UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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
incorporation or organization) identification no.)
3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89109
(Address of principal executive offices)
(702) 567-7000
(Registrant's telephone number, including area code)
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 [ ]
As of August 13,1999, 20,360,000 shares of Common Stock of the
registrant were issued and outstanding.
<PAGE>
AMERISTAR CASINOS, INC.
FORM 10-Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements:
A. Condensed Consolidated Balance
Sheets at December 31, 1998 and
June 30, 1999 (unaudited) 3 - 4
B. Condensed Consolidated Statements
of Operations (unaudited) for the
six months ended June 30, 1998 and
1999 5
C. Condensed Consolidated Statements
of Cash Flows (unaudited) for the
six months ended June 30, 1998 and
1999 6
D. Notes to Condensed Consolidated
Financial Statements 7 - 8
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9 - 18
Item 3.Quantitative and Qualitative Disclosures
about Market Risk 18
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6.Exhibits and Reports on Form 8-K 19 - 20
SIGNATURE 21
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<S> <C> <C>
December 31, June 30,
1998 1999
(Unaudited)
--------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 18,223 $ 23,279
Restricted cash 119 126
Accounts receivable, net 1,476 1,554
Income tax refund receivable 2,815 2,088
Inventories 3,614 3,339
Prepaid expenses 4,794 4,784
Deferred income taxes 3,906 3,964
-------- --------
Total current assets 34,947 39,134
PROPERTY AND EQUIPMENT AND
LEASEHOLD INTERESTS, at cost,
less accumulated depreciation and
amortization of $92,708 and
$102,890, respectively 297,820 295,643
EXCESS OF PURCHASE PRICE OVER FAIR
MARKET VALUE OF NET ASSETS
ACQUIRED 15,046 14,848
DEPOSITS AND OTHER ASSETS 3,924 3,734
-------- --------
$351,737 $353,359
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
December 31, June 30,
1998 1999
(Unaudited)
-------- --------
CURRENT LIABILITIES:
Accounts payable $ 6,324 $ 7,005
Construction contracts payable 913 -
Accrued liabilities 26,359 28,639
Current obligations under
capitalized leases 2,398 2,399
Current maturities of notes
payable and
long-term debt 9,924 10,152
-------- --------
Total current liabilities 45,918 48,195
-------- --------
OBLIGATIONS UNDER CAPITALIZED
LEASES, net of current
maturities 13,196 12,091
-------- --------
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 217,203 215,907
-------- --------
DEFERRED INCOME TAXES 7,496 8,576
-------- --------
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 204 204
Additional paid-in capital 43,043 43,043
Retained earnings 24,677 25,343
-------- --------
Total stockholders'
equity 67,924 68,590
-------- --------
$351,737 $353,359
======== ========
</TABLE>
The accompanying notes are an intetral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1999 1998 1999
-------- -------- -------- --------
REVENUES:
Casino $ 53,880 $ 62,865 $105,224 $120,949
Food and beverage 11,981 12,245 22,488 23,637
Rooms 3,757 4,628 6,305 8,561
Other 2,526 2,597 4,602 4,920
-------- -------- -------- --------
72,144 82,335 138,619 158,067
Less: Promotional allowances 5,408 6,136 10,472 11,860
-------- -------- -------- --------
Net revenues 66,736 76,199 128,147 146,207
-------- -------- -------- --------
OPERATING EXPENSES:
Casino 30,749 29,124 55,340 56,179
Food and beverage 5,057 8,069 12,251 15,413
Rooms 1,029 1,677 2,092 3,285
Other 2,118 1,658 4,084 3,992
Selling, general
and administrative 19,056 22,370 36,511 41,489
Depreciation and amortization 6,026 5,893 11,096 12,173
Preopening costs - - 10,611 -
-------- -------- -------- --------
Total operating expenses 64,035 68,791 131,985 132,531
-------- -------- -------- --------
Income (loss) from
operations 2,701 7,408 (3,838) 13,676
OTHER INCOME (EXPENSE):
Interest income 132 118 216 178
Interest expense (5,845) (6,150) (10,119) (12,247)
Other (196) (79) 115 (483)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION (BENEFIT) (3,208) 1,297 (13,626) 1,124
Income tax provision (benefit) (710) 518 (4,513) 458
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,498) $ 779 $ (9,113) $ 666
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE:
Basic $ (0.12) $ 0.04 $ (0.45) $ 0.03
======== ======== ======== ========
Diluted $ (0.12) $ 0.04 $ (0.45) $ 0.03
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360 20,360 20,360
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Six Months
Ended June 30,
