FORM10K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-22494
AMERISTAR CASINOS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0304799
(State or Other Jurisdiction of (I.R.S Employer Identification
Incorporation or Organization) No.)
3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89109
(Address of Principal Executive Offices)
Registrant's Telephone Number: (702) 567-7000
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 31, 1997, 20,360,000 shares of Common Stock of the
registrant were issued and outstanding. The aggregate market
value of the voting stock of the registrant held by non-
affiliates as of March 31, 1997 was approximately $13,220,000,
based on the Nasdaq-NMS closing price for the registrant's Common
Stock on such date.
Portions of the registrant's definitive Proxy Statement for its
June 6, 1997 Annual Meeting of Stockholders (which has not been
filed as of the date of this filing) are incorporated by
reference into Part III.
<PAGE>PART I
Item 1. Business
Introduction
Ameristar Casinos, Inc., a Nevada corporation ("Ameristar"
or "ACI"), is a multi-jurisdictional gaming company that owns and
operates four casino entertainment facilities located in Nevada,
Mississippi and Iowa and is developing a fifth property in
Henderson, Nevada, a suburb of Las Vegas. All of the Company's
principal operations are conducted through its subsidiaries. As
used in this Report, the term "Company" refers to Ameristar and
its subsidiaries on a consolidated basis. The Company's
properties are:
The Jackpot Properties -- Cactus Petes Resort Casino ("Cactus
Petes") and The Horseshu Hotel and Casino (the "Horseshu";
collectively, the "Jackpot Properties"), were the Company's first
two casino-hotels and are located on U.S. Highway 93 in Jackpot,
Nevada at the Idaho border.
Ameristar Vicksburg -- Ameristar Vicksburg is located one-
quarter mile north of Interstate 20 in Vicksburg, Mississippi,
approximately 45 miles west of Jackson. Ameristar Vicksburg
includes a permanently moored, dockside casino (the "Vicksburg
Casino") and related land-based facilities, including a 144-room
hotel currently under construction (collectively, "Ameristar
Vicksburg").
Ameristar Council Bluffs -- Ameristar Council Bluffs is
located near the Nebraska Avenue exit of Interstate 29 South in
Council Bluffs, Iowa across the Missouri River from Omaha,
Nebraska. Ameristar Council Bluffs includes a cruising riverboat
casino (the "Council Bluffs Casino"), an Ameristar hotel and
other related land-based facilities (collectively, "Ameristar
Council Bluffs").
The Reserve -- On October 9, 1996, the Company acquired The
Reserve, an African safari and big game reserve-themed casino-
hotel under construction at the junction of Interstate 515 and
Lake Mead Drive in Henderson, Nevada. The Company has redesigned
The Reserve to expand the scope and size of the project.
Construction of The Reserve has been suspended due to
uncertainties concerning the form and amount of merger
consideration payable in connection with the acquisition of The
Reserve that has adversely affected the Company's ability to
obtain financing for the completion of the project. On March 26,
1997, the Company commenced an arbitration proceeding against the
former stockholders of Gem Gaming, Inc. ("Gem"), the original
developer of The Reserve. See "Business -- Terms of the Merger
Agreement; Dispute with Gem Stockholders" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
<PAGE>Business and Marketing Strategies
The Company's business strategy is to include quality
dining, lodging, entertainment and other non-gaming amenities at
affordable prices to complement and enhance its gaming
operations. The Company believes this strategy will continue to
distinguish the Company from its competitors, many of whom
outside of Las Vegas have not emphasized non-gaming amenities in
their operations to the same extent as the Company. In selecting
markets, the Company seeks locations with strong demographics and
a favorable competitive environment. The Company also emphasizes
courteous and responsive service to promote customer loyalty.
The Company's properties emphasize slot machine play, and
the Company periodically invests in new slot equipment to promote
customer satisfaction and loyalty. Historically, slot revenues
at each property have exceeded 65% of total gaming revenue. All
of the Company's properties include table games such as
blackjack, craps and roulette. Cactus Petes and Ameristar
Vicksburg also offer poker, as will The Reserve. Keno and sports
book wagering are also offered at the Jackpot Properties. The
Reserve will offer race and sports book wagering and may offer
keno. The Company generally emphasizes competitive minimum and
maximum betting limits based on each market.
The Company's gaming revenues are derived and are expected
to continue to be derived from a broad base of customers, and
therefore the Company does not depend upon high-stakes players.
The Company extends credit to its Nevada and Mississippi gaming
customers only in limited circumstances and limited amounts on a
short-term basis and in accordance with the credit restrictions
imposed by gaming regulatory authorities. The Iowa gaming
statutes prohibit the issuance of casino credit.
Management believes that the reputation of its properties is
the Company's most effective marketing tool. Accordingly, the
Company's marketing strategy seeks to maintain and improve the
quality and reputation of its properties to attract and retain
customers with larger gaming budgets. The Company's marketing
programs emphasize high-quality amenities (including lodging and
food) at affordable prices. The Company uses players clubs at
each property to identify preferred players and develop
promotions and special events to encourage increased gaming
activity by these customers. The Company's marketing programs
also include a number of promotions, designed primarily to
increase the frequency of customer visits within local markets,
as well as tour and travel promotional packages in certain
markets. The Company uses a variety of advertising media to
market its properties, including print, television, radio and
outdoor advertising and direct mail promotions. The level of
marketing and promotional efforts varies among properties based
on competitive and seasonal factors in each market.
Expansion Strategy
The Company seeks to expand its operations through a variety
of means, including entering new North American markets created
by the legalization of casino gaming, developing new casinos or
buying existing casinos in established North American casino
gaming markets and expansion projects through Native American
reservations in North
<PAGE>America. Although the Company's preference is to own and
operate each of its gaming properties, the Company also considers
expansion opportunities involving management contracts. Pending
the availability of additional financing for the completion of
Phase I of The Reserve, the Company does not anticipate
undertaking any additional expansion opportunities that would
require a material amount of capital expenditures by the Company.
Management believes that the Company's long-term success in
expanding into new markets will be dependent in part upon the
Company's ability to distinguish its operations from those of its
known and anticipated competitors. The Company's strategy of
including quality non-gaming amenities in its facilities, such as
lodging, dining and entertainment is intended to provide these
competitive distinctions. The scope of non-gaming amenities to
be offered at future expansion projects will be determined in
part by competitive factors within a particular market and the
nature of the Company's participation in a particular project.
In addition, management believes the selection of attractive
expansion markets and quality locations within those markets will
continue to be important to the growth of the Company.
<PAGE>Property Profiles
The following table presents selected statistical and other
information concerning the Company's properties as of March 31,
1997.
<TABLE>
<S> <C> <C> <C> <C> <C>
Ameristar Ameristar The
Cactus The Vicksburg Council Reserve
Petes Horseshu (Vicksburg, Bluffs (Phase I)
(Jackpot, (Jackpot, MS) (Council (Henderson,
NV) NV) Bluffs, NV)
IA)
Opening Date 1956 1956 Feb. 1994 Jan. 1996 To be
announced
Casino
Square 25,448 3,540 32,000 27,500 70,000
Footage
Slot 883 156 955 1,012 1,850
Machines (est)
Table 36 7 47 42 50 (est)
Games
Hotel 298 120 1441 160 224
Rooms
Number of
Restaurants 4/3 1/1 3/6 4/3 4/6
/Bars
Restaurant
/Bar 460/80 124/40 873/136 800/47 1,463/99
Seating
Capacity
Guest 658 223 1,069 1,785 1,074
Parking
Spaces
Other 356-Seat Keno; 379-Seat Kids Quest Race and
Amenities Showroom; Swimming Showroom; Children's Sports
Sports Pool; Gift Shop Activity Book;
Book(2); General Center(2); Swimming
Keno; Store; Meeting Pool;
Meeting Service Space; Bingo;
Space; Station 140-Room Gift Shop
Swimming Holiday
Pool; Suites
Gift Hotel(2);
Shop; Indoor
Amusement Swimming
Arcade Pool &
Spa; Gift
Shop;
Amusement
Arcade
(1)The Company has begun site work for the development of a 144-
room hotel at Ameristar Vicksburg expected to be completed in
late 1997. In connection with this project, the Company has
recently taken out of service 54 budget motel rooms that pre-
existed the development of Ameristar Vicksburg.
(2)Operated by a third party.
<PAGE>Current Operations
The Jackpot Properties. The Jackpot Properties, which have
been operating since 1956, have been designed and developed and
are marketed to appeal to three separate markets: budget, quality
and luxury. The Company sets its prices for hotel rooms, food
and other non-gaming amenities at levels that are affordable to
its separate customer bases. The Company's objective is to be
perceived by its customers as providing good value and high
quality for the price charged. Cactus Petes is promoted by the
Company as a destination resort throughout the northwestern
United States and southwestern Canada. The Jackpot Properties
are owned and operated by Cactus Pete's, Inc., a wholly owned
subsidiary of Ameristar ("CPI").
Following the completion of a major expansion project in
1991, Cactus Petes became one of nine casino-hotels in Nevada
that currently has a Four Diamond rating from the American
Automobile Association ("AAA"), the highest rating currently
awarded to any Nevada hotel. The Horseshu Hotel has received a
Three Diamond rating from the AAA. The food and beverage
operations at the Jackpot Properties include a buffet, a fine
dining restaurant, a 24-hour restaurant, a coffee shop and a
snack bar, a showroom that features nationally known
entertainment and cocktail lounges with entertainment.
In January 1997, the Company completed a renovation of its
slot gaming equipment at the Jackpot Properties, including the
introduction of approximately 460 new slot machines in
replacement of older models, the linkage of all slot machines at
the Jackpot Properties to the Company's player tracking system,
innovative slot machine layouts and improved sensory appeal
(including touch screens and enhanced signage, sounds and
colors). In addition to promoting customer satisfaction, this
renovation is intended to improve the effectiveness of both
targeted marketing and general advertising programs.
Business in Jackpot is seasonal, with the months of March
through October being the strongest period. As a result, the
second and third calendar quarters typically produce a
disproportionate amount of the income from operations of the
Jackpot Properties. In addition, adverse weather conditions may
adversely affect the business of the Jackpot Properties, and
operations during the winter months typically vary from year to
year based on the severity of the winter weather conditions in
the northwestern United States.
Market. Management believes that approximately 50% of the
customer base of the Jackpot Properties consists of residents of
Idaho who generally frequent the properties on an overnight or
turnaround basis. Management believes that recent declines in
the rates of population and economic growth in southern Idaho
have adversely affected the performance of the Jackpot
Properties. The balance of the Company's Jackpot customers come
primarily from Oregon, Washington, Montana, northern California
and the southwestern Canadian provinces. Although many of the
customers from beyond southern Idaho are tourists traveling to
other destinations, a significant portion of these customers come
to Jackpot as a final destination.
Competition. The Company has developed a dominant share of
the market in Jackpot. The Jackpot Properties compete with four
other hotels and motels (three of which also have casinos). As
of March 31, 1997, the Jackpot Properties accounted for
approximately 54% of
<PAGE>the lodging rooms, 58% of the slot machines and 74% of the
table games in Jackpot. Management believes Cactus Petes offers
a more attractive environment and a broader and higher quality
range of gaming and leisure activities than those of its
competitors. Some additional or renovated facilities have been
introduced in Jackpot by the Company's competitors since early
1995. The Company is not aware of any additional expansion plans
by existing competitors in Jackpot.
At least two casinos with video lottery terminals similar to
slot machines are operated on Native American land in Idaho,
including one with approximately 200 VLT machines near Pocatello
that has been in operation for approximately three years. Casino
gaming began on Native American lands in both western Washington
and northeast Oregon in 1995, and casinos also operate in
Alberta, Canada. Except for the casino near Pocatello, none of
these casinos is closer to the Company's primary southern Idaho
market than Jackpot. Management believes that these casinos have
negatively impacted the recent performance of the Jackpot
Properties.
In addition, the Company is aware of past efforts to
establish additional gaming facilities on Native American land in
Idaho. However, a 1992 Idaho constitutional amendment, upheld by
the Idaho Supreme Court, prohibits all gaming except a state
lottery, charitable raffles and bingo, and pari-mutuel wagering.
The amendment expressly prohibits any form of casino gaming. The
Indian Gaming Regulatory Act of 1988 ("IGRA") restricts gaming
operations on Native American land to those allowed under state
law. Previous legal efforts challenging these restrictions have
been unsuccessful. The Company and various Idaho state officials
believe that the VLT casinos currently being operated on Native
American lands in Idaho are in violation of IGRA; however,
federal officials have not taken any enforcement action against
these operations. Although the Company is not aware of any
current proposals for the expansion of casino gaming on Native
American lands in southern Idaho, eastern Oregon or eastern
Washington, such expansion could have a material adverse effect
on the Jackpot Properties and the Company.
Ameristar Vicksburg. Ameristar Vicksburg, which opened in
February 1994, represents the Company's first expansion project
outside of Jackpot. Management believes Ameristar Vicksburg
provides superior and larger facilities than its current
competitors in the Vicksburg area and has competitive advantages
by virtue of its close proximity to Interstate 20. Nonetheless,
Vicksburg is an intensely competitive gaming market and the
Company's operations there to date have been dependent to a
substantial degree upon a continuous casino marketing and
promotional campaign. Ameristar Casino Vicksburg, Inc. ("ACVI"),
a wholly owned subsidiary of Ameristar, owns and operates
Ameristar Vicksburg.
The permanently moored, dockside Vicksburg Casino is
approximately 315 feet long and approximately 120 feet wide. Due
to the width of the Vicksburg Casino, the casino, restaurants and
showroom have the spacious feel of a land-based facility. The
Vicksburg Casino has three levels, which are connected by
escalators and elevators. The casino is on the bottom and middle
levels and has wide aisles with an open feel which provides a
comfortable and inviting atmosphere. The Vicksburg Casino has
entrances on both the lower and middle levels, with the lower-
level entrance providing access from valet parking and the middle-
level
<PAGE>entrance providing access from the self-parking area. The
Vicksburg Casino is open 24 hours a day.
The Vicksburg Casino has two restaurants, six bars (one of
which offers live cabaret-style entertainment) and a showroom
(which is used on an intermittent basis for entertainment and
players club promotions). Ameristar Vicksburg also includes the
Delta Point River Restaurant, a locally well-known fine-dining
restaurant situated on a bluff overlooking the Vicksburg Casino.
To date, operations in Vicksburg have experienced some
seasonality, with August and the winter months being the slower
periods.
Management believes Ameristar Vicksburg's competitive
advantages include its location, the size and design of the
project and the range and quality of its amenities. The primary
locational advantages of Ameristar Vicksburg are its proximity to
Interstate 20 and its ease of access. As discussed above, the
Vicksburg Casino is significantly wider than typical riverboat
casinos. In addition, management believes the overall range and
quality of the facilities, food service and entertainment at
Ameristar Vicksburg are superior to those available at its
existing competitors.
As part of a long-term plan to enhance Ameristar Vicksburg,
the Company acquired 18 acres across Washington Street from the
main entrance to the casino for the future development of
additional improvements. The Company is constructing a 144-room
hotel on a portion of this parcel. Site work for this project
has begun, and it is currently anticipated that construction will
be completed in late 1997, absent any unforeseen construction or
other delays. The Delta Point Inn, a 54-room budget motel that
pre-existed the development of Ameristar Vicksburg, has been
taken out of service and will be demolished in connection with
this expansion. Based on preliminary design plans, management
believes that the development cost of the hotel will be between
$9.0 million and $9.5 million, including capitalized construction
period interest. Management expects that a substantial portion
of these development costs will be funded through a short-term
loan and the balance will be funded out of ACVI's operating cash
flow. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources." Although management believes the Company is under no
legal obligation to construct this hotel, the Mississippi Gaming
Commission has advised the Company that the Commission would
consider it a negative factor if this hotel is not completed by
January 21, 1998, the date on which ACVI's gaming license expires
and must be renewed. The Mississippi Gaming Commission, as well
as the Company, believes that the development of additional non-
gaming amenities in Vicksburg is necessary for the growth of the
local gaming market.
Market. The primary market for Ameristar Vicksburg is
residents of the Jackson and Vicksburg, Mississippi and Monroe,
Louisiana areas; tourists coming to Vicksburg primarily to visit
the Vicksburg National Military Park; and other traffic traveling
on Interstate 20, a major east-west thoroughfare that connects
Atlanta and Dallas.
Vicksburg, with a population of approximately 25,000
persons, is located 45 miles west of Jackson, the capital of
Mississippi. According to the 1990 U.S. Census, the Jackson
<PAGE>and Vicksburg metropolitan areas had a total population of
approximately 440,000 persons. Approximately 800,000 people live
within Ameristar Vicksburg's 17-county market area. The
Vicksburg National Military Park, located within three miles of
Ameristar Vicksburg, draws approximately 900,000 registered
visitors a year. Interstate 20 (which connects Atlanta and
Dallas) passes directly through Vicksburg. According to the
Mississippi Department of Transportation, approximately
7.3 million vehicles drove across the Interstate 20 bridge at
Vicksburg during 1996. As of March 31, 1997, Vicksburg has
approximately 1,556 lodging rooms. The Vicksburg Chamber of
Commerce has estimated that the 1996 average hotel occupancy rate
in Vicksburg was approximately 70%.
Competition. Ameristar Vicksburg is subject to intense
competition from its local competitors and to a lesser extent
from casinos in Shreveport, Louisiana and a Native American
casino in Philadelphia, Mississippi. Ameristar Vicksburg's local
competition currently consists of three other casinos. Ameristar
Vicksburg has approximately 1,287 gaming positions or 34% of the
total number of positions that are in Warren County. Based on
data published by governmental authorities and other sources, the
Company has calculated its average market share of gaming revenue
for 1995 and 1996 at approximately 33.3% and 32.5%, respectively.
Management believes Ameristar Vicksburg is currently the market
leader in Warren County. Due to the intensity of competition in
the Vicksburg market, Ameristar Vicksburg's business to date has
been dependent upon continuous and aggressive marketing and
promotional efforts.
Several potential gaming sites still exist in Warren County
and Vicksburg and from time to time potential competitors propose
the development of additional casinos in or near Vicksburg.
Although management believes the current market size and
competitive environment in Warren County will be likely to
dissuade others from building additional casinos in western
Warren County for the foreseeable future, no assurance can be
given that additional competitors will not enter the market.
In addition, the Company is aware of potential sites on the
Big Black River near Interstate 20 between Jackson and Vicksburg,
which, if developed, would provide a significant competitive
advantage over Ameristar Vicksburg and other gaming operations in
Warren County due to its closer proximity to Jackson. However,
there currently is no exit off Interstate 20 in the vicinity of
these sites, the area surrounding these sites is undeveloped and
lacks any infrastructure and these sites may not meet the
navigable waterway requirements of Mississippi law for the
development of a casino. In December 1996, the Mississippi
Gaming Commission rejected an application for the development of
a casino at one of these sites, and the denial is being appealed
by an adjoining landowner. The development of a casino on the
Big Black River likely would have a material adverse effect on
Ameristar Vicksburg and the Company. If Mississippi law were
amended to permit gaming in Jackson, the development of one or
more casinos there would materially impact Ameristar Vicksburg
and the Company. Management is not aware of any current
proposals that would permit such an expansion of gaming in
Mississippi.
<PAGE>Ameristar Council Bluffs. As part of its strategy of
capitalizing on unique market opportunities, the Company opened
the Council Bluffs Casino on January 19, 1996, under one of three
gaming licenses issued for Pottawattamie County, Iowa. On the
bank of the Missouri River across from Omaha, Nebraska, Ameristar
Council Bluffs is adjacent to the Nebraska Avenue Exit on
Interstate 29 immediately north of the junction of Interstate 29
and Interstate 80. Portions of the land-based Main Street
Pavilion (including two restaurants) opened on June 17, 1996, the
Ameristar hotel opened on November 1, 1996 and the sports bar
cabaret opened on December 26, 1996. The remaining land-based
facilities, a steak house and an indoor swimming pool and spa,
opened on February 25 and March 3, 1997, respectively. Ameristar
Council Bluffs is owned and operated by Ameristar Casino Council
Bluffs, Inc., a wholly owned subsidiary of Ameristar ("ACCBI").
The Company designed Ameristar Council Bluffs as a complete
destination resort intended to serve as an entertainment
centerpiece of the region. Ameristar Council Bluffs features
architecture reminiscent of a gateway river town in the late
1800s. The design complements existing characteristics of
Council Bluffs while giving the facility its own distinctive
personality. The approximately 50-acre Ameristar Council Bluffs
site is large enough to accommodate future land-based expansion
should the Company deem it beneficial for the success of the
property.
The Council Bluffs Casino is an approximately 40,000 square
foot, two-level riverboat measuring 272 feet long by 98 feet
wide. By building the vessel with only two levels that have high
ceilings and making it 98 feet wide, the casino has the spacious
feel of a land-based facility. The casino is open 24 hours a day
and is required to make a two-hour cruise a minimum of 100 days
within the "excursion season," which is defined as April 1
through October 31. If the riverboat fails to satisfy this
cruising requirement, it will not be allowed to operate during
the balance of the year. The Council Bluffs Casino satisfied
these cruising requirements for 1996.
Both levels of the riverboat are connected by escalators and
an elevator. Guests enter the riverboat from shore via an
enclosed ramp from the 68,000-square foot Main Street Pavilion.
The Main Street Pavilion is a self-contained complex featuring an
Ameristar hotel, restaurants and entertainment options for
children and adults. The interior of the Pavilion is designed to
replicate a Victorian-era main street. The main level of the
Pavilion includes a buffet, a 24-hour restaurant, a steak house
and a sports bar cabaret, all of which are operated by the
Company. Rising above the Pavilion is a five-story, 160-room,
full-service Ameristar hotel that offers a panoramic view of the
Missouri River and the Council Bluffs Casino. The Main Street
Pavilion also includes a children's activity center operated by
New Horizon Kids Quest, Inc. and owned by a joint venture between
that company and ACCBI.
The Company has leased a portion of the Ameristar Council
Bluffs site to an entity controlled by Iowa-based Kinseth Hotel
Corporation for a limited-service 140-room Holiday Suites hotel
that opened on March 31, 1997. The Kinseth entity developed and
operates this hotel. The Holiday Suites hotel and the Main
Street Pavilion are connected by a climate-controlled walkway
that also connects to the indoor pool, spa and an exercise room.
<PAGE>The development and opening of Ameristar Council
Bluffs, including real property and land-based and riverboat
construction, cost approximately $109 million of which
approximately $2.5 million remained to be paid as of March 31,
1997. However, ACCBI and the general contractor for Ameristar
Council Bluffs are currently arbitrating a dispute, the outcome
of which may affect the total development cost of the project.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and
"Business -- Legal Proceedings."
Market. Council Bluffs has a population of approximately
54,600 people. Council Bluffs forms part of the greater Omaha,
Nebraska/Council Bluffs, Iowa metropolitan area, which according
to the 1990 U.S. Census had a population of approximately
640,000. Approximately 1,050,000 people live within a 50-mile
radius, and 1,600,000 people live within a 100-mile radius, of
Council Bluffs. The median household income of the greater
metropolitan area is approximately $36,000, with an unemployment
rate of approximately 3%.
Competition. Three gaming licenses have been issued for
Pottawattamie County, Iowa to Iowa West Racing Association.
ACCBI operates the Council Bluffs Casino pursuant to an operating
agreement with Iowa West Racing Association. The other casinos
operating under these licenses are Harveys Casino Resorts, which
operates a riverboat casino in close proximity to Ameristar
Council Bluffs, and Bluffs Run, a year-round dog track owned by
Iowa West Racing Association that has a gaming license limited to
the operation of a reel-style slots only casino. This casino,
which opened in March 1995, has approximately 1,200 slot
machines, a restaurant, buffet and lounge entertainment. During
1996, Bluffs Run was the market leader in Council Bluffs. The
Company believes that Bluffs Run will continue to provide
significant competition due to its advantage of being a land-
based facility.
Management believes Harveys provides and will continue to
provide serious competition for Ameristar Council Bluffs. The
Harveys casino opened on January 1, 1996, and substantially all
the other Harveys facilities opened in May 1996, except for a
restaurant and the swimming pool at Harveys that have not been
completed as of the date of this Report. Management believes
that the access of Ameristar Council Bluffs from Interstate 29 is
superior to that of Harveys. Ameristar Council Bluffs also has
more restaurant capacity than Harveys. Due to the impact of
construction of Ameristar Council Bluffs and Harveys in 1996 and
early 1997, management believes that the relative market
positions of the three casinos in Council Bluffs remain subject
to change.
Currently, Iowa law does not limit the number of licenses
that can be issued in a county. While no assurances can be given
that additional licenses will not be issued in Pottawattamie
County, it is management's belief that the Iowa Racing and Gaming
Commission is concerned about market saturation and will not
issue additional licenses that would impair existing operations.
There is legislation pending in Iowa to place a moratorium on
issuing any new gaming licenses. Should this legislation pass,
it would have a positive effect on the Company.
<PAGE>A ballot initiative was proposed in 1996 that would
have authorized slot machines and casino gaming at certain
locations in Nebraska, including Omaha, which is across the
Missouri River from Council Bluffs. This initiative was not
placed on the November ballot due to the determination of the
Nebraska Secretary of State that an insufficient number of
petition signatures were obtained. Although no assurances can be
given, management believes that it is unlikely that any further
legislative action or voting referendum that would authorize
casino gaming in Nebraska will be acted upon prior to 1998. The
introduction of casino gaming in Nebraska, especially in the
Omaha area, likely would have a material adverse effect on the
Company.
The Reserve
The Reserve, with an African safari and big game reserve
theme that includes statues of elephants, giraffes and other
animals, is being developed in phases at the southeast corner of
the junction of Lake Mead Drive and Interstate 515 in Henderson,
Nevada. The Company acquired The Reserve on October 9, 1996
through the merger (the "Merger") of Gem into Ameristar Casino
Las Vegas, Inc., a wholly owned subsidiary of Ameristar
("ACLVI"). See "Business -- Terms of the Merger Agreement;
Dispute with Gem Stockholders."
Following the May 1996 execution of the Merger Agreement by
which The Reserve was acquired, the Company commenced a redesign
of The Reserve intended to expand the scope and size of the
project, including a doubling of the casino square footage, to
increase revenues and to improve The Reserve's competitive
position. In late March 1997, the Company had substantially
completed the redesign of The Reserve and had scheduled the
closing of an increased bank credit facility that would provide a
substantial portion of the financing for the completion of The
Reserve. Shortly before the loan closing, the bank lenders
advised the Company that they would not proceed with the closing
due to uncertainties concerning the amount and form of merger
consideration payable by the Company to the former stockholders
of Gem. Pending the availability of additional financing, the
Company has suspended construction of The Reserve. Accordingly,
no assurance can be given when or if The Reserve will open. See
"Business -- Terms of the Merger Agreement; Dispute with Gem
Stockholders" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
As redesigned, The Reserve will be constructed in two phases
and will be opened upon the completion of Phase I, subject to
obtaining all regulatory approvals. Phase I of The Reserve is
planned to have approximately 319,000 square feet of space,
including approximately 70,000 square feet of casino space. The
Reserve's food and beverage operations are planned to include a
buffet, a 24-hour restaurant, a steak house, an Italian
restaurant, an entertainment lounge, a video lounge and a sports
lounge. A parking structure may also be constructed in Phase I,
depending on budgetary constraints. The Company has established
a construction budget (including capitalized construction period
interest and preopening costs) of approximately $125.0 million
for Phase I of The Reserve (including amounts incurred by Gem
prior to the Merger), of which approximately $31.0 million had
<PAGE>been expended through March 31, 1997. This budget is based
on current estimates, and the actual budget at the time
construction recommences may differ from the current budget.
Construction of the hotel has been substantially completed,
subject to the installation of furniture, fixtures and equipment
to be provided by the Company and the application of the exterior
finish. The shell of the casino and food service areas for
Phase I, as originally planned, is approximately 85% completed,
and the mechanical, electrical, plumbing and HVAC systems for
this portion of Phase I have been installed. Construction of a
40,000-square foot expansion for back-of-house operations began
in February 1997, and construction will be suspended upon the
completion of the foundation for this expansion area.
Phase II of the Reserve is contemplated to add a second
hotel tower with approximately 250 rooms, meeting rooms, an
additional restaurant, an animal habitat, a children's activity
center, an enhanced swimming pool and a court yard. Construction
of Phase II is planned to commence subsequent to the opening of
Phase I. There can be no assurance that the Company will
undertake to develop Phase II of The Reserve or that financing
will be available to the Company for the Phase II expansion.
Market. The gaming market in the greater metropolitan Las
Vegas area includes segments for local residents and visitors,
and both segments of this market are subject to intense and
dynamic competition. The Company expects that The Reserve will
compete primarily for local customers in the Henderson-Green
Valley suburban community. The Company also intends to market
The Reserve to visitors, including persons driving to and from
Arizona via Interstate 515, persons driving between California
and Lake Mead and other visitors to the Las Vegas area who desire
lodging in Henderson-Green Valley.
The greater metropolitan area of Las Vegas, which includes
Henderson-Green Valley, has been one of the fastest growing
metropolitan areas in the United States during the five-year
period of 1990 through 1995. Henderson was the fastest growing
city in the United States during this period, with a 57%
population growth rate. As of July 1995, the estimated
population of Clark County was approximately 1,041,000 and the
estimated combined population of Henderson and Boulder City (a
community south of Henderson) was approximately 133,000. In
1995, 8,637 building permits were issued for new single and multi-
family residential housing units in Henderson. However, no
assurance can be given that the Las Vegas metropolitan area and
Henderson-Green Valley will continue to experience population
growth or that growth will continue for any particular period of
time or at the same rates as in the recent past.*
According to the Nevada Department of Transportation,
approximately 65,000 vehicles per day currently pass through the
junction of Interstate 515 and Lake Mead Drive, the site of The
Reserve. Upon the completion of Interstate 215 to Lake Mead
Drive approximately 3.5 miles west of The Reserve, currently
anticipated in late 1997, the Nevada Department
of
*Historical demographic data in this paragraph is from the 1996 Las
Vegas Perspective, published by Metropolitan Research Association.
<PAGE>Transportation has estimated that the traffic counts at
the Interstate 515/Lake Mead Drive junction will increase to
approximately 115,000 vehicles per day.
