RIVERBOAT CASINO SALE AND PURCHASE AGREEMENT

 

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                                                               EXHIBIT 2

 

                                                                EXECUTION COPY

 

                 RIVERBOAT CASINO SALE AND PURCHASE AGREEMENT

 

  THIS RIVERBOAT CASINO SALE AND PURCHASE AGREEMENT ("Agreement") dated as

of the 30th day of September, 2004, by and among President Casinos, Inc.,

debtor and debtor-in-possession ("Seller") in a chapter 11 bankruptcy case,

Case No. 02-53005 (the "Seller Case") pending in the United States

Bankruptcy Court for the Eastern District of Missouri (the "Bankruptcy

Court"), President Riverboat Casino-Missouri, Inc., a Missouri corporation

(the "Company") and Columbia Sussex Corporation, a Kentucky corporation

("Buyer").

 

                                  BACKGROUND:

 

A. Seller is the owner of all of the Closing Shares (as herein defined) of

the Company, which is also a debtor and debtor-in-possession in a chapter 11

bankruptcy case that is jointly administered with the Seller Case (the

"Company Case" and, collectively with the Seller Case, the "Case").

 

B. The Company is the owner and operator of a riverboat casino, located on

the Mississippi River riverfront in St. Louis, Missouri and moored to a

barge known as Admiral Barge One and connected by a porte-cochere

(collectively, the "Riverboat Casino"), more particularly described as:

 

                     Name:             The Admiral

                     Official No.:     204086

 

                     Name:             Admiral Barge One

                      Official No.:     689603

 

C. An official committee of unsecured creditors (the "Committee") has been

appointed in the Company Case pursuant to section 1102 of the United States

Bankruptcy Code (the "Bankruptcy Code");

 

D. Seller, with the support of the Committee and certain holders of Seller's

12% Senior Notes due 2001 and 13% Senior Notes due 2001 (the "Bondholders"),

desires to sell, and Buyer desires to purchase, the Closing Shares upon the

terms and conditions set forth in this Agreement and subject to further

action of the Bankruptcy Court;

 

E. Seller, Company and Penn National Gaming, Inc. ("Penn") have previously

entered into that certain Riverboat Casino Sale and Purchase Agreement dated

as of the 9th day of August, 2004, certain provisions of which were

initially reviewed by the Bankruptcy Court at a hearing on September 8,

2004, and subsequently Seller, Buyer and Company amended and restated such

agreement in its entirety to reflect certain mutually-acceptable changes

thereto (as amended and restated, the "Penn Purchase Agreement");

 

F. Following execution of the Penn Purchase Agreement, Seller and the

Company sought authority from the Bankruptcy Court to hold an auction at

which Penn's offer for the Closing Shares shall be subject to higher and

better offers of third parties;

 

G. The Bankruptcy Court granted such authority and pursuant thereto a Notice

 

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of Auction and Bidding Procedures and Hearing to Consider Approval of Sale

("Notice of Auction") was issued setting forth the process, procedures and

timing of (i) submission by third Persons of higher and better offers, (ii)

qualification of all such third parties as qualified bidders and (iii) the

actual auction and Sale Order that is to be administered and issued by the

Bankruptcy Court; and

 

H. Pursuant to the provisions of the Notice of Auction, Buyer is hereby

submitting an executed sale and purchase agreement to purchase the Closing

Shares upon the terms and conditions set forth herein.

 

  NOW, THEREFORE, in consideration of the mutual covenants and promises

contained herein and other good and valuable consideration, the receipt and

adequacy of which hereby is acknowledged, and with the intent to be legally

bound hereby, the parties agree as follows:

 

  1. PURCHASE AND SALE OF CLOSING SHARES; RIVERBOAT CASINO ASSETS OWNED BY

THE COMPANY; TRADEMARK LICENSE.

 

    (a) Closing Shares to be Sold. Subject to the provisions of this

Agreement, Seller agrees to sell and Buyer agrees to purchase, all of

Seller's right, title and interest in, to and under the Closing Shares, free

and clear of any lien, mortgage, security interest, pledge, encroachment,

easement, defect of title or other claim, charge or encumbrance of any

nature whatsoever, or any restriction on transferability, option, right of

first refusal, or restriction on the use, voting, transfer, receipt of

income or other exercise of any attributes of ownership (in each case other

than under Applicable Law) (collectively, "Encumbrances").

 

    (b) Riverboat Casino Assets Owned by the Company. Immediately following

the Closing, the Company shall have good and marketable title to all assets,

properties and rights owned by the Company or otherwise material to the

operation of the Riverboat Casino wherever such assets, properties and

rights are located, and whether real, personal or mixed, tangible or

intangible, except the Excluded Assets (as defined in Section 9(c)(vii)

below) (collectively, the "Riverboat Casino Assets"), which Riverboat Casino

Assets, to the maximum extent permitted under Section 1141(c) of the

Bankruptcy Code, will be free and clear of all claims and interests of

creditors of the Company, other than the Company Liabilities. Such Riverboat

Casino Assets shall include, but in no way be limited to, the following

assets and properties of the Company:

 

      (i) the Riverboat Casino, together with its furniture, fixtures,

equipment, necessaries, uniforms, apparel, inventory held for resale (other

than Gift Shop Inventory and Food Inventory), supplies held for consumption,

life saving equipment (including life boats and inflatable boats), spare

parts, radio equipment, crockery, plates, cutlery and other similar items,

cordage, general outfit and all other appurtenances and appliances belonging

to the Riverboat Casino, and the Company's parking and transportation

shuttles and other vehicles, whether aboard the Riverboat Casino or on shore

at the time of Closing;

 

