and substitutions therefor and (b) the Barge and all slot
machines and other gaming devices, machinery, tools, fire sprinklers, alarm,
<PAGE> 50
air conditioning, heating, refrigerating and electronic monitoring systems and
equipment, window or structural cleaning rigs, maintenance equipment,
equipment for the exclusion of vermin or insects or the removal of dust,
refuse or garbage, lobby and all other indoor and outdoor furniture (including
tables, chairs, planters, desks, sofas, shelves, lockers and cabinets), wall
beds, wall safes, furnishings, appliances (including ice boxes, refrigerators,
fans, heaters, stoves, water heaters and incinerators), rugs, carpets and
other floor coverings, draperies and drapery rods and brackets, awnings,
window shades, venetian blinds, curtains, wall hangings, lamps, chandeliers
and other lighting fixtures and office maintenance and other supplies located
thereon.
"Event of Default" means the occurrence of any one or more of the following
events:
(1) Default in the payment of principal of the Note as and when the same
shall become due and payable and such default continues unremedied for twenty
(20) days; or
(2) Default in the due and punctual observance and performance of any
provisions of Sections 4.1 or 4.4 hereof; or
(3) Default in the due observance or performance of any of the other
covenants and conditions herein, in the Sale Agreement, in the exhibits
thereto, as executed and/or in the Note required to be kept and performed, and
continuance of such default for fifteen (15) days after written notice by the
Secured Party; provided, however, that the Debtor shall not be deemed to be in
default for failure to keep the Collateral in good condition, working order
and repair pursuant to Section 4.03 if the Debtor shall be diligently taking
steps to comply with the requirements of said Section; or
(4) Any representations and warranties made in this Agreement are untrue
in any material respect; or
(5) The Debtor shall apply for or consent to the appointment of a
receiver or trustee of the Debtor or for the Collateral or the commencement of
a bankruptcy case; or
(6) An order, judgment or decree shall be entered, without the
application, approval or consent of the Debtor, by any court of competent
jurisdiction, approving a petition appointing a receiver or trustee of the
Debtor or for the Collateral or for the commencement of a bankruptcy case, and
such order, judgment or decree shall continue unstayed and in effect for a
period of thirty (30) days;
(7) The Collateral is posted for foreclosure or notice of a sale to
satisfy a Lien on the Collateral is given as required by applicable law;
(8)Secured Party receives notice of cancellation of insurance in
accordance with the required time restriction agreed to by the insurance
company, and such insurance is not replaced at least ten days prior to the
effective date of the cancellation; or
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(9) Any "Event of Default" occurs under the Mortgage.
"Indebtedness" means all present and future amounts, liabilities and
obligations of the Debtor to the Secured Party or to any successor or
transferee thereof under or pursuant to the Note or this Agreement, whether
said amounts, liabilities or obligations are liquidated or unliquidated, now
existing or hereafter arising, in principal, interest, deferral and
delinquency charges, prepayment premiums, costs and attorneys' fees, as
therein stipulated, and under and pursuant to all amendments, supplements,
restatements, renewals and extensions to or of any of said documents.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on jurisprudence, statute or contract, and including but not limited
to the lien or security interest arising from a mortgage, deed of trust,
encumbrance, pledge, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, estates for years,
servitudes, usufructs, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting property.
"Mortgage" means the Preferred Ship Mortgage on the Whole of the Gold Coast
Casino Barge dated of even date herewith by the Debtor in favor of the Secured
Party, as it may from time to time be amended, modified or supplemented.
"Permitted Liens" means (i) the Security Interests and any other Liens in
favor of the Secured Party, (ii) Liens for taxes, assessments, or other
governmental charges not yet due or which are being contested in good faith by
appropriate action promptly initiated and diligently conducted, if such
reserve as shall be required by generally accepted accounting principles shall
have been made therefor, and provided that no notice of tax sale shall have
been provoked or advertised; (iii) Liens of lessors (subordinated), carriers,
warehousemen, mechanics, laborers and materialmen arising by law in the
ordinary course of business for sums either not yet due or being contested in
good faith by appropriate action promptly initiated and diligently conducted,
if such reserve as shall be required by generally accepted accounting
principles shall have been made therefor, and provided that no foreclosure or
sale has been initiated or advertised; (iv) Liens constituting purchase money
security interests, (v) any other Liens permitted by the Secured Party in
writing to be created or assumed or to otherwise exist on the Collateral, and
(vi) with respect to gaming devices that are subject to lease arrangements
where the Debtor is the lessee thereof (except for where the lessor is
controlled by, controls or is affiliated with the Debtor), precautionary Liens
in favor of the lessor thereof to the extent the Debtor would be deemed to be
the owner thereof, which liens shall be senior to any Lien thereon under this
Agreement.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other form of entity.
"Proceeds" means all cash and non-cash proceeds of, and all other profits,
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income, rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or
realization upon, Collateral, and all additions to, substitutions for or
accessions of any Collateral, including without limitation all claims of the
Debtor against third parties for loss of, damage to or destruction of, or for
proceeds payable under, or unearned premiums with respect to, policies of
insurance in respect of, any Collateral, and any condemnation or requisition
payments with respect to any Collateral, and including proceeds of all such
proceeds, in each case whether now existing or hereafter arising.
"Security Interests" means the security interests in the Collateral granted
hereunder securing the Indebtedness.
"UCC" means Miss. Code Ann. Section 75-9-101 et seq. (1972), as amended from
time to time; provided, that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than Mississippi, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or non-
perfection.
ARTICLE 2
SECURITY INTEREST
Section 2.1 The Security Interests. In order to secure the full and
punctual payment and performance of all present and future Indebtedness, the
Debtor hereby grants to the Secured Party a continuing security interest in
and to, and collaterally assigns and pledges to the Secured Party, all right,
title and interest of the Debtor in, to or under the following property,
whether now owned or existing or hereafter acquired or arising and regardless
of where located:
(l) the Equipment;
(2) All books and records of the Debtor pertaining to any of the
Collateral; and
(3) All Proceeds and products of all or any of the Collateral described in
clauses l through 2 hereof; provided, that the inclusion of such
proceeds does not constitute the Secured Party's consent to the
disposition of the Collateral except as provided in this Agreement.
The term "Collateral" means each and all of the items and property rights
described in clauses 1-3 above. It is understood and agreed that gaming
devices (including without limitation slot machines) and other items of
Collateral from time to time leased by the Debtor from other parties (other
than parties who control, are controlled by or are affiliated with the Debtor)
and the rights of the Debtor thereto are not, and shall not be or be deemed to
be, Equipment or Collateral.
Section 2.2 No Liability. The Security Interests are granted as security
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only and shall not subject the Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of the Debtor with respect to
any of the Collateral or any transaction in connection therewith.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants to the Secured Party that:
Section 3.1 Name. The name of the Debtor as it appears in its articles or
certificate of incorporation, as amended, is as it appears on page 1 of this
Agreement. Such name is the only name that the Debtor has had since its
organization.
Section 3.2 Taxpayer Identification Number. The federal taxpayer
identification number of the Debtor is 64-0814936.
Section 3.3 Records Location. The Debtor maintains books or records
relating to the Collateral on the Barge or at 802 North First Street, St.
Louis, Missouri 63102.
Section 3.4 Filing Location. When Uniform Commercial Code financing
statements have been filed in the State of Mississippi (with the Mississippi
Secretary of State and the Uniform Commercial Code records of the Second
Judicial District of Harrison County, Mississippi), the Security Interests
shall constitute perfected security interests in the Collateral to the extent
that a security interest therein may be perfected by filing pursuant to the
UCC, prior to all other Liens and rights of others therein except for the
Permitted Liens to the extent that such priority is afforded by the UCC.
Section 3.5 No Inconsistent Agreements. The Debtor has not performed any
acts or signed any agreements which might prevent the Secured Party from
enforcing any of the terms of this Agreement or which would limit the Secured
Party in any such enforcement.
Section 3.6 Title. The Debtor has good and merchantable title to the
Collateral (except that, with respect to Collateral received from the Secured
Party, the Debtor represents and warrants only such title as it received from
the Secured Party), free of Liens, except Permitted Liens. Furthermore, the
Debtor has not heretofore conveyed or agreed to convey or encumber or grant an
interest in any Collateral in any way, except in favor of the Secured Party.
Section 3.7 Priority. The Debtor has not granted to any party other than
the Secured Party any security interest in the Collateral, and the Debtor has
not taken any actions or inaction that have caused any party other than the
Secured Party to have any security interest in the Collateral.
ARTICLE 4
COVENANTS
Section 4.1 Notice of Changes. The Debtor will not change its name,
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identity, federal tax identification number or corporate structure in any
manner unless it shall have given the Secured Party at least 30 days' prior
written notice thereof. Debtor will not change its name or taxpayer
identification number without the prior written consent of the Secured Party,
which may be conditioned on Debtor's execution of additional documentation to
preserve the priority of Secured Party's Lien.
Section 4.2 Filing. The Debtor agrees that a carbon, photographic,
facsimile, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. The Debtor shall
pay all costs of, or incidental to, the recording or filing of any financing,
amendment, continuation, termination or other statements concerning the
Collateral.
Section 4.3 Condition of Equipment. The Debtor will maintain, preserve and
keep the Equipment at all times in thorough repair and good working order and
condition, and from time to time make all needful repairs, renewals and
additions so that its value and the Security Interests shall at no time become
impaired. The Debtor will not do or permit anything to be done to the
Equipment that may violate the terms of any insurance covering the Equipment
or any part thereof.
Section 4.4 Insurance. (a) The Debtor will cause to be carried and
maintained on the Collateral, without expense to the Secured Party, insurance
in such amounts, against such risks (including, without limitation, pollution,
fire, public liability, excess liability and umbrella coverages, property
damage, and workmen's compensation), in such form, including without
limitation the form of the loss payable clause (naming the Secured Party and
the Debtor as loss payee), cancellation clause, navigation limits, and the
designation of named assured, and with such insurance companies, insurers,
underwriters or funds, and on such policy forms, as the Secured Party shall
from time to time approve. In no event shall the Hull value on the Barge be
less than the outstanding amount of Indebtedness. In no event shall the
protection and indemnity insurance, including umbrella coverage, on the Barge
be less than $7,000,000. Such insurance coverage policies shall contain an
agreement by the insurer not to cancel or amend the policies without giving
the Secured Party at least 30 days' prior written notice of its intention to
do so.
(b) Payments in respect of any loss under insurance carried pursuant to
this Section 4.4 shall be made to the Debtor and the Secured Party, as their
respective interests may appear.
(c) If any claim or lien is asserted against the Barge for loss, damage or
expense which is covered by insurance required hereunder and it is necessary
for the Debtor to obtain a bond or supply other security to prevent arrest of
the Barge or to release the Barge from arrest on account of such claim or
lien, the Secured Party, on request of the Debtor, may, in the sole discretion
of the Secured Party, assign to any person, firm or corporation executing a
surety or guarantee bond or other agreement to save or release the Barge from
such arrest, all right, title and interest of the Secured Party in and to said
insurance covering said loss, damage or expense, as collateral security to
indemnify against liability under said bond or other agreement.
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(d) The Debtor will deliver to the Secured Party whenever so requested by
the Secured Party certified copies of all cover notes, binders and policies
for the purpose of inspection.
(e) The Debtor agrees that it will not execute or permit or willingly allow
to be done any act by which any insurance may be suspended, impaired or
canceled, and that he will not permit or allow the Barge to undertake any
voyage, engage in any venture or run any risk or transport any cargo which may
not be permitted by the policies in force, without having previously insured
such Barge by additional coverage to extend to such voyages, ventures, risks
or cargoes.