Competition. The Company expects The Reserve to face
significant competition in the Henderson-Green Valley market.
Station Casinos, Inc. is developing Sunset Station, a casino-
hotel approximately 3.5 miles north of The Reserve site along
Interstate 515 that is expected to open in mid-1997. Sunset
Station will be larger than The Reserve, and Station Casinos,
Inc. has operated casinos aimed at local Las Vegas residents for
many years. Plans have also been announced for the development
of two additional casino-hotels, each of which would be
approximately 3.5-miles from The Reserve. Management believes
that construction of one of these casino-hotels, near the
junction of Interstate 215 and Lake Mead Drive, will commence in
late 1997 or early 1998. The other proposed casino-hotel would
be connected to a shopping mall across from Sunset Station. The
current owner of this property has stated that it will not be
able to pursue development unless it obtains project financing.
Another company has also recently announced an agreement to
acquire another casino approximately 4.5 miles southeast of The
Reserve, with expansion plans that include enlarging the casino
and building up to 550 hotel rooms. Management is aware of
several additional sites in Henderson-Green Valley that have been
zoned for casino-hotels and believes it is likely additional
casino resorts ultimately will be developed in this market area.
Competing casino-hotels that open in advance of The Reserve
likely will obtain competitive advantages through the development
of customer loyalty and other factors. In addition, The Reserve
will compete to a lesser extent with a number of small, limited
service casinos that currently operate within a five-mile radius
and several other casino-hotels in the southeastern area of
metropolitan Las Vegas.
Terms of the Merger Agreement; Dispute with Gem
Stockholders
The Company acquired The Reserve through the Merger of Gem
into ACLVI on October 9, 1996, pursuant to a merger agreement
entered into as of May 31, 1996, as amended in July and October
1996 (the "Merger Agreement"). The following description of the
terms of the Merger Agreement and related agreements is qualified
in its entirety by, and made subject to, the actual provisions of
such agreements, which have been filed as exhibits to reports of
the Company pursuant to the Securities Exchange Act of 1934, as
amended.
In addition to the Company, ACLVI and Gem, the parties to
the Merger Agreement are Steven W. Rebeil in his individual
capacity and in his capacity as trustee of the Karizma Trust
created under a Trust Agreement dated July 21, 1991, as amended
("Rebeil"), and Dominic J. Magliarditi ("Magliarditi"). The
Karizma Trust and Magliarditi (the "Gem Stockholders") were the
only stockholders of Gem immediately prior to the Merger and
owned approximately 96.9 percent and 3.1 percent, respectively,
of the outstanding common stock of Gem prior to the Merger.
The Merger Agreement, as originally entered into, contemplated
that 7.5 million shares of the Company's Common Stock, subject to
adjustment in certain cases, would be issued to the Gem
Stockholders as merger consideration. Under the amended Merger
Agreement, all of the outstanding shares of Gem common stock were
cancelled at the merger closing and were <PAGE>converted into the
right to receive cash, subject to reduction in certain cases,
equal to the amount of the net proceeds (after payment of
underwriters' discounts and commissions and certain other
offering expenses) in excess of $4.0 million of an underwritten
public offering (the "Post-Merger Offering") of 7.5 million
shares of the Company's Common Stock (the "Post-Merger Offering
Stock") if the Post-Merger Offering is concluded by the Company
by June 1, 1997. If the Post-Merger Offering is not completed by
June 1, 1997, the Merger Agreement provides for the Gem
Stockholders to receive the Gem Notes, as described below.
In the Merger Agreement, the Company agreed to use
commercially reasonable efforts to conclude the Post-Merger
Offering prior to June 1, 1997, and the Gem Stockholders agreed
to reasonably cooperate with the Company in connection with the
Post-Merger Offering. The Merger Agreement provides certain
limited rights to the Gem Stockholders in connection with the
Post-Merger Offering, including the right of Rebeil to approve
the lead managing underwriter proposed by the Company, which
approval is not to be unreasonably withheld or denied.
The Merger Agreement provides that if the Post-Merger
Offering is not concluded prior to June 1, 1997, the Company will
deliver to the Gem Stockholders promissory notes (the "Gem
Notes") in an aggregate principal amount equal to (i) the Average
10-Day Closing Price of the Common Stock (as defined in the
Merger Agreement) as of June 1, 1997, (ii) multiplied by 7.5
million (iii) minus $4.0 million and (iv) minus certain expenses
related to the Post-Merger Offering. The Gem Notes would be
unsecured, would mature on June 1, 2000, and would accrue
interest at the rate of eight percent (8%) per annum. Interest
payments would be due on a monthly basis. The Gem Notes were
executed by the Company at the Merger closing and delivered to an
escrow agent for completion of the principal amount and delivery
to the Gem Stockholders if the Gem Notes are required to be
issued.
On March 26, 1997, the Company commenced an arbitration
proceeding against the Gem Stockholders for breaches of the
Merger Agreement and the implied covenant of good faith and fair
dealing related to the Merger. The Company's complaint alleges
that the Gem Stockholders have wrongfully and in bad faith
interfered with and impeded the Post-Merger Offering because they
believed the Post-Merger Offering would result in a lesser amount
of merger consideration than the Gem Notes. Among other
allegations, the Company's complaint alleges that Rebeil refused
to approve a prominent national investment banking firm proposed
by the Company to serve as lead managing underwriter for the Post-
Merger Offering and categorically refused to approve the
engagement of any other firm suggested by the Company as lead
managing underwriter, and that the Gem Stockholders have
threatened to bring suit and have engaged in other conduct to
dissuade potential underwriters from participating in the Post-
Merger Offering and otherwise to preclude the offering.
The Company has alleged that these actions effectively have
thwarted its ability to consummate the Post-Merger Offering and
have excused the Company's obligation to deliver merger
consideration to the Gem Stockholders in the form and amount
provided by the Merger Agreement. The Company's complaint also
alleges breaches by the Gem Stockholders of various other
representations and warranties and covenants included in the
Merger Agreement. <PAGE>The complaint further alleges that the
conduct of the Gem Stockholders was a proximate cause of the
cancellation by the Company's bank lenders of the late March 1997
closing of an increased credit facility to provide a portion of
the financing for the completion of Phase I of The Reserve.
As a consequence of the actions of the Gem Stockholders, the
Company has determined that the Post-Merger Offering cannot be
concluded before June 1, 1997, and the Company has terminated its
efforts to consummate the Post-Merger Offering. The Company is
seeking damages from the Gem Stockholders arising from their
conduct and declaratory relief to establish the amount and terms
of payment of the merger consideration in light of the conduct of
the Gem Stockholders.
As of the date of filing of this Report, the Gem
Stockholders have not answered the arbitration complaint. Due to
the very preliminary nature of this proceeding, the Company is
not in a position to provide any assessment with respect to its
potential outcome. See also "Business -- Government Regulations --
Regulatory Approvals in Connection with the Merger."
Employees
As of March 15, 1997, the Company employed approximately
2,631 full-time employees and 558 part-time employees.
Additional employees will need to be hired in connection with the
opening of The Reserve. None of the Company's current employees
is employed pursuant to collective bargaining or other union
arrangements. Management believes its employee relations are
good.
Government Regulations
The ownership and operation of casino gaming facilities are
subject to extensive state and local regulations. The Company is
required to obtain and maintain gaming licenses in each of the
jurisdictions in which the Company conducts gaming. The
limitations, conditioning or suspension of gaming licenses could
(and revocation of gaming licenses would) materially adversely
affect the operations of the Company in that jurisdiction.
Nevada. The ownership and operation of casino gaming
facilities in Nevada are subject to: (i) the Nevada Gaming
Control Act and the regulations promulgated thereunder
(collectively, "Nevada Act"); and (ii) various local regulations.
The Company's operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission ("Nevada
Commission"), the Nevada State Gaming Control Board ("Nevada
Board"), and, in the case of the Jackpot Properties, the Liquor
Board of Elko County. The Company's operations proposed to be
conducted at The Reserve will also be subject to licensing and
regulatory control of the Liquor Board of Clark County. The
Nevada Commission, the Nevada Board, and the Liquor Boards of
Elko and Clark Counties are collectively referred to as the
"Nevada Gaming Authorities."
<PAGE>The laws, regulations and supervisory procedures of
the Nevada Gaming Authorities are based upon declarations of
public policy which are concerned with, among other things: (i)
the prevention of unsavory or unsuitable persons from having a
direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of effective
controls over the financial practices of licensees, including the
establishment of minimum procedures for internal fiscal affairs
and the safeguarding of assets and revenues, (iii) providing
reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention
of cheating and fraudulent practices; and (v) providing a source
of state and local revenues through taxation and licensing fees.
Change in such laws, regulations and procedures could have an
adverse effect on the Company's gaming operations.
CPI, which operates the Jackpot Properties' casinos, is
required to be licensed by the Nevada Gaming Authorities, and
ACLVI, which will operate The Reserve, will be required to be
licensed by the Nevada Gaming Authorities. The gaming licenses
require the periodic payment of fees and taxes and are not
transferable. Ameristar is registered by the Nevada Commission
as a publicly traded corporation (a "Registered Corporation") and
has been found suitable to own the stock of CPI, which is a
corporate licensee ("Corporate Licensee") under the terms of the
Nevada Act. Ameristar will be required to be found suitable to
own the stock of ACLVI, which, if licensed, will also be a
Corporate Licensee. As a Registered Corporation, Ameristar is
required periodically to submit detailed financial and operating
reports to the Nevada Commission and furnish any other
information which the Nevada Commission may require. No person
may become a stockholder of, or receive any percentage of profits
from, a Corporate Licensee without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Company and
CPI have obtained from the Nevada Gaming Authorities the various
registrations, findings of suitability, approvals, permits and
licenses currently required in order to engage in gaming
activities in Nevada. ACLVI and/or Ameristar have filed or
intend to file applications with the Nevada Gaming Authorities
for the various registrations, findings of suitability,
approvals, permits and licenses required to engage in gaming
activities at The Reserve. No assurance can be given that ACLVI
will be licensed, or if licensed, that it will be licensed on a
timely basis. If ACLVI is licensed, it will also become subject
to the following regulatory requirements.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
CPI, ACLVI or Ameristar in order to determine whether such
individual is suitable or should be licensed as a business
associate of a gaming licensee. Officers, directors and certain
key employees of CPI and ACLVI must file applications with the
Nevada Gaming Authorities and may be required to be licensed or
found suitable by the Nevada Gaming Authorities. Officers,
directors and key employees of Ameristar who are actively and
directly involved in gaming activities of CPI or ACLVI may be
required to be reviewed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an
application for licensing for any cause which they deem
reasonable. A finding of suitability is comparable to licensing,
and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant
for licensing or a finding of suitability must pay all the costs
of the investigation. <PAGE>Changes in licensed positions must
be reported to the Nevada Gaming Authorities, and in addition to
their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with CPI, ACLVI or Ameristar,
the companies involved would have to sever all relationships with
such person. In addition, the Nevada Commission may require CPI,
ACLVI or Ameristar to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
CPI and Ameristar are required (and ACLVI will be required)
to submit detailed financial and operating reports to the Nevada
Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by CPI and ACLVI
must be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by
CPI or ACLVI, the gaming licenses it holds or has applied for
could be limited, denied, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory
procedures. In addition, CPI, ACLVI, Ameristar and the persons
involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada
Commission. Further, a supervisor could be appointed by the
Nevada Commission to operate CPI's or ACLVI's gaming properties
and, under certain circumstances, earnings generated during the
supervisor's appointment (except for the reasonable rental value
of the casinos) could be forfeited to the State of Nevada.
Limitation, conditioning or suspension of any gaming license or
the appointment of a supervisor could (and denial or revocation
of any gaming license would) materially adversely affect
Ameristar's gaming operations.
Any beneficial holder of Ameristar's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated, and have his suitability as a
beneficial holder of Ameristar's voting securities determined if
the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policy of the
State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5%
of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires
that beneficial owners of more than 10% of a Registered
Corporation's voting securities apply to the Nevada Commission
for a finding of suitability within thirty days after the
Chairman of the Nevada Board mails the written notice requiring
such filing. Under certain circumstances, an "institutional
investor", as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of a Registered Corporation's voting
securities may apply to the Nevada Commission for a waiver of
such finding of suitability if such institutional investor holds
the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting
securities for investment purposes <PAGE>unless the voting
securities were acquired and are held in the ordinary course of
business as an institutional investor and not for the purpose of
causing, directly or indirectly, the election of a majority of
the members of the board of directors of the Registered
Corporation, any change in the Registered Corporation's corporate
charter, bylaws, management, policies or operations of the
Registered Corporation, or any of its gaming affiliates, or any
other action which the Nevada Commission finds to be inconsistent
with holding the Registered Corporation's voting securities for
investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for
informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the
common stock of a Registered Corporation beyond such period of
time as may be prescribed by the Nevada Commission may be guilty
of a criminal offense. Ameristar is subject to disciplinary
action if, after it receives notice that a person is unsuitable
to be a stockholder or to have any other relationship with
Ameristar, CPI or ACLVI, Ameristar, (i) pays that person any
dividend or interest upon voting securities of Ameristar, (ii)
allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by the person,
(iii) pays remuneration in any form to that person for services
rendered or otherwise, or (iv) fails to pursue all lawful efforts
to require such unsuitable person to relinquish his voting
securities including, if necessary, the immediate purchase of
said voting securities by Ameristar, for cash at fair market
value. Additionally, the Liquor Board of Elko County and the
City of Henderson have the authority to approve all persons
owning or controlling the stock of any corporation controlling a
gaming license within their jurisdictions.
The Nevada Commission may, at its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the
debt security of a Registered Corporation if it has reason to
believe that such holder's acquisition of such ownership would
otherwise be inconsistent with the declared policy of the State
of Nevada. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Act,
the Registered Corporation can be sanctioned, including the loss
of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any
voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any
form; or (iv) makes any payment to the <PAGE>unsuitable person by
way of principal, redemption, conversion, exchange, liquidation
or similar transaction.
Ameristar is required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authorities at
any time. If any securities are held in trust by an agent or by
a nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. Ameristar is also
required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada Commission has the power to
require Ameristar stock certificates to bear a legend indicating
that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on
Ameristar.
Ameristar may not make a public offering of its securities
without the prior approval of the Nevada Commission if the
securities or the proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or to
retire or extend obligations incurred for such purposes. Such
approval, if given, does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment
merits of the securities offered. Any representation to the
contrary is unlawful.
Changes in control of Ameristar through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements, or any act or conduct by a person whereby
he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission
may also require controlling stockholders, officers, directors
and other persons having a material relationship or involvement
with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the
transaction.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada
Corporate Licensee gaming licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to
stable and productive corporate gaming. The Nevada Commission
has established a regulatory scheme to ameliorate the potentially
adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the
financial stability of Corporate Licensees and their affiliates;
(ii) preserve the beneficial aspects of conducting business in
the corporate form; and (iii) promote a neutral environment for
the orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Nevada Commission before
the Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and
before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a
plan of recapitalization proposed by the Registered Corporation's
Board of Directors in response to a tender offer made directly to
the Registered<PAGE>Corporation's stockholders for the purposes
of acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
State of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the
number of gaming devices operated; or (iii) the number of table
games operated. A casino entertainment tax is also paid by
casino operations where entertainment is furnished in connection
with the selling of food, refreshments or merchandise.
Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada Board of their
participation in such foreign gaming. The revolving fund is
subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada
Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming
operations, engage in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employ
a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal
unsuitability.
Mississippi. The ownership and operation of casino
facilities in Mississippi are subject to extensive state and
local regulation. Regulation is primarily effected through the
licensing and regulatory control of the Mississippi Gaming
Commission (the "Mississippi Commission") and the regulatory
control of the Mississippi State Tax Commission (collectively,
the "Mississippi Gaming Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"),
which legalized dockside casino gaming in Mississippi, was
enacted on June 29, 1990. Although not identical, the
Mississippi Act is similar to the Nevada Gaming Control Act. The
Mississippi Commission adopted regulations which are also similar
in many respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of
Mississippi and the Mississippi Commission seek to: (i) prevent
unsavory or unsuitable persons from having any direct or indirect
involvement with gaming at any time or in any capacity; (ii)
establish and maintain responsible accounting practices and
procedures; (iii) maintain effective control over the financial
practices of licensees, including establishing minimum procedures
for internal fiscal affairs and safeguarding of assets and
revenues, providing reliable record keeping and making periodic
reports to the Mississippi Commission; (iv) prevent cheating and
fraudulent practices; <PAGE>(v) provide a source of state and
local revenues through taxation and licensing fees; and (vi)
ensure that gaming licensees, to the extent practicable, employ
Mississippi residents. The regulations are subject to amendment
and interpretation by the Mississippi Commission. Changes in
Mississippi law or regulations may limit or otherwise materially
affect the types of gaming that may be conducted and could have
an adverse effect on the Company and the Company's Mississippi
gaming operations.
The Mississippi Act provides for legalized dockside gaming
at the discretion of the 14 eligible counties that border either
the Mississippi Gulf Coast or the Mississippi River, but only if
the voters in such counties have not voted to prohibit gaming in
that county. As of March 1, 1997, dockside gaming was
permissible in nine of the 14 eligible counties in the State and
gaming operations had commenced in Adams, Coahoma, Hancock,
Harrison, Tunica, Warren and Washington counties. Under
Mississippi law, gaming vessels must be located on the
Mississippi River or on navigable waters in eligible counties
along the Mississippi River, or in the waters of the State of
Mississippi lying south of the State in eligible counties along
the Mississippi Gulf Coast. At least one lawsuit is pending with
respect to the expansion of eligible gaming sites in Mississippi
Gulf Coast counties, and another lawsuit is pending in which a
landowner has appealed a finding of unsuitability by the
Mississippi Gaming Authorities of a site on the Big Black River
in Warren County near Interstate 20 between Jackson and
Vicksburg. The law permits unlimited stakes gaming on
permanently moored vessels on a 24-hour basis and does not
restrict the percentage of space which may be utilized for
gaming. There are no limitations on the number of gaming
licenses which may be issued in Mississippi.
Ameristar, and any subsidiary of Ameristar that operates a
casino in Mississippi (a "Gaming Subsidiary"), is subject to the
licensing and regulatory control of the Mississippi Gaming
Authorities. Ameristar is required to register as a publicly
traded holding company of ACVI under the Mississippi Act.
Ameristar is required periodically to submit detailed financial
and operating reports to the Mississippi Commission and furnish
any other information which the Mississippi Commission may
require. If Ameristar is unable to continue to satisfy the
registration requirements of the Mississippi Act, Ameristar and
its Gaming Subsidiaries cannot own or operate gaming facilities
in Mississippi. Each Gaming Subsidiary must obtain a gaming
license from the Mississippi Commission to operate casinos in
Mississippi. A gaming license is issued by the Mississippi
Commission subject to certain conditions, including continued
compliance with all applicable state laws and regulations and
physical inspection of the casinos prior to opening.
Gaming licenses are not transferable, are initially issued
for a two-year period and must be renewed periodically
thereafter. ACVI was granted a renewal of its gaming license by
the Mississippi Commission on January 21, 1996. The gaming
license for ACVI must be renewed in January of 1998. No person
may become a stockholder of or receive any percentage of profits
from a gaming licensee subsidiary of a holding company without
first obtaining licenses and approvals from the Mississippi
Commission. Ameristar has obtained such approvals in connection
with ACVI's gaming license.
<PAGE>Certain officers and employees of Ameristar and the
officers, directors and certain key employees of each Gaming
Subsidiary must be found suitable or be licensed by the
Mississippi Commission. The Company believes it has obtained or
applied for all necessary findings of suitability with respect to
such persons associated with Ameristar or ACVI, although the
Mississippi Commission, in its discretion, may require additional
persons to file applications for findings of suitability.
Employees associated with gaming must obtain work permits that
are subject to immediate suspension under certain circumstances.
In addition, any person having a material relationship or
involvement with the Company may be required to be found suitable
or licensed, in which case those persons must pay the costs and
fees associated with such investigation. The Mississippi
Commission may deny an application for a license for any cause
that it deems reasonable. Changes in certain licensed positions
must be reported to the Mississippi Commission. In addition to
its authority to deny an application for a license, the
Mississippi Commission has jurisdiction to disapprove a change in
a licensed position. The Mississippi Commission has the power to
require any Gaming Subsidiary or Ameristar to suspend or dismiss
officers, directors and other key employees or sever
relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in
such capacities.
At any time, the Mississippi Commission has the power to
investigate and require the finding of suitability of any record
or beneficial stockholder of Ameristar. Mississippi law requires
any person who acquires more than 5% of Ameristar's common stock
to report the acquisition to the Mississippi Commission, and such
person may be required to be found suitable. Also, any person
who becomes a beneficial owner of more than 10% of Ameristar's
common stock, as reported to the Securities and Exchange
Commission, must apply for a finding of suitability by the
Mississippi Commission and must pay the costs and fees that the
Mississippi Commission incurs in conducting the investigation.
The Mississippi Commission has generally exercised its discretion
to require a finding of suitability of any beneficial owner of
more than 5% of a public company's common stock. However, the
Mississippi Commission has adopted a policy that permits certain
institutional investors to own beneficially up to 10% of a public
company's common stock without a finding of suitability. If a
stockholder who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of
suitability or a license within thirty (30) days after being
ordered to do so by the Mississippi Commission may be found
unsuitable. Management believes that compliance by Ameristar
with the licensing procedures and regulatory requirements of the
Mississippi Commission will not affect the marketability of its
securities. Any person found unsuitable and who holds, directly
or indirectly, any beneficial ownership of the securities of
Ameristar beyond such time as the Mississippi Commission
prescribes, may be guilty of a misdemeanor. Ameristar is subject
to disciplinary action if, after receiving notice that a person
is unsuitable to be a stockholder or to have any other
relationship with Ameristar or its Gaming Subsidiaries,
Ameristar: (i) pays the unsuitable person any dividend or other
distribution upon the voting securities of Ameristar; (ii)
recognizes the exercise, directly or indirectly, of any voting
rights conferred by securities held by the unsuitable person;
(iii) pays the unsuitable person any remuneration in any form
for<PAGE>services rendered or otherwise, except in certain
limited and specific circumstances; or (iv) fails to pursue all
lawful efforts to require the unsuitable person to divest himself
of the securities, including, if necessary, the immediate
purchase of the securities for cash at a fair market value.
Ameristar may be required to disclose to the Mississippi
Commission, upon request, the identities of security holders,
including the holders of any debt securities. In addition, the
Mississippi Commission under the Mississippi Act may, in its
discretion, (i) require holders of debt securities of Ameristar
to file applications, (ii) investigate such holders, and (iii)
require such holders to be found suitable to own such debt
securities. Although the Mississippi Commission generally does
not require the individual holders of obligations such as notes
to be investigated and found suitable, the Mississippi Commission
retains the discretion to do so for any reason, including but not
limited to, a default, or where the holder of the debt instrument
exercises a material influence over the gaming operations of the
entity in question. Any holder of debt securities required to
apply for a finding of suitability must pay all investigative
fees and costs of the Mississippi Commission in connection with
such an investigation.
ACVI must maintain a current stock ledger in its principal
office in Mississippi and Ameristar must maintain a current list
of shareholders in the principal office of ACVI which must
reflect the record ownership of each outstanding share of any
class of equity security issued by Ameristar. The stockholder
list may thereafter be maintained by adding reports regarding the
ownership of such securities that it receives from Ameristar's
transfer agent. The ledger and stockholder lists must be
available for inspection by the Mississippi Commission at any
time. If any securities of Ameristar are held in trust by an
agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Mississippi
Commission. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. Ameristar must also render
maximum assistance in determining the identity of the beneficial
owner.
The Mississippi Act requires that the certificates
representing securities of a publicly traded corporation that has
a Gaming Subsidiary bear a legend to the general effect that such
securities are subject to the Mississippi Act and the regulations
of the Mississippi Commission. Ameristar has received an
exemption from this legend requirement from the Mississippi
Commission. The Mississippi Commission has the power to impose
additional restrictions on the holders of Ameristar's securities
at any time.
Substantially all loans, leases, sales of securities and
similar financing transactions by a Gaming Subsidiary must be
reported to or approved by the Mississippi Commission. A Gaming
Subsidiary may not make an issuance or a public offering of its
securities, but may pledge or mortgage casino facilities, if it
obtains the prior approval of the Mississippi Commission.
Ameristar may not make an issuance or a public offering of its
securities without the prior approval of the Mississippi
Commission if any part of the proceeds of the offering is to be
used to finance the construction, acquisition or operation of
gaming facilities in Mississippi or to retire or extend
obligations incurred for one or more such purposes.
Such<PAGE>approval, if given, does not constitute a
recommendation or approval of the investment merits of the
securities subject to the offering. Any representation to the
contrary is unlawful.
Changes in control of Ameristar through merger,
consolidation, acquisition of assets, management or consulting
agreements or any form of takeover, and certain recapitalizations
and stock repurchases by Ameristar, cannot occur without the
prior approval of the Mississippi Commission. The Mississippi
Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval
process relating to the transaction.
The Mississippi legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and other corporate defense tactics that affect
corporate gaming licensees in Mississippi and corporations whose
stock is publicly traded that are affiliated with those
licensees, may be injurious to stable and productive corporate
gaming. The Mississippi Commission has established a regulatory
scheme to ameliorate the potentially adverse effects of these
business practices upon Mississippi's gaming industry and to
further Mississippi's policy to: (i) assure the financial
stability of corporate gaming operations and their affiliates;
(ii) preserve the beneficial aspects of conducting business in
the corporate form; and (iii) promote a neutral environment for
the orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Mississippi Commission
before Ameristar may make exceptional repurchases of voting
securities above the current market price of its common stock
(commonly called "greenmail") or before a corporate acquisition
opposed by management may be consummated. Mississippi's gaming
regulations will also require prior approval by the Mississippi
Commission if Ameristar adopts a plan of recapitalization
proposed by its Board of Directors opposing a tender offer made
directly to the stockholders for the purpose of acquiring control
of Ameristar.
Neither Ameristar nor any subsidiary may engage in gaming
activities in Mississippi while also conducting gaming operations
outside of Mississippi without approval of the Mississippi
Commission or a waiver of such approval. The Mississippi
Commission may require determinations that, among others, there
are means for the Mississippi Commission to have access to
information concerning the out-of-state gaming operations of the
Company and its affiliates. Ameristar has previously obtained a
waiver of foreign gaming approval from the Mississippi Commission
for operations in Nevada and Iowa and will be required to obtain
the approval or a waiver of such approval from the Mississippi
Commission prior to engaging in any additional future gaming
operations outside of Mississippi.
If the Mississippi Commission decides that a Gaming
Subsidiary violated a gaming law or regulation, the Mississippi
Commission could limit, condition, suspend or revoke the license
of the Gaming Subsidiary. In addition, a Gaming Subsidiary,
Ameristar and the persons involved could be subject to
substantial fines for each separate violation. Because of such a
violation, the Mississippi Commission could seek to appoint a
supervisor to operate the casino facilities. Limitation,
conditioning or suspension of any gaming license or
the<PAGE>appointment of a supervisor could (and revocation of any
gaming license would) materially adversely affect Ameristar's and
the Gaming Subsidiary's gaming operations.
License fees and taxes, computed in various ways depending
on the type of gaming involved, are payable to the State of
Mississippi and to the counties and cities in which a Gaming
Subsidiary's respective operations will be conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
(i) a percentage of the gross gaming revenues received by the
casino operation, (ii) the number of slot machines operated by
the casino or (iii) the number of table games operated by the
casino. The license fee payable to the State of Mississippi is
based upon "gaming receipts" (generally defined as gross receipts
less payouts to customers as winnings) and equals 4% of gaming
receipts of $50,000 or less per month, 6% of gaming receipts over
$50,000 and less than $134,000 per month, and 8% of gaming
receipts over $134,000 per month. The foregoing license fees are
allowed as a credit against the Company's Mississippi income tax
liability for the year paid. The gross revenue fee imposed by
the City of Vicksburg equals approximately 4% of the gaming
receipts.
In October of 1994, the Mississippi Commission adopted a
regulation requiring as a condition of licensure or license
renewal that a gaming establishment's plan include a 500-car
parking facility in close proximity to the casino complex and
infrastructure facilities which will amount to at least 25% of
the casino cost. Notwithstanding the Company's belief that it is
in compliance with this requirement, the Mississippi Commission
has advised the Company that it believes the expansion of non-
gaming amenities by the Company and its competitors in the
Vicksburg market is necessary for the growth of this market.
Management agrees with this view, and the Company is constructing
a 144-room hotel at Ameristar Vicksburg. Site work for this
project has begun, and it is anticipated that construction will
be completed in late 1997, absent unforeseen construction or
other delays. The Mississippi Commission has advised the Company
that the Commission would consider it as a negative factor if
this hotel is not completed by the January 21, 1998 expiration
date of the Company's gaming license. Although the Company does
not believe that a failure to complete the hotel by January 21,
1998, will affect the renewal of its gaming license, no assurance
can be given with respect to the actions, if any, that the
Mississippi Commission may take against the Company if the hotel
is not completed by that date.
Iowa. The Company's Council Bluffs operations are conducted
by ACCBI and are subject to Chapter 99F of the Iowa Code and the
regulations promulgated thereunder. The Company's gaming
operations are subject to the licensing and regulatory control of
the Iowa Racing and Gaming Commission (the "Iowa Gaming
Commission").
Under Iowa law, wagering on a "gambling game" is legal, when
conducted by a licensee on an "excursion gambling boat." An
"excursion gambling boat" is a self-propelled excursion boat.
"Gambling game" means any game of chance authorized by the Iowa
Gaming Commission. The excursion season must be from April 1st
through October 31st of each calendar year. The vessel must
operate at least one excursion each day for 100 days during the
excursion season to operate during the off season. Each
excursion must consist of a minimum <PAGE>of two hours. The Iowa
Gaming Commission has determined that the excursions conducted by
the Council Bluffs Casino during the 1996 cruising season
satisfied the requirements of Iowa law for the conduct of off-
season operations, notwithstanding the failure of such minimum
number of excursions to follow a defined route due to safety
concerns.
