EXHIBIT 10
Execution Copy
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is made as of October 10, 2006, by
and among: (a) Pinnacle Entertainment, Inc., a Delaware corporation
("Pinnacle"), (b) the Official Committee of Equity Security Holders of
President Casinos, Inc. ("Committee"), (c) President Casinos, Inc., a Delaware
corporation ("PCI"), (d) President Riverboat Casino-Missouri, Inc., a Missouri
corporation ("PRC-MO"), and Xxxxxxxx X. Xxxxxxxx ("Xxxxxxxx"). As used in this
Agreement, "Debtors" refers collectively to PCI and PRC-MO, and "parties"
refers collectively to Pinnacle, the Committee, PCI, PRC-MO and Wirginis.
WHEREAS, PCI is a debtor and debtor-in-possession in Chapter 11 Bankruptcy
Case No. 02 53005 (the "PCI Case") and PRC-MO is a debtor and
debtor-in-possession in Chapter 11 Bankruptcy Case No. 02 53006 (the "PRC-MO
Case" and collectively with the PCI Case, the "Case"), both pending in the
United States Bankruptcy Court for the Eastern District of Missouri (the
"Bankruptcy Court");
WHEREAS, PCI is the owner of all of the outstanding shares of common stock in
PRC-MO, and PRC-MO 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;
WHEREAS, Pinnacle, as buyer, and PCI and PRC-MO, as sellers, entered into that
certain Riverboat Casino Sale and Purchase Agreement, dated as of February 24,
2006 (as the same may be subsequently amended or supplemented, the "Pinnacle
Purchase Agreement"), pursuant to which, subject to certain adjustments and
conditions, PCI agreed to sell to Pinnacle one hundred percent of the
outstanding shares of common stock in PRC-MO for $31,500,000.00; capitalized
terms used but not defined herein shall have the meanings set forth in the
Pinnacle Purchase Agreement;
WHEREAS, PRC-MO filed with the Bankruptcy Court the Third Amended Chapter 11
Plan of Reorganization Dated August 11, 2006 for Debtor PRC-MO (the "PRC-MO
Plan") incorporating the Pinnacle Purchase Agreement;
WHEREAS, the Committee filed with the Bankruptcy Court a competing Chapter 11
plan of reorganization for PCI and PRC-MO, the First Amended Chapter 11 Plan
of Reorganization Proposed by the Committee (dated September 20, 2006) (the
"Committee Plan"), which is based on PCI retaining the stock of PRC-MO and
PRC-MO reorganizing its operations with funds from third-party lenders;
WHEREAS, the Debtors, Pinnacle, and the Committee met to discuss the
circumstances under which such parties would agree to support a single Chapter
11 plan of reorganization for PRC-MO;
WHEREAS, PCI and PRC-MO provided certain information to Pinnacle and the
Committee to facilitate such discussions;
WHEREAS, Pinnacle and the Committee proposed to PCI and PRC-MO that the PRC-MO
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Plan should be amended to implement the terms of this Agreement, and the
parties have agreed that the Pinnacle Purchase Agreement should be amended as
described below.
WHEREAS, PCI and PRC-MO agreed to propose such amended PRC-MO Plan (the
"Amended PRC-MO Plan"); and
WHEREAS, the parties desire to resolve any and all outstanding issues between
them on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and the covenants and
understandings set forth in this Agreement, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties, the parties agree as follows:
1. The Recitals. The recitals set forth above are expressly incorporated in
this Agreement, and are made an equal part of, this Agreement.
2. The Committee Plan. Upon approval of this Agreement by the Bankruptcy
Court, the Committee will withdraw the Committee Plan.
3. The Amended PRC-MO Plan. Promptly upon approval of this Agreement by the
Bankruptcy Court, PRC-MO will file the Amended PRC-MO Plan, incorporating the
terms of this Agreement. The Amended PRC-MO Plan will include the provisions
of the PRC-MO Plan that are not inconsistent with the terms of this Agreement
and, in addition, will include the following terms and provisions:
(a) The holders of record of Allowed Class 4 Unsecured Claims (as defined
under the PRC-MO Plan and determined as of September 22, 2006) will be paid in
full the amount equal to their Allowed Class 4 Unsecured Claims on the
effective date of the Amended PRC-MO Plan.