      (ii) all of the Company's right, title and interest in and to (A) the

Lease and Sublease among the Company, the City of St. Louis, Missouri and

The Port Authority of the City of St. Louis (the "City Lease") and such

other executory leases, subleases, easements, licenses, concessions or other

 

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agreements made for the benefit of the Company listed or described on

Schedule 1(b)(ii), whether written or oral, granting to any person the right

to use or occupy real property (the "Parking Leases"; the City Lease and the

Parking Leases are collectively, the "Real Property Leases"), (B) the

Company's collective bargaining agreement with Hotel Employees, Restaurant

Employees Local 74, AFL-CIO and (C) other executory leases or contracts

either (I) listed on Schedule 1(b)(ii) or (II) entered into after the date

of this Agreement in compliance with the provisions hereof and designated in

writing by Buyer as an "Assumed Executory Lease and Executory Contract" by

no later than three (3) business days after the date on which the Company

Plan of Reorganization (as defined in Section 9(c) below) is filed

(collectively, the "Assumed Executory Leases and Executory Contracts");

 

      (iii) all gambling games, slot machines, tables and other gaming

equipment that are used by the Company in the operation of the Riverboat

Casino, together with the Company's inventory of gaming chips, tokens,

scrip, markers, gaming supplies and other items held for use by the Company

at the Riverboat Casino in the ordinary course of business;

 

      (iv) all cash in cashiers' cages, vaults, carts, drawers, cash

registers and gaming devices and machines ("Included Cash"), which amount

shall be no less than $3,000,000 on the Closing Date; (v)all food processing

and preparation and washing equipment, machines and fixtures, racks, trays,

buffet tables, furniture, flatware, serving ware, utensils, uniforms,

napkins, linens and other tangible personal property held by the Company for

use in connection with its food service and dining facilities at the

Riverboat Casino

 

      (vi) to the extent relating to the Company's marketing and operation

of the Riverboat Casino, all books, records, files and papers, whether in

hard copy or computer format, including books of account, sales and

promotional literature, manuals and data, sales and purchase correspondence,

lists of present and former suppliers, personnel and employment records of

present or former employees, documentation developed or used for accounting

or, marketing purposes;

 

      (vii) all of the Company's right, title and interest in and to each of

the following and all copies and other tangible embodiments thereof: (A) the

"Admiral" name and all variants and derivations thereof, and all other

fictitious business names, trademarks (registered and unregistered), service

marks, trade dress, logos, trade names and the goodwill of the Company's

business associated therewith, and all applications, extensions,

registrations, and renewals in connection therewith but excluding Seller's

Trademarks (as defined in Section 1(c) below), which may only be used by

Buyer pursuant to and in accordance with Section 1(c) hereof, (B) all

copyrightable works, all copyrights, and all applications, registrations and

renewals in connection therewith in both published works and unpublished

works and (C) all trade secrets and confidential and other business

information (including ideas, research and development, know-how, formulas,

works for hire, gaming, security and food service processes and techniques,

market research, tracking methods, census reports, designs, drawings,

specifications and business and marketing plans and proposals)

(collectively, "Intellectual Property");

 

      (viii) all of the Company's transferable right, title and interest in

and to licenses, permits, franchises, zoning rights, approvals,

registrations, consents and authorizations used in, or necessary to the

operation of the

 

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Riverboat Casino as presently operated or the other Riverboat Casino Assets,

including those listed in Schedule 6(i) (collectively "Gaming Licenses");

 

      (ix) all of the Company's right, title and interest in and to all post

office boxes, e-mail addresses, telephone and facsimile numbers and domain

names held for use in connection with the operation of the Riverboat Casino;

 

      (x) all computer software, proprietary or otherwise (including data

and related documentation), sales and promotional literature, manuals,

customer and supplier correspondence, plats, architectural plans, drawings,

designs, blueprints, specifications and studies that are owned or used in

connection with the operation of the Riverboat Casino, in all cases in any

form or medium, other than the Excluded Software;

 

      (xi) all know-how, trade secrets, customer lists and customer and

supplier information, personnel information, technical information, process

technology, plans, drawings, innovations, designs, ideas, proprietary,

blueprints and information and other information, including player tracking

information related to Riverboat Casino Assets, and fixed asset, general

ledger and risk management data (the Company will provide Buyer with

assistance to incorporate the fixed asset, general ledger and risk

management data into Buyer's computer systems) owned or used by the Company

in connection with the operation of the Riverboat Casino;

 

      (xii) all prepaid expenses relating to the Riverboat Casino ("Prepaid

Expenses");

 

      (xiii) all accounts receivable and related deposits, security, or

collateral therefor, including recoverable customer deposits and receivables

(collectively, the "Receivables");

 

      (xiv) all security deposits deposited by or on behalf of the Company

as lessee or sublessee under the Assumed Executory Leases and Executory

Contracts existing on the Closing Date and all deposits of the Company with

utilities and other providers of services to the Riverboat Casino (the

"Security Deposits");

 

      (xv) all of the Company's rights to any indemnity payments relating to

the Riverboat Casino Assets held by the Company; and

 

      (xvi) any credits, carryforwards, operating losses and other

attributes related to Taxes, but excluding any refunds for Taxes described

in Section 9(c)(vii)(11) below.

 

    (c) Trademark License. In further consideration of the payment of the

Purchase Price, and the mutual covenants under this Agreement, Seller grants

to Buyer a non-exclusive, fully paid-up right and license to use the names

"President", "President Riverboat Casino" and other related trademarks and

services marks of Seller (collectively, the "Seller's Trademarks") under the

common law and under any trademark or service mark registrations in

connection with the Riverboat Casino Assets within a one hundred fifty mile

radius of the St. Louis, Missouri city limits (the "Trademark License").