The legislation permitting riverboat gaming in Iowa
authorizes the granting of licenses to "qualified sponsoring
organizations." A "qualified sponsoring organization" is defined
as a person or association that can show to the satisfaction of
the Iowa Gaming Commission that the person or association is
eligible for exemption from federal income taxation under
Section 501(c)(3), (4), (5), (6), (7), (8), (10) or (19) of the
Internal Revenue Code (hereinafter "not-for-profit corporation").
The not-for-profit-corporation is permitted to enter into
operating agreements with persons qualified to conduct riverboat
gaming operations. Such operators must be approved and licensed
by the Iowa Gaming Commission. On February 28, 1995, the Iowa
Gaming Commission authorized the issuance of a license to conduct
gambling games on an excursion gambling boat to the Iowa West
Racing Association, a not-for-profit corporation organized for
the purpose of facilitating riverboat gaming in Council Bluffs,
Iowa (the "Association"). The Association entered into an
agreement with ACCBI authorizing ACCBI to operate riverboat
gaming operations in Council Bluffs under the Association's
gaming license (the "Operator's Contract"). This contract was
approved by the Iowa Gaming Commission. The term of the
Operator's Contract runs until December 31, 2002, with two five-
year renewal options. The license awarded by the Iowa Gaming
Commission was recently renewed for a one-year term expiring on
March 31, 1998.
Substantially all of ACCBI's material transactions are
subject to review and approval by the Iowa Gaming Commission.
All contracts or business arrangements, verbal or written, with
any related party or in which the term exceeds three years or the
total value of the contract exceeds $50,000 must be submitted in
advance to the Iowa Gaming Commission for approval.
Additionally, contracts negotiated between ACCBI and a related
party must be accompanied by economic and qualitative
justification.
ACCBI must submit detailed financial, operating and other
reports to the Iowa Gaming Commission. ACCBI must file monthly
gaming reports indicating adjusted gross receipts received from
gambling games and the total number and amount of money received
from admissions. Additionally ACCBI must file annual financial
statements covering all financial activities related to its
operations for each fiscal year. ACCBI must also keep detailed
records regarding its equity structure and owners.
Iowa has a graduated wagering tax equal to five percent (5%)
of the first one million dollars of adjusted gross receipts, ten
percent (10%) on the next two million dollars of adjusted gross
receipts and twenty percent (20%) on adjusted gross receipts over
three million dollars. In addition, the state charges other fees
on a per customer basis. Additionally, ACCBI pays to the City of
Council Bluffs a fee equal to $0.50 per passenger.
Under the Operator's Contract, ACCBI also pays the
Association an admissions fee of $1.50 per passenger. ACCBI has
interpreted the Operator's Contract to mean that a
person<PAGE>may leave and re-enter Council Bluffs Casino (for
example, to visit the restaurants at Ameristar Council Bluffs)
without ACCBI being obligated to pay an additional admissions fee
to the Association. ACCBI received a letter from the Association
in August 1996 in which the Association asserted that an
additional fee is due each time a person enters the Council
Bluffs Casino, including re-entries. In January 1997, ACCBI
received another letter from the Association invoking the audit
procedures under the Operator's Contract. ACCBI is cooperating
in the audit but has advised the Association that it will
vigorously resist any attempt to collect an additional fee for
passengers re-entering the boat.
If the Iowa Gaming Commission decides that a gaming law or
regulation has been violated, the Iowa Gaming Commission has the
power to assess fines, revoke or suspend licenses or to take any
other action as may be reasonable or appropriate to enforce the
gaming rules and regulations.
Regulatory Approvals in Connection with the Merger. The
Merger did not require the prior approval or consent of any
gaming regulatory authority in the States of Nevada, Mississippi
and Iowa. Each of the Gem Stockholders, Messrs. Rebeil and
Magliarditi, applied to the Nevada Commission for a finding of
suitability to be associated with Ameristar, although pursuant to
the Merger Agreement, as amended, Mr. Rebeil agreed not to be
associated with Ameristar in any capacity. The Merger Agreement
provided for Ameristar to hire Mr. Magliarditi as an officer,
although Mr. Magliarditi agreed that until the Nevada Commission
acted upon his application for a finding of suitability, he would
not assume any position as an officer of Ameristar. The Nevada
Commission denied the application of each of Messrs. Rebeil and
Magliarditi in January and February 1997, respectively. The
Company terminated Mr. Magliarditi's employment upon the denial
of his application by the Nevada Commission.
A record or beneficial owner of the Gem Notes, if issued,
could be required by one or more gaming regulatory authorities to
be found suitable, and such owner would be required to apply for
a finding of suitability within 30 days after request of such
gaming authority or within such other time period prescribed by
such gaming authority. If such a record or beneficial owner is
required to be found suitable and is not found suitable by such
gaming regulatory authority, such owner may be required by law to
dispose of the Gem Notes. If any gaming regulatory authority
determines that a person is unsuitable to own the Gem Notes, then
the Company may be subject to sanctions, including the loss of
its regulatory approvals, if, without the prior approval of the
applicable gaming regulatory authorities, it (i) pays interest on
the Gem Notes to the unsuitable person, (ii) pays the unsuitable
person remuneration in any form or (iii) makes any payment to the
unsuitable person by way of principal, redemption, conversion,
exchange, liquidation or similar transaction. Although the
Nevada Commission in January and February 1997 found each of the
Gem Stockholders unsuitable for certain purposes, the Nevada
Commission has not found either of them to be unsuitable to hold
the Gem Notes. If any gaming regulatory authority finds a Gem
Stockholder unsuitable to own the Gem Notes, a dispute between
the Company and the person or persons found unsuitable likely
would arise, which may have a material adverse effect on the
Company's business, financial condition and results of
operations.
<PAGE>The Company has been advised that if the Company and
the Gem Stockholders reach a negotiated settlement of the pending
arbitration claims, the settlement terms will require the prior
approval of the Nevada Commission. In addition, the Company has
been advised that the terms of an arbitration award may require
the approval of the Nevada Commission if they differ from the
terms of the Merger Agreement. There can be no assurance that
the Nevada Commission would approve settlement terms determined
by the Board of Directors to be acceptable to the Company or the
terms of any arbitration award. See "Business -- Terms of the
Merger Agreement; Dispute with Gem Stockholders."
The Company has been advised by the Mississippi Commission
that it is monitoring the actions of the Nevada Commission with
respect to the Merger and the Company's relationships with each
of the Gem Stockholders. As of the date of this Report, the
Mississippi Commission has not taken any action or imposed any
requirements on the Company with respect to the Merger or the
Company's relationships with either of the Gem Stockholders.
Other Jurisdictions. The Company expects to be subject to
similar rigorous regulatory standards in each jurisdiction in
which it seeks to conduct gaming operations. There can be no
assurance that regulations adopted or taxes imposed by other
jurisdictions will permit profitable operations by the Company.
Federal Regulation of Slot Machines. The Company is
required to make annual filings with the U.S. Attorney General in
connection with the sale, distribution or operation of slot
machines. All requisite filings for the most recent year and the
current year have been made.
Currency Transaction Reporting Requirements. Pursuant to a
1985 agreement between the State of Nevada and the United States
Department of the Treasury (the "Treasury"), the Nevada
Commission and the Nevada Board have authority to enforce their
own cash transaction reporting laws applicable to casinos which
substantially parallel the Federal Bank Secrecy Act. Under the
Money Laundering Suppression Act of 1994, which was passed by
Congress, the Secretary of the Treasury retained the ability to
permit states, including Nevada, to continue to enforce their own
cash transaction reporting laws applicable to casinos. The
Nevada Act requires most gaming licensees to file reports related
to cash purchases of chips, cash wagers, cash deposits or cash
payment of gaming debts, if any such transactions aggregate more
than $10,000 in a 24-hour period. Casinos are required to
monitor receipts and disbursements of currency in excess of
$10,000 and report them to the Treasury. Although it is not
possible to quantify the full impact of these requirements on the
Company's business, the changes are believed to have had some
adverse effect on results of operations since inception.
On November 28, 1994, the Treasury enacted amendments
(effective December 1, 1994) to the federal regulations under the
Bank Secrecy Act. The amendments require casinos subject to the
Bank Secrecy Act to implement written programs no later than June
1, 1995 to assure and monitor compliance with the Bank Secrecy
Act. Such programs must include "know your customer" and
suspicious transaction reporting components. Although Nevada
<PAGE>casinos are exempt from Title 31, the Nevada Commission has
recently enacted amendments to the Nevada Act that parallel in
several respects the amendments to the Bank Secrecy Act.
Potential Changes in Tax and Regulatory Requirements. From
time to time, federal and state legislators and officials have
proposed changes in tax law, or in the administration of such
laws, affecting the gaming industry. Recent proposals have
included a federal gaming tax and increases in state or local
gaming taxes. They have also included limitations on the federal
income tax deductibility of the cost of furnishing complimentary
promotional items to customers, as well as various measures which
would require withholding on amounts won by customers or on
negotiated discounts provided to customers on amounts owed to
gaming companies. It is not possible to determine with certainty
the likelihood of possible changes in tax law or in the
administration of such law. Such changes, if adopted, could have
a materially adverse effect on the Company's financial results.
The United States Congress has recently passed legislation
which creates a national gaming study commission (the "National
Gaming Commission"). The National Gaming Commission will
generally have the duty to conduct a comprehensive legal and
factual study of gambling in the United States and existing
federal, state and local policies and practices with respect to
the legalization or prohibition of gambling activities, to
formulate and propose changes in such policies and practices and
to recommend legislation and administrative actions for such
changes. It is not possible to predict the future impact of
these proposals on the Company and its operations. Any such
proposals could have a material adverse affect on the Company's
business.
Non-Gaming Regulations. The sale of alcoholic beverages by
the Company is or will be subject to the licensing, control and
regulation in Jackpot by the Liquor Board of Elko County, in
Henderson by the City of Henderson, in Vicksburg by both the City
of Vicksburg and the Alcoholic Beverage Control Division of the
Mississippi State Tax Commission, and in Council Bluffs by the
Alcoholic Beverage Division of the Iowa Department of Commerce
(collectively, the "Liquor License Authorities"). In
Mississippi, Ameristar Vicksburg has been designated as a special
resort area, which allows the Company to serve alcoholic
beverages on a 24-hour basis. In Nevada, the applicable liquor
laws allow 24-hour service of alcoholic beverages without any
additional permits. In Iowa, the applicable liquor laws allow
the sale of liquor during legal hours which are Monday through
Saturday from 6 a.m. to 2 a.m. and Sunday from 8 a.m. to 2 a.m.
All licenses are revocable and not transferable. The Liquor
License Authorities have the full power to limit, condition,
suspend or revoke any such license or to place a liquor licensee
on probation with or without conditions. Any such disciplinary
action could (and revocation would) have a material adverse
effect upon the operations of the Company's business. Certain
officers and managers of ACVI and ACLVI must be investigated by
the applicable Liquor License Authorities in connection with
ACVI's and ACLVI's liquor permits. Changes in licensed positions
must be approved by the applicable Liquor License Authorities.
<PAGE>All cruising vessels operated by the Company must
comply with U.S. Coast Guard requirements as to safety and must
hold a Certificate of Inspection. These requirements set limits
on the operation of the vessel and require that each vessel be
operated by a minimum complement of licensed personnel. Loss of
the vessel's Inspection Certificate would preclude its use as a
riverboat. Every five years, vessels must be dry-docked for an
inspection of the outside of the hull resulting in a loss of
service that may have an adverse effect on the Company. Less
stringent rules apply to permanently moored vessels.
In order to comply with the federal Merchant Marine Act of
1936, as amended, and the federal Shipping Act of 1916, as
amended, and applicable regulations thereunder, the Company's
Bylaws contain provisions designed to prevent persons who are not
citizens of the United States from holding, in the aggregate,
more than 24.9% of the Company's outstanding common stock.
All shipboard employees of the Company employed on U.S.
Coast Guard-approved vessels, even those who have nothing to do
with the actual operations of the vessel, such as dealers,
waiters and security personnel, are subject to the Jones Act,
which, among other things, exempts those employees from state
limits on workers' compensation awards.
The Company is also required to comply with various
environmental regulations. See "Properties."
Item 2. Properties
Jackpot. Cactus Petes is located on a 35-acre site and The
Horseshu is located on a 30-acre site. The Cactus Petes and The
Horseshu sites are across from each other on U.S. Highway 93.
The Company also owns 204 housing units in Jackpot, including 90
units in two apartment complexes developed as Farmers Home
Administration ("FmHA") projects. These housing units support
the primary operations of the Jackpot Properties. The Jackpot
Properties are subject to deeds of trust securing the Revolving
Credit Facility, and the FmHA housing projects are subject to
mortgage loans in favor of the FmHA.
The Company owns a gas station adjacent to Highway 93 in
Jackpot, which it operates under a franchise from Chevron.
Management believes that this facility is in material compliance
with applicable environmental and other regulatory requirements.
The Company has previously operated two other gas stations at the
Jackpot Properties, one of which was abandoned prior to the
adoption of modern environmental abandonment standards. Although
management believes that all tanks for this gas station were
removed in the mid-1970s, the Company has not conducted tests for
the presence of any environmental contamination from this gas
station. Management believes that the likelihood of a material
unfavorable outcome with respect to potential environmental
liabilities relating to this former gas station is remote.
Vicksburg. In connection with the development of Ameristar
Vicksburg, the Company has acquired seven parcels in Vicksburg
along Washington Street near Interstate 20. These parcels
comprise approximately 43.4 acres, approximately 30 of which are
developable. Of the seven parcels, three have been acquired by
direct purchase and four have been acquired by<PAGE>lease. The
aggregate monthly rent under the leases at March 1, 1997 was
approximately $54,000. Each lease provides for the Company to be
responsible for all taxes, insurance premiums, utilities and
other ownership and operating costs associated with the property
during the entire term of the lease. Each lease includes options
for the Company to purchase the applicable parcels, for an
aggregate price which decreases over time from approximately $5.9
million to approximately $2.0 million. A substantial portion of
the purchase prices may be paid in installments with interest at
stated rates. The Company does not have any plans to exercise
any of these purchase options prior to its expiration.
The Vicksburg Casino, the Company's leasehold interests
relating to the Ameristar Vicksburg site and substantially all of
that portion of the Ameristar Vicksburg site owned by the Company
serve as collateral for the Company's obligations under the
Revolving Credit Facility. The hotel being developed at
Ameristar Vicksburg and the underlying property are expected to
be subject to a deed of trust securing a loan to fund a portion
of the hotel construction costs.
In addition, the Company has developed a 20-acre mobile home
park with 30 single- and 20 double-wide mobile homes. This
mobile home park is located seven miles from Ameristar Vicksburg
and sites are available for rent by employees and other persons.
The mobile home park rental rates are competitive with the local
market.
Council Bluffs. Ameristar Council Bluffs is on an
approximately 50-acre site along the bank of the Missouri River
and adjacent to the Nebraska Avenue exit on Interstate 29
immediately north of the junction of Interstates 29 and 80. The
Company owns approximately 27 acres of this site and has rights
to use the remaining portion of the site that is owned by the
State of Iowa for a 50-year term. The Company has leased
approximately 0.623 acres of the Ameristar Council Bluffs site to
Kinseth Hotel Corporation for the development and operation by
Kinseth of a 140-room limited service Holiday Suites hotel that
opened on March 31, 1997. All of the Company's interests in
Ameristar Council Bluffs are subject to collateral security
instruments securing the Revolving Credit Facility and other
indebtedness in the original principal amount of approximately
$19.8 million.
The Reserve. The Reserve is at the southeastern corner of
the junction of Lake Mead Drive and Interstate 515 in Henderson,
Nevada on a site containing approximately 53 acres, of which
approximately 46 acres are developable. The Company currently
owns 28 acres of the site and has options to acquire the
remainder of the site. Each option exercise must be for at least
five acres and a minimum of five acres of the option land must be
acquired each year (commencing October 1, 1997) or the remaining
options expire. The Company exercised an option for five acres
of the site in April 1997. The option exercise prices, which
increase at the rate of 8% per annum from October 1, 1995, are
$217,800 per acre for the first 17 acres and $152,460 per acre
for each remaining acre, in each case plus 8% per annum from
October 1, 1995 through the date of exercise. The construction
of Phase I of The Reserve may require the Company to exercise
options for an additional seven acres of land. Phase II
construction would also require the Company to acquire additional
land, the area of which has not yet been determined.
<PAGE>The Reserve site was previously used for surface waste
disposal activities for approximately 50 years. Prior to 1994,
the site had large areas of debris, rubble and some stained soils
resulting from these waste activities. Site studies revealed
asbestos, lead and pesticide concentrations in the surface soils.
Following a surface remediation program by a third party in 1994,
the Nevada Division of Environmental Protection approved a
closure of the remediation and indicated that no further work was
required.
A 1995 Phase I environmental assessment on 23 acres of the
site now owned by the Company showed that some rubble remained on
portions of the property, but that all hazardous material had
been removed. A 1997 Phase I environmental assessment on the 30
acres of The Reserve site under option or subsequently acquired
by the Company indicated the property does not appear to have
been adversely impacted since the completion of the 1994
remediation program. Phase I environmental assessments involve
the conduct of limited procedures and may not identify the
existence or extent of actual environmental conditions.
Other. The Company leases approximately 16,000 square feet
of office space in Las Vegas, Nevada for its executive offices,
which the Company occupied in March 1997.
The Company owns a one-half interest in a 1982 Cessna
Citation ISP jet aircraft (the "Aircraft"); the other one-half
interest in the Aircraft is owned by Gem Air, Inc. ("Gem Air"),
an affiliate of Rebeil. As members of Nevada AG Air Ltd.
("NVAGAIR"), a limited liability operating company, the Company
and Gem Air own a hangar and related ground lease rights (the
"Hangar") at McCarran International Airport in Las Vegas, Nevada,
at which the Aircraft is based. NVAGAIR has leased the Hangar to
the Company on a long-term basis. Under the agreements between
the Company and Gem Air, the Company has operational control of
the Aircraft and the Hangar and is responsible for all costs,
including debt service, associated with the Aircraft and the
Hangar, other than certain variable costs associated with the use
of the Aircraft by Gem Air or its affiliates.
Item 3. Legal Proceedings
Roy Patel v. Ameristar Casino Vicksburg, Inc. On March 23,
1994, Roy Patel ("Patel") filed a lawsuit against ACVI for $5
million in compensatory and $12.5 million in punitive damages.
The suit was filed in the Circuit Court of Warren County,
Mississippi, as case number 940042CI. ACVI's security system
videotaped Mr. Patel allegedly "pinching" bets at a craps table.
Mr. Patel was expelled from the casino. Mr. Patel alleged this
was done wrongfully and in a fashion that constituted false
imprisonment and caused him embarrassment and great emotional
distress. After a trial in January 1997, the jury returned a
verdict in favor of ACVI and a finding of no liability. The
plaintiff filed a motion for a new trial, which was denied by the
court. The plaintiff has stated an intention to appeal the
judgment. ACVI's general liability insurance carriers have
accepted the tender of the defense, but under a reservation of
rights. Management does not believe that ACVI has any material
exposure, and even if there is a subsequent determination that
there is any liability management believes it would be covered by
insurance (subject to the deductible).
<PAGE>Clothe H. James, et al. v. Ameristar Casinos, Inc.,
Ameristar Casino Vicksburg, Inc., et al. On January 18, 1996,
the plaintiffs commenced a lawsuit against the Company, ACVI, and
Riverboat Corporation of Mississippi, d/b/a Isle of Capri Casino.
The suit is filed in the Circuit Court of the First Judicial
District of Hinds County, Mississippi, as Civil Action No. 251-96-
54CN. The plaintiffs filed an amended complaint on February 6,
1996. The plaintiffs seek $5 million in actual damages and $7.5
million in punitive damages. This case involves alleged wrongful
death and personal injuries to four persons. The plaintiffs
allege that ACVI and the Isle of Capri Casino each negligently
served alcohol to a visibly intoxicated person who later crashed
his vehicle. Two persons were killed and two persons were
severely injured. Ameristar and ACVI have answered the complaint
in which they have denied liability. Discovery is ongoing, and
Ameristar and has filed a motion for summary judgment to remove
Ameristar as a defendant in the proceedings. However, the court
has not yet ruled on this motion. ACVI's general liability
insurance carriers have accepted the tender of the defense, but
have notified the Company that the insurers may not be
responsible for any punitive damages. Legal counsel has advised
the Company that Mississippi law generally does not preclude
punitive damage awards being covered by general liability
policies, although there is no Mississippi case on point with the
alleged facts of the James case.
Perini-Anderson v. ACCBI. Perini-Anderson, a joint venture,
in which Perini Building Company is a principal, is the general
contractor for the construction of the main pavilion and the
Ameristar hotel at Ameristar Council Bluffs. The contract
between Perini-Anderson and ACCBI contains a guaranteed maximum
price and specific dates for completion. The contract also
contains provisions for liquidated damages if Perini-Anderson
fails to meet the established completion dates.
On September 20, 1996, ACCBI received from Perini-Anderson a
demand for arbitration regarding the amounts due under the
contract. The demand does not contain a plea for a specific
amount of damages, and instead requests an award for extra or
changed work, delayed, disrupted and accelerated work, together
with inefficiencies and impacts experienced on the project, along
with unpaid retainage and certain other costs. Based on a
statement of damages filed in the arbitration by Perini-Anderson,
management understands that Perini-Anderson's claims are for an
amount of approximately $4.6 million, which includes certain
amounts due to subcontractors that have been paid by ACCBI.
ACCBI submitted a counterclaim in the arbitration for cost
overruns in excess of the guaranteed maximum price that ACCBI has
had to pay, liquidated damages for delay and certain other costs.
ACCBI has submitted a statement of damages in the arbitration
seeking $7.1 million from Perini-Anderson. Perini-Anderson has
asserted that it is entitled to equitable extensions to the
scheduled completion date for, among other things, delays caused
by change orders and unanticipated severe weather conditions that
eliminate liability of Perini-Anderson to ACCBI for cost overruns
and liquidated damages.
The arbitration proceedings will be conducted in accordance
with the rules of the American Arbitration Association and will
be held in Council Bluffs, Iowa. There are three arbitrators,
one selected by ACCBI, one selected by Perini-Anderson and one
selected by the other two arbitrators. The hearing is scheduled
to commence in July 1997. Management is <PAGE>not able at this
time to make an assessment with respect to the outcome of this
arbitration proceeding.
Margaret Botsford v. ACVI. On October 30, 1996, Margaret
Botsford commenced a lawsuit in the Circuit Court of Warren
County, Mississippi, entitled Margaret Botsford v. Ameristar
Casino Vicksburg et al. The case number is 96,205-CI. Ms.
Botsford was an employee of ACVI. She alleges in the complaint
that she was wrongfully asked to take a breathalyzer test for
alcohol. She claims that the tests showed that she was neither
under the influence of alcohol, nor was she impaired. She
further alleges that ACVI wrongfully terminated her. According
to the complaint, ACVI's actions defamed her, failed to hold
certain information confidential, and falsely arrested her. She
ask for $500,000 in compensatory damages and $5 million in
punitive damages. ACVI has denied liability in an answer to the
complaint and the matter is currently in discovery.
Bryan K. and Dawn H. Hafen v. Steven W. Rebeil, et. al.
This lawsuit was filed in the Clark County District Court as case
number A 347722. A named defendant in the amended complaint,
filed on January 29, 1996, action is Gem. ACLVI is the successor-
in-interest by merger to Gem. The case arises out of the
purchase of land in Mesquite, Nevada by Steven W. Rebeil, a
former stockholder of Gem. The plaintiffs allege that the Gem
Stockholders (Messrs. Rebeil and Magliarditi) and their
controlled entities (including Gem) engaged in a conspiracy to
defraud the plaintiffs in connection with the land purchase. The
plaintiffs allege violations of Nevada's racketeering statutes,
fraud and unjust enrichment. The total damages claimed are
alleged to be approximately $10 million. The case is in the
beginning stages of discovery.
The Gem Stockholders are required to indemnify ACLVI against
the claims in the Hafen litigation under the Merger Agreement
pursuant to which Gem was merged into ACLVI, which obligation was
acknowledged in a letter from Mr. Magliarditi to the Company
dated June 11, 1996. The Company is seeking indemnification
against this claim in the arbitration proceeding it has commenced
against the Gem Stockholders.
Other Legal Proceedings and Claims. See "Business -- Terms
of the Merger Agreement; Dispute with Gem Stockholders" and
"Business -- Government Regulations -- Iowa" for information
concerning an arbitration proceeding recently commenced by the
Company against the Gem Stockholders and a contract dispute
between ACCBI and Iowa West Racing Association, the holder of the
gaming license under which the Council Bluffs Casino operates.
From time to time, the Company is a party to litigation
which arises in the ordinary course of business. Except for the
matters described or referred to above, the Company is not
currently a party to any litigation that management believes
would be likely, if adversely determined, to have a material
adverse effect on the Company.
<PAGE>Item 4. Submission of Matters to a Vote of Security
Holders.
None.
<PAGE>PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters
Ameristar's Common Stock is traded on the Nasdaq National
Market System ("Nasdaq-NMS") under the symbol "ASCA." The
following table sets forth, for the fiscal quarter indicated, the
high and low sale prices for the Common Stock, as reported by
Nasdaq:
</TABLE>
<TABLE>
<S> <C> <C>
High Low
1995
First Quarter $ 8.75 $ 4.50
Second Quarter 10.50 6.13
Third Quarter 8.50 6.25
Fourth Quarter 7.13 5.75
1996
First Quarter 7.50 6.00
Second Quarter 14.75 6.25
Third Quarter 13.13 5.25
Fourth Quarter 6.13 4.75
</TABLE>
On March 31, 1997, there were 329 holders of record of
Ameristar's Common Stock.
No dividends on Ameristar's Common Stock have been declared
during the last two fiscal years. The Company intends to retain
all earnings for use in the development of its business and does
not anticipate paying any cash dividends in the foreseeable
future. In addition, the Company's Revolving Credit Facility
obligates the Company to comply with certain financial covenants
that may restrict or prohibit the payment of dividends. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
<PAGE>Item 6. Selected Financial Data
The following data has been derived from the audited
financial statements of the Company and should be read in
conjunction with those statements, which are included in this
Report.
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
<S> <C> <C> <C> <C> <C> <C>
For the For the For the For the For the For the
year year three mos. year year year
ended ended ended ended ended ended
Income Statement 9/30/92 9/30/93 12/31/93 12/31/94 12/31/95 12/31/96
Data: ------- ------- -------- -------- -------- --------
(amounts in thousands, except per share data)
REVENUES:
Casino $29,741 $32,285 $ 7,938 $ 90,882 $ 99,364 $161,338
Food and beverage 9,713 10,164 2,521 17,494 19,303 24,250
Rooms 6,095 6,812 1,491 7,580 7,861 7,641
General Store 2,431 2,283 582 2,557 2,595 2,389
Other 2,066 3,464 935 5,265 5,161 5,371
------- ------- ------ -------- -------- --------
50,046 55,008 13,467 123,778 134,284 200,989
Less: Promotional
allowances 4,450 4,982 1,308 9,425 10,417 12,524
------- ------- ------- -------- -------- --------
Net revenues 45,596 50,026 12,159 114,353 123,867 188,465
------- ------- ------- -------- -------- --------
COSTS AND EXPENSES:
Casino 11,497 13,067 3,310 40,347 44,503 75,685
Food and beverage 6,469 6,758 1,922 12,469 11,747 16,773
Rooms 1,911 1,971 312 2,249 2,404 2,368
General Store 2,106 2,024 367 2,213 2,292 2,108
Other 2,818 4,071 1,024 6,199 5,919 4,946
Selling, general &
administrative 6,316 6,378 1,795 20,599 20,437 37,006
Business development - 418 122 1,446 1,704 1,622
Utilities &
maintenance 2,994 3,274 795 6,417 7,056 9,130
Depreciation and
amortization 4,054 4,185 993 7,062 9,721 14,135
Preopening costs - - - 5,408 - 7,379
------- ------- ------- -------- -------- --------
Total costs & expenses 38,165 42,146 10,640 104,409 105,783 171,152
------- ------- ------- -------- -------- --------
Income from operations 7,431 7,880 1,519 9,944 18,084 17,313
OTHER INCOME
(EXPENSE):
Interest income 31 43 9 86 205 354
Interest expense (1,192 ) (750) (30) (3,379) (3,958) (8,303)
Other (23) 26 2 (5) - (77)
------- ------- ------- -------- ------- --------
Income before income
tax provision 6,247 7,199 1,500 6,646 14,331 9,287
Income tax provision - 2,294 575 2,426 5,236 3,390
------- ------- ------- -------- -------- --------
Income before
extraordinary loss
and cumulative effect
of a change in
accounting principle 6,247 4,905 925 4,220 9,095 5,897
Extraordinary loss on
early retirement of
debt, net of income
tax benefit
of $353 - - - - (657) -
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
(continued)
<S> <C> <C> <C> <C> <C> <C>
For the For the For the For the For the For the
year year three mos. year year year
ended ended ended ended ended ended
Income Statement 9/30/92 9/30/93 12/31/93 12/31/94 12/31/95 12/31/96
Data (continued): -------- -------- -------- -------- -------- --------
(amounts in thousands, except per share data)
Cumulative effect of a
change in accounting
principle: Adoption
of SFAS 109
"Accounting for
Income Taxes" - - 720 - - -
-------- -------- -------- --------- --------- --------
NET INCOME $ 6,247 $ 4,905 $ 1,645 $ 4,220 $ 8,438 $ 5,897
======== ======== ======== ========= ========= ========
PRO FORMA NET INCOME
(unaudited):
Income before pro
forma income tax
provision $ 6,247 $ 7,778
Pro forma income tax
provision 2,124 2,645
-------- -------
Pro forma net income $ 4,123 $ 5,133
======== =======
EARNINGS PER SHARE:
Income before
extraordinary loss $0.21 $0.45 $0.29
Extraordinary loss - (0.03) -
----- ----- -----
Net income $0.21 $0.42 $0.29
===== ===== =====
PRO FORMA EARNINGS PER
SHARE (unaudited) $0.27 $0.08
===== =====
WEIGHTED AVERAGE
SHARES OUTSTANDING 20,360 20,360 20,360
====== ====== ======
PRO FORMA WEIGHTED
AVERAGE SHARES
OUTSTANDING: 18,444 19,971
====== ======
as of as of as of as of as of
Balance Sheet and 9/30/92 9/30/93 12/31/94 12/31/95 12/31/96
Other Data: ------- ------- -------- -------- --------
(amounts in thousands)
Cash $ 1,787 $ 2,853 $ 9,169 $ 14,787 $ 10,724
Total assets 42,205 66,711 125,347 202,220 270,052
Total notes payable
and long-term debt,
net of current
maturities 11,761 24,686 45,300 101,869 143,893
Stockholders' equity 25,291 26,844 56,609 65,047 70,944
Capital expenditures 2,263 26,158 33,329 64,783 76,388
</TABLE>
Financial data as of dates and for periods ending prior to
November 1993 reflect restated financial statements giving
retroactive effect to a corporate reorganization completed
immediately prior to the closing of the Company's initial public
offering. Pursuant to the reorganization, CPI and ACVI, then
companies under the common control of Craig H. Neilsen, became
wholly owned subsidiaries of the Company.