1998 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,113) $ 666
-------- --------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 11,096 12,173
Amortization of debt costs 327 334
Change in deferred taxes (4,583) 1,022
Net (gain) loss on disposition of
assets (14) 409
(Increase) decrease in other current
assets (1,324) 200
Decrease in income tax refund
receivable 2,020 727
Increase in other current liabilities 6,837 2,961
-------- --------
Total adjustments 14,359 17,826
-------- --------
Net cash provided by operating activities 5,246 18,492
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (23,317) (10,857)
Decrease in construction contracts
payable (13,785) (913)
Proceeds from sale of assets 14 694
-------- --------
Increase (decrease) in deposits and
other non-current assets 7,533 (144)
-------- --------
Net cash used in investing activities: (29,555) (11,220)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and long-term debt 35,741 250
Principal payments of notes payable,
long-term debt and capitalized leases (2,174) (2,466)
-------- --------
Net cash provided by (used in) financing
activities: 33,567 (2,216)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,258 5,056
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 13,031 18,223
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 22,289 $ 23,279
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest (net of amounts
capitalized) $ 8,834 $ 12,034
======== ========
Cash paid for income taxes $ 350 $ -
======== ========
Assets purchased with long-term debt $ - $ 44
======== ========
Assets purchased with capitalized leases $ 6,671 $ -
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
AMERISTAR CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements
include the accounts of Ameristar Casinos, Inc. ("Ameristar" or
"ACI") and its wholly owned subsidiaries (collectively, the
"Company"). The Company's principal subsidiaries, all of which are
wholly owned, are Cactus Petes, Inc. ("CPI"), Ameristar Casino
Vicksburg, Inc. ("ACVI"), Ameristar Casino Council Bluffs, Inc.
("ACCBI") and Ameristar Casino Las Vegas, Inc. ("ACLVI"). ACI also
owns A.C. Food Services, Inc., a purchasing subsidiary, and AC
Hotel Corp, a wholly owned subsidiary of ACVI that owns and
operates the Ameristar Hotel in Vicksburg, Mississippi. All
significant intercompany transactions have been eliminated.
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 hotel and other land-based facilities in
Vicksburg, Mississippi. ACCBI owns and operates Ameristar Council
Bluffs, a riverboat casino and related hotel and other land-based
facilities in Council Bluffs, Iowa. ACLVI owns and operates The
Reserve Hotel Casino, an African safari and big game reserve themed
facility in the Henderson-Green Valley suburban area of Las Vegas,
Nevada that opened on February 10, 1998.
The accompanying condensed consolidated financial statements
have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, the condensed consolidated financial statements do not
include all of the disclosures required by generally accepted
accounting principles. However, the accompanying unaudited
condensed consolidated financial statements do contain all
adjustments that, in the opinion of management, are necessary to
present fairly the financial position and the results of operations
for the interim periods included therein. The interim results
reflected in the condensed consolidated financial statements are
not necessarily indicative of results to be expected for the full
fiscal year.
Certain reclassifications, having no effect on net income,
have been made to the prior periods' condensed consolidated
financial statements to conform to the current periods'
presentation.
The accompanying condensed consolidated financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-
K/A for the fiscal year ended December 31, 1998.
NOTE 2 - NOTES PAYABLE AND LONG-TERM DEBT
The Company maintains a $125 million revolving credit facility
(the "Revolving Credit Facility") pursuant to a Credit Agreement
among Ameristar and its principal subsidiaries (the "Borrowers"), a
syndicate of bank lenders and Wells Fargo Bank, N.A. as Agent Bank,
Arranger and Swingline Lender. The Borrowers do not include AC
Hotel Corp., a subsidiary of ACVI that owns the hotel at Ameristar
Vicksburg, and a purchasing subsidiary. The Revolving Credit
Facility binds the Borrowers to a number of affirmative and
negative covenants, including promises to maintain certain
financial ratios and tests within defined parameters. As of June
30, 1999, the Company was in compliance with all covenants.