Section 4.5 Transfer and Other Liens. The Debtor will not sell, lease,
transfer, exchange or otherwise dispose of the Collateral, or any part
thereof, without the prior written consent of the Secured Party and will not
permit any Lien to attach to the Collateral, or any part thereof, other than
Permitted Liens, except that the Debtor may, in the ordinary course of its
business and in the absence of an Event of Default, (i) dispose of obsolete or
unusable items of Equipment (other than the Barge), provided that the
aggregate value of all Equipment that is disposed of under this clause prior
to the repayment of the Indebtedness does not exceed $100,000, free of the
Lien of this Agreement without any action required of the Secured Party, (ii)
sell Equipment (other than the Barge), free of the Lien of this Agreement
without any action required of the Secured Party, in order to replace gaming
devices if the replacement gaming devices are of equal or greater value and
comparable quality and are purchased by the Debtor, not financed through any
purchase money security interest or otherwise encumbered by any other liens
and (iii) sell or otherwise dispose of other Equipment (other than the Barge),
free of the Lien of this Agreement without any action required of the Secured
Party, in order to replace gaming devices if the replacement gaming devices
are leased by the Debtor or purchased by the Debtor subject to a purchase
money security interest, provided that the aggregate value of all Equipment
that is sold or disposed of under this clause prior to repayment of the
Indebtedness does not exceed $250,000.
Section 4.6 Right of Inspection and Information. The Debtor will allow the
Secured Party to inspect the Equipment from time to time during normal
business hours so long as such inspections do not interrupt the Debtor's
business. Debtor will furnish to the Secured Party promptly upon request and
in the form and content specified by the Secured Party such data and
information concerning the Collateral as the Secured Party may from time to
time specify.
Section 4.7 Taxes. The Debtor will pay as and when due and payable all
taxes, levies, license fees, assessments, and other impositions levied on the
Collateral or any part thereof before its use and operation or which
otherwise, if unpaid, might become a Lien upon any Collateral; provided, that
the Debtor shall not be required to pay any such tax, levee, fee, assessment
or imposition if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted and
if the Debtor shall have set up reserves therefor adequate under generally
accepted accounting principles (provided that such reserves may be set up
under generally accepted accounting principles); provided, further, that any
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such contest shall prevent the posting for sale or the sale of the Collateral
under special execution or otherwise for the payment of any such tax, levee,
fee, assessment or imposition, or other forfeiture or loss of title to the
Collateral.
Section 4.8 Further Assurances. On request of the Secured Party, the
Debtor will promptly (i) correct any defect, error or omission which may be
discovered in the contents of this Agreement or any financing statement
relating thereto or in the execution or acknowledgment of this Agreement or
any financing statement; (ii) execute, acknowledge, deliver and record such
further instruments (including, without limitation, further security
agreements, financing statements, continuation statements and assignments of
accounts, contract rights, general intangibles and proceeds) and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Agreement and to more fully identify and
subject to the Security Interests hereof any property intended to be covered
hereby, including without limitation any renewals, additions, substitutions,
replacements or accessions to the Collateral; and (iii) execute, acknowledge,
deliver and record any document or instrument (including specifically any
financing statement) necessary, desirable or proper to protect the Liens and
Security Interests hereunder against the rights or interests of third persons.
The Debtor shall pay all filing costs connected with any of the foregoing.
Section 4.9 Collateral Indemnity. If the validity or priority of this
Agreement or any rights, security interests or other interests created or
evidenced hereby shall be attacked, endangered or questioned or if any legal
proceedings are instituted with respect thereto, the Debtor will give prompt
written notice thereof to the Secured Party and at the Debtor's own cost and
expense will diligently endeavor to cure any defect that may be developed or
claimed, and will take all necessary and proper steps for the defense of such
legal proceedings, and the Secured Party (whether or not named as a party to
legal proceedings with respect thereto) is hereby authorized and empowered to
take such additional steps as in its judgment and discretion may be necessary
or proper for the defense of any such legal proceedings or the protection of
the validity or priority of this Agreement and the rights, security interests
and other interests created or evidenced hereby, and all reasonable expenses
so incurred of every kind and character shall be a demand obligation owing by
the Debtor to the Secured Party and shall be a part of the Indebtedness.
Section 4.10 Compliance with Laws. The Debtor will observe and comply (to
the extent necessary so that any failure will not materially and adversely
affect the business of the Debtor) with all laws, statutes, ordinances, rules,
regulations, judgments, decrees, franchises, permits, licenses, certificates
and requirements of all federal, state, county, municipal and other
governmental agencies, departments, commissions, boards, courts and
authorities applicable to the Debtor or to the Collateral. The Debtor shall
give prompt notice to the Secured Party of any notice to the Debtor by any
governmental agency of any alleged violation of law by the Debtor that would,
if determined adversely to the Debtor, have a material adverse effect on the
business of the Debtor.
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ARTICLE 5
DEFAULT
Section 5.1 Sale. Upon the occurrence and continuance of an Event of
Default, the Secured Party may exercise all rights of a secured party under
the UCC and other applicable law (including without limitation such rights
under the UCC or other applicable law authorizing the taking of self-help
remedies by a secured party in protecting its rights in, to and under
collateral) and, in addition, the Secured Party may, without being required to
give any notice, except as herein provided or as may be required by mandatory
provisions of law, sell the Collateral or any part thereof at public or
private sale, for cash, upon credit or for future delivery, and at such price
or prices as the Secured Party may deem satisfactory. The Secured Party may
be the purchaser of any or all of the Collateral so sold at any public sale
(or, if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Debtor will execute and deliver such
documents and take such other action as the Secured Party deems necessary or
advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Secured Party shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold. Each purchaser
at any such sale shall hold the Collateral so sold to it absolutely and free
from any claim or right of whatsoever kind, including any equity or right of
redemption of the Debtor which may be waived, and the Debtor, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The Debtor agrees that ten (10) days prior written notice of the
time and place of any sale or other intended disposition of any of the
Collateral constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC (or, if applicable, the comparable section of the UCC
under the laws of another jurisdiction), except that shorter or no notice
shall be reasonable as to any Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The notice (if any) of such sale shall (l) in case of a public sale,
state the time and place fixed for such sale, and (2) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Secured Party may fix in the notice of such sale.
At any such sale the Collateral may be sold in one lot as an entirety or in
separate parcels or portions, as the Secured Party may determine. The Secured
Party shall not be obligated to make any such sale pursuant to any such
notice. The Secured Party may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. In case of
any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Secured Party until
the selling price is paid by the purchaser thereof, but the Secured Party
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. Debtor hereby grants unto
Secured Party, and will cause its affiliates to grant, as necessary, the right
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to use the existing premises and docking facilities of Debtor, for a period of
four (4) months from any foreclosure within which to remove the Collateral
from Debtor's premises, free of any rent or charge.
Section 5.2 Assemble Collateral. For the purpose of enforcing any and all
rights and remedies under this Agreement the Secured Party may (i) require the
Debtor to, and the Debtor agrees that it will, at its expense and upon the
request of the Secured Party, forthwith assemble all or any part of the
Collateral as directed by the Secured Party and make it available at a place
designated by the Secured Party which is, in its opinion, reasonably
convenient to the Secured Party and the Debtor, whether at the premises of the
Debtor or otherwise, and the Secured Party shall be entitled to specific
performance of this obligation, (ii) to the extent permitted by applicable law
of this or any other state, enter, with or without process of law and without
breach of the peace, any premise where any of the Collateral is or may be
located, and without charge or liability to it seize and remove such
Collateral from such premises, (iii) have access to and use the Debtor's books
and records relating to the Collateral and (iv) prior to the disposition of
the Collateral, store or transfer it without charge in or by means of any
storage or transportation facility owned or leased by the Debtor, process,
repair or recondition it or otherwise prepare it for disposition in any manner
and to the extent the Secured Party deems appropriate and, in connection with
such preparation and disposition, use without charge any trademark, trade
name, copyright, patent or technical process used by the Debtor.
Section 5.3 Limitation on Duty of Secured Party. Beyond the exercise of
reasonable care in the custody thereof, the Secured Party shall have no duty
as to any Collateral in its possession or control or in the possession or
control of any agent or bailee or any income thereon. The Secured Party shall
be deemed to have exercised reasonable care in the custody of the Collateral
in its possession if the Collateral is accorded treatment substantially equal
to that which it accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Secured Party in good faith.
Section 5.4 Appointment of Agent. At any time or times, in order to comply
with any legal requirement in any jurisdiction, the Secured Party may appoint
a bank or trust company or one or more other Persons with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment.
Section 5.5 Expenses. At any time during which Indebtedness remains
outstanding, the Secured Party may, but shall not be required to, upon five
days' notice to the Debtor, pay the costs of all insurance and all expenses of
protecting storing, warehousing, handling and maintaining the Collateral, any
and all excise, property, sales, use, gaming and other taxes imposed by any
federal, state or local authority on any of the Collateral, or any costs
associated with maintaining the rank of any Security Interest. The Debtor
will promptly reimburse the Secured Party for any such payment unless (a) the
Debtor notifies the Secured Party within five days of receiving notice that
the Secured Party intends to pay any such expenses that such expenses have
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been paid or are not due and (b) such expenses have, in fact, been paid or are
not legally due. All sums so paid or incurred by the Secured Party for any of
the foregoing and any and all other sums for which the Debtor may become
liable hereunder and all costs and expenses (including reasonable attorneys'
fees, legal expenses and court costs) incurred by the Secured Party in
enforcing or protecting the Security Interests or any of its rights or
remedies under this Agreement, shall, together with interest thereon until
paid at the rate of twelve percent (12.0%) per annum, be additional
Indebtedness hereunder and Debtor agrees to pay all of the foregoing sums
promptly.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notices. Any notice or demand which, by provision of this
Agreement, is required or permitted to be given or served to the Debtor and
the Secured Party shall be deemed to have been sufficiently given and served
for all purposes if made in accordance with the Mortgage to the following
addresses (or such other addresses as the parties may notify each other, in
writing):
If to the Debtor: The President Riverboat Casino-Mississippi, Inc.
802 North First Street
St. Louis, Missouri 63102
Attn: James A. Zweifel
with copies to:
James W. O'Mara
Phelps Dunbar, L.L.P.
Suite 500, SkyTel Centre
200 South Lamar Street
Jackson, Mississippi 39225
Telephone: (601) 352-2720
Facsimile: (601) 360-9777
and
Virginia Boulet
Phelps Dunbar, L.L.P.
400 Poydras Street, 30th Floor
New Orleans, Louisiana 70130
Telephone: (504) 584-9286
Facsimile: (504) 568-9130
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If to the Secured Party: American Gaming & Entertainment, Ltd.
One Woodland Avenue
Paramus, NJ 07652
Attn: J. Douglas Wellington
with copies to:
Robert A. Byrd, Esq.
Byrd & Wiser
P.O. Box 1939
Biloxi, MS 39533-1939
Telephone: (228) 432-8123
Facsimile: (228) 432-7029
Bobbie T. Shell, Esq.
Baker & Botts, L.L.P.
2001 Ross Ave., Ste. 700
Dallas, TX 75201
Telephone: (214) 953-65000
Facsimile: (214) 953-6503
Shamrock Holdings Group, Inc.
Two Clinton Square
Syracuse, New York 13202
Telephone: (315) 422-9000
Facsimile: (315) 422-9361
Attention: Richard C. Breeden
T. Glover Roberts, Esq.
Sheinfeld, Maley & Kay, P.C.
1700 Pacific Avenue, Suite 4400
Dallas, Texas 75201
Telephone: (214) 953-8019
Facsimile:(214) 953-8199
William S. Boyd, Esq.
P.O. Box 1326
Gulfport, MS 39502
Telephone: (228) 864-1915
Facsimile: (228) 864-1957
John Hedglin, Esq.
Rimmer, Rawlings, MacInnis
& Hedglin
1290 Deposit Guaranty Plaza
Jackson, MS 39201
Telephone: (601) 969-1030
Facsimile: (601) 969-1040
and
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Douglas S. Draper, Esq.