The Vicksburg Casino and certain other portions of Ameristar
Vicksburg opened in late February 1994. The remaining Ameristar
Vicksburg facilities were completed and opened through May 1994.
The Council Bluffs Casino opened in mid-January 1996. Portions
of the land-based facilities at Ameristar Council Bluffs opened
in June, November and December 1996. The Company's remaining
land-based facilities at Ameristar Council Bluffs opened in
February and March 1997.
<PAGE>Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Results of Operations
Ameristar Casinos, Inc. ("Ameristar" or "ACI") owns and
operates casino-hotels through three wholly owned subsidiaries,
Cactus Pete's, Inc. ("CPI"), Ameristar Casino Vicksburg, Inc.
("ACVI") and Ameristar Casino Council Bluffs, Inc. ("ACCBI"). In
addition, Ameristar is developing a casino-hotel through a fourth
subsidiary, Ameristar Casino Las Vegas, Inc. ("ACLVI"), and holds
a majority interest in Nevada AG Air Ltd. ("NVAGAIR").
Collectively, Ameristar together with the aforementioned wholly
owned subsidiaries and NVAGAIR are referred to herein as the
"Company."
CPI owns and operates Cactus Petes Resort Casino ("Cactus
Petes") and The Horseshu Hotel and Casino (collectively, the
"Jackpot Properties"), two casino-hotels located in Jackpot,
Nevada at the Idaho border. ACVI owns and operates a riverboat-
themed dockside casino (the "Vicksburg Casino") and related land-
based facilities (collectively, "Ameristar Vicksburg") in
Vicksburg, Mississippi. ACCBI owns and operates a riverboat
casino (the "Council Bluffs Casino") and related land-based hotel
and other facilities (collectively, "Ameristar Council Bluffs")
in Council Bluffs, Iowa. The Council Bluffs Casino opened on
January 19, 1996, portions of the Main Street Pavilion opened on
June 17, 1996, the hotel opened on November 1, 1996, and the
remainder of Ameristar Council Bluffs opened in early 1997.
ACLVI will be the operating entity for The Reserve Hotel and
Casino ("The Reserve") under development in Henderson, Nevada at
the intersection of Interstate 515 and Lake Mead Drive. The
Company, through the merger of the initial developer of The
Reserve into ACLVI, acquired The Reserve on October 9, 1996.
ACLVI will complete construction of The Reserve, and will operate
the property upon its completion. Construction on The Reserve
has been suspended pending the availability of additional
financing. Uncertainties concerning the form and amount of
merger consideration payable in connection with the acquisition
of The Reserve caused the Company's bank lenders to cancel the
closing of an increased credit facility for the Company scheduled
to occur in late March 1997. See "Liquidity and Capital
Resources" below.
In connection with the acquisition of The Reserve, in July
1996 the Company established NVAGAIR, a limited liability
company, to hold certain aviation-related assets the Company
controls though its majority interest in NVAGAIR.
The Company's quarterly and annual operating results may be
affected by competitive pressures, the timing of the commencement
of new gaming operations, the amount of preopening costs incurred
by the Company, construction at existing facilities and general
weather conditions. Consequently, the Company's operating
results for any quarter or year may not be indicative of results
to be expected for future periods.
<PAGE>Year Ended December 31, 1996 Versus Year Ended December 31,
1995
Summary
The opening of Ameristar Council Bluffs, beginning with the
Council Bluffs Casino in January 1996, brought a year of
significant growth in Ameristar's consolidated net revenues and
income from operations before preopening costs.
Consolidated net revenues increased over 50% from $123.9
million in 1995 to $188.4 million in 1996. Income from
operations rose to $24.7 million in 1996 before the $7.4 million
charge for preopening costs associated with the opening of
Ameristar Council Bluffs, a 36.5% increase over income from
operations of $18.1 million in the prior year. Income from
operations after preopening costs was $17.3 million in 1996.
Total operating expenses as a percentage of net revenues
were 90.8% in 1996 (86.9% before the Ameristar Council Bluffs
preopening costs) versus 85.4% in 1995. The increase reflects,
in addition to the preopening costs, a higher casino expenses to
casino revenues ratio in the new Council Bluffs Casino than at
the Company's other properties. See "Costs and Expenses" below.
On a year-to-year comparable basis (i.e., before preopening
costs in 1996 and an extraordinary charge in 1995), net income
increased $1.5 million to $10.6 million in 1996 from $9.1 million
in 1995, reflecting the positive impact of the opening of
Ameristar Council Bluffs. After preopening costs, net income for
the year ended December 31, 1996 was $5.9 million versus net
income for the year ended December 31, 1995 of $8.4 million.
Earnings per share before preopening costs were $.52 for 1996
($.29 after preopening costs). Earnings per share were $.42 for
1995 after an extraordinary charge of $.03 per share for the
refinancing of the Company's credit line.
Revenues
During 1996, Ameristar Council Bluffs was one of the top
gaming revenue producers in the State of Iowa, while both
Ameristar Vicksburg and the Jackpot Properties remained market
share leaders in their areas.
With nearly a full year of casino operations and a partial
year of non-gaming operations, Ameristar Council Bluffs had total
net revenues of $70.3 million for 1996. Despite the opening of
land-based facilities in the middle and at the end of the year,
Ameristar Council Bluffs was the leader in both casino and total
revenues among the Company's four operating casino properties.
Net revenues for Ameristar Vicksburg were $66.1 million for
the year ended December 31, 1996 compared with $67.6 million for
the prior year. Though showing a slight decrease in revenues,
management believes Ameristar Vicksburg was able to maintain its
leading position in the Vicksburg market through effective
promotional strategies and by <PAGE>continuing to provide
customers with superior service and quality gaming and nongaming
products.
The Jackpot Properties produced net revenues of $51.6
million, a 7.7% decrease from the $55.9 million produced in 1995.
Management believes that the decrease is primarily the result of
additional competition for the traditional gaming customer base
of the Jackpot Properties. This competition has come from new
and renovated facilities in Jackpot, as well as the addition of
Native American and other casinos in the outer market, including
Washington, Oregon and Canada. The 1996 net revenues were also
affected by adverse weather conditions during the year and below-
average table games win percentages in the second quarter.
Management also believes that declines in the rates of population
and economic growth in southern Idaho have adversely affected the
Jackpot Properties. A decline in casino revenues of $2.8
million, combined with an increase in promotional allowances of
$0.5 million, account for the majority of the decline in net
revenues.
In an effort to improve their competitive position, the
Jackpot Properties have begun new direct mail programs to
outlying areas to develop new customers and retain current
customers. In addition, approximately 460 new state-of-the-art
slot machines with innovative layouts and improved sensory appeal
(including touch screens and enhanced signs, sounds and colors)
have been introduced to improve customers' entertainment
experiences and encourage repeat visits.
Costs and Expenses
As noted above, the Company's overall operating expense
ratio was higher in 1996 than in 1995, due primarily to the
Ameristar Council Bluffs preopening costs and to an expense-to-
revenue ratio in the Council Bluffs Casino that is significantly
higher than at the Vicksburg Casino or the Jackpot Properties.
Since 1996 was the first year of operations for the Council
Bluffs Casino, the higher operating expense ratio had the effect
of increasing the Company's overall operating expense ratio. The
higher casino expense ratio in the Council Bluffs Casino is
caused by a gaming tax rate in Iowa that is significantly higher
than in the other jurisdictions in which the Company operates, as
well as an admissions fee payable in Iowa that is not charged
against the Company's other operations. If the gaming tax rate
in Iowa was similar to the rate in Nevada or Mississippi,
operating expenses (excluding preopening costs) as a percentage
of net revenues would have shown a decrease in 1996, reflecting
the Company's efforts to contain controllable costs while still
providing an outstanding experience and value for its customers.
Without the Iowa admissions fee, the decrease in the expense
ratio would have been even more significant.
Casino costs and expenses increased $31.2 million in 1996
due to the opening of the Council Bluffs Casino in January 1996.
As a percentage of casino revenues, casino expenses increased to
46.9% in 1996 compared with 44.8% in 1995. While most of this
increase relates to the higher gaming tax rate and the admissions
fee in Iowa, an increase also occurred at the Jackpot Properties
from 40.4% to 43.2%. While casino revenues declined somewhat at
the Jackpot Properties, as previously discussed, the
corresponding casino expenses could not be <PAGE>proportionally
reduced, due to the Company's desire to maintain high customer
service standards. The Vicksburg Casino's expense to revenue
ratio in the casino department decreased from 47.4% in 1995 to
42.4% in 1996, reflecting the success of that property's
continued efforts to control costs.
The Company's food and beverage costs and expenses increased
$5.0 million in 1996 due to the opening of several dining
facilities at Ameristar Council Bluffs during the year. The
Company's food and beverage expense to revenue ratio increased
from 60.9% in 1995 to 69.2% in 1996. This increase reflects a
food and beverage expense ratio of 91.8% at Ameristar Council
Bluffs, caused mainly by the inefficiencies of restaurant start-
ups that accompanied the opening of the dining establishments
during the year.
Selling, general and administrative costs and expenses
increased $16.6 million or 81.7% from 1995 to 1996. This
significant increase accompanies the notable growth experienced
by the Company in 1996. The majority of the increase relates to
the opening of Ameristar Council Bluffs in 1996 and the
associated marketing, riverboat operations and other general and
administrative costs incurred during the year. Additionally,
corporate expenses increased due to the relocation of the
Company's executive offices to Las Vegas, Nevada in the third
quarter of 1996.
Utilities and maintenance expenses increased $2.1 million or
29.4% and depreciation and amortization expenses increased $4.4
million or 45.4% from 1995 to 1996. Absent the new Ameristar
Council Bluffs properties, both of these expense categories would
have seen moderate decreases in 1996.
Business development costs decreased slightly during the
year, reflecting Ameristar's concentration on current projects,
including the completion of Ameristar Council Bluffs and the
acquisition and development of The Reserve. Although the Company
continues to explore potential expansion opportunities in new and
existing jurisdictions, management does not anticipate
undertaking any expansion projects that would require a material
amount of capital expenditures by the Company until the Company
has obtained financing for the completion of Phase I of The
Reserve. Investments in expansion projects may be made through
wholly owned subsidiaries, joint ventures, partnerships or other
arrangements. No assurances can be given, however, that the
Company will commence gaming operations at any expansion project
undertaken or, if such operations are commenced, that they will
be profitable.
Preopening costs of $7.4 million were expensed during 1996
as construction of each significant component of Ameristar
Council Bluffs was completed and placed into service.
Interest expense, net of capitalized interest of $2.3
million in 1996 and $1.9 million in 1995, increased $4.3 million
or 109.8% from 1995. This increase primarily reflects the
additional debt outstanding to finance the Company's expansion.
In addition, as Ameristar Council Bluffs' facilities were
completed during 1996, the capitalization of interest on funds
borrowed to construct the project was discontinued and subsequent
interest costs were reflected as an expense on the income
statement rather than as an additional cost of the project on the
balance sheet.
<PAGE>The Company's average borrowing rate was 8.90% in 1996
compared to 8.21% in 1995. The Company expects to incur
increased interest expense in 1997 due to an increase in the
amount of debt, some of which will be capitalized as part of
construction costs.
The Company's effective federal tax rate on income was 36.5%
in both 1996 and 1995 versus the federal statutory rate of 35%,
due to the effects of certain expenses incurred by the Company
which are not deductible for federal income tax purposes.
Year Ended December 31, 1995 Versus Year Ended December 31, 1994
Summary
The improvement in operating results for 1995 over 1994 was
primarily due to a full year of operations at the Ameristar
Vicksburg casino and the absence of any preopening costs in 1995.
Consolidated net revenues for 1995 were $123.9 million
compared with $114.4 million in 1994, an 8.3% increase. Income
from operations rose to $18.1 million in 1995. During 1994,
income from operations of $9.9 million reflected $5.4 million in
preopening costs amortization associated with the Ameristar
Vicksburg facility which commenced operations in February 1994.
Before the amortization of preopening costs in 1994, income from
operations rose 17.8% in 1995 due primarily to 3% revenue growth
at the Jackpot Properties and the two months of additional
operations at Ameristar Vicksburg.
Total operating expenses decreased as a percentage of net
revenues from 91.3% in 1994 to 85.4% in 1995. Excluding
Ameristar Vicksburg's preopening costs of $5.4 million, 1994's
total operating expenses as a percentage of net revenues were
86.6%.
Net income for the year ended December 31, 1995 was $8.4
million, which included an after tax extraordinary loss of
$657,000 related to the refinancing of the Company's bank credit
facility. Including the after tax effect of preopening costs
totaling $3.5 million, net income of $4.2 million was generated
in 1994. Earnings per share for 1995 were $.42 (after the
extraordinary loss of $.03 per share due to the refinancing
mentioned above) versus $.21 (after amortization of preopening
costs of $.17 per share) in 1994.
Revenues
Both the Jackpot Properties and Ameristar Vicksburg were
market share leaders during 1995. The Jackpot Properties
produced record revenues of $55.9 million, an increase of $1.6
million or 3.0% over 1994. While slot revenues at the Jackpot
Properties increased only 0.7% from 1994, table game revenues
rose 15.8%. Ameristar Vicksburg had an average market share of
34% in 1995 due to aggressive promotional strategies. Revenues
for Ameristar Vicksburg were $67.6 million for the year ended
December 31, 1995 compared with $59.8 million for the 10 months
the facility was open in 1994.
<PAGE>Other revenues decreased $0.1 million or 2.0% from
1994 primarily due to a significant reduction in showroom
entertainment revenue at Ameristar Vicksburg. Due to low
attendance, the Company began utilizing the showroom on a more
strategic basis by opening it for weekend and special events
entertainment rather than having the showroom open on a full-time
basis as in 1994.
Costs and Expenses
Casino costs and expenses increased $4.2 million or 10.3%
from 1994 to 1995. This was due primarily to a full year of
operations at Ameristar Vicksburg in 1995. Food and beverage
costs and expenses decreased $0.7 million or 5.8% in 1995 from
1994 due primarily to cost containment measures implemented at
Ameristar Vicksburg. For the Jackpot Properties, costs and
expenses remained relatively constant between the two years.
Selling, general and administrative costs and expenses
decreased $0.2 million or 0.8% from 1994 to 1995. Utilities and
maintenance costs and expenses increased $0.6 million or 10.0%
from 1994 to 1995. Depreciation and amortization increased $2.7
million or 37.7%.
Business development costs increased $0.3 million or 17.8%
from 1994 to 1995. While the Company was unsuccessful in its bid
in 1995 to obtain a gaming license in Lawrenceburg, Indiana, the
Company continued to explore potential gaming opportunities in
other jurisdictions.
Interest expense, net of capitalized interest of $1.9
million in 1995 and $0.2 million in 1994, increased $0.6 million
or 17.1% from 1994. The Company's incremental borrowing rate was
8.21% in 1995 compared to 10.5% in 1994.
The Company's effective federal tax rate on income before
extraordinary loss was 37% in both 1995 and 1994 versus the
federal statutory rate of 35%, due to certain non-deductible
expenses.
Liquidity and Capital Resources
The Company's cash flow from operations was $33.2 million
for the year ended December 31, 1996, as compared to
$23.0 million for the year ended December 31, 1995. The Company
had unrestricted cash of approximately $10.7 million as of
December 31, 1996. The Company historically has funded its daily
operations through net cash provided by operating activities and
its significant capital expenditures through bank debt and other
debt financing. The Company's current assets decreased by
approximately $13.6 million from December 31, 1995 to
December 31, 1996, primarily as a result of expenditures related
to the completion and opening of Ameristar Council Bluffs,
including the application of an $11.5 million restricted security
deposit.
Ameristar, as borrower, and its principal operating
subsidiaries (including ACLVI), as guarantors, maintain a
Revolving Credit Facility with Wells Fargo Bank, NA (formerly
First Interstate Bank of Nevada, NA; "WFB") and a syndicate of
banks (the "Revolving Credit <PAGE>Facility"). The maximum
principal available at December 31, 1996 was $99.0 million;
however, the maximum principal available reduced to $94.5 million
on January 1, 1997, pursuant to the terms of the Revolving Credit
Facility. The Company may not borrow under the Revolving Credit
Facility in excess of 3.5 times its rolling four quarter EBITDA
("Earnings before Interest, Taxes, Depreciation and
Amortization"). As of December 31, 1996, 3.5 times the Company's
rolling four quarter EBITDA exceeded the maximum funds available
under the Revolving Credit Facility.
Borrowings under the Revolving Credit Facility bear interest
at a rate based either on LIBOR or WFB's prime rate, at the
election of the Company, and the ratio of the Company's
consolidated total debt to consolidated cash flow, as measured by
an EBITDA formula. As of December 31, 1996, the Company had
outstanding one $91.0 million LIBOR draw and two prime rate draws
totaling $2.5 million at an average interest rate of 8.56% per
annum. These borrowings have been used to repay pre-existing
borrowings of $44.8 million, to fund the continued development of
Ameristar Council Bluffs and to pay certain costs related to the
acquisition of The Reserve, including the repayment of
$11.5 million in indebtedness secured by The Reserve.
In connection with the acquisition of The Reserve, the bank
lenders under the Revolving Credit Facility gave their consent
for Ameristar to make capital contributions to ACLVI of up to
$0.5 million and to make loans to ACLVI of up to $16.0 million
(which intercompany loans may be funded out of borrowings under
the Revolving Credit Facility). Following the completion of
Ameristar Council Bluffs, the Revolving Credit Facility permits
draws under the Revolving Credit Facility to be used only for
general working capital purposes and the funding of permitted
intercompany loans to ACLVI.
The maximum borrowings available under the Revolving Credit
Facility reduce semi-annually commencing January 1, 1997 on a
sliding scale (ranging from $4.5 million to $7.1 million in
reductions) with a final principal payment of $42.0 million due
at maturity on December 31, 2001.
The Revolving Credit Facility is secured by liens on
substantially all of the real and personal property of the
Company and its subsidiaries other than The Reserve. The
Revolving Credit Facility prohibits any secondary liens on these
properties without the prior written approval of the lenders.
Certain changes in control of the Company may constitute a
default under the Revolving Credit Facility. The Revolving
Credit Facility also requires the Company to expend two percent
of consolidated revenues on capital maintenance annually. The
Revolving Credit Facility prohibits Ameristar from declaring or
paying any dividends on the Common Stock of Ameristar if such
declaration or payment would result in an event of default under
the Revolving Credit Facility or if the Company's total leverage
ratio (as defined) would be less than 2.00:1.00. The Revolving
Credit Facility binds the Company to a number of affirmative and
negative covenants, including promises to maintain certain
financial ratios within defined parameters. As of December 31,
1996, the Company was in compliance with these covenants.
<PAGE>In November 1996, the Company began negotiations with
WFB and other banks for the replacement of the Revolving Credit
Facility with a $175 million long-term credit facility (the "1997
Credit Facility"). The Company and the lenders had scheduled a
closing for the 1997 Credit Facility for late March 1997.
However, due to uncertainties related to the amount and form of
merger consideration payable to the former stockholders of Gem
Gaming, Inc. ("Gem") in connection with the acquisition of The
Reserve, the bank lenders cancelled the closing. See "Business --
Terms of the Merger Agreement; Dispute with Gem Stockholders."
Pending the availability of additional financing, the Company has
suspended construction on The Reserve. Although the Company is
exploring financing alternatives, there can be no assurance that
additional financing for the construction of The Reserve will be
available on terms acceptable to the Company or at all.
Pending the anticipated closing of the 1997 Credit Facility,
the Company obtained short-term unsecured loans from a private
lender totaling $12.0 million. The Company anticipated repaying
these short-term loans out of the initial draws under the 1997
Credit Facility. Following the cancellation of the closing of
the 1997 Credit Facility, the Company obtained a short-term loan
from WFB in the amount of $20.0 million, which matures on May 31,
1997. The proceeds of this loan have been used to repay the
prior short-term loans of $12.0 million, to pay the costs to
complete the redesign of The Reserve and certain construction
activities initiated prior to the suspension of construction of
The Reserve, and for other working capital purposes.
The Company, WFB and the other lenders under the Revolving
Credit Facility are negotiating the terms of an amendment to the
Revolving Credit Facility for the purpose of increasing the
maximum principal available to repay the $20.0 million short-term
loan from WFB, modifying the principal reduction schedule and
modifying certain covenants in the Revolving Credit Facility. If
by April 1, 1998, the dispute with the Gem Stockholders has not
been resolved through arbitration or settlement and the Company
has not restructured its long-term debt, management anticipates
that the Company would need to seek waivers of certain covenants
under the Revolving Credit Facility, and no assurance can be
given that a request for such waivers would be granted.
ACCBI entered into a preferred ship mortgage with General
Electric Credit Corp. ("GECC") on December 28, 1995 for the sum
of $11,511,000. The loan is secured by the Council Bluffs
Casino. The GECC loan is amortized over four years with the
first year's amortization calculated as if it were a 36-month
loan. Principal outstanding at the end of the first year is
amortized over the remaining 36 months of the loan. The monthly
principal payments were $320,000 for the first 12 months and
$213,000 for the remaining 36 months. The loan matures on
January 1, 2000. The interest rate is fixed at 9.12% for the
life of the loan.
Proceeds of $7,137,400 from an equipment loan entered into
by ACCBI with WFB on December 12, 1995, were used to finance
Ameristar Council Bluffs' slot machines,<PAGE>surveillance
equipment and property signage. The loan is secured by the
equipment and a preferred ship mortgage on the Council Bluffs
Casino subordinate to the GECC loan. The loan amortizes over
four years with monthly principal payments of approximately
$149,000. The interest rate on this loan is equal to the LIBOR
rate or base rate available from time to time under the Revolving
Credit Facility, as selected by ACCBI. The final payment is due
on December 12, 1999.
At December 31, 1996, the Company had other debt outstanding
of approximately $14.7 million (excluding a $34.3 million
obligation to the Gem Stockholders that has been recorded on the
Company's balance sheet pending the final determination of the
form and amount of merger consideration), with an average per
annum interest rate of 12.6%.
The Company intends that ACVI will borrow approximately
$7.0 million in 1997 for the purpose of funding a portion of the
construction costs of a 144-room hotel at Ameristar Vicksburg.
The balance of these construction costs (approximately
$2.0 million to $2.5 million) are expected to be funded out of
ACVI's operating cash flow. The Company is currently negotiating
with a private lender for a nonrecourse loan that would be
secured by the hotel. The Company anticipates that this loan
will have a maturity date of not earlier than June 1, 1998 and
require monthly or quarterly interest payments. However, no
assurance can be given that this or any other loan will be
obtained on these terms or other terms acceptable to the Company.
The Company currently intends to use the proceeds of the
anticipated loan to reduce the outstanding balance under the
Revolving Credit Facility and to reborrow funds under the
Revolving Credit Facility for the payment of construction costs
as they are incurred.
Capital expenditures in the year ended December 31, 1996,
were approximately $76.4 million (including approximately
$22.7 million expended by Gem prior to the Merger), compared to
approximately $64.8 million in the year ended December 31, 1995.
Of the 1996 expenditures, $46.3 million were related to the
development of Ameristar Council Bluffs and $29.2 million were
related to the development of The Reserve. The majority of the
1995 capital expenditures related to the development of Ameristar
Council Bluffs. The Company funded its capital expenditures in
1996 from net cash provided by operating activities, bank debt
(including the Revolving Credit Facility), purchase money
financing and short-term debt.
The Company anticipates making capital expenditures of
approximately $26.0 million in 1997, including approximately
$9.8 million for the development and construction of Phase I of
The Reserve, approximately $7.0 million for the development and
construction of a 144-room hotel at Ameristar Vicksburg
(including capitalized construction period interest),
approximately $6.5 million for the payment of the remaining costs
of completing Ameristar Council Bluffs and approximately
$2.7 million for maintenance of existing facilities and other
purposes. The anticipated amount of capital expenditure spending
in 1997 does not reflect any amounts that would be expended if
the Company is able to resume construction on The Reserve, which
was suspended following the cancellation of the closing of the
1997 Credit Facility. The total construction budget, including
capitalized construction period interest and preopening costs,
established by the Company for Phase I of The Reserve is $125.0
million, of which approximately $31.0 million had been incurred
as of March 31, 1997. This budget <PAGE>remains subject to
change based on design changes and refinements and changes in
construction bid amounts at the time construction recommences.
Management anticipates that the above-described capital
expenditure requirements will be funded out of short-term
borrowings intended to be replaced by an increase in the
Revolving Credit Facility, the proceeds of a loan for the
development of the Ameristar Vicksburg hotel, purchase money and
lease financing related to the acquisition of furniture, fixtures
and equipment (including gaming equipment) and operating cash
flow. Although no assurance can be given, the Company
anticipates that it will have sufficient funds to meet its
capital expenditure requirements in 1997. However, an adverse
change in the Company's operations or operating cash flow may
affect the Company's ability to meet its capital expenditure
requirements and/or maintain compliance with the terms of the
Revolving Credit Facility or other borrowings.
Management believes that currently available and anticipated
capital resources will be sufficient to complete Phase I of The
Reserve as budgeted. However, if cost overruns are incurred on
any capital project or if any unforeseen contingencies arise that
are not covered by insurance or otherwise reimbursable,
additional capital resources will be required in order to the
Company to complete construction of The Reserve.
Additional capital resources will be required in order for
the Company to resume construction of The Reserve, if cost
overruns are incurred on any capital project or if any unforeseen
contingencies arise that are not covered by insurance or
otherwise reimbursable. The Company does not anticipate using
any material capital resources to pursue or develop any
additional expansion project until it has obtained financing for
the completion of Phase I of The Reserve. There can be no
assurance that sources of funding for any currently unanticipated
requirements would be permitted by restrictions included in the
Revolving Credit Facility or would be available on terms
acceptable to the Company.
Under the terms of the Merger Agreement, the Company may be
required to issue three-year 8% interest bearing promissory notes
(the "Gem Notes") to the Gem Stockholders. The Merger Agreement
provides for the Gem Notes to be in a principal amount equal to
7.5 million multiplied by the average closing price of
Ameristar's Common Stock during the last 10 trading days of May
1997, minus $4.0 million and certain other reductions. Although
the Company has commenced an arbitration proceeding against the
Gem Stockholders in which the Company has alleged it has been
excused from issuing the Gem Notes, no assurance can be given the
Company will not issue the Gem Notes. See "Business -- Terms of
the Merger Agreement; Dispute with Gem Stockholders."
The ability of the Company to meet its debt service
requirements and to comply with the covenants under the Revolving
Credit Facility and other indebtedness will be dependent upon
whether and in what amount the Gem Notes are issued, the terms of
the contemplated amendment to the Revolving Credit Facility and
the future performance of the Company, which is subject to
financial, economic, competitive, regulatory and other factors
affecting the Company, many of which are beyond its control. The
failure of the Company to satisfy these<PAGE>requirements could
force the Company to adopt one or more alternatives, such as
reducing or delaying any other planned expansions or capital
expenditures, selling or leasing assets, restructuring debt or
obtaining additional equity capital. There can be no assurance
that any of these alternatives could be effected on satisfactory
terms or within any particular time frame, and the adoption of
one or more of such alternatives could impair the Company's
competitive position and reduce its future cash flow.
Ameristar has not declared any dividends on its Common Stock
during the last two fiscal years, and the Company intends for the
foreseeable future to retain all earnings for use in the
development of its business instead of paying cash dividends. In
addition, as described above, the Revolving Credit Facility
obligates the Company to comply with certain financial covenants
that may restrict or prohibit the payment of dividends.
Factors Affecting Forward-Looking Statements
This Report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Discussions containing such forward-looking statements
may be found in the material set forth above in this section and
under "Business" as well as within this Report generally. Also,
documents subsequently filed by the Company with the Securities
and Exchange Commission may contain forward-looking statements.
Actual results could differ materially from those anticipated in
the forward-looking statements as a result of various factors
described below and elsewhere in this Report that are beyond the
control of the Company. The Company cautions the reader,
however, that such factors may not be exhaustive, particularly
with respect to future filings. Among the factors to be
considered by current and prospective stockholders of the Company
are the following:
The Company currently does not have the financing necessary
to complete Phase I of The Reserve and construction has been
suspended. Due to the uncertain outcome of the pending
arbitration proceedings with the Gem Stockholders, no assurance
can be given as to when or if the Company will obtain additional
financing to complete Phase I of The Reserve.
The Company cannot estimate when the recently commenced
arbitration proceeding between the Company and the Gem
Stockholders will be completed or otherwise resolved or the
outcome of such proceeding. Management believes it is unlikely
that the Company will be able to pursue any expansion
opportunities until this proceeding is completed or settled
unless any such expansion opportunities do not require a material
amount of capital expenditures by the Company. In addition,
depending on the outcome of this proceeding, the expansion of the
Company may continue to be limited or restricted by its financial
or other obligations to the Gem Stockholders.
The Company's ability to satisfy its covenant and other
requirements under the Revolving Credit Facility and other long-
term indebtedness will be dependent upon the completion of the
contemplated amendment of the Revolving Credit Facility on
favorable terms and the future operating performance of the
Company. In addition, no assurance can be given that the Company
will be able to obtain waivers of covenant requirements under the
<PAGE>Revolving Credit Facility, which management believes will
be necessary by April 1, 1998, if the dispute with the Gem
Stockholders has not been resolved and the Company has not
restructured its long-term debt.