Seller agrees that during the term of the Trademark License, Seller will not

license the use of Seller's Trademarks to any other Person. The Trademark

License shall be effective for a period of one year from the Closing Date.

Upon expiration of the Trademark License, Buyer will cease all further use

of Seller's Trademarks

 

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and Buyer will have no further rights thereto. Any termination or expiration

of the Trademark License shall not terminate or otherwise affect any other

provision of this Agreement. As used herein, "Person" means any natural

person, business trust, corporation, partnership, limited liability company,

joint stock company, proprietorship, association, trust, joint venture,

unincorporated association or any other legal entity of whatever nature.

 

  2. Consideration.

 

  (a) Purchase Price. The aggregate consideration to be paid by Buyer to

Seller for the Closing Shares shall be the payment of a cash amount equal to

(A) Twenty Nine Million Dollars ($29,000,000), less (B) the Deficiency, if

any, plus (C) the Surplus, if any (the "Purchase Price"). The Purchase Price

shall be payable as follows: (i) Buyer is paying a refundable $1,000,000

cash deposit (the "Deposit") by wire transfer of immediately available funds

to an escrow account (the "Escrow Account") held by U.S. Bank National

Association as escrow agent under an Escrow Agreement in substantially the

form attached hereto as Exhibit A (the "Escrow Agreement") within three (3)

days of the execution of this Agreement; and (ii) on the Closing Date, (x)

the Deposit (with interest accrued thereon, if any) shall be paid over to

Seller from the Escrow Account and (y) Buyer shall pay the Purchase Price,

less the Deposit (plus interest accrued thereon, if any), by wire transfer

of immediately available funds to such account or accounts as Seller shall

direct. The Purchase Price shall be subject to adjustment by (A) the

prorations set forth in Section 2(b) and (B) the payment of any Cure Amounts

(as defined below) by Buyer in accordance with Section 2(c). If Buyer

increases the amount of the cash consideration offered for the Closing

Shares or otherwise modifies the terms and conditions of its bid as set

forth in this Agreement in order to outbid a proponent of a higher and

better offer, then the Purchase Price shall automatically be increased by an

equal amount and/or the terms and conditions hereof shall be automatically

modified and, if Buyer is the successful bidder, Buyer and Seller shall

execute a written instrument to memorialize such increased Purchase Price

(and change in form of consideration, as applicable) and such modifications

to the terms and conditions hereof. All interest and other earnings on the

Deposit shall, whether or not the Closing occurs, be the property of Buyer.

In the event that (I) Seller or the Company (as applicable) completes a sale

of the Closing Shares and/or the Riverboat Casino Assets to a Person other

than Buyer or its affiliate, or (II) the conditions to Buyer's obligations

are not fulfilled or waived and the sale of the Closing Shares to Buyer has

not occurred on or before August 1, 2005, in any case, for any reason other

than the breach by Buyer of its obligations under this Agreement, then the

Deposit, with interest accrued thereon, if any, shall be immediately

returned to Buyer. If (1) all conditions set forth in Section 4 hereof have

been satisfied (or on the Closing Date will be satisfied) or waived by Buyer

and (2) Buyer breaches its obligation to purchase the Closing Shares, then

the Deposit (excluding interest accrued thereon, if any, which interest

shall in any event be returned to Buyer) shall be forfeited to Seller, but

without prejudice to any legal remedy for money damages Seller may have, if

any, against Buyer as a result of such breach, provided, however, that

Seller's legal remedies hereunder shall be limited exclusively to money

damages, and, provided, further, that in no event shall Seller have the

right to specific performance or any other equitable remedy against Buyer in

connection with this Agreement or the transactions contemplated hereby.

 

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    (b) Costs and Prorations.

 

      (i) To the extent applicable, all transfer, recording or similar taxes

and fees and expenses incurred in connection with redocumentation of the

Admiral and Admiral Barge One with the United States Coast Guard shall be

borne by Seller, and Seller hereby undertakes to timely remit all such

amounts to the applicable authority and to prepare and file all proper

returns and reports with respect thereto.

 

      (ii) All real and personal property taxes and assessments, rents,

water rates and charges, electric, gas and telephone charges and all other

apportionable operating costs and charges and expenses with respect to the

Riverboat Casino Assets will be apportioned and adjusted between Seller and

Buyer as of the Closing, provided that if the Closing will occur before the

tax rate or assessment is fixed for the year in which the Closing takes

place, the apportionment of such real and personal property taxes will be

made upon the basis of the tax rate for the preceding year applied to the

latest assessed valuation, but such apportionment will be readjusted as soon

as the applicable rate and assessment is fixed. Seller and Buyer at Closing

shall execute and deliver a closing statement reflecting their reasonable

estimate of the prorations of expenses described above in a form reasonably

satisfactory to each party. Any net proration due to Buyer will reduce the

Purchase Price, and any net proration due to Seller will increase the

Purchase Price. To the extent adjustments cannot be determined as of

Closing, the parties agree to make such post Closing adjustments (by the

reduction or increase of the Purchase Price and payment of such increase in

cash to Seller, as applicable) as are appropriate and to resolve open items

within sixty (60) days after the Closing.

 

    (c) Cure Amounts. Seller hereby agrees that it shall be solely

responsible for all cure amounts payable under Bankruptcy Code Section 365

to the extent necessary for the Company to assume the Assumed Executory

Leases and Executory Contracts ("Cure Amounts"). Seller at its sole option

shall either pay all such Cure Amounts in cash no later than Closing, or

shall direct Buyer in writing to pay such Cure Amounts out of the Purchase

Price (with a corresponding reduction thereof) otherwise required by this

Agreement to be paid to Seller, in which case Buyer shall pay such Cure

Amounts at Closing.