Heller, Draper, Hayden, Horn, L.L.C.
650 Poydras Street
Suite 2500
New Orleans, La. 70130-6103
Telephone: (504) 568-1888
Facsimile: (504) 522-0949
Section 6.2 Amendment. Neither this Agreement nor any provisions thereof
may be changed, waived, discharged or terminated orally or in any manner other
than by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
Section 6.3 Waivers. No course of dealing on the part of the Secured
Party, its officers, employees, consultants or agents, nor any failure or
delay by the Secured Party with respect to exercising any of its rights,
powers or privileges under this Agreement shall operate as a waiver thereof.
Section 6.4 Cumulative Rights. The rights and remedies of the Secured
Party under this Agreement and any other agreements, documents and instruments
securing any of the Indebtedness shall be cumulative, and the exercise or
partial exercise of any such right or remedy shall not preclude the exercise
of any other right or remedy.
Section 6.5 Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, subsections or other divisions of this
Agreement or the exhibits hereto are only for the convenience of the parties
and shall not be construed to have any effect or meaning with respect to the
other content of such articles, sections, subsections or other divisions, such
other content being controlling as to the agreement between the parties
hereto.
Section 6.6 Singular and Plural. Words used herein in the singular, where
the context so permits, shall be deemed to include the plural and vice versa.
The definitions of words in the singular herein shall apply to such words when
used in the plural where the context so permits and vice versa.
Section 6.7 Governing Law. This Agreement is a contract made under and
shall be construed in accordance with and governed by the laws of the State of
Mississippi.
Section 6.8 Termination. Upon full and final payment and performance of
the Indebtedness, this Agreement shall terminate, and the Secured Party shall
pay to the Debtor all amounts then remaining in the possession of the Secured
Party from collections on or proceeds of the Collateral. Upon request of the
Debtor, the Secured Party shall execute and deliver to the Debtor at the
Debtor's expense such termination statements as the Debtor may reasonably
request to evidence such termination.
Section 6.9 Successors and Assigns. (a) All covenants and agreements
contained by or on behalf of the Debtor in this Agreement shall bind its
successors and assigns and shall inure to the benefit of the Secured Party and
its successors and assigns.
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(b) This Agreement is for the benefit of the Secured Party and for such
other Person or Persons as may from time to time become or be the holders of
any of the Indebtedness, and this Agreement shall be transferrable and
negotiable, with the same force and effect and to the same extent as the
Indebtedness may be transferrable, it being understood that, upon the transfer
or assignment by the Secured Party of any of the Indebtedness, the legal
holder of such Indebtedness shall have all of the rights granted to the
Secured Party under this Agreement.
Section 6.10 Counterparts. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
DEBTOR:
THE PRESIDENT RIVERBOAT CASINO-
MISSISSIPPI, INC.
By: /s/ James A. Zweifel
---------------------------------------
Name: James A. Zweifel
Title: Executive Vice President and
Chief Financial Officer
SECURED PARTY:
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: /s/ J. Douglas Wellington
---------------------------------------
Name: J. Douglas Wellington
Title: President & CEO
EXHIBIT 10.4
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PREFERRED SHIP MORTGAGE
ON THE WHOLE OF THE
GOLD COAST CASINO BARGE
(Official Number 995650)
$5,827,500.00
=============================
The President Riverboat Casino-Mississippi, Inc.
802 North First Street
St. Louis, Missouri 63102
-Sole Owner and Mortgagor-
In Favor of
American Gaming & Entertainment, Ltd.
One Woodland Avenue
Paramus, New Jersey 07652
-Sole Lender and Mortgagee-
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Dated as of August 10, 1999
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Discharge Amount: $5,827,500.00 together
With Interest, Costs, Attorneys' Fees and Other Expenses
and Performance of the Mortgage Covenants
PREFERRED SHIP MORTGAGE
THIS PREFERRED SHIP MORTGAGE, dated as of August 10, 1999, is granted by:
The President Riverboat Casino-Mississippi, Inc.
802 North First Street
St. Louis, Missouri 63102
a corporation organized and existing under and by virtue of the laws of the
State of Mississippi (the "Mortgagor"), to and in favor of:
American Gaming & Entertainment, Ltd.
One Woodland Avenue
Paramus, New Jersey 07652
a corporation organized and existing under and by virtue of the laws of the
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State of Delaware (the "Mortgagee").
WHEREAS:
A. The Mortgagor is the sole owner of the whole of the vessel identified
and described in the Granting Clause of this Preferred Ship Mortgage (this
"Mortgage").
B. The Mortgagor is truly and justly indebted unto the Mortgagee in the
full and true sum of FIVE MILLION, EIGHT HUNDRED, TWENTY-SEVEN THOUSAND FIVE
HUNDRED AND NO/100 DOLLARS ($5,827,500.00), said indebtedness being
represented and evidenced by one certain promissory note made and subscribed
by the Mortgagor in the principal sum of FIVE MILLION, EIGHT HUNDRED, TWENTY-
SEVEN THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($5,827,500.00), dated as of
August 10, 1999, being payable to the order of Mortgagee as principal in
accordance with the terms stated therein (the "Note"). A copy of the Note is
attached hereto, made a part hereof, and identified as Exhibit "A".
C. In order to secure the payment of the principal amount of the Note,
together with the payment of all other sums now or hereafter owing by the
Mortgagor to the Mortgagee under the terms of the Note and this Mortgage (the
"Indebtedness"), the Mortgagor has agreed to execute and deliver this Mortgage
to the Mortgagee, as follows:
GRANTING CLAUSE
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
THAT, in consideration of the premises and of the additional covenants
herein contained and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and in order to secure the
payment of the principal on the Note together with the performance and
observance of and compliance with the covenants, terms and conditions
contained in this Mortgage and the Note, THE MORTGAGOR HAS granted, conveyed,
mortgaged, pledged, hypothecated, set over and confirmed, AND THE MORTGAGOR
DOES BY THESE PRESENTS grant, convey, mortgage, pledge, hypothecate, set over
and confirm UNTO AND IN FAVOR OF THE MORTGAGEE, the whole of the following
named and described vessel (referred to hereinafter as the "Barge") to wit:
OFFICIAL HAILING
NAME NUMBER PORT
---- ------ ----
Gold Coast Casino 995650 Biloxi, Mississippi
TOGETHER WITH all improvements and structures from time to time thereon, and
all equipment and appurtenances from time to time thereon or thereof,
including without limitation all engines, machinery, masts, spars, boats,
cables, motors, tools, anchors, chains, booms, cranes, rigs, pumps, pipes,
tanks, tackle, rigging, supplies, fittings and all other property located
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thereon, derived therefrom or used in connection therewith, and all
replacements thereof and substitutions therefor and shall include without
limitation all slot machines and other gaming devices, machinery, tools, fire
sprinklers, alarm, air conditioning, heating, refrigerating and electronic
monitoring systems and equipment, window or structural cleaning rigs,
maintenance equipment, equipment for the exclusion of vermin or insects or the
removal of dust, refuse or garbage, lobby and all other indoor and outdoor
furniture (including tables, chairs, planters, desks, sofas, shelves, lockers
and cabinets), wall beds, wall safes, furnishings, appliances (including ice
boxes, refrigerators, fans, heaters, stoves, water heaters and incinerators),
rugs, carpets and other floor coverings, draperies and drapery rods and
brackets, awnings, window shades, venetian blinds, curtains, wall hangings,
lamps, chandeliers and other lighting fixtures and office maintenance and
other supplies.
TO HAVE AND HOLD the same unto Mortgagee, its successors and assigns,
forever upon the terms herein set forth to secure the performance and
observance of and compliance with the covenants, terms and conditions in this
Mortgage and the Note contained.
PROVIDED, only, and the condition of these presents is such, that if the
Mortgagor, its successors or assigns, shall pay or cause to be paid to
Mortgagee or any other holder of the Note all sums due thereunder, and shall
perform, observe and comply with the covenants, terms and conditions in this
Mortgage and in the Note contained, expressed or implied, to be performed,
observed or complied with by and on the part of the Mortgagor, then these
presents and the rights hereunder shall cease, terminate and be void;
otherwise to be and remain in full force and effect.
AND NOW, THE PARTIES HEREBY FURTHER AGREE, COVENANT AND DECLARE that the
Barge is to be held subject to the following covenants, conditions,
provisions, terms and uses:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. Definition of Terms. For all purposes of this Mortgage,
unless the context otherwise requires:
(a) All references to Person shall mean an individual, a corporation, a
partnership, a trust, a trustee, an unincorporated organization or a
government or any agency or political subdivision thereof.
(b) Act shall mean Chapter 313 of Title 46 United States Code.
(c) National Vessel Documentation Center shall mean the National Vessel
Documentation Center of the United States Coast Guard, at Falling Waters, West
Virginia.
SECTION 1.02. Rules of Construction. Unless the context clearly indicates
to the contrary, the following rules shall apply to the construction of this
Mortgage.
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(a) Words importing the singular number shall include the plural number and
vice versa.
(b) All references herein to particular articles or sections, unless
otherwise provided, are references to articles or sections of this Mortgage.
(c) The headings herein are solely for convenience of reference and shall
not constitute a part of this Mortgage nor shall they affect its meaning,
construction or effect.
(d) References to the Note, and other agreements and/or instruments shall
be deemed to refer to such Note, agreements and instruments as the same may
from time to time be amended, supplemented or modified by the parties hereto
in accordance with the terms thereof.
(e) To the extent there is an inconsistency between the terms of the
Security Agreement executed by the parties hereto on the date hereof, and the
terms of this Mortgage, then the terms of the Security Agreement shall
control.
ARTICLE II
GENERAL MORTGAGE PROVISIONS
SECTION 2.01. Secured Amount.
(a) For purposes of this Mortgage and in order to comply with Title 46,
Section 31321(b)(3) of the United States Code, the parties to this Mortgage
hereby declare that the Indebtedness secured hereby as of the date hereof is
the sum of FIVE MILLION, EIGHT HUNDRED, TWENTY-SEVEN THOUSAND FIVE HUNDRED AND
NO/100 DOLLARS ($5,827,500.00), as the principal amount of Indebtedness
together with performance of mortgage covenants. The discharge amount is the
same as the total amount, together with interest, attorneys' fees, costs and
other expenses and performance of mortgage covenants.
(b) It is not intended that this Mortgage include any property other than
the Barge, as defined in the Granting Clause hereto, but should any
determination be made at any time for any reason that this Mortgage includes
any property other than a "vessel," then if such property is comprised of
incidental equipment, such property may be separately discharged from the lien
of this Mortgage by the payment of one-one hundredth of one percent of the
total amount of the Note then remaining unpaid.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR
The Mortgagor represents, warrants, covenants and agrees with Mortgagee as
follows:
SECTION 3.01. Status of Mortgagor. Mortgagor is a corporation organized
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and existing under and by virtue of the laws of the State of Mississippi;
Mortgagor is and will remain a citizen of the United States of America within
the meaning of Title 46, Section 802, of the United States Code, entitled to
own and operate the Barge and to engage in the coastwise trade; Mortgagor is
duly authorized to mortgage the Barge; all action necessary and required by
law for the execution and delivery of this Mortgage has been duly and
effectively taken; and this Mortgage is a valid and binding obligation of
Mortgagor enforceable in accordance with its terms.