<PAGE>
Ameristar issued $100 million in 10-1/2% Senior Subordinated
Notes due 2004 under an Indenture dated July 15, 1997 (the "Senior
Subordinated Notes"). All of Ameristar's current subsidiaries (the
"Guarantors") have jointly and severally, and fully and
unconditionally, guaranteed the Senior Subordinated Notes. Each of
the Guarantors is a wholly owned subsidiary of Ameristar, and the
Guarantors constitute all of Ameristar's direct and indirect
subsidiaries. Ameristar is a holding company with no operations
independent of those of the Guarantors and no assets other than its
investments in the Guarantors, and the aggregate assets,
liabilities, earnings and equity of the Guarantors are
substantially equivalent to the assets, liabilities, earnings and
equity of the Company on a consolidated basis. Separate financial
statements and certain other disclosures concerning the Guarantors
are not included in this report because, in the opinion of
management, they are not deemed material to investors. Other than
customary restrictions imposed by applicable corporate statutes,
there are no restrictions on the ability of the Guarantors to
transfer funds to Ameristar in the form of cash dividends, loans or
advances.
NOTE 3 - EARNINGS (LOSS) PER SHARE
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS"),
"Earnings Per Share", effective for fiscal years ending after
December 15, 1997. The Company adopted SFAS 128 for the year
ending December 31, 1997. SFAS 128 requires the computation and
presentation of basic and diluted earnings per share for all
periods for which an income statement is presented. For the three
and six months ended June 30, 1998 and 1999, the Company had no
material dilutive securities outstanding.
Options to purchase 575,000 and 1,286,000 share of common
stock were outstanding at June 30, 1998 and 1999, respectively, at
exercise prices of $5.06 - $16.00 for the 1998 period and $2.64 -
$3.47 for the 1999 period. For the 1998 periods, these options
were not included in a pro forma computation of earnings per share
assuming dilution because the options' exercise prices were greater
that the average market price of the common shares during the
respective periods presented. For the 1999 periods, the
outstanding shares did not cause any dilution of the earnings per
share.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company
Ameristar Casinos, Inc. ("Ameristar" or "ACI") develops, owns
and operates casinos and related hotel, food and beverage,
entertainment and other facilities, with five properties in
operation in Nevada, Mississippi and Iowa. Ameristar's principal
operations are conducted through four wholly owned subsidiaries:
Cactus Petes, Inc. ("CPI"); Ameristar Casino Vicksburg, Inc.
("ACVI"); Ameristar Casino Council Bluffs, Inc. ("ACCBI"); and
Ameristar Casino Las Vegas, Inc. ("ACLVI"). Ameristar and its
wholly owned subsidiaries are collectively referred to herein as
the "Company."
CPI owns and operates Cactus Petes Resort Casino 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, including a
150-room hotel that opened on June 5, 1998 (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 across the
Missouri River from Omaha, Nebraska. ACLVI owns and operates The
Reserve Hotel Casino ("The Reserve"), an African safari and big
game reserve themed facility in the Henderson-Green Valley suburban
area of Las Vegas, Nevada. The Reserve opened February 10, 1998.
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.