 

    (d) Determination of Surplus or Deficiency; Post-Closing Purchase Price

Adjustment.

 

      (i) On or before the fifth (5th) Business Day preceding the Closing

Date, Seller shall prepare and deliver to Buyer an interim balance sheet

(the "Estimated Closing Balance Sheet") of Company as of the close of

business on the final day of the calendar month immediately preceding the

calendar month during which the Closing Date occurs (the "Test Month"),

together with a statement of Company's Net Current Assets as of such date

calculated in accordance with generally accepted accounting principles

("GAAP") and the accounting practices of Company applied on a consistent

basis; provided that if the Closing Date occurs within the first fifteen

(15) Business Days of a calendar month, the Estimated Closing Balance Sheet

shall be prepared as of the close of business on the final day of the second

calendar month immediately preceding the calendar month during which the

Closing Date occurs (the "Test Month"). The amount of Net Current Assets set

forth in the Estimated Closing Balance Sheet shall be final and binding for

purposes of

 

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determining the amount of any Surplus or Deficiency used in calculating the

Purchase Price, unless Buyer delivers in good faith a written statement that

Buyer objects to the calculation of Net Current Assets at least two (2)

Business Days prior to the anticipated Closing Date (the "Objection Notice")

together with Buyer's determination of the Net Current Assets as of the Test

Month. Seller shall make available to Buyer and its representatives the

books, records and workpapers used to prepare the Estimated Closing Balance

Sheet. In the event of an Objection Notice, Seller and Buyer shall negotiate

in good faith during the period preceding the Closing Date to resolve the

dispute. If the dispute is not resolved by the specified Closing Date, (A)

Buyer shall pay the Purchase Price at the Closing based upon the amount of

any Deficiency or Surplus, as applicable, calculated with reference to the

Net Current Assets as determined by Buyer, and (B) Buyer shall deposit into

escrow pursuant to the Escrow Agreement, an amount equal to the Purchase

Price based upon the amount of any Deficiency or Surplus, as applicable,

calculated with reference to the Net Current Assets set forth in the

Estimated Balance Sheet as prepared by Seller, less the amount of the

Purchase Price paid by Buyer at the Closing in accordance with clause (A)

above. "Surplus" means the amount, if any, by which Net Current Assets as

determined in accordance with this Section 2(d)(i) is a positive number and

"Deficiency" means the amount, if any, by which Net Current Assets as

determined in accordance with this Section 2(d)(i) is a negative number.

 

      (ii) As promptly as practicable after the Closing Date, but in no

event more than sixty (60) days after the Closing Date (such date on which

the Closing Balance Sheet is delivered, the "Closing Financial Statements

Delivery Date"), Buyer will prepare and deliver to Seller a balance sheet of

Company as of the close of business on the day immediately preceding the

Closing Date (the "Closing Balance Sheet") and a calculation of Net Current

Assets, each in accordance with GAAP and the accounting practices of Seller

applied on a consistent basis. The Closing Balance Sheet and the calculation

of the Net Current Assets shall be accompanied by a certificate of an

officer of Buyer to the effect that the Closing Balance Sheet presents

fairly, in accordance with GAAP and the accounting practices of Company

applied on a consistent basis, the financial condition of Company as of the

close of business on the day immediately preceding the Closing Date.

 

      (iii) Seller and its financial advisors and/or accountants (the

"Seller's Advisors") will be entitled to reasonable access during normal

business hours to the relevant records, personnel and working papers of the

Buyer to aid in their review of the Closing Balance Sheet and the

calculation of Net Current Assets therefrom. The Closing Balance Sheet and

the calculation of Net Current Assets therefrom shall be deemed to be

accepted by Seller and shall be conclusive for the purposes of the

adjustment described in Section 2(d)(iv) and (v) except to the extent, if

any, that Seller or Seller's Advisors shall have delivered, within thirty

(30) days after the Closing Financial Statements Delivery Date, a written

notice to Buyer setting forth objections thereto, specifying in reasonable

detail any such objection (it being understood that any amounts not disputed

as provided herein shall be paid promptly). If a change proposed by Seller

is disputed by Buyer, then Buyer and Seller shall negotiate in good faith to

resolve such dispute. If, after a period of thirty (30) days following the

date on which Seller gives Buyer notice of any such proposed change, any

such proposed change still remains disputed, then Buyer and Seller hereby

agree that a nationally recognized accounting firm reasonably and mutually

acceptable to Buyer and Seller (the "Accounting Firm") shall resolve any

remaining disputes. The

 

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Accounting Firm shall act as an arbitrator to make a determination with

respect to the issues that are disputed by the parties, based on

presentations by Seller and Buyer, and by independent review of the

Accounting Firm if deemed necessary in the sole discretion of the Accounting

Firm, which determination shall be limited to only those issues still in

dispute. The decision of the Accounting Firm shall be final and binding and

shall be in accordance with the provisions of this Section 2(d)(iii). The

fees and expenses of the Accounting Firm, if any, shall be shared equally by

Buyer and Seller. The date on which the Net Current Assets is finally

determined pursuant to this Section 2(d)(iii) is referred to hereinafter as

the "Determination Date."

 

      (iv) If the amount of Net Current Assets used to calculate the

Purchase Price paid at Closing pursuant to Section 2(d)(i)(A) above is

greater than the amount of Net Current Assets as determined pursuant to

Section 2(d)(iii) above, Seller shall pay to Buyer, as an adjustment to the

Purchase Price, an amount equal to such difference. Any payments required to

be made by Seller pursuant to this Section 2(d)(iv) shall be made within ten

(10) days of the Determination Date by wire transfer of immediately

available funds to an account designated by Buyer.