SECTION 3.02. Liens. The following liens on the Barge arising after the
date hereof shall be permitted except to the extent that there exists for such
liens a notice of seizure or sale or an advertisement for seizure or sale:
(a) Liens for taxes, assessments, or other governmental charges not yet due
or which are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by
generally accepted accounting principles shall have been made therefor;
(b) Liens of lessors (subordinated), carriers, warehousemen, mechanics,
laborers and materialmen arising by law in the ordinary course of business for
sums either not yet due or being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall be
required by generally accepted accounting principles shall have been made
therefor;
(c) Liens (i) for crew's wages (1) for fifteen (15) days after the
termination of a voyage, or (2) which shall then be contested in good faith by
appropriate action promptly initiated and diligently conducted, if such
reserve as shall be required by generally accepted accounting principles shall
have been made therefor, (ii) for general average (1) which are unclaimed, (2)
for fifteen (15) days after having been claimed, (3) which are covered by
insurance, or (4) which shall then be contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserve as shall
be required by generally accepted accounting principles shall have been made
therefor, (iii) for salvage, whether voluntary or contract, (1) which are
unclaimed, (2) for fifteen (15) days after having been claimed, (3) which are
covered by insurance, or (4) which shall then be contested in good faith by
appropriate action promptly initiated and diligently conducted, if such
reserve as shall be required by generally accepted accounting principles shall
have been made therefor, (iv) otherwise incident to the then current
operations of the Barge, for the wages of a stevedore when employed directly
by Mortgagor, or the operator, master or agent of the Barge, (v) covered by
insurance and any deductible applicable thereto, (vi) for repairs or with
respect to any changes made in or on the Barge (1) which are unclaimed, (2)
for fifteen (15) days after having been claimed, (3) which are covered by
insurance, or (4) which shall then be contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserve as shall
be required by generally accepted accounting principles shall have been made
therefor, and (vii) for necessaries (1) which are unclaimed, (2) for fifteen
(15) days after having been claimed, (3) which are covered by insurance, or
(4) which shall then be contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by
generally accepted accounting principles shall have been made therefor;
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(d) Permitted Liens, as that term is defined in the Security Agreement of
even date herewith (the "Security Agreement") between Mortgagor and Mortgagee,
as it may from time to time be amended, modified or supplemented; and
(e) Liens listed on the General Index or Abstract of Title relative to the
Barge attached hereto on Exhibit "B" and not removed by Mortgagee.
SECTION 3.03. Compliance With Law. Mortgagor will comply with and satisfy
all applicable formalities and provisions of the laws and regulations of the
United States of America, and any supplement or amendment thereto, in order to
perfect, establish and maintain this Mortgage as a preferred mortgage upon the
Barge and upon all renewals, improvements and replacements made in or to the
Barge. Mortgagor shall furnish to Mortgagee, from time to time, such proofs
as Mortgagee may reasonably request with respect to Mortgagor's compliance
with the foregoing covenant. Mortgagor shall promptly pay and discharge all
United States Coast Guard fees and expenses in connection with the recordation
of this Mortgage and any supplement or amendment thereto. In the event that
this Mortgage, the Note secured hereby, or any provisions hereof or thereof,
shall be deemed invalidated in whole or in part by reason of any present or
future law or any decision of any court, Mortgagor will execute such other and
further assurances and documents as in the opinion of Mortgagee may be
required to more effectually subject the Barge to the payment and the
performance of the terms and provisions of this Mortgage and the Note. In
addition, Mortgagor will furnish to Mortgagee such additional information as
Mortgagee may reasonably require.
SECTION 3.04. Operation of Barge. Mortgagor will not cause or permit the
Barge to be operated in any manner contrary to law and Mortgagor will not
engage in any unlawful trade or violate any law or carry any cargo that will
expose the Barge to penalty, forfeiture or capture, and will not do, or suffer
or permit to be done, anything which can or may injuriously affect the
registration or enrollment or flag of the Barge under the laws and regulations
of the United States of America.
SECTION 3.05. Payment of Taxes, etc. Mortgagor will pay as and when due
and payable all taxes, levies, license fees, assessments, and other
impositions levied on the Barge or any part thereof before its use and
operation or which otherwise, if unpaid, might become a Lien upon the Barge;
provided, that Mortgagor shall not be required to pay any such tax, levee,
fee, assessment or imposition if the amount, applicability or validity thereof
shall currently be contested in good faith by appropriate proceedings
diligently conducted and if Mortgagor shall have set up reserves therefor
adequate under generally accepted accounting principles (provided that such
reserves may be set up under generally accepted accounting principles);
provided, further, that any such contest shall prevent the posting for sale or
the sale of the Barge under special execution or otherwise for the payment of
any such tax, levee, fee, assessment or imposition, or other forfeiture or
loss of title to the Barge.
SECTION 3.06. Notice of Mortgage. Mortgagor will place, and at all times
will retain on board the Barge a properly certified copy of this Mortgage, a
Notice of this Mortgage and the Certificate of Documentation of the Barge.
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SECTION 3.07. Release From Arrest. If the Barge is attached, arrested,
levied upon or taken into custody by virtue of any legal proceeding in any
court, Mortgagor will promptly notify Mortgagee thereof by telegraph,
confirmed by letter, and within ten (10) working days will cause the Barge to
be released by posting such security as may be acceptable to the court in
which such proceedings are pending, and will promptly notify Mortgagee thereof
in the manner aforesaid.
SECTION 3.08. Maintenance of Barge. Mortgagor will at its own expense at
all times maintain, preserve and keep the Barge in good condition, working
order and repair and will from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements. The Barge
shall, and Mortgagor covenants that it will, at all times comply with all
applicable laws, treaties and covenants and rules and regulations issued
thereunder. Mortgagor will not make, or permit to be made, any substantial
change in the structure, type, name, or rig of the Barge without first
receiving written approval thereof from Mortgagee, which approval shall not be
unreasonably withheld.
SECTION 3.09. Access to Barge. Mortgagor at all reasonable times will
afford Mortgagee or its authorized representatives full and complete access to
the Barge for the purpose of inspecting the same and its cargo and papers.
SECTION 3.10. Documentation of Barge. Mortgagor will keep the Barge duly
documented as a vessel of the United States of America and entitled to engage
in the operations conducted by the Mortgagor. Mortgagor will never operate
the Barge outside the navigation limits of the insurance carried pursuant to
Section 3.12 of Article III of this Mortgage.
SECTION 3.11. Sale, Charter, Mortgage, or Release of Barge. Mortgagor will
not sell, mortgage, transfer, or demise charter the Barge or enter into any
arrangement or contract with respect to the Barge which might be construed as
a financing lease, without the written consent of Mortgagee first had and
obtained, which consent shall not be unreasonably withheld; and any such
written consent to any one sale, mortgage, transfer, or demise charter shall
not be construed to be a waiver of this provision in respect of any subsequent
proposed sale, mortgage, transfer, or demise charter. Any such sale,
mortgage, transfer, or demise charter of the Barge shall be subject to the
provisions of this Mortgage and the lien it creates, unless released therefrom
by Mortgagee. Nothing herein shall in any way limit the ability of Mortgagor
to sell equipment in accordance with the Security Agreement.
SECTION 3.12 Insurance.
(a) Mortgagor will cause to be carried and maintained on the Barge, without
expense to Mortgagee, insurance in such amounts, against such risks
(including, without limitation, pollution, fire, public liability, excess
liability and umbrella coverages, property damage, and workmen's
compensation), in such form, including without limitation the form of the loss
payable clause (naming Mortgagee and Mortgagor as loss payee), cancellation
clause, navigation limits, and the designation of named assured, and with such
insurance companies, insurers, underwriters or funds, and on such policy
forms, as Mortgagee shall from time to time approve. In no event shall the
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Hull value on the Barge be less than the outstanding amount of Indebtedness
under the Note. In no event shall the protection and indemnity insurance,
including umbrella coverage, on the Barge be less than $7,000,000. Such
insurance coverage policies shall contain an agreement by the insurer not to
cancel or amend the policies without giving Mortgagee at least 30 days' prior
written notice of its intention to do so.
(b) Payments in respect of any loss under insurance carried pursuant to
this Section 3.12 shall be made to Mortgagor and Mortgagee, as their
respective interests may appear.
(c) If any claim or lien is asserted against the Barge for loss, damage or
expense which is covered by insurance required hereunder and it is necessary
for Mortgagor to obtain a bond or supply other security to prevent arrest of
the Barge or to release the Barge from arrest on account of such claim or
lien, Mortgagee, on request of the Mortgagor, may, in the sole discretion of
Mortgagee, assign to any person, firm or corporation executing a surety or
guarantee bond or other agreement to save or release the Barge from such
arrest, all right, title and interest of Mortgagee in and to said insurance
covering said loss, damage or expense, as collateral security to indemnify
against liability under said bond or other agreement.
(d) Mortgagor will deliver to Mortgagee whenever so requested by Mortgagee
certified copies of all cover notes, binders and policies for the purpose of
inspection.
(e) Mortgagor agrees that it will not execute or permit or willingly allow
to be done any act by which any insurance may be suspended, impaired or
canceled, and that he will not permit or allow the Barge to undertake any
voyage, engage in any venture or run any risk or transport any cargo which may
not be permitted by the policies in force, without having previously insured
such Barge by additional coverage to extend to such voyages, ventures, risks
or cargoes.
SECTION 3.13. Payments by Mortgagee. At any time during the term of this
Mortgage, Mortgagee may, but shall not be required to, upon five days' notice
to Mortgagor, pay the costs of all insurance and all expenses of protecting
storing, warehousing, handling and maintaining the Barge, any and all excise,
property, sales, use, gaming and other taxes imposed by any federal, state or
local authority on the Barge, or any costs associated with maintaining the
rank of this Mortgage. Mortgagor will promptly reimburse Mortgagee for any
such payment unless (a) Mortgagor notifies Mortgagee within five days of
receiving notice that Mortgagee intends to pay any such expenses that such
expenses have been paid or are not due and (b) such expenses have, in fact,
been paid or are not legally due. All sums so paid or incurred by Mortgagee
for any of the foregoing and any and all other sums for which Mortgagor may
become liable hereunder and all costs and expenses (including reasonable
attorneys' fees, legal expenses and court costs) incurred by Mortgagee in
enforcing or protecting any of its rights or remedies under this Mortgage,
shall, together with interest thereon until paid at the rate of twelve percent
(12.0%) per annum, and Mortgagee agrees to pay all of the foregoing sums
promptly.
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SECTION 3.15. Requisition of Barge but not Title. If the United States of
America or any government of any other country or any department, agency or
representative thereof shall not take the title or ownership of the Barge but
shall requisition, charter, or in any manner take over the use of the Barge
pursuant to any present or future law, proclamation, decree, order or
otherwise, and in the event Mortgagor is in default of the terms of this
Mortgage, all charter hire and compensation resulting therefrom shall be
payable to Mortgagee, and if, as a result of such requisitioning, chartering
or taking of the use of the Barge such government, department, agency or
representative thereof shall pay or become liable to pay any sum by reason of
the loss of or injury to or depreciation of the Barge any such sum is hereby
made payable to Mortgagee, who shall be entitled to receive the same and shall
apply any such sums referred to in this Section 3.15 to the payment of the
Note; and in the event of any such requisitioning, chartering or taking of the
use of the Barge, Mortgagor shall promptly execute and deliver to Mortgagee
such documents, if any, and shall promptly do and perform such acts, if any,
as in the opinion of counsel for Mortgagee may be necessary or useful to
facilitate or expedite the collection by Mortgagee of such claims arising out
of the requisitioning, chartering or taking of the use of the Barge.
ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
SECTION 4.01.