(b) The holders of the 12% Notes due 2001 and 13% Senior Exchange Notes due
2001, designated as the Class 5 Claims under the PRC-MO Plan (exclusive of any
amounts owed to J. Xxxxxx Xxxxxxxx Associates, Inc. on account of the Assigned
Distribution Amount as defined in PRC-MO Plan, collectively, the
"Bondholders"), will receive on the effective date of the Amended PRC-MO Plan
an amount equal to the Allowed Class 5 Claims of the Bondholders (the "Total
Bond Claims") under the PRC-MO Plan less $10 million. This payment will leave
$10 million of allowed claims held by the Bondholders unsatisfied (the "Unpaid
Bond Amount"). The Bondholders will (i) waive the payment of $5 million of the
Unpaid Bond Amount and (ii) defer, as provided in Section 3(c) below, payment
of the remaining $5 million of the Unpaid Bond Amount (the "Deferred Bond
Payment").
(c) The Deferred Bond Payment will be paid to the Bondholders from one-half
of any gross aggregate amounts recovered by the Trustee of the Distribution
Trust (as defined in the PRC-MO Plan), PCI, or any affiliate (collectively,
the "President Companies") in excess of $5 million from (i) any amounts
received from any source with respect to claims related to the failure by
Columbia Sussex Corporation ("Columbia Sussex") to consummate an agreement to
purchase PRC-MO's riverboat-casino and (ii) any amounts received as sales tax
refunds due to PRC-MO. The recovery amount due to the Bondholders with respect
to the Deferred Bond Amount will be calculated without taking into account any
expenses or costs incurred by the Trustee of the Distribution Trust, PCI, or
any other party in pursuit of Columbia Sussex and such sales tax claims.
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(d) Any settlement of PCI and PRC-MO claims against Columbia Sussex will be
subject to review and approval by the Bankruptcy Court. PCI and the Trustee of
the Distribution Trust will give to the Bondholders prior written notice of
any proposed settlement of the Columbia Sussex claims, and the Bondholders may
object to the fairness of any such proposed settlement in the proceedings for
approval thereof conducted by the Bankruptcy Court.
(e) The Bondholders will have no obligation to extend additional financing
to fund the operating costs or the litigation costs of the Distribution Trust,
PCI, or PCI's bankruptcy estate.
(f) The substantial contribution claim pursuant to Section 503(b)(3)(D) or
503(b)(4) of the Bankruptcy Code of the Ad Hoc Committee of Equity Security
Holders of PCI (the "Ad Hoc Committee") will be allowed in the amount of: (i)
$557,037.29 plus (ii) additional substantiated fees and expenses in the amount
not to exceed $17,962.71, and shall be paid on the effective date of the
Amended PRC-MO Plan.
(g) The professionals employed by the Committee shall be included in the
definitions of Professionals, Professional Fees, and Professional Fee Claims
and the fees and expenses thereof shall be paid pursuant to Section 2.3 of the
PRC-MO Plan.
(h) The amendment to the Pinnacle Purchase Agreement described in Section 4,
below, shall be reflected in the Amended PRC-MO Plan.
4. Amendments to Pinnacle Purchase Agreement.
(a) Section 2(f) of the Pinnacle Purchase Agreement is hereby amended in its
entirety to read as follows:
Reduction of Base Purchase Price. If the Amended PRC-MO Plan (as such term
is defined in that certain Settlement Agreement dated as of October 10, 2006)
is not confirmed prior to January 1, 2007, the Base Purchase Price shall be
reduced by an amount equal to the adjusted EBITDA (the "Adjusted EBITDA")
attributable to the period beginning January 1, 2007, and ending on the date
such plan is confirmed. The Adjusted EBITDA shall for any period mean (i) the
earnings before interest, taxes, depreciation and amortization (calculated to
the extent relevant in accordance with GAAP) of the operations of the Company,
(ii) reduced by the amount of distributions to the Seller for payment of
parent level administrative expenses attributable to such period in an amount
not to exceed $100,000 per month during such period (pro rated through the day
the Amended PRC-MO Plan is confirmed). Notwithstanding the foregoing, the Base
Purchase Price shall not be reduced during any period in which the failure of
the Amended PRC-MO Plan to be confirmed is attributable to Pinnacle's action
or failure to act or to events otherwise within Pinnacle's control.