 

      (v) If the amount of Net Current Assets used to calculate the Purchase

Price paid at Closing pursuant to Section 2(d)(i)(A) above is less than the

amount of Net Current Assets as determined pursuant to Section 2(d)(iii)

above, Buyer shall pay to Seller, as an adjustment to the Purchase Price, an

amount equal to such difference. Any payments required to be made by Buyer

pursuant to this Section 2(d)(v) shall be made within ten (10) days of the

Determination Date first, by payment to Seller of amounts deposited into the

Escrow Account pursuant to Section 2(d)(i)(B) and then, to the extent of any

additional payment required to be made by Buyer, by wire transfer of

immediately available funds to an account designated by Buyer. Any balance

remaining in the Escrow Account after payment of amounts required to be paid

to Seller under this subsection shall be immediately returned to Buyer.

 

(vi)For purposes of this Section 2(d), "Net Current Assets" means the

difference between (A) the sum of (1) Included Cash, (2) Prepaid Expenses,

(3) Security Deposits, (4) Receivables, (5) fifty percent (50%) of Seller's

direct cost (including freight) of slot machines newly installed at the

Riverboat Casino within six months prior to Closing, provided such purchase

and installation is approved in advance and in writing by Buyer, and (6)

seventy-five percent (75%) of Seller's direct cost (including freight) of

the Windows-CDS software and TiTo integrated gaming system ("Tito Assets")

referred to in, and in accordance with, the Motion for Authorization to

Purchase and Implement Certain Gaming Systems and Equipment filed with the

Bankruptcy Court on July 9, 2004, provided such purchase does not exceed

$1,829,000 in the aggregate, over (B) the sum of (1) Accounts Payable and

(2) Accrued Expenses and Deferred Obligations. Notwithstanding Buyer's

approval of items set forth in clauses (5) or (6) above, Buyer shall in no

way become liable for the payment of any such amounts unless and until the

Closing shall have occurred, in which case the adjustments provided for in

this Section 2(d) shall apply.

 

  3. COMPANY LIABILITIES. Buyer acknowledges that on and following the

Closing, the Riverboat Casino Assets will be subject to the following

Liabilities (the "Company Liabilities"), which obligations shall remain the

obligations of the Company:

 

    (a) subject to Seller's obligations under Section 2(c), all of the

 

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Company's respective obligations under the Assumed Executory Leases and

Executory Contracts (but not including obligations arising out of a Default

thereunder prior to the Closing), to the extent such obligations accrue from

and after the date of the Closing (the term "Default", as used herein,

meaning (i) a breach, default or violation, (ii) the occurrence of an event

that with or without the passage of time or the giving of notice, or both,

would constitute a breach, default or violation or cause an Encumbrance to

arise, or (iii) with respect to any Contract, the occurrence of an event

that with or without the passage of time or the giving of notice, or both,

would give rise to a right of termination, renegotiation or acceleration or

a right to receive damages or a payment of penalties);

 

    (b) all of the Company's respective obligations with respect to accounts

payable arising on or after June 20, 2002, the Case petition date, and

existing on the Closing Date, excluding the Administrative Claims for

professional fees (the "Accounts Payable"); and

 

    (c) (i) the accrued liability of the Company as of Closing to pay the

ultimate winnings owed to individuals playing the Company's progressive slot

machines and games primary progressive reserve, games reserve for top

awards, slots reserve for top awards (it being agreed that the progressive

slot liability shall be determined by a meter reading by Buyer and Seller at

Closing); (ii) poker progressive reserve of the Company; (iii) gift shop

certificate liability of the Company; (iv) the Company's lost and found

money; (v) the Company's customer safekeeping deposits; (vi) players club

accrual (or other outstanding complementaries) of the Company; (vii)

outstanding chips/tokens of the Company; (viii) the Company's employee

benefit accruals for holiday, vacation, personal day, sick day and severance

benefits, all as determined in accordance with good and customary gaming

practice; and (ix) all obligations of the Company with respect to other

accrued expenses existing on the Closing Date (collectively, "Accrued

Expenses and Deferred Obligations").

 

Following the Closing, neither Buyer nor the Company will assume or

otherwise have any responsibility with respect to any other Liability of

Seller or the Company not expressly included within the definition of

Company Liabilities, including the Excluded Liabilities, provided that Buyer

acknowledges it shall have no monetary recourse against Seller with respect

to any such other Liability in accordance with the provisions of Section 14.

 

  4. BUYER'S CONDITIONS. Buyer's obligation to purchase the Closing Shares

is expressly conditioned (unless waived by Buyer in writing) upon

satisfaction of each of the following conditions:

 

    (a) The entry by the Bankruptcy Court of an order approving the Break-Up

Fee, the Sale Order and the Confirmation Order, as respectively defined in

Sections 9(a), (b) and (c) below, each of which shall have become a Final

Order. The Sale Order shall, among other things, authorize the sale of the

Closing Shares to Buyer free and clear of all Encumbrances. "Final Order"

means an order or judgment of the Bankruptcy Court which has not been

reversed, stayed, modified or amended, that is in full force and effect, and

as to which (i) the time to appeal or application for review by a higher

court has expired without any appeal or application for review having been

filed, or (ii) any appeal or application for review by a higher court that

has been or may be taken has resulted in entry of an order affirming the

decision of the Bankruptcy Court, with all additional review periods from

that affirmance having expired without any appeal or other application for

review thereof having been filed;

 

                                     9

 

<PAGE> 49

 

    (b) The entry of such further orders as required to implement this

Agreement including a Final Order under Section 365 or 1123(b)(2) of the

Bankruptcy Code authorizing assumption by Seller and/or the Company of

Assumed Executory Leases and Executory Contracts, with specific findings

that upon payment by Seller and/or the Company of the Cure Amounts, all

Defaults required to be cured in order for the Company to assume the Assumed

Executory Leases and Executory Contracts have been cured and that the

Company has provided adequate assurance of future performance necessary to

satisfy the requirements of Section 365 of the Bankruptcy Code;