A. Events of Default. In case any one or more of the following events,
herein termed "Events of Default," shall happen:
(1) Default in the payment of principal of the Note as and when the same
shall become due and payable and such default continues unremedied for ten
(10) days; or
(2)Default in the due and punctual observance and performance of any
provisions of Sections 3.01, 3.03, 3.04, 3.07, 3.09, 3.10, 3.11, 3.12, 3.13,
3.14 or 3.15 of Article III; or default in the due and punctual observance and
performance of any provisions of Section 3.05 of Article III hereof and such
default shall continue for fifteen (15) days; or
(3) Default in the due observance or performance of any of the other
covenants and conditions herein, in the Sale Agreement, in the exhibits
thereto, as executed and/or in the Note required to be kept and performed, and
continuance of such default for fifteen (15) days after written notice by
Mortgagee; provided, however, that Mortgagor shall not be deemed to be in
default for failure to keep the Barge in good condition, working order and
repair pursuant to Section 3.08 of Article III if Mortgagor shall be
diligently taking steps to comply with the requirements of said Section; or
(4) Any representations and warranties made in this Mortgage are untrue
in any material respect; or
(5) Mortgagor shall (i) abandon the Barge without due cause; or (ii)
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cease to be a citizen of the United States of America within the meaning of
Title 46, Section 802 of the United States Code entitled to employ the Barge
in the trade in which it is engaged; or
(6) Mortgagor shall apply for or consent to the appointment of a receiver
or trustee of Mortgagor or for the Barge; or
(7) An order, judgment or decree shall be entered, without the
application, approval or consent of Mortgagor, by any court of competent
jurisdiction, approving a petition appointing a receiver or trustee of
Mortgagor or for the Barge, and such order, judgment or decree shall continue
unstayed and in effect for a period of thirty (30) days; or
(8) The title or ownership of the Barge shall be requisitioned, purchased
or taken by the government of any country or by any department, agency or
representative thereof and there shall not have been paid to Mortgagee an
amount in cash in United States dollars equal to the fair value of the Barge
within ninety (90) days after such event occurs; or
(9) The Barge is posted for foreclosure or notice of a sale to satisfy a
lien on the Barge is given as required by applicable law; or
(10) Mortgagee receives notice of cancellation of insurance on the Barge
in accordance with the required time restriction agreed to by the insurance
company and such insurance is not replaced prior to the effective date of the
cancellation; or
(11) Any "Event of Default" occurs under the Security Agreement.
B. Remedies. Then and in each and every such case Mortgagee shall have the
right to:
(1) Declare all the then unpaid principal sum of the Note to be due and
payable immediately, and upon such declaration the same with any delinquent
interest payment, as provided for in the Note, to date of declaration shall
become due and be immediately due and payable;
(2) Exercise all the rights and remedies in foreclosure and otherwise
given to Mortgagee by the laws and regulations of the United States of America
or of the country wherein the Barge shall then be found or of any country
wherein the Barge may thereafter be found or of any other applicable
jurisdiction;
(3) Bring suit at law, in equity or in admiralty, as it may be advised,
to recover judgment for any and all amounts due under the Note and this
Mortgage, or otherwise hereunder, and collect the same from Mortgagor and/or
out of any and all property of Mortgagor whether covered by this Mortgage or
otherwise;
(4) Take the Barge without legal process wherever the same may be; and
Mortgagor or other person in possession, forthwith upon demand of Mortgagee
shall surrender to Mortgagee possession of the Barge and Mortgagee may,
without being responsible for loss or damage, hold, lay up, lease, charter,
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operate or otherwise use the Barge for such time and upon such terms as it may
deem to be for its best advantage, accounting only for the net profits, if
any, arising from such use of the Barge and charging upon all receipts from
the use of the Barge or from the sale thereof by court proceedings or pursuant
to Subsection (5) of this Section 4.01 next following, all costs, expenses,
charges, damages or losses by reason of such use; and if at any time Mortgagee
shall avail itself of the right herein given it to take the Barge, Mortgagee
shall have the right to dock the Barge for a reasonable time at any dock,
pier, or other premises of Mortgagor without charge, or to dock it at any
other place at the cost and expense of the Mortgagor;
(5) Without being responsible for loss or damage, sell the Barge at any
place and at such time as Mortgagee may specify and in such manner as
Mortgagee may deem advisable free from any claim by the Mortgagor in
admiralty, in equity, at law or by statute, after first giving notice of the
time and place of sale with a general description of the property in the
following manner:
(a) By publishing such notice for three (3) consecutive days, within
ten (10) days prior to the sale, in a daily newspaper of general circulation
published in Biloxi, Mississippi;
(b) If the place of sale should not be Biloxi, Mississippi, then by
publication of such notice in a daily newspaper, if any, published at the
place of sale; and
(c) By mailing a similar notice to Mortgagor on the day of first
publication; Mortgagee may adjourn any such sale from time to time by
announcement at the time and place appointed for such sale or for such
adjourned sale, and without further notice or publication Mortgagee may make
any such sale at the time and place to which the same shall be so adjourned.
Any such sale may be conducted without bringing the Barge to be sold to the
place designated for such sale and in such manner as Mortgagee may deem to be
for its best advantage.
(6) Mortgagor hereby consents to the appointment of a consent keeper by
Mortgagee with the costs thereof to be a cost of the sale to be paid from the
proceeds of the sale or by Mortgagor.
SECTION 4.02. Sale of Barge by Mortgagee. Any sale of the Barge made in
pursuance of this Mortgage, whether under the power of sale hereby granted or
any judicial proceedings, shall operate to divest all right, title and
interest of any nature whatsoever of Mortgagor therein and thereto, and shall
bar Mortgagor, its successors and assigns, and all persons claiming by,
through or under them. At any such sale Mortgagee or any other holder of the
Note (the "holder/purchaser") may bid for and purchase the Barge and upon
compliance with the terms of sale may hold, retain and dispose of such
property without further accountability therefor. In case of any such sale
the holder/purchaser shall be entitled, for the purpose of making settlement
or payment for the property purchased, to use and apply the Note or any
portion thereof in order that there may be credited against the amount
remaining due and unpaid thereon the sums payable to the holder/purchaser out
of the net proceeds of such sale after allowing for the costs and expense of
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sale and other charges; and thereupon the holder/purchaser shall be credited,
on account of such purchase price, with the net proceeds that shall have been
so credited upon the Note. No purchaser shall be bound to inquire whether
notice has been given, or whether any default has occurred, or as to the
propriety of the sale or as to the application of the proceeds thereof.
SECTION 4.03. Mortgagee to Sign for Mortgagor. Mortgagee is hereby
appointed attorney-in-fact of Mortgagor to execute and deliver to any
purchaser aforesaid and is hereby vested with full power and authority to
make, in the name and in behalf of Mortgagor, a good conveyance of the title
to the Barge so sold. In the event of any sale of the Barge, under any power
herein contained, Mortgagor will, if and when required by Mortgagee, execute
such form of conveyance of such Barge as Mortgagee may direct or approve.
SECTION 4.04. Mortgagee to Collect Hire, etc. Mortgagee is hereby
appointed attorney-in-fact of Mortgagor upon the happening of any Event of
Default, in the name of Mortgagor to demand, collect, receive, compromise and
sue for, so far as may be permitted by law, all amounts due from underwriters
under any insurance thereon as payment of losses or as return premiums or
otherwise, salvage awards and recoveries, recoveries in general average or
otherwise, and all other sums, due or to become due at the time of the
happening of any Event of Default in respect of the Barge, or in respect of
any insurance thereof from any person whomsoever, and to make, give and
execute in the name of Mortgagor acquittances, receipts, releases, or other
discharges for the same, whether under seal or otherwise, and to endorse and
accept in the name of Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect to the foregoing.
All amounts so received shall first be applied to operating expenses and then
to unpaid interest and then to unpaid principal on the Note.
SECTION 4.05. Mortgagee's Right to Possession. Whenever any right to enter
and take possession of the Barge accrues to Mortgagee, it may require
Mortgagor to deliver, and Mortgagor shall on demand, at its own cost and
expense, deliver the Barge to Mortgagee as demanded. If any legal proceedings
shall be taken to enforce any right under this Mortgage, Mortgagee shall be
entitled as a matter of right to the appointment of a receiver of the Barge
and the freights, hire, earnings, issues, revenues, income and profits due or
to become due and arising from the operation thereof.
SECTION 4.06. Appearance by Mortgagee on Behalf of Mortgagor. Mortgagor
authorizes and empowers Mortgagee or its appointees or any of them to appear
in the name of Mortgagor, its successors and assigns, in any court of any
country or nation of the world where a suit is pending against the Barge
because of or on account of any alleged lien against the Barge from which the
Barge has not been released and to take such proceedings as to them or any of
them may seem proper towards the defense of such suit and the discharge of
such lien, in the event that the Mortgagor shall not be taking proceedings
reasonably satisfactory to Mortgagee, and in such case all expenditures made
or incurred by Mortgagee or his appointees for the purpose of such defense or
discharge shall be a debt due from the Mortgagor, its successors and assigns,
to Mortgagee, and shall be secured by the lien of this Mortgage in like manner
and extent as if the amount and description thereof were written herein.
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SECTION 4.07. Acceleration of Indebtedness Secured Hereby. Mortgagor
covenants that upon the happening of any one or more of the Events of Default,
then upon written demand of Mortgagee, the Mortgagor will pay to Mortgagee the
whole of the indebtedness then owed under Note secured hereby and under this
Mortgage, and in case the Mortgagor shall fail to pay the same forthwith upon
such demand, Mortgagee shall be entitled to recover judgment for the whole
amount so due and unpaid, together with such further amounts as shall be
sufficient to cover the reasonable costs and expenses of collection, including
a reasonable compensation to Mortgagee's agents, attorneys and counsel and any
necessary advances, expenses and liabilities made or incurred by them
hereunder. All moneys collected by Mortgagee under this Section shall be
applied by Mortgagee in accordance with the provisions of Section 4.11 of this
Article IV.
SECTION 4.08. Right of Mortgagee. Each and every power and remedy herein
given to Mortgagee shall be cumulative and shall be in addition to every other
power and remedy herein given or now or hereafter existing at law, in equity,
in admiralty or by statute, and each and every power and remedy whether herein
given or otherwise existing may be exercised from time to time and as often
and in such order as may be deemed expedient by Mortgagee, and the exercise or
the beginning of the exercise of any power to remedy shall not be construed to
be a waiver of the right to exercise at the same time or thereafter any other
power or remedy. No delay or omission by Mortgagee in the exercise of any
right or power or in the pursuance of any remedy accruing upon any Event of
Default shall impair any such right, power or remedy or construed to be a
waiver of any such Event of Default or to be any acquiescence therein; nor
shall the acceptance by Mortgagee of any security or of any payment of or on
account of the Note after any Event of Default or of any payment on account of
any past default be construed to be a waiver of any right to take advantage of
any future Event of Default or of any past Event of Default not completely
cured thereby.
SECTION 4.09. Restoration of Position. In case Mortgagee shall have
proceeded to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to Mortgagee, then and in every such case Mortgagor and Mortgagee
shall be restored to their former positions and rights hereunder with respect
to the property subject or intended to be subject to this Mortgage, and all
rights, remedies and powers of Mortgagee shall continue as if no such
proceedings had been taken.
SECTION 4.10. Proceeds of Sale. The proceeds of any sale of the Barge and
the net earnings from the hire or from any charter, operation or other use of
the Barge by Mortgagee under any of the powers herein specified and any and
all other money received by Mortgagee pursuant to or under the terms of this
Mortgage or in any proceedings hereunder, the application of which has not
elsewhere herein been specifically provided, shall be applied at the
discretion of Mortgagee with Mortgagee having the right to impute payments as
it may desire among the following:
FIRST: To the payment of all reasonable expenses and charges, including
the expenses of any sale, and expenses of any retaking, attorney's fees, court
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costs, keeper's fees, necessary repairs and any other expenses or advances
made or incurred by Mortgagee in the protection of its rights or the pursuance
of its remedies hereunder, and to provide adequate indemnity against liens
claiming priority over or equality with the lien of this Mortgage;
SECOND: To the payment in full of any amount then unpaid and accrued and
due as a deficiency payment pursuant to the terms of the Note.
THIRD: To the payment in full of any amount then unpaid and accrued and
due as principal pursuant to the terms of the Note.
FOURTH: To the payment of any other amounts remaining unpaid and accrued
and due Mortgagee by Mortgagor on this Mortgage.