(b) Section 16 of the Pinnacle Purchase Agreement is hereby amended in its
entirety to read as follows:
Termination Events. This Agreement may be terminated prior to the Closing
Date:
(a) by Buyer or Seller upon written notice to the other party at any time
prior to the Closing (I) if the Confirmation Order has not been entered on or
before June 30, 2007 (or such later date as mutually agreed to by the
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parties), or (II) Closing shall not have occurred on or before December 31,
2007 (or such later date as is mutually agreed to by the parties hereto) by
reason of the failure of any condition precedent under Section 4, provided
that such failure did not result primarily from the terminating party
materially breaching any covenant contained in this Agreement, or unless the
terminating party shall have waived such condition precedent in writing);
(b) by Buyer upon written notice to Seller if Buyer is in compliance in all
material respects with this Agreement and Seller or Company fails to perform
any material obligation required to be performed by Seller or Company, as
applicable, prior to or at the Closing, which failure continues for twenty
(20) Business Days after written notice from Buyer to Seller or the Company,
as applicable, of such failure;
(c) by Seller upon written notice to Buyer if Seller is in compliance in all
material respects with this Agreement and Buyer fails to perform any material
obligation required to be performed by Buyer prior to or at the Closing, which
failure continues for twenty (20) Business Days after written notice from
Seller to Buyer of such failure;
(d) by mutual written agreement of Buyer and Seller;
(e) [Omitted];
(f) by Buyer upon written notice to Seller if any of the conditions of
Section 4 cannot be met and will not be waived by Buyer;
(g) by Seller upon written notice to Buyer if any of the conditions of
Section 5 cannot be met and will not be waived by Seller; and
(h) [Omitted].
Upon a valid termination of this Agreement by Seller pursuant to subsection
(c) above, the Deposit (excluding interest accrued thereon, if any) shall be
forfeited to Seller, but without prejudice to any legal remedy for money
damages that 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; 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. Upon a valid termination of this Agreement pursuant to
subsections (a), (d), (f) or (g), the Deposit (with interest accrued thereon,
if any) shall be immediately returned to Buyer and both parties shall execute
mutual escrow instructions to Escrow Agent to that effect. Upon a valid
termination of this Agreement by Buyer pursuant to subsection (b) above, the
Deposit (with interest accrued thereon, if any) shall be immediately returned
to Buyer, without prejudice to any legal or equitable remedy that Buyer may
have, if any, against Seller as a result of such breach.
5. Wirginis. Wirginis will (i) support the approval of this Agreement, the
consummation of the Pinnacle Purchase Agreement, and the confirmation of the
Amended PRC-MO Plan, (ii) not support and, to the extent applicable, vote
against any bankruptcy plan inconsistent with the Amended PRC-MO Plan, and
(iii) pay to Pinnacle any amounts Wirginis receives (including the fair market
value of any property received or any securities or other interests of PRC-MO
or PCI retained) pursuant to any bankruptcy plan that is inconsistent with (x)
the Amended PRC-MO Plan or (y) the Pinnacle Purchase Agreement, in each case,
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to the extent such amounts are in excess of the amounts Wirginis would be
entitled to receive had the Amended PRC-MO Plan been confirmed and the
Pinnacle Purchase Agreement been consummated in accordance with their terms.
6. Support. So long as Pinnacle is not in breach of its obligations under
the Pinnacle Purchase Agreement or hereunder, and provided that the Pinnacle
Purchase Agreement and this Agreement are still in full force and effect, the
signatories to this Agreement will support the approval of this Agreement, the
consummation of the Pinnacle Purchase Agreement, and the confirmation of the
Amended PRC-MO Plan. No signatory to this Agreement may propose or support a
Chapter 11 plan of reorganization for PRC-MO or PCI that is inconsistent with
the terms of this Agreement or the Amended PRC-MO Plan. No signatory to this
Agreement may take any action that will cause a delay in the commencement or
continuation of the November 14, 2006 hearing to consider confirmation of the
Amended PRC-MO Plan.
7. Parties' Mutual Releases. The term "Release Date" means the date by which
both of the following have occurred: (a) the closing of the transaction under
the Pinnacle Purchase Agreement and (b) the payment to Pinnacle of all amounts
set forth in Section 3(a) of this Agreement and the Total Bond Claims minus
the Unpaid Bond Amount. On the Release Date, each of the parties, on behalf of
itself and all others who could claim by or through such party, hereby fully
and forever releases and discharges all of the other parties and each of their
respective predecessors (including, without limitation the Ad Hoc Committee),
members of the Ad Hoc Committee and the Committee (but only with respect to
those members who sign this Agreement agreeing to be bound by the provisions
of Section 6 and Section 7 hereof) (such members, the Ad Hoc Committee and the
Committee, collectively, the "Equity Releasees"), and their respective
successors and assigns, from any and all claims, actions, rights, agreements,
or liabilities, known or unknown, asserted or unasserted, suspected to exist
or not suspected to exist, whether arising under federal statute, state
statute, federal or state common law or otherwise, which now or in the future
may exist, including, without limitation, any and all known or unknown claims
based upon or arising out of any events, facts, or circumstances alleged or
that could have been alleged, by amendment or otherwise. This release covers
all known and unknown claims arising out of all known and unknown facts from
the beginning of time through the Release Date. The sole exceptions to this
release are (i) claims that Pinnacle will have for the Deferred Bond Payments,
(ii) any claims that any party may have against any other party under this
Agreement, and (iii) any rights, obligations or claims of any party under the
Pinnacle Purchase Agreement or the Amended PRC-MO Plan; provided that, for the
avoidance of doubt, the forgoing exception shall not include any claim of
Pinnacle against the Equity Releasees arising out of or related to the actions
of the Equity Releasees in connection with (x) arranging for financing to
acquire the claims of the Bondholders and/or unsecured creditors, and (y) the
formulation, financing and pursuit of a plan of reorganization in the Case.