Some of the Company's known or future competitors in various
markets have or may have greater name recognition and financial
and marketing resources than the Company. In addition, each of
the Company's currently operating properties is subject to
changes in competitive conditions, including those resulting from
the legalization or expanded legalization of gaming in
jurisdictions in which the Company operates or bordering
jurisdictions, that could have a material adverse effect on the
Company. See "Business."
Construction and expansion projects of the Company entail
significant risks, including shortages of materials (including
slot machines or other gaming equipment) or skilled labor,
unforeseen construction scheduling, engineering, environmental or
geological problems, work stoppages, weather interference,
floods, fires, other casualty losses, and unanticipated cost
increases. No assurance can be given that any project will be
completed on time, if at all, or on budget.
The Company is dependent upon Craig H. Neilsen, the
Company's president and chief executive officer, who controls
approximately 86.9% of the outstanding shares of Common Stock of
Ameristar, and Mr. Neilsen's management team. The Company has
experienced and expects to continue to experience strong
competition in hiring and retaining qualified operating and
corporate management personnel. In addition, the death of Mr.
Neilsen could result in the need for his estate, heirs or
devisees to sell a substantial number of shares of the Common
Stock to obtain funds to pay inheritance tax liabilities.
The Company's riverboat and dockside facilities in
Mississippi and Iowa could be lost from service due to casualty,
mechanical failure, extended or extraordinary maintenance, floods
or other severe weather conditions. Cruises of the Council
Bluffs Casino are subject to risks generally incident to the
movement of vessels on inland waterways, including risks of
casualty due to river turbulence and severe weather conditions.
The loss of a riverboat or dockside facility from service for any
period of time likely would adversely affect the Company's
operating results and could result in the occurrence of an event
of a default under one or more credit facilities or contracts.
Item 8. Financial Statements and
Supplementary Data
The Report of the Company's Independent Public Accountants
appears at page F-1 hereof, and the Consolidated Financial
Statements and Notes to Consolidated Financial Statements of the
Company appear at pages F-2 through F-26 hereof.
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of
the Registrant
The information required by this Item is set forth under the
captions "Item 1 -- Election of Directors -- Information Concerning
the Nominees" and "-- Directors and Executive Officers" in the
Company's definitive Proxy Statement to be filed with the
Securities and Exchange Commission and is incorporated herein by
this reference as if set forth in full.
Item 11. Executive Compensation
The information required by this Item is set forth under the
caption "Executive Compensation" in the Company's definitive
Proxy Statement to be filed with the Securities and Exchange
Commission and is incorporated herein by this reference as if set
forth in full.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
The information required by this Item is set forth under the
caption "Item 1 -- Election of Directors -- Security Ownership of
Certain Beneficial Owners and Management" in the Company's
definitive Proxy Statement to be filed with the Securities and
Exchange Commission and is incorporated herein by this reference
as if set forth in full.
Item 13. Certain Relationships and Related
Transactions.
The information required by this Item is set forth under the
caption "Certain Transactions" in the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission
and is incorporated herein by this reference as if set forth in
full.
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
The following are filed as part of this Report:
(a)1. Financial Statements
Report of Independent Public Accountants.
Consolidated Balance Sheets as of December 31,
1995 and 1996.
Consolidated Statements of Income for the years
ended December 31, 1994, 1995 and 1996.
<PAGE>Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1994,
1995 and 1996.
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1995 and 1996.
Notes to Consolidated Financial Statements.
(a)2. Financial Statement Schedules
All schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under related
instructions or are inapplicable and therefore have been
omitted.
(a)3. Exhibits
The following exhibits listed are filed or incorporated
by reference as part of this Report.
Exhibi
t Description of Exhibit Method of Filing
Number
2.1 Plan of Acquisition. See Exhibits 10.8(a)-(i).
See Exhibits 10.8(a)-(i).
3.1 Articles of Incorporation. Incorporated by reference
to Exhibit 3.1 to
Registration Statement on
Form S-1 filed by
Ameristar Casinos, Inc.
("ACI") under the
Securities Act of 1933,
as amended (File No. 33-
68936) (the "Form S-1").
3.2 Bylaws. Incorporated by reference
to Exhibit 3.2 to ACI's
Annual Report on Form 10-
K for the year ended
December 31, 1995 (the
"1995 10-K").
4.1 Specimen Common Stock Incorporated by reference
Certificate. to Exhibit 4 to Amendment
No. 2 to the Form S-1.
4.2 Long-Term Debt. See Exhibits 10.7(a) and
See Exhibits 10.7(a) and 10.8.
10.7(b).
<PAGE>
* 10.1(a) Employment Agreement, dated Incorporated by reference
November 15, 1993, between to Exhibit 10.1(a) to
ACI and Thomas M. Steinbauer. ACI's Annual Report on
Form 10-K for the year
ended December 31, 1994
(the "1994 10-K").
* 10.1(b) Employment Agreement, dated Incorporated by reference
March 21, 1995, between ACI to Exhibit 10.1(c) to the
and John R. Spina, and 1994 10-K.
related letter agreement.
* 10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference
Non-Employee Director Stock to Exhibit 10.2 to ACI's
Option Plan, as amended and Quarterly Report on Form
restated. 10-Q for the quarter
ended June 30, 1994.
* 10.3 Ameristar Casinos, Inc. Incorporated by reference
Management Stock Option to Exhibit 10.3 to ACI's
Incentive Plan, as amended Quarterly Report on Form
and restated. 10-Q for the quarter
ended September 30, 1996
(the "September 1996 10-
Q").
* 10.4 Form of Indemnification Incorporated by reference
Agreement between ACI and to Exhibit 10.33 to
each of its directors and Amendment No. 2 to the
officers. Form S-1.
* 10.5 Housing Agreement, dated Incorporated by reference
November 15, 1993 between to Exhibit 10.17 to the
Cactus Pete's Inc. ("CPI") 1994 10-K.
and Craig H. Neilsen.
10.6 Plan of Reorganization, dated Incorporated by reference
November 15, 1993, between to Exhibit 2.1 to the
ACI and Craig H. Neilsen in 1994 10-K.
his individual capacity and
as trustee of the
testamentary trust created
under the last will and
testament of Ray Neilsen
dated October 9, 1963.
10.7(a) Credit Agreement, dated Incorporated by reference
June 1, 1995, among ACI, the to Exhibits 10.1 and 99.1
lenders listed therein and to ACI's Quarterly Report
Wells Fargo Bank, N.A., as on Form 10-Q for the
the successor to First quarter ended June 30,
Interstate Bank of Nevada, 1995.
N.A. ("WFB/FIB"), as agent,
together with a list
describing omitted schedules
and exhibits thereto.
10.7(b) Consent to Merger and Incorporated by reference
Increased Commitment to Exhibit 10.4 to the
Agreement, dated October 4, September 1996 10-Q.
1996, among ACI, the lenders
listed therein and WFB/FIB,
as agent.
10.8(a) Merger Agreement, dated as of Incorporated by reference
May 31, 1996, among Gem, ACI, to Exhibits 10.1 and 99.1
ACLVI, Steven W. Rebeil to ACI's Quarterly Report
("Rebeil") and Dominic J. on Form 10-Q for the
Magliarditi ("Magliarditi"), quarter ended June 30,
together with a list 1996 (the "June 1996 10-
describing omitted schedules Q").
and exhibits thereto.
10.8(b) First Amendment to Merger Incorporated by reference
Agreement, dated July 2, to Exhibit 10.5 to the
1996, among Gem, ACI, ACLVI, June 1996 10-Q.
Rebeil and Magliarditi.
10.8(c) Second Amendment to Merger Incorporated by reference
Agreement, dated as of to Exhibits 10.3 and 99.1
September 27, 1996, among to ACI's Current Report
Gem, ACI, ACLVI, Rebeil and on Form 8-K filed on
Magliarditi, together with a October 24, 1996 (the
list describing omitted "October 1996 8-K").
schedules and exhibits
thereto.
10.8(d) Gem Individuals' Notes Escrow Incorporated by reference
Agreement and Escrow to Exhibit 10.4 to the
Instructions, dated as of October
September 27, 1996, among 1996 8-K.
ACI, Rebeil and Magliarditi.
10.8(e) Letter agreement, dated Incorporated by reference
October 3, 1996, between ACI to Exhibit 10.5 to the
and Magliarditi. October
1996 8-K.
10.8(f) Purchase Agreement, dated as Incorporated by reference
of June 30, 1996, between ACI to Exhibit 10.6 to the
and Gem Air, Inc. ("Gem June 1996 10-Q.
Air").
10.8(g) Aircraft Operating Agreement, Incorporated by reference
dated as of July 5, 1996, to Exhibit 10.4 to the
between ACI and Gem Air. June 1996 10-Q.
10.8(h) Operating Agreement of Nevada Incorporated by reference
AG Air, Ltd. ("NVAGAIR"), to Exhibit 10.2 to the
dated as of July 5, 1996. June 1996 10-Q.
10.8(i) Sublease, dated as of Incorporated by reference
June 30, 1996, between ACI to Exhibit 10.3 to the
and NVAGAIR. June 1996 10-Q.
10.9(a) Lease, dated September 8, Incorporated by reference
1992, between Magnolia Hotel to Exhibit 10.2 to the
Company and ACVI as the Form S-1.
assignee of Craig H. Neilsen.
10.9(b) First Amendment to Agreement, Incorporated by reference
dated July 14, 1993, between to Exhibit 10.2(b) to the
Magnolia Hotel Company and 1995 10-K.
ACVI as the assignee of Craig
H. Neilsen.
<PAGE>
10.9(c) Second Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.2(c) to the
1995, between Magnolia Hotel 1995 10-K.
Company and ACVI.
10.10(a)Lease, dated September 18, Incorporated by reference
1992, between R.R. Morrison, to Exhibit 10.3 to the
Jr. and ACVI as the assignee Form S-1.
of Craig H. Neilsen.
10.10(b)First Amendment to Lease Incorporated by Reference
Agreement, dated June 1, to Exhibit 10.3 to the
1995, between R.R. Morrison & 1995 10-K.
Son, Inc. and ACVI.
10.11(a)Lease, dated December 11, Incorporated by reference
1992, between Martha Ker to Exhibit 10.4 to the
Brady Lum et. al. and ACVI as Form S-1.
the assignee of Craig H.
Neilsen.
10.11(b)First Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.4(b) to the
1995, between Lawrence O. 1995 10-K.
Branyan, Jr., as trustee of
the Brady-Lum Family Trust
dated May 15, 1993 and ACVI.
10.12 Settlement, Use and Filed electronically
Management Agreement and DNR herewith.
Permit, dated May 15, 1995,
between the State of Iowa
acting through the Iowa
Department of Natural
Resources and ACCBI as the
assignee of Koch Fuels, Inc.
See also Exhibit 99.1
10.13 Option Agreement, dated July Filed electronically
11, 1995, between Levy Realty herewith.
Trust and ACLVI as the
successor to Gem Gaming, Inc.
("Gem").
10.14 Contract, dated December 19, Incorporated by reference
1995, between ACCBI and to Exhibit 10.16 to the
Perini-Andersen, a joint 1995 10-K.
venture.
10.15(a)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.1 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement (Hotel
Tower), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific Construction Company,
Inc. ("Camco Pacific").
<PAGE>
10.15(b)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.2 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement
(Casino), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific.
10.16 Excursion Boat Sponsorship Incorporated by reference
and Operations Agreement, to Exhibit 10.15 to the
dated September 15, 1994, 1995 10-K.
between Iowa West Racing
Association and ACCBI.
21.1 Subsidiaries of ACI. Filed electronically
herewith.
23.1 Consent of Arthur Andersen Filed electronically
LLP. herewith.
27.1 Financial Data Schedule. Filed electronically
herewith.
99.1 Agreement to furnish the Filed electronically
Securities and Exchange herewith.
Commission omitted exhibits
and schedules to certain
exhibits and certain
instruments defining the
rights of holders of certain
long-term debt.
* Denotes a management contract or compensatory plan or
arrangement.
(b) Reports on Form 8-K
Form 8-K filed on October 24, 1996, reporting under
Item 2 the acquisition by the Company of The Reserve Hotel &
Casino, Henderson, Nevada, through the merger of Gem into
ACLVI.
Form 8-K/A (Amendment No. 1) filed on December 23,
1996, including under Item 7 (i) balance sheets of Gem as of
December 31, 1994 and 1995 and as of October 8, 1996, and
related statements of operations, stockholders' equity and
cash flows for the period from Gem's inception (March 9,
1994) to December 31, 1994, for the year ended December 31,
1995 and for the period from January 1, 1996 to October 8,
1996, and cumulative for the period from inception to
October 8, 1996, together with the related notes and audit
report of Arthur Andersen LLP, and (ii) pro forma balance
sheet of the Company as of September 30, 1996 and pro forma
statements of income of the Company for the nine months
ended September 30, 1996 and year ended December 31, 1995,
and related notes.
<PAGE>SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERISTAR CASINOS, INC.
(Registrant)
April 14, 1997 By: /s/ CRAIG H. NEILSEN
Craig H. Neilsen
President, Chairman of the
Board and CEO
Pursuant to the requirements of the Securities Exchanges Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Name and Title Date
Craig H. Neilsen,
President, Chairman of
/s/ CRAIG H. NEILSEN the Board and CEO April 14,
(principal executive 1997
officer)
Thomas M. Steinbauer,
Senior Vice President of
Finance and
Administration
/s/ THOMAS M. (principal financial April 14,
STEINBAUER officer and principal 1997
accounting officer) and
Director
/s/ JOHN R. SPINA John R. Spina, Director April 14,
1997
/s/ PAUL I. CORDDRY Paul I. Corddry, April 14,
Director 1997
/s/ LARRY A. HODGES Larry A. Hodges, April 14,
Director 1997
<PAGE>On this 14th of April 1997, Craig H. Neilsen directed
Christine L. Hinton, in his presence as well as our own, to sign
the foregoing document as "Craig H. Neilsen." Upon viewing the
signatures as signed by Christine L. Hinton and in our presence,
Craig H. Neilsen declared to us that he adopted them as his own
signatures.
/s/Diane Foster
Witness
/s/ Cheryl Atchison
Witness
STATE OF NEVADA )
):ss.
COUNTY OF CLARK )
I, Janice S. Lupton, Notary Public in and for said county
and state, do hereby certify that Craig H. Neilsen personally
appeared before me and is known or identified to me to be the
president and chief executive officer of Ameristar Casinos, Inc.
the corporation that executed the within instrument or the person
who executed the instrument on behalf of said corporation. Craig
H. Neilsen, who being unable due to physical incapacity to sign
his name or offer his mark, did direct Christine L. Hinton, in
his presence, as well as my own, to sign his name to the
foregoing document. Craig H. Neilsen, after viewing his name as
signed by Christine L. Hinton, thereupon adopted the signatures
as his own by acknowledging to me his intention to so adopt as if
he had personally executed the same both in his individual
capacity and in behalf of said corporation, and further
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal this 14th day of April 1997.
/s/Janice S. Lupton
Notary Public
My Commission Expires: October 23, 2000
Residing at: Las Vegas, Nevada
<PAGE>
AMERISTAR CASINOS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1996
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Ameristar Casinos, Inc.:
We have audited the accompanying consolidated balance sheets of
Ameristar Casinos, Inc. (a Nevada corporation) and subsidiaries as
of December 31, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Ameristar Casinos, Inc. and subsidiaries as of
December 31, 1995 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 14, 1997
(except with respect to the matter discussed in Note 11,
as to which the date is March 26, 1997)
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
December 31,
1995 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,787 $ 10,724
Restricted cash 256 418
Restricted security deposit 11,511 -
Accounts receivable, net 1,003 1,408
Income tax refund receivable 311 -
Inventories 2,273 2,385
Prepaid expenses 2,467 3,081
Deferred income taxes 1,199 2,138
-------- --------
Total current assets 33,807 20,154
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Buildings and improvements 98,217 169,004
Building under capitalized lease 800 800
Furniture, fixtures and
equipment 34,741 53,857
Furniture, fixtures and equipment
under capitalized leases 1,029 1,029
-------- --------
134,787 224,690
Less: Accumulated depreciation and
amortization 42,716 56,253
-------- --------
92,071 168,437
Land 14,989 25,009
Land under capitalized leases 4,865 4,865
Construction in progress 51,292 27,159
-------- --------
163,217 225,470
-------- --------
PREOPENING COSTS 3,141 2,594
-------- --------
EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS ACQUIRED - 19,043
-------- --------
DEPOSITS AND OTHER ASSETS 2,055 2,791
-------- --------
$202,220 $270,052
======== ========
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Share Data)
December 31,
1995 1996
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 3,767 $ 7,303
Construction contracts payable 7,838 5,336
Accrued liabilities 10,394 13,564
Current obligations under
capitalized leases 506 506
Current maturities of notes payable
and long-term debt 6,895 19,740
Federal income tax payable - 49
-------- --------
Total current liabilities 29,400 46,498
-------- --------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current maturities 7,441 8,333
-------- --------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 94,428 135,560
-------- --------
DEFERRED INCOME TAXES 5,904 8,446
-------- --------
MINORITY INTEREST - 271
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized - 30,000,000 shares;
Issued - None - -
Common stock, $.01 par value:
Authorized - 30,000,000 shares;
Issued and outstanding -
20,360,000 shares at
December 31, 1995 and 1996 204 204
Additional paid-in capital 43,043 43,043
Retained earnings 21,800 27,697
-------- --------
65,047 70,944
-------- --------
$202,220 $270,052
======== ========
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Casino $ 90,882 $ 99,364 $161,338
Food and beverage 17,494 19,303 24,250
Rooms 7,580 7,861 7,641
General Store 2,557 2,595 2,389
Other 5,265 5,161 5,371
-------- -------- --------
123,778 134,284 200,989
Less: Promotional
allowances 9,425 10,417 12,524
-------- -------- --------
Net revenues 114,353 123,867 188,465
-------- -------- --------
OPERATING EXPENSES:
Casino 40,347 44,503 75,685
Food and beverage 12,469 11,747 16,773
Rooms 2,249 2,404 2,368
General Store 2,213 2,292 2,108
Other 6,199 5,919 4,946
Selling, general and
administrative 20,549 20,237 36,872
Related party expenses 50 200 134
Business development 1,446 1,704 1,622
Utilities and maintenance 6,417 7,056 9,130
Depreciation and amortization 7,062 9,721 14,135
Preopening costs 5,408 - 7,379
-------- -------- --------
Total operating expenses 104,409 105,783 171,152
-------- -------- --------
Income from operations 9,944 18,084 17,313
OTHER INCOME (EXPENSE):
Interest income 86 205 354
Interest expense (3,379) (3,958) (8,303)
Other (5) - (77)
-------- -------- --------
INCOME BEFORE INCOME TAX
PROVISION 6,646 14,331 9,287
Income tax provision 2,426 5,236 3,390
-------- -------- --------
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
(Amounts in Thousands, Except Per Share Data)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY
LOSS $ 4,220 $ 9,095 $ 5,897
EXTRAORDINARY LOSS ON
EARLY RETIREMENT OF
DEBT, net of income tax
benefit of $354 - (657) -
-------- -------- --------
NET INCOME $ 4,220 $ 8,438 $ 5,897
======== ======== ========
EARNINGS PER SHARE:
Income before
extraordinary loss $ 0.21 $ 0.45 $ 0.29
Extraordinary loss - (0.03) -
-------- -------- --------
Net income $ 0.21 $ 0.42 $ 0.29
======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING 20,360 20,360 20,360
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands, Except Number of Shares)
Capital Stock
------------------ Additional
No. of Paid-In Retained
Shares Balance Capital Earnings Total
---------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 20,360,000 $ 204 $43,043 $ 9,142 $52,389
Net income - - - 4,220 4,220
---------- ------- ---------- -------- -------
Balance,
December 31, 1994 20,360,000 204 43,043 13,362 56,609
Net income - - - 8,438 8,438
---------- ------- ---------- -------- -------
Balance,
December 31, 1995 20,360,000 204 43,043 21,800 65,047
Net income - - - 5,897 5,897
---------- ------- ---------- -------- -------
Balance,
December 31, 1996 20,360,000 $ 204 $43,043 $27,697 $70,944
========== ======= ========== ======== =======
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 4,220 $ 8,438 $ 5,897
-------- -------- --------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 7,062 9,721 14,135
Change in deferred income
taxes (1,513) 3,209 (181)
Net (gain) loss on
disposition of assets 5 - (56)
Amortization of debt
issuance costs 149 205 229
Amortization of preopening
costs 5,408 - 7,379
Extraordinary loss on early
retirement of debt - 1,011 -
Changes in current assets
and liabilities:
Restricted cash (130) (16) (162)
Receivables, net (1,185) 260 (94)
Inventories (559) (735) (112)
Prepaid expenses (729) (1,165) (468)
Accounts payable 1,136 10 3,524
Accrued liabilities 4,559 2,110 3,037
Income taxes payable - - 49
-------- -------- --------
Total adjustments 14,203 14,610 27,280
-------- -------- --------
Net cash provided by operating
activities 18,423 23,048 33,177
-------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (26,521) (63,559) (43,087)
Increase (decrease) in
construction contracts
payable (3,986) 3,318 (4,791)
Proceeds from sale of assets 3 - 56
Increase in deposits and other
assets (3,529) (2,781) (5,924)
-------- -------- --------
Net cash used in investing
activities (34,033) (63,022) (53,746)
-------- -------- --------
</TABLE>
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(Amounts in Thousands)
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of long-
term debt $ 32,393 $ 75,839 $ 44,628
Debt issuance costs (413) (1,403) -
Restricted security deposit - (11,511) 11,511
Principal payments of long-
term debt and capitalized
leases (10,591) (17,333) (39,633)
-------- -------- --------
Net cash provided by financing
activities 21,389 45,592 16,506
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,779 5,618 (4,063)
CASH AND CASH EQUIVALENTS --
BEGINNING OF YEAR 3,390 9,169 14,787
-------- -------- --------
CASH AND CASH EQUIVALENTS -- END
OF YEAR $ 9,169 $ 14,787 $ 10,724
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
AMERISTAR CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies
Principles of consolidation and basis of presentation
The consolidated financial statements of Ameristar Casinos,
Inc. ("ACI" or the "Company"), a Nevada corporation, include the
accounts of the Company and its wholly owned subsidiaries, Cactus
Petes, Inc. ("CPI"), Ameristar Casino Vicksburg, Inc. ("ACVI"),
Ameristar Casino Council Bluffs, Inc. ("ACCBI"), Ameristar Casino
Las Vegas, Inc. ("ACLVI"), and Ameristar Casino Lawrenceburg, Inc.
("ACLI"), as well as a majority interest in Nevada AG Air, Ltd.
("NVAGAIR").
CPI owns and operates two casino-hotels in Jackpot, Nevada --
Cactus Petes Resort Casino and The Horseshu Hotel and Casino. ACVI
owns and operates Ameristar Vicksburg, a riverboat-themed dockside
casino, and related land-based facilities in Vicksburg,
Mississippi. ACCBI owns and operates Ameristar Council Bluffs, a
riverboat casino and associated hotel and other land-based
facilities in Council Bluffs, Iowa. ACLVI owns and is developing
The Reserve Casino and Hotel ("The Reserve") in the Henderson-Green
Valley suburban area of Las Vegas, Nevada. ACLI was established to
pursue gaming opportunities in Indiana. However, in 1996, the
Company made a decision to discontinue such activity and has
dissolved this entity.
The gaming licenses granted to ACVI and ACCBI must be
periodically renewed by the respective state gaming authorities to
continue gaming operations.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material intercompany accounts and transactions have been
eliminated from the accompanying consolidated financial statements.
Cash and cash equivalents
The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents. Cash equivalents are carried at cost, which
approximates market, due to the short-term maturities of these
instruments.
<PAGE>
Accounts receivable
Gaming receivables are included as part of the Company's
accounts receivable balance. An allowance of $140,000 and $256,000
at December 31, 1995 and 1996, respectively, has been applied to
reduce receivables to amounts anticipated to be collected.
Inventories
Inventories are stated at the lower of cost or market. Cost
is determined principally on the weighted average basis. The value
of inventories associated with the General Store and Gift Shop
operations is determined by the retail method.
Depreciation and capitalization
Property and equipment is recorded at cost, including interest
charged on funds borrowed to finance construction. Interest of
$227,000, $1,850,000 and $2,313,000 was capitalized for the years
ended December 31, 1994, 1995 and 1996, respectively. Depreciation
is provided on both the straight-line and accelerated methods in
amounts sufficient to relate the cost of depreciable assets to
operations. Amortization of building and furniture, fixtures and
equipment under capitalized leases is provided over the shorter of
the estimated useful life of the asset or the term of the
associated lease (including lease renewal or purchase options the
Company expects to exercise). Depreciation and amortization is
provided over the following estimated useful lives:
Buildings and improvements 5 to 40 years
Building under capitalized lease 39 years
Furniture, fixtures and equipment 3 to 15 years
Furniture, fixtures and equipment
under capitalized leases 3 to 5 years
Betterments, renewals and repairs that extend the life of an
asset are capitalized. Ordinary maintenance and repairs are
charged to expense as incurred.
Dividends
The Company intends to retain future earnings for use in the
development of its business and does not anticipate paying any cash
dividends in the foreseeable future.
Gaming revenues and promotional allowances
In accordance with industry practice, the Company recognizes
as gaming revenues the net win from gaming activities, which is the
difference between gaming wins and losses. Gross revenues include
the retail value of complimentary food, beverage and lodging
services furnished to customers. The retail value of these
promotional allowances is deducted to compute net revenues. The
estimated departmental costs of providing such promotional
allowances are included in casino costs and expenses and consist of
the following:
<PAGE>
<TABLE>
Years ended December 31,
1994 1995 1996
-------- -------- --------
(Amounts in Thousands)
<S> <C> <C> <C>
Food and beverage $6,078 $7,999 $ 9,560
Room 544 438 732
Other 921 - 469
-------- -------- --------
$7,543 $8,437 $10,761
======== ======== ========
</TABLE>
Advertising
The Company expenses advertising costs the first time the
advertising takes place. Advertising expense included in selling,
general and administrative expenses was approximately $2,682,000,
$3,685,000 and $6,144,000 for the years ended December 31, 1994,
1995 and 1996, respectively.
Business development expenses
Business development expenses are general costs incurred in
connection with identifying, evaluating and pursuing opportunities
to expand into existing or emerging gaming jurisdictions. Such
costs include, among others, legal fees, land option payments and
fees for applications filed with regulatory agencies and are
expensed as incurred.
Preopening costs
Preopening costs primarily represent direct personnel and
other operating costs incurred prior to the opening of new
facilities. These costs are capitalized as incurred. Upon
commencement of operations, the Company expenses all such
preopening costs.
Federal income taxes
Income taxes are recorded in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires recognition
of deferred income tax assets and liabilities for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled.
Reclassifications
Certain reclassifications, having no effect on net income,
have been made to the prior periods' consolidated financial
statements to conform with the current year presentation.
<PAGE>
Note 2 - Accrued liabilities
Accrued liabilities consist of the following:
<TABLE>
December 31,
1995 1996
------- -------
(Amounts in Thousands)
<S> <C> <C>
Compensation and related
benefits $ 3,717 $ 5,496
Taxes other than income
taxes 2,292 2,623
Progressive slot machine
jackpots 897 916
Interest 835 939
Deposits and other
accruals 2,653 3,590
------- -------
$10,394 $13,564
======= =======
</TABLE>
Note 3 - Federal income taxes
The components of the income tax provision are as follows:
<TABLE>
Years ended December 31,
1994 1995 1996
-------- -------- --------
(Amounts in Thousands)
<S> <C> <C> <C>
Current $ 3,939 $ 2,027 $ 3,571
Deferred (1,513) 3,209 (181)
-------- -------- --------
Provision on income before
extraordinary item 2,426 5,236 3,390
Tax benefit of extraordinary item - (354) -
-------- -------- --------
$ 2,426 $ 4,882 $ 3,390
======== ======== ========
</TABLE>
The reconciliation of income tax at the federal statutory
rates to income tax expense is as follows:
<TABLE>
Years ended December 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate 35% 35% 35%
Nondeductible expenses 2% 2% 2%
-------- -------- --------
37% 37% 37%
======== ======== ========
</TABLE>
Under SFAS No. 109, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of
the Company's net deferred tax liability consisted of the
following:
<PAGE>
<TABLE>
December 31,
1995 1996
-------- --------
(Amounts in Thousands)
<S> <C> <C>
Deferred tax assets:
Preopening expenses $ 1,248 $ 2,940
Accrued book expenses not
currently deductible 976 1,269
Alternative minimum tax credit (1) 949 949
Project development costs 474 914
Asset reserves 76 90
Other 86 69
-------- --------
Total deferred tax assets 3,809 6,231
-------- --------
Deferred tax liabilities:
Tax depreciation in
excess of book depreciation (7,087) (9,107)
Book capitalized interest
in excess of tax (340) (325)
Tax book difference in
acquired land (2) - (1,784)
Other (1,087) (1,323)
-------- --------
Total deferred tax liabilities (8,514) (12,539)
-------- --------
Net deferred tax liability $ (4,705) $ (6,308)
======== ========
</TABLE>
_____________
(1) The excess of the alternative minimum tax over
regular federal income tax is a tax credit which
can be carried forward indefinitely to reduce
future federal income tax liabilities.
(2) In connection with the acquisition of Gem
Gaming, Inc. as described in Note 10, the
Company recognized a step-up in the basis of
land of $5.0 million which resulted in a
deferred tax liability of approximately $1.8
million computed at the statutory rate of 35
percent.
Note 4 - Supplemental cash flow disclosures
The Company made cash payments for interest, net of amounts
capitalized, of $3,175,000, $3,386,000 and $7,930,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.
The Company made cash payments for federal income taxes of
$4,875,000, $1,220,000 and $2,900,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
The Company acquired assets through capitalized leases of
$696,000 and $1,083,000 during the years ended December 31, 1994
and 1995, respectively.