 

    (c) Receipt by Buyer on the Closing Date on board the Riverboat Casino

of the Riverboat Casino's drawings and specifications and other technical

information in Seller or the Company's possession;

 

    (d) The maintenance and delivery to Buyer of the original Certificates

of Documentation of the Admiral and Admiral Barge One, as applicable, to the

United States Coast Guard, National Riverboat Casino Documentation Center;

 

    (e) The receipt on the Closing Date by Buyer of stock power or powers

executed by Seller, conveying to Buyer all of Seller's right, title and

interest in and to the Closing Shares, along with written resignation of all

of Company's officers and directors;

 

    (f) Seller's representations and warranties set forth in Section 6

below, taken as a whole, shall be true and correct in all material respects

on the Closing Date (as though made then and as though the Closing Date were

substituted for the date of this Agreement), which shall be certified by an

officer of Seller as of Closing, provided that for purposes of determining

whether such representations and warranties are true and correct in all

material respects, all "materiality" qualifications contained in such

representations and warranties set forth in Section 6 shall be disregarded;

 

    (g) Seller's representations and warranties set forth in Section 6(p)

below shall be true and correct in all respects on the Closing Date (as

though made then and as though the Closing Date were substituted for the

date of this Agreement), which shall be certified by an officer of Seller as

of Closing;

 

    (h) [intentionally omitted].

 

    (i) Seller and the Company shall each have performed and complied in all

material respects with all obligations and covenants required to be

performed and observed by them under this Agreement prior to or as of the

Closing, which shall be certified by an officer of Seller as of Closing;

 

    (j) The Missouri Gaming Commission (the "Commission") shall have issued

without condition all licenses, permits, approvals, consents, authorizations

and orders (which shall be Final Orders) as are required in order for Buyer

to acquire the Closing Shares and for the Company to lawfully operate the

Riverboat Casino following the Closing under the laws and regulations of the

State of Missouri, including the gaming license and liquor license described

in Schedule 6(i) (the "MGC Approval"), and the Company shall have

indefeasibly paid in full or settled all outstanding amounts owed to the

Commission as set forth on Schedule 6(l) hereof;

 

    (k) All other necessary filings shall have been completed, waiting

periods observed and governmental approvals obtained as determined to the

 

                                    10

 

<PAGE> 50

 

reasonable satisfaction of Buyer, including Hart Scott-Rodino Anti-Trust

Improvement Act of 1976 (the "HSR Act");

 

    (l) There shall not have occurred any material adverse change in the

business, operations, prospects or condition (financial or otherwise) of the

Company and the Riverboat Casino Assets, taken as a whole, other than any

change, event, occurrence, effect or state of facts relating to (i) any new

casino development or similar project in the St. Louis metropolitan area,

(ii) any condemnation proceeding involving, or other loss of use of, the

parking lot known as Cherrick Lot or (iii) any Excepted Environmental

Conditions (a "Material Adverse Change");

 

    (m) The Sale Order shall contain a finding that notice of the Sale

Motion was proper and the Confirmation Order shall contain a finding that

notice of the Confirmation Order was proper;

 

    (n) Buyer shall have received evidence, reasonably satisfactory to

Buyer, that the amount of the Company's Included Cash as of the Closing Date

is not less than $3,000,000;

 

    (o) Seller shall have delivered a certificate of its secretary dated the

Closing Date and certifying (i) that attached thereto is a true and complete

copy of the certificate or articles of incorporation and by-laws of Seller

and the Company as in effect on the date of such certification and (ii) as

to the incumbency and specimen signature of each officer of Seller and the

Company executing this Agreement or any other document delivered in

connection herewith (such certificate to contain a certification by another

officer of Seller as to the incumbency and signature of the officer signing

the certificate referred to in this clause (n); and

 

    (p) Buyer shall have received, at Buyer's expense, the commitment of a

title insurance company reasonably acceptable to Buyer ("Title Company") as

of the Closing Date to issue, with respect to the City Lease:

 

      (i) an ALTA extended coverage leasehold title insurance policy in the

amount of $30,000,000 insuring leasehold title to the City Lease in the

Company, and (A) including an endorsement insuring Buyer against loss or

damage sustained by reason of the Title Company denying liability under the

new title policy by reason of knowledge imputed to the Company or Seller

through its officers and directors and other fiduciaries of company (the

"Non-Imputation Coverage"), (B) dated as of the Closing Date, and (C)

subject only to Permitted Exceptions (as defined below), or

 

      (ii) an endorsement to any existing owner's coverage title insurance

policies insuring the Company and delivered to buyer which shall include (A)

if available, Non-Imputation Coverage, (B) updating the date of the existing

title policy to the Closing Date, and (C) insuring over any matter which is

not a Permitted Exception.

 

  For the purposes of this Agreement, "Permitted Exceptions" means (1) liens

for real property taxes and assessments for the current year, not yet

delinquent, (2) liens or encumbrances arising out of any activity of Buyer

with respect to the City Lease, (3) except as described on Schedule 4(p),

those matters listed on Schedule B of the title report or the existing title

policy, as applicable, a copy of which has been provided to Buyer prior to

the date hereof, and (4) those matters listed on Schedule B of any new title

 

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<PAGE> 51

 

report or title policy, as applicable, which are approved by Buyer within 10

business days of receipt thereof.