The following table highlights the results of operations of
Ameristar's operating subsidiaries for its principal properties:
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Three months Six months
ended June 30 ended June 30
-------------- --------------
1998 1999 1998 1999
-------------- --------------
Consolidated cash flow information:
Cash flow provided by
operating activities $5,712 $13,399 $5,246 $18,492
Cash flow used in
investing activities (7,245) (6,241) (29,555) (11,220)
Cash flow provided by
(used in) financing
activities 709 (1,183) 33,567 (2,216)
Net revenues:
Jackpot Properties $14,282 $15,204 $26,695 $28,338
Ameristar Vicksburg 16,388 19,319 32,918 38,385
Ameristar Council Bluffs 24,030 28,268 48,143 53,640
The Reserve 12,036 13,408 20,391 25,844
Corporate and other - - - -
------- ------- ------- -------
Consolidated net revenues $66,736 $76,199 $128,147 $146,207
======= ======= ======== ========
Adjusted operating income (loss)(1):
Jackpot Properties $2,977 $3,518 $4,573 $5,940
Ameristar Vicksburg 2,713 3,952 6,193 7,598
Ameristar Council Bluffs 4,218 5,460 7,961 10,101
The Reserve (4,816) (2,137) (7,259) (4,012)
Corporate and other (2,391) (3,385) (4,695) (5,951)
-------- -------- ------- --------
Consolidated operating income $2,701 $7,408 $6,773 $13,676
======== ======== ======= ========
Adjusted operating income (loss) margins (1):
Jackpot Properties 20.8% 23.1% 17.1% 21.0%
Ameristar Vicksburg 16.6% 20.5% 18.8% 19.8%
Ameristar Council Bluffs 17.6% 19.3% 16.5% 18.8%
The Reserve (40.0%) (15.9%) (35.6%) (15.5%)
Corporate and other - % - % - % - %
------- ------- ------- -------
Consolidated operating
income margin 4.0% 9.7% 5.3% 9.4%
======= ======= ======= =======
EBITDA (2)
Jackpot Properties $3,790 $4,321 $6,197 $7,498
Ameristar Vicksburg 4,325 5,252 9,364 10,682
Ameristar Council Bluffs 5,978 7,297 11,443 13,750
The Reserve (3,057) (268) (4,605) (300)
Corporate and other (2,309) (3,301) (4,530) (5,781)
------- -------- ------- --------
Consolidated EBITDA $8,727 $13,301 $17,869 $25,849
======= ======== ======== ========
EBITDA Margins (2):
Jackpot Properties 26.5% 28.4% 23.2% 26.5%
Ameristar Vicksburg 26.4% 27.2% 28.4% 27.8%
Ameristar Council Bluffs 24.9% 25.8% 23.8% 25.6%
The Reserve (25.4%) (2.0%) (22.6%) (1.2%)
Corporate and other - % - % - % - %
------- -------- ------- -------
Consolidated EBITDA margin 13.1% 17.5% 13.9% 17.7%
======= ======== ======= =======
</TABLE>
(see following page for footnotes)
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
(1) Adjusted operating income (loss) for the 1998 periods is
calculated before the write off of $10.6 million in preopening
costs related to the opening of The Reserve on February 10, 1998.
(2) EBITDA consists of income from operations plus depreciation,
amortization and preopening costs. EBITDA Margin is EBITDA as a
percentage of net revenues. EBITDA information is presented solely
as a supplemental disclosure because management believes that it is
a widely used measure of operating performance in the gaming
industry and for companies with a significant amount of
depreciation and amortization. EBITDA should not be construed as
an alternative to income from operations (as determined in
accordance with generally accepted accounting principles) as an
indicator of the Company's operating performance, or as an
alternative to cash flow from operating activities (as determined
in accordance with generally accepted accounting principles) as a
measure of liquidity. The Company has significant uses of cash
flows, including capital expenditures and debt principal
repayments, that are not reflected in EBITDA. It should also be
noted that not all gaming companies that report EBITDA information
may calculate EBITDA in the same manner as the Company.
Summary of Operating Results
Ameristar had record growth in revenues for the three and six
months ended June 30, 1999 and record income from operations for
the three months ended June 30, 1999. Consolidated net revenues
for the three months ended June 30, 1999, increased to $76.2
million compared to $66.7 million for the same quarter in 1998.
Net revenues for the six months ended June 30, 1999, were $146.2
million compared to $128.1 million in 1998. The majority of these
increases were related to improved casino revenue resulting from
new slot product at certain of the properties and the additional 41
days of operation for The Reserve in 1999 compared to 1998 for the
six-month period.