The Company acquired assets through the issuance of notes
payable of $6,112,000, $141,000 and $3,173,000 during the years
ended December 31, 1994, 1995 and 1996, respectively.
The Company retired the balance of $44,810,000 under the 1993
Revolving Credit Facility by entering into a new Revolving Credit
Facility (see Note 5) during the year ended December 31, 1995.
<PAGE>
The Company assumed a note payable of $311,000 and recognized
a minority interest of $271,000 in connection with the purchase of
certain aviation-related assets.
The following reflects the noncash components of the Company's
acquisition of Gem Gaming, Inc. (amounts in thousands):
<TABLE>
<S> <C>
Purchase price -- Notes payable
to former stockholders of
Gem Gaming, Inc. (net of
discount) $33,650
-------
Fair value of net assets
acquired:
Prepaid expenses 146
Property and equipment 29,546
Preopening costs 1,873
Accounts payable (12)
Construction contracts
payable (2,289)
Accrued liabilities (133)
Long-term debt (11,400)
Capitalized lease (1,340)
Deferred tax liability (1,784)
-------
14,607
-------
Excess of purchase price over
fair market value of net
assets acquired $19,043
=======
</TABLE>
Note 5 - Notes payable and long-term debt
Notes payable and long-term debt consist of the following:
<TABLE>
December 31,
1995 1996
-------- --------
(Amounts in Thousands)
<S> <C> <C>
Revolving Credit Facility (see
below). $80,000 $93,500
Note payable, with interest at 9.12
percent, collateralized by a
preferred ship mortgage, guaranteed
by ACI, due in monthly payments of
principal plus interest through
December 1999. 11,511 7,674
Note payable to bank, with variable
interest at a rate equivalent to
that required by the revolving
credit facility, collateralized by
certain equipment of ACCBI,
guaranteed by ACI, due in monthly
payments of $148,696 plus interest
through December 1999. 7,137 5,204
<PAGE>
Contracts payable for the purchase
of gaming equipment, with variable
interest at prime plus two percent
(10.5 percent at December 31,
1995), collateralized by gaming
equipment, due in monthly payments
of principal plus interest of
approximately $270,000 through
January 1996. 268 -
Mortgages payable to Farmers Home
Administration with variable
interest (effective rates of
approximately 4.5 and 3.8 percent
for the years ended December 31,
1995 and 1996, respectively),
collateralized by a first deed of
trust on certain apartment units
and land, due in variable monthly
payments of not less than $4,725,
including interest, through
November 2016 and October 2033. 1,421 1,378
Note payable to insurance finance
corporation, with interest at 6.9
percent, due in monthly principal
and interest payments totaling
$134,207 through August 1996 and at
6.9 percent, due in monthly
principal and interest payments
totaling $148,817 through June
1997. 918 846
Note payable to lender, with
interest at 15 percent, unsecured,
interest payable monthly, principal
due in April 1997. - 10,000
Notes payable to former stockholders
of Gem Gaming, Inc., noninterest-
bearing through May 31, 1997,
thereafter at 8 percent, interest
payable monthly, due May 31, 2000
(net of unamortized discount of
$1,120,000 for imputed interest
during the noninterest-bearing term
of the notes) (see Note 10). - 34,255
Note payable to financing company,
with interest at 10.75 percent,
collateralized by certain
equipment, due in monthly principal
and interest payments of $53,177
through January 1999. - 1,148
Note payable to equipment financing
company, with interest at 8.03
percent, collateralized by
aircraft, due in monthly principal
and interest payments of $10,326
through July 1998, with remaining
unpaid principal and interest due
in August 1998. - 643
<PAGE>
Note payable to bank, with interest
at 9.0 percent, collateralized by
certain aviation-related assets,
due in monthly principal and
interest payments of $3,875 through
January 1999, with remaining unpaid
principal and interest due in
February 1999. - 311
Other 68 341
-------- --------
101,323 155,300
Less: Current maturities 6,895 19,740
-------- --------
$ 94,428 $135,560
======== ========
</TABLE>
On October 5, 1993, CPI entered into a $50.0 million Reducing
Revolving Credit Facility (the "1993 Revolving Credit Facility")
with a syndicate of banks, with interest at Wells Fargo Bank's
(formerly First Interstate Bank) ("WFB") prime rate plus the
"applicable margin" (as defined), adjusted quarterly. The
applicable margin could range from 0.25 percentage points to 3.5
percentage points, based on the Company's funded debt to cash flow
ratio (as defined). The 1993 Revolving Credit Facility required
monthly interest payments and semi-annual principal payments.
On July 5, 1995, the Company, as borrower, and its principal
operating subsidiaries, as guarantors, entered into a new Revolving
Credit Facility (the "Revolving Credit Facility") with WFB and a
syndicate of banks. The maximum borrowings initially available was
$70.0 million, which increased to $94.5 million upon the Company
meeting certain loan conditions. The maximum principal available
was increased to $99.0 million in connection with the Company's
acquisition of The Reserve. In connection with the acquisition of
The Reserve, the lenders under the Revolving Credit Facility gave
their consent for ACI to make capital contributions to ACLVI of up
to $0.5 million and to make loans to ACLVI of up to $16.0 million
(which intercompany loans may be funded out of borrowings under the
Revolving Credit Facility). As a result of the retirement of the
1993 Revolving Credit Facility, the Company incurred an
extraordinary pre-tax loss (related primarily to the write-off of
unamortized loan costs) of $1,011,000.
As of December 31, 1996, the Company had drawn $93.5 million
on the Revolving Credit Facility. These borrowings were used to
repay the 1993 Revolving Credit Facility of $44.8 million, to fund
the development of Ameristar Council Bluffs, and to pay certain
costs related to the acquisition of The Reserve, including the
repayment of indebtedness secured by The Reserve. Following the
completion of Ameristar Council Bluffs, the Revolving Credit
Facility permits additional draws under the Revolving Credit
Facility to be used only for general working capital purposes or
the funding of permitted intercompany loans to ACLVI.
The Company may not borrow under the Revolving Credit Facility
in excess of 3.5 times its rolling four quarter EBITDA (earnings
before interest, taxes, depreciation and amortization). As of
December 31, 1996, 3.5 times the Company's rolling four quarter
EBITDA exceeded the maximum funds available from the Revolving
Credit Facility. The maximum amount available under the Revolving
Credit Facility reduces semi-annually commencing January 1, 1997 on
a sliding scale
<PAGE>
(ranging from $4.5 million to $7.1 million in reductions) with a
final reduction of $42.0 million at maturity on December 31, 2001.
Under the terms of the Revolving Credit Facility, concurrent
with each loan draw, the Company may select the interest rate based
on either the London Interbank Offering Rate ("LIBOR") or WFB's
prime interest rate. The maximum number of outstanding draws at
any time using a LIBOR rate is five, with a minimum draw amount of
$5.0 million per draw. A LIBOR draw can be for a one-, two-, three-
or six-month term with interest accruing monthly and due at the end
of the term, but in no event less frequently than quarterly. The
interest rate is fixed throughout the term of a LIBOR-based draw
and ranges from LIBOR plus 1.5 percentage points to LIBOR plus 3.5
percentage points. On a prime interest rate draw, the interest
rate is variable and ranges from a minimum of prime to a maximum of
prime plus 2.0 percentage points with interest payable monthly in
arrears. As of December 31, 1996, the Company has taken LIBOR and
prime draws totaling $93.5 million with an average interest rate of
approximately 8.6 percent per annum. The applicable margins for
both LIBOR draws and prime interest rate draws adjust semi-annually
based on the ratio of the Company's consolidated total debt to
consolidated cash flow, as measured by an EBITDA formula.
The Revolving Credit Facility is secured by liens on
substantially all of the real and personal property of the Company
and its subsidiaries. The Revolving Credit Facility prohibits any
secondary liens on these properties without the prior written
approval of the lenders. Certain changes in control of the Company
may constitute a default under the Revolving Credit Facility. The
Revolving Credit Facility also requires the Company to expend two
percent of consolidated revenues on capital maintenance annually.
The Revolving Credit Facility binds the Company to a
number of other affirmative and negative covenants. These include
promises to maintain certain financial ratios within defined
parameters, not to engage in new businesses without lender approval
and to make certain reports to the lenders. As of December 31,
1996, the Company was in compliance with these covenants.
On December 28, 1995, ACCBI entered into a preferred ship
mortgage with General Electric Credit Corp. ("GECC"). Borrowing
totaled $11,511,000 and occurred on December 29, 1995. GECC
required the Company to maintain a cash security deposit (the
"Security Deposit") in the full amount of the borrowing until
certain conditions precedent were fulfilled, including having the
casino at Ameristar Council Bluffs fully operational and open to
the general public for gaming operations and satisfying all
licensing requirements within 30 days of the borrowing date. The
Security Deposit was released by GECC on January 19, 1996.
This borrowing is secured by Ameristar II, the riverboat
casino in Council Bluffs. The loan's principal will be repaid over
four years. Principal payments of approximately $320,000 per month
for the first 12 months and approximately $213,000 per month for
the remaining 36 months are required. The Company may prepay the
entire borrowing at a premium ranging from one percent to two
percent during the first 18 months of the loan. Thereafter until
maturity, the Company may prepay the loan without premium. ACI has
entered into an unconditional guaranty of prompt payment and
performance with respect to this borrowing.
Proceeds from an equipment loan entered into with WFB on
December 12, 1995 for $7,137,000 were used to finance slot
machines, surveillance equipment and property signage at ACCBI.
The loan is being amortized over four years with monthly principal
payments of
<PAGE>
approximately $149,000. The interest rate is equivalent to that
charged on the Revolving Credit Facility.
The mortgages payable to Farmers Home Administration provide
long-term financing for low income housing facilities constructed
by the Company. Monthly principal and interest payments are
determined by a formula based upon demographics of the tenants.
Interest rates on the mortgages may vary from 1.0 percent to 11.88
percent. Provisions of the loan agreements require that rents
received be used to fund operating and maintenance expenses, debt
service and reserve accounts.
In connection with the merger of Gem Gaming, Inc. into ACLVI,
the Company acquired a one-half interest in an aircraft owned by
Gem Air, Inc., an affiliate of Gem Gaming, Inc. In addition, the
Company and Gem Air, Inc. formed NVAGAIR to hold certain other
aviation-related assets. Certain aviation-related notes payable
were assumed by NVAGAIR or the Company as a result of these
transactions.
The book value of the Company's long-term debt approximates
fair value due to the predominantly variable-rate nature of the
obligations. Also, fixed rate obligations are at rates that
approximate the Company's incremental borrowing rate for debt with
similar terms and remaining maturities.
Maturities of the Company's borrowings for the next five years
as of December 31, 1996 are as follows (amounts in thousands):
<TABLE>
<S> <C>
1997 $ 19,740
1998 15,892
1999 15,865
2000 46,799
2001 13,845
Thereafter 43,159
--------
$155,300
========
</TABLE>
Note 6 - Leases
The Company has entered into capitalized lease agreements for
a restaurant, including associated furniture, fixtures and
equipment, and land on which Ameristar Vicksburg is situated. Such
leases contained initial terms for rental payments covering the
period of project development and were converted to the primary
lease terms (as defined below) upon the opening of the project.
Ameristar Vicksburg opened on February 27, 1994, at which time
the primary terms of the leases became effective. The primary
terms of the leases, expiring from 5 to 30 years from the opening
date, require total payments of approximately $655,000 per year.
Each lease contains a purchase option exercisable at various times
during the term of the lease generally in varying amounts based on
the time of exercise. The purchase options lapse in conjunction
with the expiration dates of the primary terms of the corresponding
leases. Assuming the Company defers the exercise of its purchase
option under each lease to the expiration of the purchase option,
As of December 31, 1996, the Company had drawn $93.5 million
2004 and approximately $480,000 in 2024 to purchase all of the
parcels. If the Company were to accelerate its exercise of the
purchase
<PAGE>
options to the earliest possible dates, the Company would pay
approximately $4,700,000 currently and $1,250,000 in 1999.
The Company generally may terminate each lease upon the
payment of termination penalties, the maximum aggregate amount of
which is $328,000. In addition, if the leases were terminated, the
Company may be required to restore certain parcels to their
condition prior to the lease commencement date, including the
removal of the cofferdam and other improvements lying below the
water. However, the Company has no plans to abandon the site.
ACVI has entered into a seven-year capitalized lease for
restaurant equipment, due in monthly payments totaling
approximately $118,000 per year, through April 2001. ACVI also
entered into a five-year capitalized lease for a computer system.
Quarterly payments are required totaling approximately $42,000 per
year through October 1998.
ACI has entered into two three-year capitalized lease
agreements for computer equipment on behalf of ACCBI. Monthly
payments are required totaling approximately $197,000 per year
through November 1998. ACCBI has entered into a five-year
capitalized lease agreement for telephone systems and related
equipment. Monthly payments totaling approximately $76,000 per
year will be required. Payments begin upon satisfactory
installation of all equipment, which is expected in April 1997.
ACLVI has entered into a ten-year capitalized lease agreement
for signage at The Reserve, with monthly payments totaling
approximately $260,000 per year through November 2007.
Future minimum lease payments required under capitalized
leases for the five years subsequent to December 31, 1996 are as
follows (amounts in thousands):
<TABLE>
<S> <C>
1997 $ 1,309
1998 1,267
1999 2,250
2000 928
2001 859
Thereafter 12,729
-------
19,342
Less: Amount representing interest 10,503
-------
Present value of net minimum
lease payments $ 8,839
=======
</TABLE>
ACCBI, as lessor, has leased a portion of the Ameristar
Council Bluffs site to an independent hospitality company which has
agreed to construct and operate a 140-room hotel on the property.
The lease is for a period of 50 years beginning March 1, 1996. The
lease requires the hospitality company to pay ACCBI base rent of
$5,000 per month and percentage rent equal to 5 percent of the
hotel's gross sales in excess of $2.0 million per year. The
agreement requires the hospitality company's hotel to be completed
on or before March 31, 1997.
ACI has leased office space located in Las Vegas, Nevada to
serve as its corporate offices. The office space is leased under
two one-year operating lease agreements. The agreements require
aggregate monthly payments of approximately $32,000, plus the
Company's share of certain common area maintenance expenses.
Payments under the leases are subject to annual escalation
<PAGE>
clauses corresponding to increases in the cost of living. The
first lease agreement, covering approximately 90 percent of the
office space leased by the Company, contains two three-year
renewal options. The initial term of the first lease is through
November 1997. The second lease agreement, covering approximately
10 percent of the office space leased by the Company, contains two
two-year renewal options. The initial term of the second lease is
through January 1998. Rental expense of approximately $32,000 was
recorded under these leases in the year ended December 31, 1996.
Note 7 - Benefit plans
Profit-sharing plan
The Company had a qualified non-contributory profit-sharing
plan covering all employees with one or more years of service.
Effective September 30, 1995, the Company's profit-sharing plan was
discontinued. Company contributions were discretionary and were
set by the Board of Directors. The plan had a September 30 fiscal
year end. The Company's annual contributions to the plan were
$240,000 and $350,000 for the plan years ended September 30, 1994
and 1995, respectively.
401(k) plan
The Company instituted a defined contribution 401(k) plan in
March 1996 which covers all employees who meet certain age and
length of service requirements and allows an employer contribution
up to 50 percent of the first four percent of each participating
employee's compensation. Plan participants can elect to defer
before tax compensation through payroll deductions. These
deferrals are regulated under Section 401(k) of the Internal
Revenue Code. The Company's matching contribution was $373,000 for
the fiscal year ended December 31, 1996.
Insurance plan
The Company has a qualified employee insurance benefit trust
covering all employees on a regular basis who work an average of 32
hours or more per week. The amount of the Company's contribution
is determined by the Trust Committee. The plan also requires
contributions from eligible employees and their dependents. The
Company's contribution expense for the plan was approximately
$1,292,000, $2,113,000 and $2,258,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
Stock Option Plans
The Company has adopted a Management Stock Option Incentive
Plan ("Option Plan") which provides for the grant of options to
purchase Common Stock intended to qualify as incentive stock
options or non-qualified options. All officers, directors (other
than non-employee directors), employees, consultants, advisors,
independent contractors and agents are eligible to receive options
under the Option Plan, except that only employees may receive
incentive stock options. The maximum number of shares available
for issuance under the Option Plan is 1,000,000. No person
eligible to receive options under the Option Plan may receive
options for the purchase of more than an aggregate of 200,000
shares. The Option Plan is administered by the Board of
<PAGE>
Directors or, in its discretion, by a Committee of the Board of
Directors. In September 1996, the Board of Directors amended the
Option Plan, subject to stockholder approval, to increase the
number of shares issuable under the Option Plan to 1,600,000 and to
expand the eligibility provisions to include non-employee directors
of ACI.
The exercise price of incentive stock options granted under
the Option Plan must be at least equal to the fair market value of
the shares on the date of grant (110 percent of fair market value
in the case of participants who own shares possessing more than 10
percent of the combined voting power of the Company) and may not
have a term in excess of 10 years from the date of grant (five
years in the case of participants who are more than 10 percent
stockholders). With certain limited exceptions, options granted
under the Option Plan are not transferable other than by will or
the laws of descent and distribution.
In December 1995, certain stock options were amended to reduce
the per share exercise prices to $6.13 (the market price on the
date of amendment) from initial exercise prices ranging from $11.00
to $14.00.
The Company has also adopted a Non-Employee Director Stock
Option Plan ("Director Plan") which provides for the grant of non-
qualified options to purchase Common Stock to the non-employee
members of the Company's Board of Directors. The maximum number of
shares of Common Stock available for issuance under the Director
Plan is 100,000 shares. The Director Plan is administered by the
Board of Directors.
Under the Director Plan, each non-employee director is
automatically granted an initial option to purchase 1,000 shares of
Common Stock and will automatically be granted an option to
purchase an additional 1,000 shares of Common Stock on each
anniversary of such date if he remains a non-employee director on
that anniversary date. Options granted under the Director Plan
have an exercise price equal to the fair market value of the shares
on the date of grant and have a term of 10 years from the date of
grant. Options granted under the Director Plan become exercisable
one year from the date of grant and are not transferable other than
by will or the laws of descent and distribution. Upon stockholder
approval of the September 1996 amendments to the Option Plan, the
Director Plan will be terminated.
The Company accounts for its stock option plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," under which no compensation cost has been
recognized. Had compensation cost for these plans been determined
consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
<TABLE>
December 31,
1995 1996
-------- --------
(Amounts in Thousands,
Except Per Share Data)
<S> <S> <C> <C>
Net income: As reported $8,438 $5,897
Pro forma 8,371 5,708
Earnings per share: As reported $0.42 $0.29
Pro forma 0.41 0.28
</TABLE>
<PAGE>
The fair value of each option granted (or repriced during the
period for which SFAS 123 is effective) is estimated on the date of
grant (or repricing) using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants (or
repricings) in 1995 and 1996, respectively: risk-free interest
rates of 5.7 and 6.4 percent; expected volatility of 60 and 63
percent. The expected lives of the options are 5 years for both
1995 and 1996. No dividends are expected to be paid.
Because the SFAS No. 123 method of accounting has not been
applied to options granted prior to January 1, 1995, the resulting
pro forma compensation cost may not be representative of that to be
expected in future years.
Summarized information for the stock option plans is as
follows:
<TABLE>
1994 1995 1996
-------------- -------------- --------------
Wtd. Wtd. Wtd.
avg. avg. avg.
ex. ex. ex.
Shares price Shares price Shares price
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 226,500 $11.00 281,000 $11.74 548,000 $6.15
Granted 72,000 13.88 390,000 6.12 70,000 7.31
Exercised - - -
Canceled (17,500) 11.00 (123,000) 10.84 (52,000) 6.67
------- ------- -------
Options outstanding,
end of year 281,000 11.74 548,000 6.15 566,000 6.25
======= ======= =======
Options available for
grant 819,000 552,000 534,000
Options exercisable,
end of year 41,800 11.00 52,400 6.50 154,800 6.24
Weighted average fair
value of options
granted $3.49 $4.34
</TABLE>
At December 31, 1996, 541,500 of the 566,000 options
outstanding have exercise prices between $5.50 and $6.50, with a
weighted average exercise price of $6.09 and a weighted average
remaining contractual life of 8.4 years. 22,500 options
outstanding have exercise prices between $7.00 and $10.00, with a
weighted average exercise price of $9.11 and a weighted average
remaining contractual life of 9.5 years. The remaining 2,000
options have an outstanding exercise price of $16.00, with a
remaining contractual life of 7.4 years.
Note 8 - Commitments and contingencies
Development
In October, 1996, the Company acquired The Reserve, a casino-
hotel under construction in Henderson, Nevada. The Company has
redesigned The Reserve to expand the scope and size of the project.
Construction of The Reserve has been suspended due to uncertainties
concerning the form and amount of merger consideration payable in
connection with the acquisition of Gem Gaming, Inc., original
developers of The Reserve, that has adversely affected the
Company's ability to obtain financing for the completion of the
Project (see Notes 10 and 11). As redesigned, The Reserve is
planned to be constructed in two phases and will be opened upon the
completion of Phase I, subject to obtaining all regulatory
approvals. The Company has established a construction
<PAGE>
budget (including capitalized construction period interest and
preopening costs, excluding land) of approximately $120.0 million
for Phase I of The Reserve (including amounts incurred by Gem
Gaming, Inc. prior to the merger), of which approximately $26.1
million had been incurred as of December 31, 1996.
The Company is continuing the development of the Ameristar
Council Bluffs riverboat casino complex. The Ameristar Council
Bluffs Casino opened on January 19, 1996, portions of the Main
Street Pavilion opened on June 17, 1996, the hotel opened on
November 1, 1996, the sports bar on December 31, 1996, and the
remainder of Ameristar Council Bluffs opened in early 1997. The
total cost of the facilities, including the riverboat, buildings,
equipment and preopening costs is approximately $109.0 million. As
of December 31, 1996, approximately $105.4 million (including
preopening costs) had been incurred to develop the Ameristar
Council Bluffs riverboat casino complex.
In early 1997, the Company began constructing a 144-room hotel
at Ameristar Vicksburg expected to be completed in late 1997. In
connection with this construction, a 54-room budget motel that pre-
existed the development of Ameristar Vicksburg has been taken out
of service and will be demolished in connection with this
expansion. Based on preliminary design plans, management believes
that the development cost of the hotel will be between $9.0 and
$9.5 million, including capitalized construction period interest.
Management expects that a substantial portion of these development
costs will be funded through a short-term loan and the balance will
be funded out of ACVI's operating cash flow.
Litigation
The Company is engaged in several legal actions arising in the
ordinary course of business. With respect to these legal actions,
the Company believes that it has adequate legal defenses, insurance
coverage or indemnification protection and believes that the
ultimate outcome(s) will not have a material adverse impact on the
Company's financial position.
In September 1996, the Company received from the general
contractor of the Main Street Pavilion and the hotel for its
property in Council Bluffs, Iowa, a demand for arbitration
regarding amounts due under the contract. The demand does not
contain a plea for a specific amount of damages, and instead
requests an award for extra or changed work, delayed, disrupted and
accelerated work, together with inefficiencies and impacts
experienced on the project, along with unpaid retainage and certain
other costs. Based on a statement of damages filed in the
arbitration, management understands that the general contractor's
claims are for an amount of approximately $4.6 million, which
includes certain amounts due to subcontractors that have already
been paid by ACCBI. ACCBI submitted a counterclaim in the
arbitration for cost overruns in excess of the guaranteed maximum
price that ACCBI has had to pay, liquidated damages for delay and
certain other costs. ACCBI has submitted a statement of damages in
the arbitration proceeding seeking $7.1 million from the general
contractor.
Note 9 - Related party transactions
The Company engages Neilsen and Company to provide certain
construction and professional services, office space and other
equipment and facilities. Neilsen and Company is
<PAGE>
controlled by the principal stockholder and President of the Company.
Total payments to Neilsen and Company were $87,000, $110,000 and
$46,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. The Company also leases office space from the Lynwood
Shopping Center which is controlled by the principal stockholder and
President of the Company. Total payments to the Lynwood Shopping
Center were $94,000 and $88,000 for the years ended December 31,
1995 and 1996, respectively. No such payments were made in 1994. In
management's opinion, at the time the above described transactions
were entered into, they were in the best interest of the Company
and on terms as fair to the Company as could have been obtained
from unaffiliated parties.
During 1995, ACVI purchased for approximately $211,000 a
residence from the President of the Company to be used for general
corporate purposes.
Note 10 - Gem Gaming, Inc. Merger
On October 9, 1996, Gem Gaming, Inc. ("Gem"), a Nevada
Corporation, was merged with and into ACLVI, pursuant to a merger
agreement entered into on May 31, 1996, as amended in July and
October, 1996 (the "Merger Agreement"). Gem was originally
established to develop The Reserve and has had no operations.
Activities relating to the development of The Reserve have been
included in the consolidated financial statements of the Company
since October 9, 1996. The merger of Gem into ACLVI was recorded
using the purchase method of accounting.
Under the amended Merger Agreement, all of the outstanding
shares of Gem common stock were cancelled at the merger closing and
were converted into the right for the former stockholders of Gem
(the "Gem Stockholders") to receive cash, subject to reduction,
equal to the amount of the net proceeds (after payment of
underwriter's discounts and commissions and certain other offering
expenses) in excess of $4.0 million from an underwritten public
offering of 7.5 million shares of the Company's Common Stock (the
"Post-Merger Offering"). If the Post-Merger Offering is not
concluded in whole or in part prior to June 1, 1997, the Company
will deliver to the Gem Stockholders promissory notes (the "Gem
Notes") in an aggregate principal amount equal to (i) the average
10-day closing price of the Common Stock as of June 1, 1997, (ii)
multiplied by 7.5 million (iii) minus $4.0 million and (iv) minus
one-half of any offering expenses. The Gem Notes would be
unsecured, would mature on June 1, 2000, and would accrue interest
at the rate of eight percent per annum. Interest would be payable
on a monthly basis.
To reflect the obligation to the Gem Stockholders upon the
closing of the merger, the Company recorded notes payable at
$35,375,000, the amount at which they would have been issued based
on the Company's stock price on the closing date of the merger,
less a discount of $1,725,000 to reflect imputed interest over the
noninterest-bearing term of the obligation. As of December 31,
1996, approximately $605,000 of the discount had been amortized to
interest expense. The amount recorded as notes payable exceeds the
fair market value of the net assets acquired by the Company in the
merger. The excess of purchase price over fair market value of net
assets acquired, recorded as a long-term asset on the Company's
consolidated balance sheet, will be amortized over the estimated
40-year depreciable life beginning in the period in which the
acquired property commences operations.
<PAGE>
The following unaudited supplemental pro forma information
shows estimated net income and earnings per share as though the
merger had occurred at the beginning of 1995 and 1996,
respectively. The pro forma amounts reflect the Company's actual
results combined with Gem's actual results for the periods
presented, adjusted to reflect additional interest expense as if
the Gem Notes had been issued at the beginning of the respective
period, and the associated income tax benefit at the federal
statutory rate of 35 percent. No pro forma revenues are disclosed
because Gem had no operations prior to the merger.
<TABLE>
Years ended December 31,
1995 1996
-------- --------
<S> <C> <C>
Pro forma net income before
extraordinary items (in
thousands) $8,639 $3,756
====== ======
Pro forma net income (in
thousands) $7,982 $3,756
====== ======
Pro forma earnings per share $0.39 $0.18
====== ======
</TABLE>
Note 11 - Subsequent event
In late March, 1997, the Company had scheduled the closing of
an increased bank credit facility that would provide a substantial
portion of the financing for the completion of Phase I of The
Reserve (see Note 8). Shortly before the loan closing, the bank
lenders advised the Company that they would not proceed with the
closing due to uncertainties concerning the amount and form of
merger consideration payable by the Company to the Gem
Stockholders. Pending the availability of additional financing,
the Company has suspended construction of The Reserve. The Company
intends to resume construction upon obtaining the required
financing.
Following the cancellation of the closing of the increased
bank credit facility, the Company obtained a commitment for a short-
term loan from WFB in the amount of $20.0 million which is expected
to mature on May 31, 1997. The Company expects to roll this loan
into the increased bank credit facility upon closing of the
increased bank credit facility. The proceeds of this loan will be
used to repay prior short term loans, to pay the costs to complete
the redesign of The Reserve and certain construction activities
completed prior to suspension of construction of The Reserve, and
for other working capital purposes.
On March 26, 1997, the Company commenced an arbitration
proceeding against the Gem Stockholders for breaches of the Merger
Agreement described in Note 10 and the implied covenant of good
faith and fair dealing related to the merger. The Company's
complaint alleges that the Gem Stockholders have wrongfully and in
bad faith interfered with and impeded the Post-Merger Offering
because they believed the Post-Merger Offering would result in a
lesser amount of merger consideration than the Gem Notes. The
Company has alleged that actions of the Gem Stockholders have
effectively thwarted its ability to consummate the Post-Merger
Offering and have excused the Company's obligation to deliver
merger consideration to the Gem Stockholders in the form and amount
provided by the Merger Agreement. The complaint further alleges
that the conduct of the Gem Stockholders was a proximate cause of
the cancellation by the Company's bank lenders of the closing of
the increased bank credit facility discussed above. If by April 1,
1998, the dispute with the Gem Stockholders has not been resolved
through arbitration or settlement and the Company has not
restructured its long-term debt, management anticipates that the
Company would need to seek waivers of certain covenants under the
Revolving Credit Facility, and no assurance can be given that a
request for such waivers would be granted.
<PAGE>
As a consequence of the actions of the Gem Stockholders, the
Company has determined that the Post-Merger Offering cannot be
concluded before June 1, 1997, and the Company has terminated its
efforts to consummate the Post-Merger Offering. The Company is
seeking damages from the Gem Stockholders arising from their
conduct and declaratory relief to establish the amount and terms of
payment of the merger consideration in light of the conduct of the
Gem Stockholders. Due to the preliminary nature of this
proceeding, the Company is unable to provide any assessment with
respect to its potential outcome.
<PAGE>INDEX TO EXHIBITS
Exhibit Description of Exhibit Method of Filing
Number
2.1 Plan of Acquisition. See Exhibits 10.8(a)-(i).
See Exhibits 10.8(a)-(i).