 

    (q) Seller shall have delivered to Buyer a Lease and Sublease Estoppel

Certificate and Consent Agreement, in substantially the form attached hereto

as Exhibit B (with such changes thereto as Buyer shall approve, such

approval not to be unreasonably withheld or delayed), duly executed by each

of the parties thereto;

 

    (r) Seller shall have delivered to Buyer an estoppel certificate, in

substantially the form attached hereto as Exhibit C (with such changes

thereto as Buyer shall approve, such approval not to be unreasonably

withheld or delayed), executed by each counterparty other than the Company

under any written Real Property Lease;

 

    (s) The Main Office and the other Excluded Assets shall have been

effectively assigned and transferred to an entity other than the Company and

the Company shall no longer have any interest therein;

 

    (t) A trademark assignment, in form and substance reasonably

satisfactory to Buyer and in a form recordable with the United Stated Patent

and Trademark Office, pursuant to which Seller shall have effectively

assigned and transferred to the Company each of the trademarks listed on

Schedule 4(t), each of which shall be deemed to be included in the Riverboat

Casino Assets;

 

    (u) Buyer shall have received a written analysis prepared by Seller as

of a date which is not more than 30 business days prior to the Closing Date,

together with copies of all supporting work papers thereto and other

information as may be reasonably requested by Buyer (the "Liquidation

Analysis"), as to the effect, upon the consolidated net operating loss

properly attributable to the Company, of income of Seller's consolidated

group (including income with respect to excess loss accounts required to be

taken into account under Treasury Regulations Section 1.1502-19) and the

discharge of all indebtedness and other obligations of Seller and all

members of Seller's consolidated group in connection with a final

liquidation of Seller and all such members of Seller's consolidated group

(and assuming, for purposes of such analysis, that all existing indebtedness

and other obligations of Seller and all members of Seller's consolidated

group as of immediately prior to the Closing Date hereunder were discharged

in a final liquidation occurring as of the Closing Date, with reasonable

assumptions being made with respect to the value of any assets of Seller and

the members of its consolidated group, and including the cash Purchase Price

to be paid by Buyer under this Agreement) (the "Assumed Final Liquidation"),

and the Liquidation Analysis shall demonstrate, to the reasonable

satisfaction of Buyer, that the consolidated net operating loss properly

attributable to the Company will not be diminished to an amount less than

$30,000,000 as a result of the Assumed Final Liquidation, provided that

Buyer acknowledges that any discharge of indebtedness of the Company to any

other member of Seller's consolidated group will not be deemed to diminish

such net operating loss for purposes of this subsection. If Buyer and Seller

are unable to agree upon the Liquidation Analysis, the Assumed Final

Liquidation or any assumption or other aspect thereof, any such disputed

matter shall be resolved by a nationally recognized accounting firm

reasonably and mutually acceptable to Buyer and Seller.

 

  5. SELLER'S CONDITIONS. Seller's obligation to sell the Closing Shares to

 

                                   12

 

<PAGE> 52

 

Buyer is expressly conditioned (unless waived by Seller in writing) upon

satisfaction of each of the following conditions:

 

    (a) The (i) payment of the Purchase Price (less the Deposit (with

interest accrued thereon, if any)) by wire transfer from Buyer and (ii) the

receipt of the Deposit (with interest accrued thereon, if any) from the

Escrow Agent;

 

    (b) The receipt of copies (certified by the secretary of Buyer) of the

resolutions of Buyer's board or other documentation authorizing the

execution, delivery and performance of this Agreement and the transactions

and documents contemplated herein;

 

    (c) The entry by the Bankruptcy Court of the Sale Order and the

Confirmation Order;

 

    (d) Buyer's representations and warranties in Section 7 below, taken as

a whole, shall be true and correct in all material respects on the Closing

Date (as though made then and as though the Closing Date were substituted

for the date of this Agreement), which shall be certified by an officer of

Buyer as of Closing, provided that for purposes of determining whether such

representations and warranties are true and correct in all material

respects, all "materiality" and "in all material respects" qualifications

contained in such representations and warranties set forth in Section 7

shall be disregarded;

 

    (e) Buyer shall have performed and complied in all material respects

with all obligations and covenants required to be performed and observed by

Buyer under this Agreement prior to or as of the Closing, which shall be

certified by an officer of Buyer as of closing;

 

    (f) The MGC Approval shall have been obtained; and

 

    (g) All other necessary filings shall have been completed, waiting

periods observed and governmental approvals obtained as determined to the

reasonable satisfaction of Seller, including the HSR Act.

 

  6. SELLER'S REPRESENTATIONS. Seller hereby represents and warrants to

Buyer that the following statements contained in this Section 6 are correct

and complete as of the date of this Agreement:

 

    (a) Seller has and on the Closing Date will have (in each case, subject

to liens and claims to be discharged upon the issuance of the Sale Order)

good and lawful title to and possession of the Closing Shares, free and

clear of all Encumbrances. The Company has and on the Closing Date will have

(in each case, subject to liens and claims to be discharged upon the

issuance of the Confirmation Order) good and lawful title to and possession

of the Riverboat Casino Assets, free and clear of all claims and interests

of creditors of the Company (to the maximum extent permitted under Section

1141(c) of the Bankruptcy Code), other than the Company Liabilities.

 

    (b) Provided the Sale Order and the Confirmation Order are issued by the

Bankruptcy Court and subject to the other terms and conditions of this

Agreement, the Riverboat Casino and the other Riverboat Casino Assets shall

be owned by the Company following the Closing Date free and clear of all

claims and interests of creditors of the Company other than the Company

Liabilities.