FIFTH: To the payment of any surplus thereafter remaining to Mortgagor or
to whomsoever may be entitled thereto.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.01. Notice. Any notice to be given under this Mortgage shall,
except as otherwise expressly provided herein, be served by registered or
certified mail, overnight express mail, or hand delivered, addressed as
follows:
(a) To Mortgagor:
The President Riverboat Casino-Mississippi, Inc.
802 North First Street
St. Louis, Missouri 63102
Attention: James A. Zweifel
with copies to:
James W. O'Mara
Phelps Dunbar, L.L.P.
Suite 500, SkyTel Centre
200 South Lamar Street
Jackson, Mississippi 39225
Telephone: (601) 352-2720
Facsimile: (601) 360-9777
and
Virginia Boulet
Phelps Dunbar, L.L.P.
400 Poydras Street, 30th Floor
New Orleans, Louisiana 70130
Telephone: (504) 584-9286
Facsimile: (504) 568-9130
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(b) To Mortgagee:
American Gaming & Entertainment, Ltd.
One Woodland Avenue
Paramus, New Jersey 07652
with copies to:
Robert A. Byrd, Esq.
Byrd & Wiser
P.O. Box 1939
Biloxi, MS 39533-1939
Telephone: (228) 432-8123
Facsimile: (228) 432-7029
Bobbie T. Shell, Esq.
Baker & Botts, L.L.P.
2001 Ross Ave., Ste. 700
Dallas, TX 75201
Telephone: (214) 953-6500
Facsimile: (214) 953-6503
Shamrock Holdings Group, Inc.
Two Clinton Square
Syracuse, New York 13202
Telephone: (315) 422-9000
Facsimile: (315) 422-9361
T. Glover Roberts, Esq.
Sheinfeld, Maley & Kay, P.C.
1700 Pacific Avenue, Suite 4400
Dallas, Texas 75201
Telephone: (214) 953-8019
Facsimile: (214) 953-8199
William S. Boyd, Esq.
P.O. Box 1326
Gulfport, MS 39502
Telephone: (228) 864-1915
Facsimile: (228) 864-1957
John Hedglin, Esq.
Rimmer, Rawlings, MacInnis
& Hedglin
1290 Deposit Guaranty Plaza
Jackson, MS 39201
Telephone: (601) 969-1030
Facsimile: (601) 969-1040
and
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<PAGE> 78
Douglas S. Draper, Esq.
Heller, Draper, Hayden, Horn, L.L.C.
650 Poydras Street
Suite 2500
New Orleans, La. 70130-6103
Telephone: (504) 568-1888
Facsimile: (504) 522-0949
unless another address shall be furnished in writing by the party to receive
such notice to the party giving such notice, and any such notice shall be
deemed made as of the date of mailing or hand delivery.
SECTION 5.02. Counterparts. This Mortgage may be executed in any number of
counterparts and all such counterparts executed and delivered each as an
original shall constitute but one and the same instrument.
SECTION 5.03. Interest of Mortgagor. The interest of Mortgagor in the
Barge and the interest mortgaged by this Mortgage is that of one hundred
percent (100%) absolute and sole ownership.
SECTION 5.04. Survivorship of Covenants. All the covenants, promises,
stipulations and agreements of Mortgagor in this Mortgage and the Note
contained shall bind Mortgagor and its successors and assigns and shall inure
to the benefit of Mortgagee and its successors and assigns.
SECTION 5.05. Amendments. This Mortgage may not be modified, extended,
supplemented or amended in any respect, or any waiver given in regard to any
of the provisions hereof, in any case which might affect the rights of
Mortgagee hereunder, except with the written consent of Mortgagee, and so long
as Mortgagor shall do all acts and things necessary to maintain the preferred
status of this Mortgage.
SECTION 5.06. Discharge of Lien. When the Note has been paid in full,
including all costs, expenses and attorneys' fees provided for therein,
Mortgagee shall, at Mortgagor's expense, execute and deliver to Mortgagor such
documents as Mortgagor shall reasonably request to evidence the surrender and
discharge of the lien hereof upon the Barge.
SECTION 5.07. Incorporation into Mortgage. The Whereas Clauses and the
Granting Clause of this Mortgage are incorporated in and are made a part of
this Mortgage.
SECTION 5.08. Governing Law. This Mortgage shall be governed by and
construed according to the provisions of the Act, and where silent, by the
General Maritime Law of the United States.
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WHEREFORE, the Mortgagor has executed this Preferred Ship Mortgage in
multiple original counterparts on the day and year first above written.
THE PRESIDENT RIVERBOAT CASINO-
MISSISSIPPI, INC.
By: /s/ James A. Zweifel
---------------------------------------
Name: James A. Zweifel
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT "A"
[Note attached.]
EXHIBIT "B"
[General Index and Abstract of Title attached - see Section 3.02.]
EXHIBIT 10.5
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Agreement") dated as of August 10, 1999, is
made by President Casinos, Inc., a Delaware corporation (the "Guarantor"), in
favor of American Gaming & Entertainment, Ltd., a Delaware corporation (the
"Lender"), who agree as follows:
RECITALS
A. The President Riverboat Casino-Mississippi, Inc., a Mississippi
corporation (the "Borrower"), is or will be indebted unto the Lender for a
loan made or to be made pursuant to the terms of a certain promissory note
dated of even date herewith in the aggregate principal amount of Five Million,
Eight Hundred, Twenty-Seven Thousand, Five Hundred and NO/100 Dollars
($5,827,500.00), together with costs, interest, expenses and attorneys' fees,
made by the Borrower payable to the order of the Lender (as amended, modified,
supplemented, restated, extended or renewed from time to time, the "Note").
B. The making of the loan to the Borrower pursuant to the Note will benefit
the Guarantor.
C. The Lender has required, as a condition to the making of the loan, the
execution of this Agreement by the Guarantor.
NOW, THEREFORE, in order to induce the Lender to accept the Note from the
Borrower, the Guarantor covenants and agrees in favor of the Lender as
follows:
Section 1. Guaranty. The Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the full and punctual payment and performance of all
present and future amounts, liabilities and obligations of the Borrower to the
Lender or to any successor or transferee thereof under or pursuant to the
Note, this Agreement or any of the collateral documents executed by the
Borrower in favor of the Lender in connection with the Note (the "Collateral
Documents"), whether said amounts, liabilities or obligations are liquidated
or unliquidated, now existing or hereafter arising, in principal, interest,
deferral and delinquency charges, prepayment premiums, costs and attorneys'
fees, as therein stipulated, and under and pursuant to all amendments,
supplements and restatements to any of said documents (the "Indebtedness").
Payments made on the Indebtedness will not discharge or diminish the
obligations and liability of the Guarantor under this Agreement for any
remaining and succeeding Indebtedness. As to the Guarantor, the guarantee
provided for in this Agreement is an absolute, unconditional, continuing
guarantee of payment and not of collectibility and is in no way conditioned
upon or limited by: (a) any attempt to collect from the Borrower; (b) the
commencement of any bankruptcy or receivership proceedings by or against the
Borrower; (c) the Borrower's discharge or reduction of its liability (or any
part thereof) under federal bankruptcy law or any applicable state law; (d)
any attempt to collect from, or the exercise of any rights and remedies
against, any person other than the Borrower who may at any time now or
hereafter be primarily or secondarily liable for any or all of the
<PAGE> 81
Indebtedness, including, without limitation, the Guarantor and any other
maker, endorser, surety, or guarantor of all or a portion of the Indebtedness
(all of the aforementioned persons in this clause (b) other than the Borrower
being herein called collectively the "Obligors" and individually an
"Obligor"); or (e) any resort or recourse to or against any security or
collateral now or hereafter pledged, assigned, or granted to the Lender under
the provisions of any instrument or agreement or otherwise assigned or
conveyed to it. If the Borrower fails to pay any of the Indebtedness, when
and as the same shall become due and payable (whether by acceleration,
declaration, extension or otherwise), the Guarantor shall on demand pay the
same to the Lender in immediately available funds, in lawful money of the
United States of America, at its address specified in or pursuant to Section 8
of this Agreement.
Section 2. Joint and Several Liability. The Guarantor hereby binds and
obligates said Guarantor and Guarantor's successors and assigns jointly and
severally with the Borrower and with the other Obligors for the full and
punctual payment and performance of all of the Indebtedness precisely as if
the same had been contracted and were due and owing by such Guarantor
personally. It is agreed and understood that the Guarantor shall be bound by
all the provisions of this Agreement and for the payment and performance of
the Indebtedness in the same manner as if it were the only person executing
this Agreement or guarantying the Indebtedness.
Section 3. Obligations Absolute. The obligations and liabilities of the
Guarantor under this Agreement are primary, joint and several obligations of
the Guarantor, are continuing, absolute, and unconditional, shall not be
subject to any counterclaim, recoupment, set-off, reduction, or defense based
upon any claim that the Guarantor may have against the Borrower or any of the
Obligors or that the Borrower may have against the Lender or any other party,
are independent of any other guaranty or guaranties at any time in effect with
respect to all or any part of the Indebtedness, and may be enforced regardless
of the existence of such other guaranty or guaranties. The obligations and
liabilities of the Guarantor under this Agreement shall not be affected,
impaired, lessened, modified, waived or released by the invalidity or
unenforceability of the Note or any or all of the Collateral Documents or by
the death of or bankruptcy, reorganization, dissolution, liquidation or
similar proceedings affecting the Borrower or the Guarantor or one or more of
the other Obligors or the sale or other disposition of all or substantially
all of the assets of any of the foregoing. The Guarantor hereby consents that
at any time and from time to time, the Lender may, without in any manner
affecting, impairing, lessening, modifying, waiving or releasing any or all of
the obligations and liabilities of the Guarantor under this Agreement, and
whether or not any of the following actions shall modify or affect the rights
of the Guarantor as to subrogation, reimbursement or indemnity against any
other parties (including the other Obligors), do any one or more of the
following, all without notice to, or further consent of, the Guarantor:
(a) renew, extend or otherwise change the time or terms for payment of
the principal of any of the Indebtedness or any renewals or extensions
thereof;
(b) extend or change the time or terms for performance of any other
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obligations, covenants or agreements of the Borrower or any of the Obligors;
(c) amend, compromise, release, terminate, waive, surrender, or otherwise
deal with in any manner satisfactory to the Lender:
(i) any or all of the provisions of the Note or any or all of the
Collateral Documents,
(ii) any or all of the Indebtedness,
(iii) any or all of the obligations and liabilities of the Borrower,
the Guarantor or one or all of the other Obligors under this Agreement, the
Note or any and all Collateral Documents (without remission of any part of the
Indebtedness) or any or all property or other security given at any time as
collateral by such Guarantor, the Borrower or any other Obligor, without
affecting, impairing, lessening or releasing any or all of the obligations and
liabilities of the Guarantor under this Agreement, and
(iv) any or all of the Obligors; and
(d) sell, assign, collect, substitute, exchange or release any or all
property or other security now or hereafter serving as collateral for any or
all of the Indebtedness or under any or all of the Collateral Documents;
(e) receive additional property or other security as collateral for any
or all of the Indebtedness;
(f) fail or delay to enforce, assert or exercise any right, power,
privilege or remedy conferred upon the Lender;
(g) grant consents or indulgences or take action or omit to take action
under, or in respect of, the Note and any or all of the Collateral Documents;
and
(h) apply any payment received by the Lender of, or on account of, any of
the Indebtedness from the Borrower, from any of the Obligors or from any
source other than the Guarantor to the Indebtedness in whatever order and
manner the Lender elects, and any payment received by the Lender from the
Guarantor (or any of them) for or on account of this Agreement may be applied
by the Lender to any of the Indebtedness in whatever order and manner the
Lender elects.