3.1 Articles of Incorporation. Incorporated by reference
to Exhibit 3.1 to
Registration Statement on
Form S-1 filed by
Ameristar Casinos, Inc.
("ACI") under the
Securities Act of 1933,
as amended (File No. 33-
68936) (the "Form S-1").
3.2 Bylaws. Incorporated by reference
to Exhibit 3.2 to ACI's
Annual Report on Form 10-
K for the year ended
December 31, 1995 (the
"1995 10-K").
4.1 Specimen Common Stock Incorporated by reference
Certificate. to Exhibit 4 to Amendment
No. 2 to the Form S-1.
4.2 Long-Term Debt. See Exhibits 10.7(a) and
See Exhibits 10.7(a) and 10.8.
10.7(b).
* 10.1(a) Employment Agreement, dated Incorporated by reference
November 15, 1993, between to Exhibit 10.1(a) to
ACI and Thomas M. Steinbauer. ACI's Annual Report on
Form 10-K for the year
ended December 31, 1994
(the "1994 10-K").
* 10.1(b) Employment Agreement, dated Incorporated by reference
March 21, 1995, between ACI to Exhibit 10.1(c) to the
and John R. Spina, and 1994 10-K.
related letter agreement.
* 10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference
Non-Employee Director Stock to Exhibit 10.2 to ACI's
Option Plan, as amended and Quarterly Report on Form
restated. 10-Q for the quarter
ended June 30, 1994.
* 10.3 Ameristar Casinos, Inc. Incorporated by reference
Management Stock Option to Exhibit 10.3 to ACI's
Incentive Plan, as amended Quarterly Report on Form
and restated. 10-Q for the quarter
ended September 30, 1996
(the "September 1996 10-
Q").
* 10.4 Form of Indemnification Incorporated by reference
Agreement between ACI and to Exhibit 10.33 to
each of its directors and Amendment No. 2 to the
officers. Form S-1.
* 10.5 Housing Agreement, dated Incorporated by reference
November 15, 1993 between to Exhibit 10.17 to the
Cactus Pete's Inc. ("CPI") 1994 10-K.
and Craig H. Neilsen.
10.6 Plan of Reorganization, dated Incorporated by reference
November 15, 1993, between to Exhibit 2.1 to the
ACI and Craig H. Neilsen in 1994 10-K.
his individual capacity and
as trustee of the
testamentary trust created
under the last will and
testament of Ray Neilsen
dated October 9, 1963.
10.7(a) Credit Agreement, dated Incorporated by reference
June 1, 1995, among ACI, the to Exhibits 10.1 and 99.1
lenders listed therein and to ACI's Quarterly Report
Wells Fargo Bank, N.A., as on Form 10-Q for the
the successor to First quarter ended June 30,
Interstate Bank of Nevada, 1995.
N.A. ("WFB/FIB"), as agent,
together with a list
describing omitted schedules
and exhibits thereto.
10.7(b) Consent to Merger and Incorporated by reference
Increased Commitment to Exhibit 10.4 to the
Agreement, dated October 4, September 1996 10-Q.
1996, among ACI, the lenders
listed therein and WFB/FIB,
as agent.
10.8(a) Merger Agreement, dated as of Incorporated by reference
May 31, 1996, among Gem, ACI, to Exhibits 10.1 and 99.1
ACLVI, Steven W. Rebeil to ACI's Quarterly Report
("Rebeil") and Dominic J. on Form 10-Q for the
Magliarditi ("Magliarditi"), quarter ended June 30,
together with a list 1996 (the "June 1996 10-
describing omitted schedules Q").
and exhibits thereto.
10.8(b) First Amendment to Merger Incorporated by reference
Agreement, dated July 2, to Exhibit 10.5 to the
1996, among Gem, ACI, ACLVI, June 1996 10-Q.
Rebeil and Magliarditi.
10.8(c) Second Amendment to Merger Incorporated by reference
Agreement, dated as of to Exhibits 10.3 and 99.1
September 27, 1996, among to ACI's Current Report
Gem, ACI, ACLVI, Rebeil and on Form 8-K filed on
Magliarditi, together with a October 24, 1996 (the
list describing omitted "October 1996 8-K").
schedules and exhibits
thereto.
10.8(d) Gem Individuals' Notes Escrow Incorporated by reference
Agreement and Escrow to Exhibit 10.4 to the
Instructions, dated as of October
September 27, 1996, among 1996 8-K.
ACI, Rebeil and Magliarditi.
10.8(e) Letter agreement, dated Incorporated by reference
October 3, 1996, between ACI to Exhibit 10.5 to the
and Magliarditi. October
1996 8-K.
10.8(f) Purchase Agreement, dated as Incorporated by reference
of June 30, 1996, between ACI to Exhibit 10.6 to the
and Gem Air, Inc. ("Gem June 1996 10-Q.
Air").
10.8(g) Aircraft Operating Agreement, Incorporated by reference
dated as of July 5, 1996, to Exhibit 10.4 to the
between ACI and Gem Air. June 1996 10-Q.
10.8(h) Operating Agreement of Nevada Incorporated by reference
AG Air, Ltd. ("NVAGAIR"), to Exhibit 10.2 to the
dated as of July 5, 1996. June 1996 10-Q.
10.8(i) Sublease, dated as of Incorporated by reference
June 30, 1996, between ACI to Exhibit 10.3 to the
and NVAGAIR. June 1996 10-Q.
10.9(a) Lease, dated September 8, Incorporated by reference
1992, between Magnolia Hotel to Exhibit 10.2 to the
Company and ACVI as the Form S-1.
assignee of Craig H. Neilsen.
10.9(b) First Amendment to Agreement, Incorporated by reference
dated July 14, 1993, between to Exhibit 10.2(b) to the
Magnolia Hotel Company and 1995 10-K.
ACVI as the assignee of Craig
H. Neilsen.
10.9(c) Second Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.2(c) to the
1995, between Magnolia Hotel 1995 10-K.
Company and ACVI.
10.10(a)Lease, dated September 18, Incorporated by reference
1992, between R.R. Morrison, to Exhibit 10.3 to the
Jr. and ACVI as the assignee Form S-1.
of Craig H. Neilsen.
10.10(b)First Amendment to Lease Incorporated by Reference
Agreement, dated June 1, to Exhibit 10.3 to the
1995, between R.R. Morrison & 1995 10-K.
Son, Inc. and ACVI.
10.11(a)Lease, dated December 11, Incorporated by reference
1992, between Martha Ker to Exhibit 10.4 to the
Brady Lum et. al. and ACVI as Form S-1.
the assignee of Craig H.
Neilsen.
10.11(b)First Amendment to Lease Incorporated by reference
Agreement, dated June 1, to Exhibit 10.4(b) to the
1995, between Lawrence O. 1995 10-K.
Branyan, Jr., as trustee of
the Brady-Lum Family Trust
dated May 15, 1993 and ACVI.
10.12 Settlement, Use and Filed electronically
Management Agreement and DNR herewith.
Permit, dated May 15, 1995,
between the State of Iowa
acting through the Iowa
Department of Natural
Resources and ACCBI as the
assignee of Koch Fuels, Inc.
See also Exhibit 99.1
10.13 Option Agreement, dated July Filed electronically
11, 1995, between Levy Realty herewith.
Trust and ACLVI as the
successor to Gem Gaming, Inc.
("Gem").
10.14 Contract, dated December 19, Incorporated by reference
1995, between ACCBI and to Exhibit 10.16 to the
Perini-Andersen, a joint 1995 10-K.
venture.
10.15(a)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.1 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement (Hotel
Tower), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific Construction Company,
Inc. ("Camco Pacific").
10.15(b)AIA Standard Form of Incorporated by reference
Agreement between Owner and to Exhibit 10.2 to the
Contractor (Form No. A101- September 1996 10-Q.
1987) and First Addendum to
Contractor's Agreement
(Casino), dated October 25,
1995, between ACLVI (as the
successor to Gem) and Camco
Pacific.
10.16 Excursion Boat Sponsorship Incorporated by reference
and Operations Agreement, to Exhibit 10.15 to the
dated September 15, 1994, 1995 10-K.
between Iowa West Racing
Association and ACCBI.
21.1 Subsidiaries of ACI. Filed electronically
herewith.
23.1 Consent of Arthur Andersen Filed electronically
LLP. herewith.
27.1 Financial Data Schedule. Filed electronically
herewith.
99.1 Agreement to furnish the Filed electronically
Securities and Exchange herewith.
Commission omitted exhibits
and schedules to certain
exhibits and certain
instruments defining the
rights of holders of certain
long-term debt.
* Denotes a management contract or compensatory plan or
arrangement.
SETTLEMENT, USE AND MANAGEMENT AGREEMENT AND DNR PERMIT
THIS SETTLEMENT, USE AND MANAGEMENT AGREEMENT AND DNR
PERMIT (this "Agreement") is made as of May 15, 1995, by and
between Koch FUELS, INC., a Delaware corporation having its
principal place of business at 4111 E. 37th Street North,
Wichita, KS 67220, doing business as a private corporation in
Iowa (hereinafter called "Koch") and the STATE OF IOWA
(hereinafter called the "State"), acting by and through the IOWA
DEPARTMENT OF NATURAL RESOURCES (hereinafter called the "DNR").
RECITALS
WHEREAS, Koch was provided a Special Warranty Deed dated June 2,
1987, whereby it purportedly received fee title to parcels of
land in Pottawattamie County, Iowa, identified as "Parcel "A",
Parcel "B" and Parcel "C" in Exhibit "A" hereto (hereinafter
referred to as the "Real Estate");
WHEREAS, the Real Estate is riparian land with one of its
contiguous borders being the Missouri River;
WHEREAS, the State has claimed ownership to portions of the Real
Estate under the laws of the State, as applied by the courts of
the State and interpreted by the DNR, based on a claim that such
portions of the Real Estate formed by accretion to the bed of a
navigable river within the State;
WHEREAS, Koch disputes the State's claim;
WHEREAS, portions of the Real Estate were substantially developed
for industrial purposes before Koch purchased the Real Estate and
before the State made any claim of ownership as to the Real
Estate;
WHEREAS, a good faith dispute exists between the DNR and Koch as
to the boundaries between the portion of the Real Estate owned by
Koch and the portion of the Real Estate owned by the State;
WHEREAS, Koch has filed an action in the Iowa District Court for
Pottawattamie County at Council Bluffs (hereinafter referred to
as the "District Court"), [insert Case Number], to quiet title to
the Real Estate in Koch (hereinafter referred to as the "Quiet
Title Action");
WHEREAS, the Real Estate is neither a park, a forest, a fish and
wildlife area, nor a public recreation area;
WHEREAS, the Iowa Racing & Gaming Commission, an agency of the
State, has determined that the people of the State will benefit
if portions of the Real Estate are developed as a commercial
recreational complex featuring a casino gambling boat and related
appurtenances and facilities including, but not limited to, the
following: one or more hotels, one or more shopping areas,
docking and terminal facilities, parking areas, driveways and
walkways;
WHEREAS, members of the public have made little, if any, use of
the Real Estate for access to the Missouri River for recreational
purposes;
WHEREAS, Koch has proposed to pay a one-time payment of Five
Hundred Fifty-Six Thousand Five Hundred Fifty-Five Dollars
($556,555) (hereinafter referred to as the "Monetary
Consideration") to an escrow agent, such Monetary Consideration
to be paid by the escrow agent as directed by the DNR, but only
to sellers of privately-owned real estate pursuant to agreements
with the DNR, for State acquisition of privately-owned real
estate which abuts the Missouri River, or adjoins State-owned
real estate which abuts the Missouri River, or to a third party
whose land is acquired to qualify such purchase agreement as an
agreement for exchange of like-kind real estate, such acquired
real estate to be held by the State in trust and maintained and
managed by the DNR or another public agency for conservation
purposes and for the benefit of the public;
WHEREAS, the Monetary Consideration will enable the DNR to
acquire other real estate substantially expanding public
recreational access to the Missouri River;
WHEREAS, Koch or its assignee propose to make certain
improvements to the portion of the Real Estate identified as
"Parcel "3"" on the diagram attached hereto as Exhibit "B"
(hereinafter referred to as the "Premises") that will facilitate
public access to and along the existing bank of the Missouri
River;
WHEREAS, after the expiration of the term of years set forth
herein for control by Koch or its assignee of the Premises (and
any renewals which hereafter may be negotiated) said riparian
parcel will be available for public recreational access to the
Missouri River free of any impediments which would otherwise
exist by virtue of Koch's claim to the Real Estate; and
WHEREAS, Koch and the State desire to settle the Quiet Title
Action and their dispute as to the ownership of the Real Estate
and to provide for the development of the Real Estate for
recreational purposes.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises of the
parties hereto and other valuable consideration, the receipt of
which is hereby acknowledged, in order to resolve the disputed
claims of the parties, and, pursuant to the authority granted to
the DNR under Chapter 28E, Section 461A.4 and Section 461A.24 of
the 1995 Code of Iowa, Koch and the DNR agree as follows:
1. State Real Estate. In settlement of the Quiet Title Action
and the disputed claims with respect to the Real Estate and
in consideration of the Right to Use (as hereinafter
defined), Koch hereby disclaims all of its interest in and
acknowledges the State's title to the Premises, and Koch or
its assignee shall execute and deliver to the DNR a
quitclaim deed conveying all of its right, title and
interest, if any, in and to the Premises to the State
(subject to the Right to Use described below) upon the later
of (i) approval of this Agreement by the District Court,
(ii) approval of the Survey (described below) by the DNR and
Koch, or (iii) payment of the Monetary Consideration into
the escrow created pursuant to the terms of an escrow
agreement in the form of Exhibit "C" attached hereto
(hereinafter referred to as the "Escrow Agreement").
2. Koch Real Estate. In settlement of the Quiet Title Action
and the disputed claims with respect to the Real Estate, and
pursuant to Section 461A.24 of the Iowa Code, the DNR, on
behalf of the State, hereby disclaims all of the State's
interest in and acknowledges Koch's title to all those
portions of the Real Estate not identified as "Parcel "3""
on the diagram attached hereto as Exhibit "B" (hereinafter
referred to as "Koch's Property") and, the DNR shall execute
and deliver to Koch a boundary line agreement in the form
attached hereto as Exhibit "D" and an Affidavit Explanatory
of Title and Disclaimer of Interest in Real Estate in the
form attached hereto as Exhibit "E," disclaiming all of its
right, title and interest, if any, in Koch's Property to
Koch, upon the later of (i) approval of this Agreement by
the District Court (ii) approval of the Survey by the DNR
and Koch or (iii) payment of the Monetary Consideration into
escrow pursuant to the terms of the Escrow Agreement. The
State, through the appropriate State agency or authority
shall provide Koch such other quitclaim deeds, disclaimers,
affidavits, or other documentation as Koch shall reasonably
request to evidence that it has fee title, including
riparian rights, to Koch's Property free from any
enforceable claims of the State with respect to title to or
ownership of Koch's Property, specifically including, but
not limited to, claims resulting from accretions from the
bed of the Missouri River.
3. Right to Use Premises. Koch's prospective assignee
anticipates developing the Premises with commercial or
recreational facilities (which may include one or more
shopping areas) that would be compatible with its adjoining
casino gambling facilities. In settlement of the Quiet
Title Action and the disputed claims with respect to the
Real Estate, the DNR, on behalf of the State, hereby grants
to Koch and its assignees, and their successors, assignees
and mortgagees, employees, designees, agents, customers,
licensees, and invitees the right to use (hereinafter
referred to as the "Right to Use") the Premises for a term
of fifty (50) years for commercial or recreational purposes
including the development, construction, operation,
management and use of retail facilities, hotel facilities,
recreational vehicle parks, parking areas, and other uses
compatible or complementary to the foregoing or to the
operation of a gaming facility on adjoining property, all in
accordance with applicable law. The Right to Use shall also
include the right of Koch or its successor or assignee to
grant to any other persons or entities, including any
political subdivision of the State, the right to use all or
any portion of the Premises for any or all of the uses
otherwise permitted under the Right to Use. Public access
consistent with the public trust doctrine shall be
permitted;
provided, however, nondiscriminatory access restrictions are
permitted where necessary for safety or reasonable
commercial or operational considerations.
4. Public Trust Improvements. Koch or its assignees shall
construct the improvements described on Exhibit "F,"
attached hereto and incorporated herein by this reference,
on the Real Estate and such improvements shall be reasonably
available for use by the general public during the term of
the Right to Use.
5. Settlement of Quiet Title Action. The Agreement is intended
to be a full and complete settlement of the Quiet Title
Action and of the claims of State and Koch with respect to
ownership of the Real Property. The approval of this
Agreement by the District Court, the Iowa Natural Resource
Commission, and the Iowa State Executive Council shall be a
condition precedent to its effectiveness. Each of Koch and
the DNR agrees to use its best efforts to obtain the
approval of this Agreement by the Iowa State Executive
Council and the District Court.
6. Consideration. As additional consideration for the State's
settling the Quiet Title Action and the disputed claims with
respect to the Real Estate and granting the Right to Use to
Koch, Koch shall pay the Monetary Consideration into the
escrow created pursuant to the terms of the Escrow
Agreement. DNR shall use the Monetary Consideration to
purchase for the public privately-owned real estate which
abuts the Missouri River or adjoins State-owned real estate
which abuts the Missouri River. The DNR shall cause the
escrow agent to pay the Monetary Consideration at the
direction of the DNR, but only to sellers of such privately-
owned real estate pursuant to written purchase agreements
between the DNR and such sellers or to a third party whose
land is acquired to qualify such purchase agreement as an
agreement for exchange of like-kind real estate. The State
shall hold such acquired real estate in trust. The DNR or
another public agency shall maintain and manage the acquired
real estate for conservation purposes and for the benefit of
the public. The acquired real estate shall remain available
for use by the general public for all purposes consistent
with the public trust doctrine. The DNR has determined that
the present value of the foregoing payment exceeds the
present value of the aggregate amount that Koch might
otherwise be required to pay to the DNR as consideration for
the Right to Use under the DNR's Rule 571, Chapter 18. As
such, the foregoing payment shall be in lieu of, and in
complete and total satisfaction of, any payment that Koch
might otherwise be required to pay to the DNR as
consideration for the Right to Use under the DNR's Rule 571,
Chapter 18.
7. DNR Permit; Improvements. Pursuant to Section 461A.4 of the
1995 Code of Iowa, the DNR has issued Construction Permit
9538, dated April 19, 1995 (hereinafter referred to as the
"Existing Permit"), which authorizes inter alia excavation
of the boat mooring area and the construction of certain
improvements on the Koch Property. Paragraph 3 of the
Existing Permit which conditions the Existing Permit on,
inter alia, the approval "of a long term use agreement
covering the land on which the construction will occur" is
hereby deemed satisfied upon the date when this Agreement
becomes effective. Neither Koch nor its assignee shall
commence construction improvements on any portion of the
Premises until the DNR shall have granted a
permit under Section 461A.4 of the Iowa Code for such
improvements. The DNR shall not unreasonably withhold or
delay the approval and issuance of such permits. In
determining the reasonableness of the exercise of the DNR's
permitting authority, due consideration shall be given to
the DNR's grant of the Right to Use as consideration for the
covenants and agreements of Koch set forth herein, including
the payment of the Monetary Consideration.
8. Permits. Except as set forth in Section 7 hereof, Koch or
its assignees shall be solely responsible for obtaining any
and all necessary permits and authorizations for activities
including, without limitation, construction permits, casino
gambling boat licensing, and Section 404 permits.
9. Boundary Management. Koch and its assignees shall be
responsible for addressing any boundary problems affecting
title to the Premises during the term of the Right to Use.
Should any dispute arise during the term of the Right to Use
with respect to the boundary between the Premises and any
other property, Koch shall notify DNR and Koch and the DNR
shall cooperate in resolving such dispute.
10. DNR's Use of Premises. The DNR reserves the right to enter
upon the Premises at any time for any purpose in connection
with programs of the DNR and temporarily use the Premises in
such manner as does not materially interfere with the Right
to Use.
11. Expenditure of Funds. Nothing in this Agreement shall
obligate or bind either party to expend funds in excess of
the funds available to such party.
12. Indemnification. Neither the State, nor any agency,
official or employee thereof, shall be responsible for
accidents of any nature which may occur within or upon the
Premises. Koch and its successors and assignees hereby
agree to indemnify and hold harmless the State, its
agencies, officials and employees (collectively, the
"Indemnified Parties") from and against all liability, loss,
damage or expense (hereinafter collectively referred to as
"Loss") which may arise in consequence of the State's entry
into this agreement delegating authority to develop,
maintain and manage the Premises. However, neither Koch nor
its assignees shall have any duty to indemnify the
Indemnified Parties or hold the Indemnified Parties harmless
from Loss arising from the acts of officials, employees or
agents of the State while on the Premises.
13. Insurance. Koch or its assignee, shall maintain in force
(i) Commercial General Liability Insurance naming the State
as an additional insured with a minimum combined single
limit of $1,000,000 per occurrence with umbrella/excess
coverage of not less than $4,000,000 for Bodily Injury and
Property Damage and (ii) statutorily required Workers'
Compensation insurance. During the term of the Right to
Use, Koch or its assignee shall also maintain on file with
the State a current certificate of insurance certifying the
insurance coverages set forth above.
14. Term of Agreement. This Agreement and all obligations of
the parties set forth herein, shall become effective only
upon (i) the payment of the Monetary
Consideration as set forth above, (ii) the duly authorized
signature of the Director of the DNR and (iii) the closing
of the sale or other transfer of Koch's interest in the Real
Estate to Ameristar Casinos, Inc., a Nevada corporation or
its designee (hereinafter called "Ameristar"). Unless and
until Koch sells or transfers its interest in the Real
Estate to Ameristar, the representations, recitals,
covenants and other provisions of this Agreement shall be
ineffective. This Agreement shall remain in full force and
effect until and including the date which is fifty (50)
years after the date this Agreement becomes effective.
15. Termination and Suspension For Cause. This Agreement may be
terminated upon thirty (30) days written notice to either
party should it be determined the other party shall have
failed in a material manner to comply with the terms of this
Agreement and such non-compliance shall have continued for
sixty (60) days after the party in non-compliance shall have
received written notice setting forth with specificity the
elements of the alleged non-compliance; provided, however,
if such non-compliance is not reasonably susceptible of cure
within such 60-day period and the party in non-compliance
begins to cure such non-compliance within such 60-day
period, then the party in non-compliance shall have such
additional period of time as it reasonably requires to cure
such non-compliance. In the event the party alleged to be
in non-compliance shall be unwilling or unable to cure such
non-compliance within the cure period set forth above, then
this Agreement shall terminate thirty (30) days after the
end of such time period allowed for curing the non-
compliance. In addition, in the event an unexpected
emergency endangers the public health or safety, then either
party may unilaterally suspend this Agreement and the Right
to Use, but only to the extent reasonably necessary to
protect the public health and safety. Such suspension shall
terminate and this Agreement shall be revived to the extent
such suspension ceases to be reasonably necessary to protect
the public health and safety.
16. Surrender of Premises. Upon the earlier of (i) the
expiration or termination of this Agreement or (ii) the
permanent abandonment of the Premises by Koch or its
assignee or their successors in interest with respect to the
Premises (hereinafter collectively referred to as "User"),
User shall yield possession of the Premises to the DNR and
shall, within ninety (90) days after such time, at the DNR's
option, either (A) remove the improvements located on the
Premises from the Premises and restore the Premises to open
green space by removal of debris and grading and seeding the
Premises in a reasonable manner or (B) assign and transfer
the portion of the improvements located on the Premises to
the DNR in its then existing condition. No later than sixty
(60) days before the earlier of (i) expiration or
termination of this Agreement or (ii) the permanent
abandonment of the Premises by User, User shall deliver
notice (hereinafter called the "Termination Notice") to the
DNR requesting a meeting to discuss the disposition of the
Premises. Promptly thereafter, User and the DNR shall use
reasonable good faith efforts to meet at the Premises to
inspect the Premises and discuss the disposition of the
Premises. The DNR shall exercise the foregoing option on or
before the date which is five (5) days before the earlier of
(i) the expiration or termination, as the case may be, of
this Agreement or (ii) the permanent abandonment of the
Premises by User. If, due to unexpected or unforeseen
circumstances or the termination of this Agreement for
cause, User shall be unaware of the impending (i)
termination of this Agreement or (ii) permanent abandonment
of the Premises by User on the date when the Termination
Notice would otherwise be required to be given, then the
deadline for delivery of the Termination Notice shall be
equitably adjusted to reflect the date when User could
reasonably be expected to provide such notice.
17. Nondiscrimination. Koch shall not exclude any person from
participation in, or deny any person the benefits of, the
use of the Premises, or otherwise subject any person to
discrimination with respect to the use of the Premises
because of the person's race, color, national origin, age or
disability.
18. Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Iowa.
19. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and
their successors and assigns. Except as set forth in the
next sentence hereof, neither Koch nor any assignee of Koch
shall assign this Agreement without the consent of the DNR,
which consent shall not be unreasonably withheld or delayed.
Koch may assign this Agreement to Ameristar. BY EXECUTION
OF THIS AGREEMENT, THE DNR CONSENTS TO SUCH ASSIGNMENT, AND,
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, UPON
THE ASSIGNMENT OF THIS AGREEMENT TO AMERISTAR, KOCH SHALL BE
RELIEVED OF ALL OBLIGATIONS AND LIABILITIES UNDER THIS
AGREEMENT.
20. Interpretation. Should any dispute arise with respect to
the enforceability or legality of this Agreement, each
provision of this Agreement shall be interpreted so as to
make such provision legal and enforceable and, to the extent
any provision of this Agreement shall be determined to be
illegal or unenforceable as drafted, such provision shall be
deemed modified or limited to the extent necessary to cause
such provision to be enforceable and legal.
21. Financing. Koch's assignee, Ameristar, contemplates
obtaining financing consisting of one or more construction
or permanent loans or a sale leaseback or similar
arrangement to be secured by all or a portion of the
improvements to be constructed on the Premises and User's
rights under this Agreement (together with any refinancings
of any of them, hereinafter called "Permitted Financing").
In the event User applies for or obtains any Permitted
Financing, the DNR shall for each such Permitted Financing,
notwithstanding the existence of any claim, dispute or
litigation between the parties hereto, promptly execute and
consent to a Mortgagee Attornment Agreement substantially in
the form attached hereto as Exhibit "G" and shall agree to
any additional terms or provisions reasonably requested by
the lender under the Permitted Financing which relate to
such lender's security interest in the improvements to be
constructed on the Premises or in this Agreement.
22. Limitations on Authority. Notwithstanding any other
provision of this Agreement, this Agreement shall not vest
in Koch the authority to exercise any governmental
functions or powers, including but not limited to, law
enforcement activities delegated to the DNR under applicable
regulations, statutes, and judicial decisions.
23. Recordation. Either party may record this Agreement in the
office of the Pottawattamie County Recorder upon the
satisfaction of all conditions precedent to the
effectiveness of this Agreement.
24. Preparation of Survey. The parties shall cooperate and use
commercially reasonable efforts to cause a survey (the
"Survey") of the Real Property to be prepared to describe
with greater particularity the boundary between the Koch
Property and the Premises. The legal descriptions of the
Koch Property and the Premises set forth in the Survey shall
be deemed binding upon Koch and the State upon approval of
the Survey by Koch and the DNR. Neither Koch nor the DNR
shall unreasonably delay or withhold such approval.
Following approval of the Survey, Koch and the DNR shall
each use its best efforts to cause the District Court to
enter a decree quieting title in the form of Exhibit "H"
attached hereto reflecting the legal descriptions set forth
in the Survey.
25. Approval by Executive Council of Iowa. Because portions of
this settlement agreement might be construed as requiring
approval of the Executive Council of Iowa, approval of the
Executive Council of Iowa shall be obtained before this
settlement agreement is presented to the District Court.
This Agreement is entered into as of the date first above
written.
KOCH FUELS, INC.
By: /s/ R.J. Witte
Name: R.J. Witte
Title: Vice President
ATTEST:
By: /s/ H. Allen Coldwell
Name: H. Allen Coldwell
Title: Secretary
This agreement is entered into under the authority of a
resolution adopted at the regular meeting of the Natural Resource
Commission on May 11, 1995 , as shown in
the minutes thereof.
IOWA DEPARTMENT OF NATURAL RESOURCES
By: /s/ Larry J. Wilson
Name: Larry J. Wilson
Title: Director
APPROVED BY:
EXECUTIVE COUNCIL OF IOWA
By: /s/ Golda Beals
Name: Golda Beals
Title: Secretary
STATE OF IOWA )
) ss.
COUNTY OF Polk )
On the _7__ day of ___June________________, 1995, before me,
a notary Public in and for said State, personally appeared Larry
J. Wilson who stated that he is the duly appointed and acting
Director of the Iowa Department of Natural Resources and that the
Iowa Natural Resource Commission by majority vote at its meeting
on May 11, 1995 authorized him to execute the foregoing
instrument, and that he executed the foregoing instrument as his
voluntary act and deed and as the voluntary act and deed of the
Iowa Department of Natural Resources.
/s/ Junie R. Gookin
Notary Public in and for the
State of Iowa
STATE OF KANSAS )
) ss.
COUNTY OF SEDGWICK )
On the __5__ day of __June_________________, 1995, before me,
the undersigned, a Notary Public in and for the State of Iowa,
personally appeared ____R.J. Witte___, to me personally known,
who being by me duly sworn, did say that (s)he is the ___Vice
President______ of the corporation executing the within and
foregoing instrument that the seal affixed thereto is the seal of
the corporation; that the instrument was signed and sealed on
behalf of the corporation by authority of its Board of Directors;
and that __R.J. Witte_______ as officer acknowledged the
execution of the foregoing instrument to be the voluntary act and
deed of the corporation, by it and by (him/her) voluntarily
executed.
/s/ Laure A. Palmer
Notary Public in and for the
State of Iowa
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On the __7__ day of __June_________________, 1995, before me,
a notary Public in and for said State, personally appeared Golda
Beals who stated that she is the duly appointed and acting
Secretary of the Executive Council of Iowa and that the Executive
Council of Iowa by majority vote at its meeting on May 15, 1995
authorized her to execute the foregoing instrument, and that she
executed the foregoing instrument as her voluntary act and deed
of the Executive Council of Iowa.