The terms of the release in this Section 7 will be included in the Amended
PRC-MO Plan and any order of the Bankruptcy Court confirming the Amended
PRC-MO Plan.
8. Assumption of Risk. The parties expressly understand that the facts with
respect to this Agreement may turn out to be different from the facts now
known or believed by the parties to be true. Each of the parties expressly
assumes the risk of the facts turning out to be different, and this Agreement
will be in all respects effective and not subject to termination or rescission
by reason of any such differences. Each of the parties understands and
acknowledges the significance and the consequences of this specific waiver of
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unknown claims and hereby assumes full responsibility for any injuries,
damages, losses, or liabilities that the party may incur from the waiver of
any unknown claims.
9. No Admission of Liability. The parties acknowledge that this Agreement
represents a settlement of disputed claims and that, by entering into this
Agreement, none of the parties admits or acknowledges the existence of any
liability or wrongdoing.
10. Amendment of Plan or Purchase Agreement. The Amended PRC-MO Plan may not
be amended, supplemented, or modified, nor may its terms or conditions be
waived (or otherwise deemed satisfied), to the extent that any such amendment,
supplement, modification, or waiver contravenes, or otherwise negates the
terms and conditions of, this Agreement or adversely affects any party,
without the written consent of all of the parties. The Pinnacle Purchase
Agreement may not be amended, supplemented, or modified, nor may its terms or
conditions be waived (or otherwise deemed satisfied), to the extent that any
such amendment, supplement, modification, or waiver (i) results in a material
reduction in the purchase price that is not already contemplated in the
Pinnacle Purchase Agreement, or (ii) results in a change in the Excluded
Assets (as that term is defined in the Pinnacle Purchase Agreement), without
the written consent of all of the parties.
11. Expedited Approval. The parties immediately will seek the Bankruptcy
Court's approval of this Agreement on an expedited basis pursuant to Rule 9019
of the Federal Rules of Bankruptcy Procedure.
12. Bankruptcy Court Approval. This Agreement will be of no force and effect
unless and until it is approved pursuant to a final order of the Bankruptcy
Court. The Bankruptcy Court's approval is a condition precedent to
enforceability of this Agreement.
13. Representations, Warranties and Covenants. The parties represent and
warrant that they have read and thoroughly understand the terms and conditions
of this Agreement. This Agreement represents a final and complete expression
of the understandings between the parties and this Agreement may not be
contradicted by evidence of any prior oral agreement or of a contemporaneous
oral agreement or understanding between the parties. There are no promises,
terms, conditions or obligations other than those contained in this Agreement.
Each party hereby represents and warrants that it has full and complete
authority to sign this Agreement and that, in signing this Agreement, it is
binding itself and its predecessors, successors, and assigns to this
Agreement. Each party will use commercially reasonable efforts to seek and
obtain approval of this Agreement and confirmation of the Amended PRC-MO Plan
by the Bankruptcy Court.
14. Neutral Construction of the Agreement. This Agreement is a product of
arms length negotiations between the parties and represents the jointly
conceived, bargained for, and agreed upon language mutually determined by the
parties to express their intentions in entering into this Agreement. Any
ambiguity or uncertainty in this Agreement will be deemed to be caused by or
attributable to the parties collectively. In any action to enforce or
interpret this Agreement, the Agreement will be construed in a neutral manner,
and no term or provision of this Agreement, or the Agreement as a whole, may
be construed more or less favorably to any one party to this Agreement.
15. Agreement Binding on Successors. The terms and conditions of this
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Agreement will be binding on the parties and their successors and assigns.
16. Choice of Law. The validity, construction, and enforcement of this
Agreement will be governed by the laws of the State of Missouri without regard
to its choice of law principles. If legal action is initiated relative to this
Agreement or rights or obligations of the parties under this Agreement, the
action must be initiated, maintained, and continued in the Bankruptcy Court.
17. Headings. The headings in this Agreement are inserted for the
convenience of the parties only and may not be used to interpret, construe, or
in any way affect the meaning of the terms and provisions of this Agreement.