 

                                    13

 

<PAGE> 53

 

Provided the Sale Order and the Confirmation Order are issued by the

Bankruptcy Court, the Closing Shares shall be owned by Buyer following the

Closing Date free and clear of all Encumbrances. Except for certain items

located in the Main Office that are listed on Schedule 6(b), all of the

tangible personal property of the Company that is necessary for the

operation of the Riverboat Casino in the same manner as presently operated

by the Company immediately prior to Closing is physically located at the

Riverboat Casino or at the properties covered by the Assumed Executory

Leases and Executory Contracts. Except as set forth in Schedule 6(b), all

tangible personal property included in the Riverboat Casino Assets are

suitable for the purposes for which they are used, in good working

condition, reasonable wear and tear excepted, and are free from any known

defects. The Hull Certification attached to Schedule 6(b) hereto is true and

correct and is in full force and effect.

 

    (c) The Company is a corporation duly organized, validly existing and in

good standing under the laws of the jurisdiction in which it was

incorporated and is qualified to do business as a foreign corporation in

each jurisdiction where it is required to be qualified to avoid liability or

disadvantage. Seller has all requisite corporate power and authority

necessary to execute and deliver this Agreement, sell the Closing Shares and

otherwise perform its obligations under this Agreement and any documents

related thereto, subject only to the issuance of the Sale Order by the

Bankruptcy Court. Subject to the issuance of the Sale Order and the

Confirmation Order, this Agreement and any related document executed and

delivered by Seller and/or the Company (as applicable) has been, or will be,

duly executed and delivered by Seller and/or the Company (as applicable) and

constitutes, or, when executed will constitute, a valid and binding

obligation of Seller and/or Company, enforceable against Seller and/or

Company in accordance with its terms, subject only to the issuance of the

Sale Order by the Bankruptcy Court.

 

    (d) Attached to this Agreement as Schedule 6(d) are the audited balance

sheets of the Company as of February 28, 2002 and 2003 and February 29,

2004, and the related unaudited statements of operations and cash flows for

the years then ended (the "Annual Financial Statements"), and the unaudited

balance sheet of Company as of June 30, 2004 (the "Balance Sheet") and the

related statement of operations for the three months then ended (the

"Interim Financial Statements", and together with the Annual Financial

Statements, the "Financial Statements"). The date of the Balance Sheet is

referred to herein as the "Balance Sheet Date." The Financial Statements

are, and the Post-Signing Financial Statements (as defined below) will be

true, correct and complete and fairly present in all material respects the

financial position of the Company as of the dates shown and the results of

the Company's operations for the periods covered thereby. The Financial

Statements have been prepared in accordance with GAAP applied on a

consistent basis, except that the Financial Statements lack full footnote

disclosures and the Interim Financial Statements are subject to year end

adjustment consistent with prior periods.

 

    (e) Schedule 6(e) attached to this Agreement sets forth a list of all

real property used by the Company in connection with its ownership and

operation of the Riverboat Casino. Except for the Real Property Leases

identified on Schedule 6(e), for easement rights which are shown on the

title policy as appurtenant to the City Lease and for public rights of way,

the lawful operation or occupancy of the Riverboat Casino does not require

use of any other real property, for parking, access, support or any other

purpose, and no other real property is now being used in conjunction with

the operation

 

                                   14

 

<PAGE> 54

 

or occupancy of the Riverboat Casino. Except for Real Property Leases

identified on Schedule 6(e), the Company does not own, lease, license, hold

or use any other land, buildings or other interest, including any option, in

real property. A true and complete copy of each written Real Property Lease

identified on Schedule 6(e) has been delivered to Buyer, including all

amendments or modifications thereto and any other agreements related thereto

such as options, rights of first offer or rights of first refusal to

purchase the leased premises or any portion thereof. Each oral Real Property

Lease has been described in reasonable detail on Schedule 6(e). Each of the

Real Property Leases is in full force and effect and no claim of Default by

either tenant or landlord thereunder has been made. The description of the

leased premises in each Real Property Lease describes the real property

being used thereunder fully and adequately. The Company has not received

written notice of any condemnation proceedings by any public authority

relating to any of the real property leased by the Company, except for any

condemnation proceeding involving the parking lot known as Cherrick Lot (a

"Cherrick Proceeding"), and, to Seller's Knowledge, none are pending. The

Riverboat Casino has adequate water supply, sanitary facilities, telephone,

gas, electricity and fire protection services and other public utilities

sufficient to operate the Riverboat Casino as it is presently operated.

Except as set forth on Schedule 6(e), the Company has the exclusive right to

occupy the real property leased pursuant to the Real Property Leases

identified on Schedule 6(e) and the Company has not granted any leases,

subleases, licenses, concessions, options, or other agreements, written or

oral, to any third party granting the right to use or occupy said real

property.

 

    (f) Except as described on Schedule 6(f) and except with respect to the

Excluded Assets, the business of the Riverboat Casino has been conducted in

the ordinary course since the Balance Sheet Date, and there has not been

with respect to the Company any of the items specified below since the

Balance Sheet Date:

 

      (i) any increase in the compensation payable or to become payable to

any director, officer, employee or agent of the Company, except for

increases for non-officer employees made in the ordinary course of business

or as otherwise consented to in writing by Buyer, nor any other change in

any employment or consulting arrangement;

 

      (ii) any sale, assignment or transfer of any Riverboat Casino Assets,

or any additions to or transactions involving any Riverboat Casino Assets,

other than those made in the ordinary course of business or as otherwise

consented to in writing by Buyer;

 

      (iii) other than in the ordinary course of business or pursuant to the

Company Plan of Reorganization, any waiver or release of any claim or right

or cancellation of any debt held (other than Excluded Liabilities);

 

      (iv) any damage, destruction or loss, whether or not covered by

insurance, (A) materially and adversely affecting the Riverboat Casino

Assets or the operations, assets, properties or prospects of the Riverboat

Casino Assets or (B) of any item or items ca