/s/ Diane J. Birchard
Notary Public in and for the
State of Iowa
EXHIBIT "A"
THE REAL ESTATE
EXHIBIT "B"
DIAGRAM OF THE KOCH PROPERTY AND THE PREMISES
EXHIBIT "C"
FORM OF ESCROW AGREEMENT
EXHIBIT "D"
FORM OF THE BOUNDARY LINE AGREEMENT
EXHIBIT "E"
FORM OF THE AFFIDAVIT EXPLANATORY OF TITLE AND DISCLAIMER OF
INTEREST
EXHIBIT "F"
THE PUBLIC TRUST IMPROVEMENTS
EXHIBIT "G"
FORM OF MORTGAGEE ATTORNMENT AGREEMENT
EXHIBIT "H"
FORM OF COURT DECREE
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
BETWEEN
LEVY REALTY TRUST
AS SELLER
AND
AMERISTAR CASINO LAS VEGAS, INC.
AS BUYER
April 2, 1997
TABLE OF CONTENTS
Article Page
1 - Fundamental Provisions 1
2 - Agreement of Sale 1
3 - Buyer's Deliveries to Escrow Agent 2
4 - Seller's Deliveries to Escrow Agent 2
5 - Conditions Precedent 2
6 - Pre-Closing Obligations 3
7 - Closing 3
8 - Prorations, Fees and Costs 5
9 - Distribution of Funds and Documents 5
10 - Delivery of Documents; Liquidated Damages 6
11 - Representations and Warranties 6
12 - Notices 7
13 - Extent of Escrow Agent's Responsibilities 7
14 - Damage and Condemnation 8
15 - General Provisions 9
TABLE OF EXHIBITS
Exhibit Paragraph
A Legal Description of the Property 1.8
B Affidavit of Non-Foreign Status 4.1.2
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
IN CONSIDERATION of the covenants herein
contained, Seller hereby agrees to sell, and Buyer hereby
agrees to buy, the Property hereinafter described, upon the
following terms and conditions.
ARTICLE 1 - Fundamental Provisions
1.1 Purpose: This Article 1 sets forth certain
fundamental provisions and definitions for purposes of this
Agreement.
1.2 Date of this Agreement: April 2, 1997.
1.3 Seller: Levy Realty Trust.
1.4 Buyer: Ameristar Casino Las Vegas, Inc.
1.5 Escrow Agent: Stewart Title Guaranty.
1.6 Title Company: Stewart Title Company of Nevada.
1.7 Property: See Exhibit "A" attached hereto.
1.8 Total Price: $1,176,120.00 plus $258 multiplied
times the number of days that have elapsed from July 11, 1996
until the "Closing Date" (as defined below).
1.9 Opening Cash Deposit: $50,000.00.
1.10 Balance of the Total Price: $1,126,120.00 plus
$258 multiplied times the number of days that have elapsed
from July 11, 1996 until the "Closing Date" (as defined
below).
1.11 Escrow Time Limit Date: June 30, 1997.
1.12 Address for Notices to Seller:
Levy Realty Trust
720 S. Fourth St. Ste. 305
Las Vegas, Nevada 89102
Attn: Kenneth R. Gragson, Trustee
1.13 Address for Notices to Buyer:
Ameristar Casino Las Vegas, Inc.
3773 Howard Hughes Parkway #490 S
Las Vegas, Nevada 89109
Attn: Brian E. Katz
1.14 Address for Notices to Escrow Agent:
Stewart Title Guaranty
1980 Post Oaks Boulevard, Suite 610
Houston, Texas 77057
Attn: Lolly Avant
ARTICLE 2 - Agreement of Sale
2.1 Seller is the owner of fee title to the Property
specified in Article 1.
2.2 Seller hereby agrees to sell the Property, and
Buyer hereby agrees to buy the Property, for the Total Price
specified in Article 1, upon the terms and conditions set
forth herein.
2.3 The Total Price shall be payable in cash at the
close of escrow.
ARTICLE 3 - Buyer's Deliveries to Escrow Agent
3.1 Within two (2) business days of the date of this
agreement, Buyer shall deliver to Escrow Agent the Opening
Cash Deposit specified in Article 1.
3.2 Within ninety (90) days of the date of this
agreement, Buyer shall deliver to Escrow Agent each of the
following:
3.2.1 The Balance of the Total Price specified in
Article 1.
3.2.2 The amount, if any, required of Buyer under
Article 8 entitled "Prorations, Fees and Costs."
3.3 The failure of Buyer to make any delivery required
above by the date, or within the time, set forth above shall
constitute a material breach hereof by Buyer.
ARTICLE 4 - Seller's Deliveries to Escrow Agent
4.1 Within four (4) business days of the date of this
agreement, Seller shall deliver to Escrow Agent each of the
following:
4.1.1 A grant deed (the "Seller's Grant Deed"),
duly executed and acknowledged by Seller, on Stewart Title
Company of Nevada's standard form, conveying the Property to
Buyer.
4.1.2 An affidavit in the form attached hereto as
Exhibit "B," made under penalty of perjury, to the effect
that Seller is not a "foreign person" in the sense of
Internal Revenue Code Section 1445.
ARTICLE 5 - Conditions Precedent
5.1 The closing of the escrow is subject to the
following condition precedent:
5.1.1 Delivery to Escrow Agent, on or before five
(5) days after the date of this Agreement, of Buyer's written
approval of the covenants, conditions, reservations,
restrictions, easements and other matters described in a
Preliminary Title Report (the "Preliminary Title Report") on
the Property prepared by the Title Company specified in
Article 1. If Buyer disapproves of any item described in the
Preliminary Title Report pursuant to this Subparagraph,
except as to monetary item(s) that may be paid under
Paragraph 9.4, Seller shall have five (5) days in which to
cure such item(s) of disapproval, in which case the time
within which the condition set forth in this Subparagraph is
to be satisfied shall be extended by five (5) days from the
time of delivery of such disapproval; provided, however, that
if Seller is unwilling or unable to eliminate any item
disapproved by Buyer in the manner set forth above, so that
the foregoing condition is not satisfied, neither party shall
be deemed to be in default hereunder, and either party may
terminate the escrow and this Agreement in the manner set
forth in Paragraph 5.3.
5.2 Buyer may unilaterally waive the condition
precedent described in Subparagraph 5.1.1. Any such waiver
shall be effective only if the same is (i) in writing,
(ii) signed by the appropriate waiving party, and
(iii) delivered to Escrow Agent on or before the date such
condition is to be satisfied. Notwithstanding the foregoing
provisions of this Paragraph, any of the foregoing conditions
may be waived after the date such condition is to be
satisfied, provided, however, that any such waiver shall be
effective only if the same is in writing and signed by both
parties.
5.3 In the event any of the foregoing conditions is
neither satisfied nor waived in the manner specified in
Paragraph 5.2, either party, provided it is not then in
default hereunder, may terminate the escrow and this
Agreement by giving a written notice of termination to the
other party and Escrow Agent. The giving of such notice
shall be optional, not mandatory. No delay in the giving of
such notice shall affect the rights hereunder of the party
giving the same. In the event such notice is given, the
provisions of Paragraphs 7.3 and 7.4 shall apply.
5.4 Each party will, concurrently with its delivery
to Escrow Agent of any documents described in this Article 5,
deliver a copy of the same to the other party.
ARTICLE 6 - Pre-Closing Obligations
6.1 Escrow Agent shall have no concern with, or
liability or responsibility for, this Article.
6.2 Prior to the Closing Date, Buyer and its
representatives, agents and independent contractors shall
have the right and license to enter onto the Property for the
purpose of obtaining any and all information regarding the
Property as Buyer deems appropriate, including but not
limited to engineering and survey studies and soil tests.
Buyer agrees to and does hereby hold Seller harmless from and
against any loss, liability or damage, including reasonable
attorneys' fees and costs, resulting from the activities of
Buyer, or Buyer's representatives, agents and independent
contractors, or anyone acting pursuant to authorization from
Buyer, in relation to the Property, and from and against any
mechanics' liens or claims of lien resulting therefrom.
Before undertaking any activity on the Property which
requires a permit from any governmental agency, Buyer shall
obtain such permit and pay any fee, cost, charge or expense
required to obtain or carry out such permit. The provisions
of this Section 6.2 shall not be deemed to in any way limit
the provisions of that certain License Agreement dated as of
February 14, 1997 between Buyer and Seller.
ARTICLE 7 - Closing
7.1 Escrow Agent shall close the escrow (the "Closing
Date") by (i) filing for record the Seller's Grant Deed and
such other documents as may be necessary to procure the Title
Policy (described below), and (ii) delivering funds and
documents as set forth in Article 9 entitled "Distribution of
Funds and Documents," within two (2) business days after each
of the following conditions has been satisfied:
7.1.1 All funds and instruments required by
Articles 3 and 4 have been delivered to Escrow Agent.
7.1.2 Each of the conditions precedent set forth
in Article 5 has been, or upon such closing shall be,
satisfied or waived.
7.1.3 Escrow Agent has procured, or is satisfied
that it can procure, the Title Company's ALTA policy of title
insurance (the "Title Policy") with liability in the amount
of the Total Price, insuring that fee title to the Property
vests in Buyer subject only to (i) nondelinquent county and
city, if any, general and special taxes constituting a lien
at the close of escrow, and the lien of supplemental taxes,
if any, (ii) covenants, conditions, reservations,
restrictions, easements and other items appearing as
exceptions in the Preliminary Title Report approved by Buyer
pursuant to Subparagraph 5.1.1, and (iii) any other lien
voluntarily imposed by Buyer as of the close of the escrow.
7.2 If Escrow Agent cannot close the escrow on or
before the Escrow Time Limit Date, it will, nevertheless,
close the same when all conditions have been satisfied or
waived, notwithstanding that one or more of such conditions
has not been timely performed, unless (i) a notice of
termination has already been delivered to Escrow Agent in
accordance with the provisions of Paragraph 5.3, or
(ii) after the Escrow Time Limit Date and prior to the close
of the escrow, Escrow Agent receives a written notice to
terminate the escrow and this Agreement from a party who, at
the time such notice is delivered, is not in default
hereunder. The right to terminate the escrow and this
Agreement under the provisions of clause (ii) of this
Paragraph shall be optional, not mandatory. No delay in the
giving of such notice shall affect the rights hereunder of
the party giving the same.
7.3 Escrow Agent shall have no liability or
responsibility for determining whether or not a party giving
a notice of termination is or is not in default hereunder.
Within two (2) business days after receipt of such notice
from one party, Escrow Agent shall deliver a copy of such
notice to the other party. Unless written objection to the
termination of the escrow is received by Escrow Agent within
ten (10) days after Escrow Agent so delivers such notice to
the other party, (i) Escrow Agent shall forthwith terminate
the escrow and return all funds, documents and other items
held by it to the party depositing same, except that Escrow
Agent may retain such documents and other items usually
retained by escrow agents in accordance with standard escrow
termination procedures and practices, and (ii) each party
shall forthwith pay to Escrow Agent one-half (1/2) of Escrow
Agent's reasonable escrow termination charges.
Notwithstanding the foregoing provisions of this Paragraph,
Escrow Agent may deduct from any cash or other funds held by
it, a sum sufficient to pay Buyer's portion of its escrow
termination charges in full. If written objection to the
termination of the escrow is delivered to Escrow Agent within
such 10-day period, Escrow Agent is authorized to hold all
funds, documents and other items delivered to it in
connection with the escrow and may, in Escrow Agent's sole
discretion, take no further action until otherwise directed,
either by the parties' mutual written instructions or final
order of a court of competent jurisdiction.
7.4 Neither (i) the exercise of such right of
termination, (ii) delay in the exercise of such right, nor
(iii) the return of funds, documents or other items, shall
affect the right of the party giving such notice of
termination to pursue legal remedies for the other party's
breach of this Agreement (including but not limited to
damages for the payment of all or any portion of Escrow
Agent's escrow termination charges). Nor shall (i) the
giving of such notice, (ii) the failure to object to
termination of the escrow, or (iii) the return of funds,
documents or other items affect the right of the other party
to pursue other legal remedies for the breach of the party
who gives such notice.
ARTICLE 8 - Prorations, Fees and Costs
8.1 Escrow Agent shall prorate (i.e., apportion)
between the parties, in cash, to the close of the escrow,
only county, city and special district taxes and assessments
(if any), based on the latest information available to Escrow
Agent.
8.2 All prorations and/or adjustments called for in
this Agreement shall be made on the basis of a 30-day month,
unless otherwise specifically instructed in writing.
8.3 Seller shall pay (i) County Documentary Transfer
Tax, in the amount Escrow Agent determines to be required by
law, (ii) the ALTA Title Policy premium, (iii) one-half (1/2)
of Escrow Agent's escrow fee or escrow termination charge,
(iv) fees for beneficiaries' statements, and (v) usual
seller's document drafting and recording charges.
8.4 Buyer shall pay (i) one-half of Escrow Agent's
escrow fee or escrow termination charge, and (ii) usual
buyer's document drafting and recording charges.
ARTICLE 9 - Distribution of Funds and Documents
9.1 All cash received hereunder by Escrow Agent shall
be, until the close of the escrow, kept on deposit with other
escrow funds in Escrow Agent's general escrow account(s), in
any state or national bank, and may be transferred to any
other such general escrow account(s).
9.2 Escrow Agent shall deposit the Opening Cash
Deposit into an interest bearing account at a financial
institution reasonably acceptable to Buyer and Seller
promptly after the receipt thereof. Interest earned on the
Opening Cash Deposit shall be credited to the account of
Buyer.
9.3 All disbursements by Escrow Agent shall be made by
checks of Escrow Agent.
9.4 Escrow Agent will cause the County Recorder of
Clark County, Nevada to mail the Seller's Grant Deed after
recordation, to Buyer.
9.5 Escrow Agent will, at the close of the escrow,
deliver by United States mail (or will hold for personal
pickup, if requested) each nonrecorded document received
hereunder by Escrow Agent, to the payee or person
(i) acquiring rights under said document or (ii) for whose
benefit said document was acquired.
9.6 Escrow Agent will, at the close of the escrow,
deliver by United States mail (or hold for personal pickup,
if requested) (i) to Seller, or order, the cash, plus or
minus any appropriate prorations or other charges, and
(ii) to Buyer, or order, any excess funds theretofore
delivered to Escrow Agent by Buyer.
9.7 Escrow Agent will, at the close of the escrow,
deliver to Seller a copy of the Seller's Grant Deed
(conformed to show recording data) and each document recorded
to place title in the condition required by this Agreement.
ARTICLE 10 - Delivery of Documents; Liquidated Damages
10.1 Escrow Agent shall have no concern with, or
liability or responsibility for, this Article.
10.2 If the escrow is terminated for any reason other
than a default by Seller, then forthwith upon such
termination, Buyer shall deliver to Seller any documents and
materials related to the Property previously delivered by
Seller to Buyer.
10.3 If Buyer fails to complete the purchase of the
Property and such failure constitutes a breach of this
Agreement, Buyer, by its initials following this Paragraph,
and Seller, by its initials following this Paragraph, agree
that the Original Cash Deposit shall constitute liquidated
damages to Seller for such breach by Buyer. Buyer and Seller
agree that the aforesaid sum is a reasonable amount for
liquidated damages for such a breach under the circumstances
existing at the time this Agreement is entered into.
Forthwith upon any such breach by Buyer, Buyer shall either
(i) instruct Escrow Agent, in writing, to pay such sum to
Seller out of funds deposited with Escrow Agent by Buyer and
not previously released to Seller, or (ii) pay such sum to
Seller.
Seller: Buyer:
/s/KG /s/TS
ARTICLE 11 - Representations and Warranties
11.1 Escrow Agent shall have no concern with, or
liability or responsibility for, this Article.
11.2 In addition to any other express agreements of
Seller contained herein, the matters set forth in this
Paragraph constitute representations and warranties by Seller
which shall be true and correct as of the close of escrow.
In the event that, during the period between the execution of
this Agreement and the close of escrow, Seller learns, or has
reason to believe, that any of the following representations
and warranties may cease to be true, Seller hereby covenants
to give notice thereof to Buyer immediately:
11.2.1 Seller has the legal power, right and
authority to enter into this Agreement and to consummate the
transaction contemplated hereby.
11.2.2 Until the close of escrow, Seller shall
maintain the Property in its present condition, ordinary wear
and tear excepted.
11.2.3 Seller is not a foreign person in the
sense of Internal Revenue Code Section 1445.
11.3 In addition to any other express agreements of
Buyer contained herein, the matters set forth in this
Paragraph constitute representations and warranties by Buyer
which shall be true and correct as of the close of escrow.
In the event that, during the period between the execution of
this Agreement and the close of escrow, Buyer learns, or has
reason to believe, that any of the following representations
and warranties may cease to be true, Buyer hereby covenants
to give notice thereof to Seller immediately:
11.3.1 Buyer is the successor in interest to Gem
Gaming, Inc., under the Purchase and Sale Agreement dated
April 5, 1995, between Seller and Gem Gaming, Inc.
11.3.2 Buyer has the legal power, right and
authority to enter into this Agreement and to consummate the
transaction contemplated hereby.
11.3.3 Seller has made no representations or
warranties to Buyer, oral or written, except as specifically
set forth in this Agreement.
ARTICLE 12 - Notices
12.1 Unless otherwise specifically provided herein, all
notices, demands or other communications given hereunder
shall be in writing and
shall be deemed to have been duly delivered upon personal
delivery, or as of the second business day after mailing by
United States mail, postage prepaid, to the Address of the
recipient specified in Article 1, or to such other address or
person as any party may designate to the others for such
purpose in the manner hereinabove set forth.
ARTICLE 13 - Extent of Escrow Agent's Responsibilities
13.1 Escrow Agent shall not be liable for any of its
acts or omissions unless the same shall constitute negligence
or willful misconduct.
13.2 Escrow Agent shall not be responsible for (i) the
sufficiency or correctness as to form or the validity of any
document deposited with Escrow Agent, (ii) the manner of
execution of any such deposited document, unless such
execution occurs in Escrow Agent's premises and under its
supervision, or (iii) the identity, authority or rights of
any person executing any document deposited with Escrow
Agent.
13.3 If Escrow Agent receives or becomes aware of
conflicting demands or claims with respect to the escrow, the
rights of any party hereto, or funds, documents or other
items deposited with Escrow Agent, Escrow Agent shall have
the right to discontinue any further acts until such conflict
is resolved to its satisfaction, and it shall have the
further right to commence or defend any action for the
determination of such conflict. The parties shall,
immediately after demand therefor by Escrow Agent, reimburse
Escrow Agent (in such respective proportions as Escrow Agent
shall determine) any reasonable attorneys' fees and court
costs incurred by Escrow Agent pursuant to this Paragraph.
13.4 Any commitment made in writing to Escrow Agent by
a bank, trust company, insurance company or savings and loan
association, to deliver its check or funds into the escrow
may, in the sole discretion of Escrow Agent, be treated as
the equivalent of a deposit herein of the amount thereof.
Recordation of any instruments delivered through the escrow,
if necessary or proper in the issuance of the Title Policy,
is authorized. No examination or insurance as to the amount
or payment of personal property taxes is required unless
specifically requested. If any party obtains a loan on the
Property, then, during the pendency of the escrow, Escrow
Agent is authorized to furnish the lender, or anyone acting
on its behalf, any information concerning the escrow,
including, but not limited to, a certified copy of this
Agreement and any amendments hereto.
ARTICLE 14 - Damage and Condemnation
14.1 The risk of physical loss to the Property shall be
borne by Seller prior to the close of escrow and by Buyer
thereafter. In the event that the Property shall be damaged
by fire, flood, earthquake or other casualty to the extent
that the cost to repair or restore such damage will exceed
five percent (5%) of the Total Price, Buyer may, at its
option, elect not to acquire the Property, by written notice
to Seller within twenty (20) days after the date upon which
such damage or other casualty occurs. If Buyer does not give
such notice, Buyer shall be deemed to have elected to proceed
with the purchase and shall close thereon, at which time
Seller shall assign to Buyer all of Seller's interests in all
insurance proceeds (if any) relating to such damage. In the
event that such damage occurs and Buyer elects not to
purchase the Property, then the escrow and this Agreement
shall be terminated.
14.2 If the cost to repair any such damage to the
Property will not exceed five percent (5%) of the Total
Price, then Buyer shall not have a right to elect not to
acquire the Property by reason thereof, but at Buyer's
option, to be exercised by written notice to Seller within
twenty (20) days after the date upon which such damage
occurs, Seller shall either (i) assign to Buyer at the
closing Seller's interests in all insurance proceeds (if any)
relating to such damage, or (ii) retain all insurance
proceeds (if any), and administer the expenditure thereof for
the purpose of restoring and repairing such damage prior to
the close of escrow, with the closing delayed until such
restoration and repair is complete, but in no event shall
Seller be obligated to expend more than the insurance
proceeds actually available to Seller in order to complete
such restoration and repair, and in no event shall the
closing be extended by more than sixty (60) days, at which
time Seller shall assign to Buyer at the closing all then
unexpended insurance proceeds (if any) and Buyer shall accept
the Property in its condition existing on the date of such
closing.
14.3 In the event that, prior to the close of escrow,
any governmental agency shall commence any action in eminent
domain to take any portion of the Property, Buyer shall have
the option either to (i) elect not to acquire the Property,
or (ii) complete the acquisition of the Property in which
case Buyer shall be entitled to all of the proceeds of such
taking, such election to be made by written notice to Seller
within twenty (20) days after the date upon which Buyer
receives notice of the commencement of such governmental
action. Buyer's failure to give such notice shall be deemed
to constitute an election by Buyer to complete the
acquisition of the Property.
ARTICLE 15 - General Provisions
15.1 Unless the context otherwise indicates, whenever
used in this Agreement:
15.1.1 The word "cash" means (i) currency,
(ii) checks currently dated, payable to Escrow Agent, and
honored upon presentation for payment, or (iii) amounts
credited by wire-transfer into Escrow Agent's bank account.
15.1.2 The word "party" or "parties" means Buyer
and/or Seller, as the context may require.
15.1.3 The word "escrow" means the escrow created
by this Agreement.
15.1.4 The phrase "the opening of the escrow"
means the date Escrow Agent signs the "Consent of Escrow
Agent" attached hereto.
15.1.5 The phrase "the close of the escrow" means
the date and time at which the Seller's Grant Deed is filed
for record.
15.2 The use herein of (i) the neuter gender includes
the masculine and the feminine, and (ii) the singular number
includes the plural, whenever the context so requires.
15.3 Captions in this Agreement are inserted for
convenience of reference only and do not define, describe or
limit the scope or the intent of this Agreement or any of the
terms hereof.
15.4 All exhibits referred to herein and attached
hereto are incorporated herein by reference.
15.5 This Agreement contains the entire agreement
between the parties relating to the transaction contemplated
hereby, and all prior or contemporaneous agreements,
understandings, representations and statements, oral or
written, are merged herein.
15.6 No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is in
writing and signed by the party against whom the enforcement
of such modification, waiver, amendment, discharge or change
is or may be sought.
15.7 In the event that either party commences
litigation for the judicial interpretation, enforcement,
termination, cancellation or rescission hereof, or for
damages for the breach hereof, the prevailing party shall be
entitled to its reasonable attorneys' fees and court and
other costs incurred.
15.8 This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada.
15.9 Time is of the essence to this Agreement.
15.10 All obligations referred to herein to be performed
at a time or times after the close of the escrow, and all
warranties and representations contained herein, shall
survive the close of the escrow and the delivery of Seller's
Grant Deed.
15.11 In the event that any term, covenant, condition,
provision or agreement herein contained is held to be
invalid, void or otherwise unenforceable by any court of
competent jurisdiction, the fact that such term, covenant,
condition, provision or agreement is invalid, void or
otherwise unenforceable shall in no way affect the validity
or enforceability of any other term, covenant, condition,
provision or agreement herein contained.
15.12 All terms of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by, the parties
hereto and their respective legal representatives, successors
and assigns.
15.13 Buyer understands that some of Seller's
beneficiaries are licensed real estate brokers.
IN WITNESS WHEREOF, this Agreement has been
executed by the parties, in the State of Nevada, as of the
date set forth in Article 1.
SELLER:
LEVY REALTY TRUST
By: /s/ Kenneth R. Gragson
Its: Trustee
BUYER:
AMERISTAR CASINO LAS VEGAS,INC.
By: /s/ Thomas Steinbauer
Its: Vice President
CONSENT OF ESCROW AGENT
The undersigned Escrow Agent hereby agrees to
(i) accept the foregoing Agreement, (ii) be escrow agent
under said Agreement for the fees therein specified, and
(iii) be bound by said Agreement in the performance of its
duties as escrow agent; provided, however, that the
undersigned shall have no obligations, liability or
responsibility under (i) this Consent or otherwise, unless
and until said Agreement, fully signed by the parties, has
been delivered to the undersigned, or (ii) any amendment to
said Agreement unless and until the same shall be accepted by
the undersigned in writing.
Dated: March __, 1997
ESCROW AGENT:
/s/ Lolly Avant
By:__________________________
Its:_________________________
EXHIBIT "A"
That portion of Sections 13 & 14, Township 22 South,
Range 62 East, M.D.B.&M., described as follows:
Parcel Two (2) as shown by map thereof in File 82 of
Parcel Maps, Page 94 in the Office of the County
Recorder of Clark County, Nevada.
EXHIBIT "B"
Treas. Reg. Section 1.1445-2T(b)(2)(iii)(B)
TO:
Section 1445 of the Internal Revenue Code provides
that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To
inform the transferee that withholding of tax is not required
upon the disposition of a U.S. real property interest by Levy
Realty Trust, the undersigned hereby certifies the following
on behalf of Levy Realty Trust.
1. Levy Realty Trust is not a foreign person,
foreign corporation, foreign trust or foreign estate (as
those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
2. Levy Realty Trust's U.S. tax identification
number is 82-0281594; and
3. Levy Realty Trust's office address is 2605
South Decatur Boulevard, Las Vegas, Nevada 89102, Attention:
Kenneth R. Gragson, Trustee.
The undersigned and Levy Realty Trust understand
that this certification may be disclosed to the Internal
Revenue Service by transferee and that any false statement
contained herein could be punished by fine, imprisonment or
both.
Under penalties of perjury I declare that I have
examined this certification and to the best of my knowledge
and belief it is true, correct and complete, and I further
declare that I have authority to sign this document on behalf
of Levy Realty Trust.
Date: April 4, 1997
LEVY REALTY TRUST
By: /s/Kenneth R. Gragson, Trustee
Its: Trustee
EXHIBIT 21.1
SUBSIDIARIES OF AMERISTAR CASINOS, INC.
Cactus Pete's, Inc., a Nevada corporation
Ameristar Casino Vicksburg, Inc., a Mississippi corporation
Ameristar Casino Council Bluffs, Inc., an Iowa corporation
Ameristar Casino Las Vegas, Inc., a Nevada corporation
Nevada AG Air, Ltd., a Nevada limited liability company
AC Food Services, Inc., a Nevada corporation
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into
the Company's previously filed Registration Statement on
Form S-8 (File No. 33-83378).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
April 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This data should be reviewed in conjunction with the financial statements
included in this report.
</LEGEND>
<CIK> 0000912145
<NAME> AMERISTAR CASINOS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10724
<SECURITIES> 0
<RECEIVABLES> 1408
<ALLOWANCES> 0
<INVENTORY> 2385
<CURRENT-ASSETS> 20154
<PP&E> 281723
<DEPRECIATION> 56253
<TOTAL-ASSETS> 270052
<CURRENT-LIABILITIES> 46498
<BONDS> 0
0
0
<COMMON> 204
<OTHER-SE> 70740
<TOTAL-LIABILITY-AND-EQUITY> 270052
<SALES> 188465
<TOTAL-REVENUES> 188465
<CGS> 0
<TOTAL-COSTS> 171152
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8303
<INCOME-PRETAX> 9287
<INCOME-TAX> 3390
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5897
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
SUPPLEMENTAL AGREEMENT OF AMERISTAR CASINOS, INC.
Ameristar Casinos, Inc. ("ACI") hereby agrees to furnish
supplementally to the Securities and Exchange Commission a copy
of any of the exhibits and schedules to Exhibit 10.12 to ACI's
Annual Report on Form 10-K for the year ended December 31, 1996.
Such Exhibit 10.12 includes a list setting forth a description of
the omitted exhibits and schedules.
ACI further agrees to furnish supplementally to the Securities
and Exchange Commission a copy of any of the following
instruments defining the rights of holders of long-term debt
issued by ACI or its subsidiaries:
Promissory Note, dated November 22, 1976, from Cactus
Pete's, Inc. ("CPI") to United States of America and related
Credit Agreement.
Promissory Note, dated October 7, 1983, from CPI to United
States of America and related Credit Agreements.
Promissory Note, dated December 28, 1995, from Ameristar
Casino Council Bluffs, Inc. ("ACCBI") and General Electric
Credit Corporation ("GECC") and related Preferred Ship
Mortgage, Subordination and Intercreditor Agreement and
Subordinations of Preferred Ship Mortgage; and Corporate
Guaranty from ACI to GECC.
Loan Agreement, dated December 12, 1995, between ACCBI, as
borrower, ACI, as guarantor, and Wells Fargo Bank, N.A. (as
the successor to First Interstate Bank of Nevada, N.A.), as
lender ("WFB/FIB"); Promissory Note from ACCBI to WFB/FIB;
and related Security Agreement and Ship Mortgage.
Credit Agreement, dated June 27, 1996, between ACCBI and PDS
Financial Corporation ("PDS"); Promissory Note from ACCBI to
PDS; related Security Agreement; and Guaranty from ACI to
PDS.
Promissory Note, dated October 10, 1994, from Gem Air, Inc.
to The CIT Group/Equipment Financing, Inc. and related
Aircraft Security Agreement. (Contractually assumed
obligation.)
Business Loan Agreement, dated June 15, 1994, between Gem
Air, Inc. and Bank of America Nevada; Amendment to Business
Loan Agreement, dated November 15, 1994, between Gem Air,
Inc. and Bank of America Nevada; and related Deed of Trust,
Assignment of Rents, and Fixture Filing. (Contractually
assumed obligation.)