18. Attorneys Fees. If any party to this Agreement employs an attorney to
remedy, prevent or obtain relief from a breach or default of this Agreement,
or arising out of a breach or default of this Agreement, or in connection with
asserting or contesting the validity of this Agreement, any of the terms,
covenants, provisions, and all conditions hereof, or of any of the matters
referred to herein, and such party is the prevailing party in any action
brought with respect thereto, such party will be entitled to be reimbursed for
all of its reasonable attorneys' fees, including without limitation, those
attorneys' fees incurred in each and every action, suit, or proceeding,
including any and all appeals and petitions therefrom, and all costs and
expenses incurred in connection therewith, from the party against whom such
action was brought against.
19. Power of Representatives. Any party executing this Agreement in a
representative capacity is duly authorized and empowered to do so.
20. Counterpart Signatures. This Agreement may be signed in counterparts,
each of which taken together shall constitute an original. Delivery of an
executed counterpart of the signature page to this Agreement by facsimile or
electronic mail shall be as effective as delivery of a manually executed
counterpart of this Agreement.
21. Entire Agreement and Integration. Except as expressly provided in this
Agreement, this Agreement is the final written expression and complete and
exclusive statement of all the agreements, conditions, promises, and covenants
among the parties with respect to the specific subject matter hereof, and
supersedes all prior or contemporaneous agreements, negotiations,
representations, understandings, and discussions among the parties or their
respective counsel with respect the subject matter covered in this Agreement.
Any amendment or modification of this Agreement, to be legally binding, must:
be in writing, specifically refer to this Agreement, and be signed by the duly
authorized representative of all parties hereto.
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22. Notices. Notices shall be sent as follows:
If to Pinnacle:
address specified for "Buyer" in Section 20
of the Pinnacle Purchase Agreement
with a copy to:
Xxxxxxx X. Xxxxxxx
Xxxxxxx & Xxxx X.X.
The Equitable Building, Suite 1300
00 Xxxxx Xxxxxxxx
Xx. Xxxxx, XX 00000 Facsimile: (000) 000-0000
If to the Committee:
Xxxxxx X. Xxxxxxxxx
Klee, Tuchin, Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to PCI or PRC-MO:
address specified for "Seller" in Section 20
of the Pinnacle Purchase Agreement
Any party may change its address or fax numbers for purposes of this paragraph
upon delivery to the other parties of a written notice of change of address.
23. Further Assurances. Each party will do and perform, or cause to be done
and performed, all such further acts and things, and will execute and deliver
all such other agreements, certificates, instruments and documents that any
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement.
24. Termination. If the Court has not entered an order approving this
Agreement by October 23, 2006, then (a) this Agreement shall be void ab
initio, (b) nothing herein shall be deemed an admission by any party, (c) this
Agreement shall not be admissible in the Bankruptcy Court or in any other
court or proceeding, and (d) each party shall retain all of its rights which
existed immediately prior to the parties' agreement to settle their disputes
as provided in this Agreement.
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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date
set forth opposite their respective signatures.
PINNACLE ENTERTAINMENT, INC. PRESIDENT CASINOS, INC.
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxx Xxxxxxx Name: Xxxxx X. Xxxxxxxx
---------------------------- ----------------------------
Its: President Its: Sr. VP & CFO
---------------------------- ----------------------------
THE OFFICIAL COMMITTEE OF PRESIDENT RIVERBOAT CASINO-
EQUITY SECURITY HOLDERS OF MISSOURI, INC.
PRESIDENT CASINOS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxxxxx
---------------------------- ----------------------------
Its: Chairman Its: Sr. VP & CFO
---------------------------- ----------------------------
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxxxx, in his
individual capacity
Solely with respect to Section 6 and Section 7 hereof:
/s/ Xxxx Xxxxxx /s/ Xxxx Xxxxxx
------------------------------------ ------------------------------------
Xxxxxxx X. Xxxxxx, as a member of Xxxxxxx X. Xxxxxx, as a member of
the Committee the Ad Hoc Committee
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------ ------------------------------------
Xxxx X. Xxxxxxxx, as a member of Xxxxxxxx X. Xxxxxxxx, as a member of
the Committee the Ad Hoc Committee
/s/ Xxxx x. Xxxxxx /s/ M. Xxxxx Xxxxxx
------------------------------------ ------------------------------------
Ches. X. Xxxxxx, as a member of M. Xxxxx Xxxxxx, as a member of the Committee
the Ad Hoc Committee
/s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx, as a member of
the Committee
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxxxx, as a member of
the Committee