Section 4. Waiver by Guarantor. The Guarantor unconditionally waives: (a)
notice of the execution and delivery of the Loan Documents; (b) notice of the
Lender's acceptance of and reliance on this Agreement or of the creation of
any of the Indebtedness; (c) presentment, demand, dishonor, protest, notice of
non-payment and notice of dishonor of the Indebtedness, the Note and the
Collateral Documents; (d) notice of transfer or assignment of the Indebtedness
and this Agreement; and (e) all notices required by statute or otherwise to
preserve any rights against the Guarantor hereunder, including, without
limitation, any demand, proof, or notice of non-payment of any of the
Indebtedness by the Borrower or any of the Obligors and notice of any failure
or default on the part of the Borrower or any of the Obligors to perform or
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<PAGE> 83
comply with any term of any of the other documents.
Section 5. Subrogation. Until such time as the Indebtedness has been paid
and performed in full and the provisions of this Agreement are no longer in
effect, the Guarantor shall not exercise any right to subrogation,
reimbursement or contribution against the Borrower or other Obligor nor any
right to subrogation, reimbursement and indemnity against any property or
other security serving at any time as collateral for any or all of the
Indebtedness, all of which rights of subrogation, reimbursement, contribution
and indemnity the Guarantor jointly and severally subordinates to the full and
punctual payment and performance of the Indebtedness.
Section 6. Subordination. In the event that the Guarantor should for any
reason advance or lend monies to the Borrower, whether or not such funds are
used by the Borrower to make a payment under the Borrower's Indebtedness, the
Guarantor hereby agrees that any and all rights that the Guarantor may have or
acquire to collect from or to be reimbursed by the Borrower (or from or by any
other Obligor of the Borrower's Indebtedness), shall in all respects, whether
or not the Borrower presently is or subsequently becomes insolvent, be
subordinate to the rights of the Lender to collect and enforce the payment and
performance of the Borrower's Indebtedness, until such time as the
Indebtedness has been fully paid and performed and the provisions of this
Agreement are no longer in effect.
Section 7. Remedies. Upon the failure in the payment or performance of any
of the Indebtedness when due (whether by acceleration or otherwise) the Lender
may institute a judicial proceeding for the collection of the sums or the
performance of the Indebtedness so due and unpaid or unperformed, and may
prosecute such proceeding to judgment for final decree, and may enforce the
same against the Guarantor and collect the monies adjudged or decreed to be
payable in the manner provided by law out of the property of the Guarantor,
wherever situated. In the event of such a failure, the Lender shall have the
right to proceed first and directly against the Guarantor under this Agreement
without proceeding against the Borrower or any other person (including other
Obligors), without exhausting any other remedies which it may have and without
resorting to any other security held by the Lender.
Section 8. Notices. Any notice or demand which, by provision of this
Agreement, is required or permitted to be given or served by the Lender to or
on the Guarantor shall be deemed to have been sufficiently given and served
for all purposes (if mailed) three calendar days after being deposited,
postage prepaid, in the United States Mail, registered or certified mail, or
(if delivered by express courier) one business day after being delivered to
such courier, or (if delivered in person) the same day as delivery, in each
case addressed (until another address or addresses is given in writing by the
Guarantor to the Lender) as follows:
President Casinos, Inc.
802 North First Street
St. Louis, Missouri 63102
Attn: James A. Zweifel
4
<PAGE> 84
with copies to:
James W. O'Mara
Phelps Dunbar, L.L.P.
Suite 500, SkyTel Centre
200 South Lamar Street
Jackson, Mississippi 39225
Telephone: (601) 352-2720
Facsimile: (601) 360-9777
and
Virginia Boulet
Phelps Dunbar, L.L.P.
400 Poydras Street, 30th Floor
New Orleans, Louisiana 70130
Telephone: (504) 584-9286
Facsimile: (504) 568-9130
Any notice or demand which, by any provision of this Agreement, is required
or permitted to be given or served by the Guarantor to or on the Lender shall
be deemed to have been sufficiently given and served for all purposes (if
mailed) three calendar days after being deposited, postage prepaid, in the
United States Mail, registered or certified mail, or (if delivered by express
courier) one business day after being delivered to such courier, or (if
delivered in person) the same day as delivery, in each case addressed (until
another address or addresses are given in writing by the Lender to the
Guarantor) as follows:
American Gaming & Entertainment, Ltd.
One Woodland Avenue
Paramus, New Jersey 07652
Attn: J. Douglas Wellington
with copies to:
Robert A. Byrd, Esq.
Byrd & Wiser
P.O. Box 1939
Biloxi, MS 39533-1939
Telephone: (228) 432-8123
Facsimile: (228) 432-7029
Bobbie T. Shell, Esq.
Baker & Botts, L.L.P.
2001 Ross Ave., Ste. 700
Dallas, TX 75201
Telephone: (214) 953-6500
Facsimile: (214) 953-6503
5
<PAGE> 85
Shamrock Holdings Group, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Richard C. Breeden
Telephone: (315) 422-9000
Facsimile: (315) 422-9361
T. Glover Roberts, Esq.
Sheinfeld, Maley & Kay, P.C.
1700 Pacific Avenue, Suite 4400
Dallas, Texas 75201
Telephone: (214) 953-8019
Facsimile: (214) 953-8199
William S. Boyd, Esq.
P.O. Box 1326
Gulfport, MS 39502
Telephone: (228) 864-1915
Facsimile: (228) 864-1957
John Hedglin, Esq.
Rimmer, Rawlings, MacInnis
& Hedglin
1290 Deposit Guaranty Plaza
Jackson, MS 39201
Telephone: (601) 969-1030
Facsimile: (601) 969-1040
Douglas S. Draper, Esq.
Heller, Draper, Hayden, Horn, L.L.C.
650 Poydras Street
Suite 2500
New Orleans, La. 70130-6103
Telephone: (504) 568-1888
Facsimile: (504) 522-0949
Section 9. Amendment. Neither this Agreement nor any provisions thereof
may be changed, waived, discharged or terminated orally or in any manner other
than by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
Section 10. Waivers. No course of dealing on the part of the Lender, its
officers, employees, consultants or agents, nor any failure or delay by the
Lender with respect to exercising any of its rights, powers or privileges
under this Agreement shall operate as a waiver thereof.
Section 11. Cumulative Rights. The rights and remedies of the Lender under
this Agreement and the Note and the Collateral Documents shall be cumulative,
and the exercise or partial exercise of any such right or remedy shall not
preclude the exercise of any other right or remedy.
Section 12. Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, subsections or other divisions of this
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<PAGE> 86
Agreement are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section 13. Governing Law. This Agreement is a contract made under and
shall be construed in accordance with and governed by the laws of the United
States of America and the State of Mississippi.
Section 14. Termination. Upon full and final payment and performance of
the Indebtedness, this Agreement shall terminate. Notwithstanding the
foregoing, if at any time, any payment or part thereof to the Lender with
respect to any of the Borrower's Indebtedness is rescinded or must otherwise
be restored by the Lender pursuant to any insolvency, bankruptcy,
reorganization, receivership or any other debt relief granted to the Borrower
or to any other Obligor, this Agreement and the Guarantor's obligations and
liabilities hereunder shall automatically and retroactively be reinstated. In
the event that the Lender must rescind or restore any payment received in
total or partial satisfaction of the Borrower's Indebtedness, any prior
release or discharge from the terms of this Agreement and the Guarantor's
obligations and liabilities hereunder shall automatically and retroactively be
renewed and reinstated and shall remain in full force and effect to the same
degree and extent as if such release or discharge had never been granted. It
is the intention of the Guarantor, the Borrower and the Lender that the
Guarantor's obligations and liabilities hereunder shall not be discharged
except by the full and complete payment and performance of such Indebtedness,
and then only to the extent of such payment and performance.
Section 15. Successors and Assigns.
(a) All covenants and agreements contained by or on behalf of the
Guarantor in this Agreement shall bind the Guarantor's successors and assigns
and shall inure to the benefit of the Lender and its successors and assigns.
(b) This Agreement is for the benefit of the Lender and for such other
person or persons as may from time to time become or be the holders of any of
the Indebtedness, and this Agreement shall be transferrable and negotiable,
with the same force and effect and to the same extent as the Indebtedness may
be transferrable, it being understood that, upon the transfer or assignment by
the Lender of any of the Indebtedness, the legal holder of such Indebtedness
shall have all of the rights granted to the Lender under this Agreement.
IN WITNESS WHEREOF, the Guarantor has caused this Agreement to be duly
executed as of the date first written above.
PRESIDENT CASINOS, INC.
By: /s/ James A. Zweifel
---------------------------------------
Name: James A. Zweifel
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT 10.6
PRESIDENT CASINOS, INC.
1999 INCENTIVE STOCK PLAN
1. Purpose. The purpose of the President Casinos, Inc. 1999 Incentive Stock
Plan (the "Plan") is to encourage directors and key employees of President
Casinos, Inc. (the "Corporation") and such subsidiaries of the Corporation as
the Administrator (as defined below) designates, to acquire common stock, par
value $0.06 per share (the "Common Stock"), of the Corporation or to receive
monetary payments based on the value of such stock or based upon achieving
certain goals on a basis mutually advantageous to such directors and employees
and the Corporation and thus provide an incentive for directors and employees
to contribute to the success of the Corporation and align the interests of
directors and key employees with the interests of the stockholders of the
Corporation.
2. Administration. The Plan shall be administered by the Board of Directors
of the Corporation or the Compensation Committee or other committee of the
Board of Directors (the "Administrator").
The authority to select persons eligible to participate in the Plan, to grant
benefits in accordance with the Plan and to establish the timing, pricing,
amount and other terms and conditions of such grants (which need not be
uniform with respect to the various participants or with respect to different
grants to the same participant), may be exercised by the Administrator in its
sole discretion.
Subject to the provisions of the Plan, the Administrator shall have exclusive
authority to interpret and administer the Plan, to establish appropriate rules
relating to the Plan, to delegate some or all of its authority under the Plan
and to take all such steps and make all such determinations in connection with
the Plan and the benefits granted pursuant to the Plan as it may deem
necessary or advisable.
The Board of Directors in its discretion may delegate and assign specified
duties and authority of the Administrator to any other committee and retain
the other duties and authority of the Administrator to itself. Also, the
Board of Directors in its discretion may appoint a separate committee of
outside directors to make awards that satisfy the requirements of Section
162(m) of the Internal Revenue Code of 1986 (the "Code").
3. Shares Reserved Under the Plan. Subject to the provisions of Section 12
(relating to adjustment for changes in capital stock) there is hereby reserved
for issuance under the Plan an aggregate of 300,000 shares of Common Stock of
the Corporation, which may be authorized but unissued or treasury shares.
As used in this Section 3, the term "Plan Maximum" shall refer to the number
of shares of Common Stock of the Corporation that are available for grant of
awards pursuant to the Plan. Stock underlying outstanding options, stock
appreciation rights or performance awards will reduce the Plan Maximum while
such options, stock appreciation rights or performance awards are outstanding.
<PAGE> 88
Shares underlying expired, canceled or forfeited options, stock appreciation
rights or performance awards shall be added back to the Plan Maximum. When
the exercise price of stock options is paid by delivery of shares of Common
Stock of the Corporation, or if the Administrator approves the withholding of
shares from a distribution in payment of the exercise price, the Plan Maximum
shall be reduced by the net (rather than the gross) number of shares issued
pursuant to such exercise, regardless of the number of shares surrendered or
withheld in payment. If the Administrator approves the payment of cash to an
optionee equal to the difference between the fair market value and the
exercise price of stock subject to an option, or if a stock appreciation right
is exercised for cash or a performance award is paid in cash the Plan Maximum
shall be increased by the number of shares with respect to which such payment
is applicable. Restricted stock issued pursuant to the Plan will reduce the
Plan Maximum while outstanding even while subject to restrictions. Shares of
restricted stock shall be added back to the Plan Maximum if such restricted
stock is forfeited or is returned to the Corporation as part of a
restructuring of benefits granted pursuant to the Plan.
Notwithstanding the above, the maximum number of shares subject to stock
options that may be awarded in any calendar year to any individual shall not
exceed 150,000 shares (as adjusted in accordance with Section 12).
4. Participants. Participants will consist of such directors, officers and
key employees of the Corporation or any designated subsidiary as the
Administrator in its sole discretion shall determine. Designation of a
participant in any year shall not require the Administrator to designate such
person to receive a benefit in any other year or to receive the same type or
amount of benefit as granted to the participant in any other year or as
granted to any other participant in any year. The Administrator shall
consider such factors as it deems pertinent in selecting participants and in
determining the type and amount of their respective benefits.
5. Types of Benefits. The following benefits may be granted under the Plan:
(a) stock appreciation rights ("SARs"); (b) restricted stock ("Restricted
Stock"); (c) performance awards ("Performance Awards"); (d) incentive stock
options ("ISOs"); (e) nonqualified stock options ("NQSOs"); and (f) Stock
Units, all as described below.
6. Stock Appreciation Rights. A SAR is the right to receive all or a portion
of the difference between the fair market value of a share of Common Stock at
the time of exercise of the SAR and the exercise price of the SAR established
by the Administrator, subject to such terms and conditions set forth in a SAR
agreement as may be established by the Administrator in its sole discretion.
At the discretion of the Administrator, SARs may be exercised (a) in lieu of
the exercise of an option, (b) in conjunction with the exercise of an option,
(c) upon lapse of an option, (d) independent of an option or (e) each of the
above in connection with a previously awarded option under the Plan. If the
option referred to in (a), (b) or (c) above qualified as an ISO pursuant to
Section 422 of the Code, the related SAR shall comply with the applicable
provisions of the Code and the regulations issued thereunder. At the time of
grant, the Administrator may establish, in its sole discretion, a maximum
amount per share which will be payable upon exercise of a SAR, and may impose
conditions on exercise of a SAR. At the discretion of the Administrator,
2
<PAGE> 89
payment for SARs may be made in cash or shares of Common Stock of the
Corporation, or in a combination thereof. SARs will be exercisable not later
than ten years after the date they are granted and will expire in accordance
with the terms established by the Administrator.
7. Restricted Stock. Restricted Stock is Common Stock of the Corporation
issued or transferred under the Plan (other than upon exercise of stock
options or as Performance Awards) at any purchase price less than the fair
market value thereof on the date of issuance or transfer, or as a bonus,
subject to such terms and conditions set forth in a Restricted Stock agreement
as may be established by the Administrator in its sole discretion. In the
case of any Restricted Stock:
(a) The purchase price, if any, will be determined by the Administrator;
(b) The period of restriction shall be established by the Administrator;
(c) Restricted Stock may be subject to (i) restrictions on the sale or
other disposition thereof, (ii) rights of the Corporation to reacquire such
Restricted Stock at the purchase price, if any, originally paid therefor upon
termination of the service of a director or the employee's employment within
specified periods, (iii) representation by the director or employee that he or
she intends to acquire Restricted Stock for investment and not for resale and
(iv) such other restrictions, conditions and terms as the Administrator deems
appropriate;
(d) The participant shall be entitled to all dividends paid with respect to
Restricted Stock during the period of restriction and shall not be required to
return any such dividends to the Corporation in the event of the forfeiture of
the Restricted Stock;
(e) The participant shall be entitled to vote the Restricted Stock during
the period of restriction; and
(f) The Administrator shall determine whether Restricted Stock is to be
delivered to the participant with an appropriate legend imprinted on the
certificate or if the shares are to be issued in the name of a nominee or
deposited in escrow pending removal of the restrictions.
8. Performance Awards. Performance Awards are Common Stock of the
Corporation, monetary units or some combination thereof, to be issued without
any payment therefor, in the event that certain performance goals established
by the Administrator are achieved over a period of time designated by the
Administrator, but not in any event more than five years. The goals
established by the Administrator may include return on average total capital
employed, earnings per share, increases in share price or such other goals as
may be established by the Administrator. In the event the minimum corporate
goal is not achieved at the conclusion of the period, no payment shall be made
to the participant. Actual payment of the award earned shall be in cash or in
Common Stock of the Corporation or in a combination of both, as the
Administrator in its sole discretion determines. If Common Stock of the
Corporation is used, the participant shall not have the right to vote and
receive dividends until the goals are achieved and the actual shares are
issued.
9. Incentive Stock Options. ISOs are stock options to purchase shares of
Common Stock at not less than 100% of the fair market value of the shares on
3
<PAGE> 90
the date the option is granted, subject to such terms and conditions set forth
in an option agreement as may be established by the Administrator in its sole
discretion that conform to the requirements of Section 422 of the Code. ISOs
shall only be granted to participants who are employees of the Company as
required under Section 422 of the Code. The purchase price may be paid (a) by
check, (b), in the discretion of the Administrator, by the delivery of shares
of Common Stock of the Corporation owned by the participant for at least six
months, or (c), in the discretion of the Administrator, by a combination of
any of the foregoing, in the manner provided in the option agreement. The
aggregate fair market value (determined as of the time an option is granted)
of the stock with respect to which ISOs are exercisable for the first time by
an optionee during any calendar year (under all option plans of the
Corporation and its subsidiary corporations) shall not exceed $100,000.
10. Nonqualified Stock Options. NQSOs are nonqualified stock options to
purchase shares of Common Stock at purchase prices established by the
Administrator on the date the options are granted, subject to such terms and
conditions set forth in an option agreement as may be established by the
Administrator in its sole discretion. The purchase price may be paid (a) by
check, (b), in the discretion of the Administrator, by the delivery of shares
of Common Stock of the Corporation owned by the participant for at least six
months, or (c), in the discretion of the Administrator, by a combination of
any of the foregoing, in the manner provided in the option agreement. NQSOs
granted after the date of stockholder approval of the Plan shall be
exercisable no later than ten years after the date they are granted.
11. Stock Units. A Stock Unit represents the right to receive a share of
Common Stock from the Corporation at a designated time in the future, subject
to such terms and conditions set forth in a Stock Unit agreement as may be
established by the Administrator in its sole discretion. The participant
generally does not have the rights of a stockholder until receipt of the
Common Stock. The Administrator may in its sole discretion provide for
payments in cash, or an adjustment in the number of Stock Units, equivalent to
the dividends the participant would have received if the participant had been
the owner of shares of Common Stock instead of the Stock Units.
12. Adjustment Provisions.
(a) If the Corporation shall at any time change the number of issued shares
of Common Stock without new consideration to the Corporation (such as by stock
dividends or stock splits), the total number of shares reserved for issuance
under the Plan and the number of shares covered by each outstanding benefit
shall be adjusted so that the aggregate consideration payable to the
Corporation, if any, and the value of each such benefit shall not be changed.
Benefits may also contain provisions for their continuation or for other
equitable adjustments after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation, issuance of stock rights or
warrants or similar occurrence.
(b) Notwithstanding any other provision of the Plan, and without affecting
the number of shares reserved or available hereunder, the Board of Directors
may authorize the issuance or assumption of benefits in connection with any
merger, consolidation, acquisition of property or stock or reorganization upon
such terms and conditions as it may deem appropriate.
13. Nontransferability. Each benefit granted under the Plan to a director or
an employee shall not be transferable otherwise than by will or the laws of
4
<PAGE> 91
descent and distribution; provided, however, NQSOs granted under the Plan may
be transferred, without consideration, to a Permitted Transferee (as defined
below). Benefits granted under the Plan shall be exercisable, during the
participant's lifetime, only by the participant or a Permitted Transferee. In
the event of the death of a participant, exercise or payment shall be made
only:
(a) By or to the Permitted Transferee, executor or administrator of the
estate of the deceased participant or the person or persons to whom the
deceased participant's rights under the benefit shall pass by will or the laws
of descent and distribution; and
(b) To the extent that the deceased participant or the Permitted
Transferee, as the case may be, was entitled thereto at the date of his death.
For purposes of this Section 13, "Permitted Transferee" shall include (i) one
or more members of the participant's family, (ii) one or more trusts for the
benefit of the participant and/or one or more members of the participant's
family or (iii) one or more partnerships (general or limited), corporations,
limited liability companies or other entities in which the aggregate interests
of the participant and members of the participant's family exceed 80% of all
interests. For this purpose, the participant's family shall include only the
participant's spouse, children and grandchildren.
14. Taxes. The Corporation shall be entitled to withhold the amount of any
tax attributable to any amounts payable or shares deliverable under the Plan
after giving the person entitled to receive such payment or delivery notice as
far in advance as practicable, and the Corporation may defer making payment or
delivery as to any benefit if any such tax is payable until indemnified to its
satisfaction. The person entitled to any such delivery may, by notice to the
Corporation at the time the requirement for such delivery is first
established, elect to have such withholding satisfied by a reduction of the
number of shares otherwise so deliverable, such reduction to be calculated
based on a closing market price on the date of such notice.
15. Tenure. A participant's right, if any, to continue to serve the
Corporation and its subsidiaries as a director, officer, employee or otherwise
shall not be enlarged or otherwise affected by his or her designation as a
participant under the Plan.
16. Duration, Interpretation, Amendment and Termination. No benefit shall be
granted more than ten years after the date of adoption of the Plan; provided,
however, that the terms and conditions applicable to any benefit granted
within such period may thereafter be amended or modified by mutual agreement
between the Corporation and the participant or such other person as may then
have an interest therein. Also, by mutual agreement between the Corporation
and a participant hereunder, stock options or other benefits may be granted to
such participant in substitution and exchange for, and in cancellation of, any
benefits previously granted such participant under the Plan. To the extent
that any stock options or other benefits which may be granted within the terms
of the Plan would qualify under present or future laws for tax treatment that
is beneficial to a recipient, then any such beneficial treatment shall be
considered within the intent, purpose and operational purview of the Plan and
the discretion of the Administrator, and to the extent that any such stock
options or other benefits would so qualify within the terms of the Plan, the
Administrator shall have full and complete authority to grant stock options or
other benefits that so qualify (including the authority to grant,
simultaneously or otherwise, stock options or other benefits which do not so
5
<PAGE> 92
qualify) and to prescribe the terms and conditions (which need not be
identical as among recipients) in respect to the grant or exercise of any such
stock option or other benefits under the Plan. The Board of Directors may
amend the Plan from time to time or terminate the Plan at any time. However,
no action authorized by this paragraph shall reduce the amount of any existing
benefit or change the terms and conditions thereof without the participant's
consent. No amendment of the Plan shall, without approval of the stockholders
of the Corporation, (a) increase the total number of shares which may be
issued under the Plan or increase the amount or type of benefits that may be
granted under the Plan or (b) modify the requirements as to eligibility for
benefits under the Plan.
17. Effective Date. The Plan shall become effective as of the date it is
adopted by the Board of Directors of the Corporation subject only to approval
by the holders of a majority of the outstanding voting stock of the
Corporation within twelve months after the adoption of the Plan by the Board
of Directors.
<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-28-2000
<PERIOD-END> AUG-31-1999
<CASH> 20916
<SECURITIES> 275
<RECEIVABLES> 1572
<ALLOWANCES> 293
<INVENTORY> 1869
<CURRENT-ASSETS> 27675
<PP&E> 212292
<DEPRECIATION> 66637
<TOTAL-ASSETS> 175424
<CURRENT-LIABILITIES> 65672
<BONDS> 100464
0
0
<COMMON> 302
<OTHER-SE> (8922)
<TOTAL-LIABILITY-AND-EQUITY> 175424
<SALES> 0
<TOTAL-REVENUES> 107058
<CGS> 0
<TOTAL-COSTS> 99263
<OTHER-EXPENSES> 691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9812
<INCOME-PRETAX> (2412)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2412)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2412)
<EPS-BASIC> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