Income from operations for the quarter ended June 30, 1999,
was $7.4 million compared to $2.7 million for the same quarter in
1998. Total operating expenses as a percentage of net revenues
decreased to 90.3 percent for the second quarter of 1999 compared
to 96.0 percent for the quarter ended June 30, 1998. Income from
operations for the six months ended June 30, 1999, was $13.7
million compared to $6.8 million before preopening costs and the
related tax benefit for the same period in 1998. Loss from
operations for the six months ended June 30, 1998, after preopening
costs of $10.6 million was $3.8 million.
Net income for the quarter ended June 30, 1999, was $0.8
million compared to a net loss of $2.5 million for the same period
in 1998. For the six months ended June 30, 1999, net income was
$0.7 million compared to a net loss of $2.0 million for the first
six months of 1998 before preopening costs and the related tax
benefit and $9.1 million after preopening costs.
Earnings per share for the quarter ended June 30, 1999 were
$0.04 compared to a loss per share of $0.12 for the same quarter in
1998. Earnings per share for the first six months of 1999 were
$0.03 compared to a loss per share of $0.10 before preopening costs
and $0.45 after preopening costs for the first six months of 1998.
Revenues and Operating Income by Property
Net revenues for Ameristar Council Bluffs were $28.3 million
for the quarter ended June 30, 1999, compared to $24.0 million for
the same quarter in 1998, an increase of $4.3 million or 17.9
percent. For the six months ended June 30, 1999, net revenues were
$53.6 million compared to $48.1 million for the
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
same period in 1998, an 11.4 percent increase. Operating income
increased by $1.2 million or 29.5 percent for the three months and
$2.1 million or 26.9 percent for the six months ended June 30, 1999
compared to the same periods in 1998. Increased slot revenue, as a
result of new slot product placed in service during the fourth
quarter of 1998 and the first quarter of 1999 and continued growth
in the market, are primarily responsible for these increases.
However, operating costs also increased, particularly in marketing
and direct mail packages.
The Jackpot Properties increased net revenues to $15.2 million
and $28.3 million, respectively, for the three and six months ended
June 30, 1999 compared to $14.3 million and $26.7 million for the
same periods in 1998. Operating income increased to $3.5 million
and $5.9 million, respectively, for the second quarter and six-
month period ended June 30, 1999, compared to $3.0 million and $4.6
million for the same periods in 1998. Most of the revenue increase
is attributable to increased casino revenues due to a higher hold
percentage on table games and enhanced slot product. In
conjunction with the increased revenue, continued cost-control
measures have improved the operating efficiency of the Jackpot
Properties.
Ameristar Vicksburg continues to be the gaming revenue market
leader in Warren County, Mississippi with net revenues of $19.3
million for the second quarter of 1999 and $38.4 million for the
first six months of 1999, compared to $16.4 million and $32.9
million, respectively, for the same periods in 1998. Operating
income for the three and six months ended June 30, 1999 was $4.0
million and $7.6 million, respectively, compared to $2.7 million
and $6.2 million in the same periods in 1998. The increase in net
revenues was a result of a higher table games hold percentage,
higher slot revenues due to the addition of 144 new, innovative
slot machines to the casino floor and the June 1998 opening of the
150-room Ameristar Hotel Vicksburg. Operating costs were up in
Vicksburg due to increased legal costs and increased marketing
expenses. The hotel operations contributed $1.3 million in
revenues and $0.4 million in operating income for the first six
months of 1999.
The Reserve had net revenues of $13.4 million for the three-
month period ended June 30, 1999, compared to $12.0 million for the
same period in the prior year. For the six months ended June 30,
1999, net revenues were $25.8 million compared to $20.4 million for
the 140 days that the property operated during the first six months
of 1998. The operating loss for the quarter ended June 30, 1999
was a loss of $2.1 million compared to a loss of $4.8 million for
the same quarter in 1998. On a year-to-date basis, the operating
loss before preopening costs and the related tax benefit was $4.0
million compared to a loss of $7.3 million for the same period last
year. Along with improving revenues, material reductions in labor
and food costs have contributed to the property's improved
operating performance.
Consolidated Revenues and Expenses
On a consolidated basis for the quarter ended June 30, 1999
compared to the quarter ended June 30, 1998, casino revenues
increased $9.0 million or 16.7 percent, food and beverage revenues
increased $0.3 million or 2.2 percent, and rooms revenues increased
$0.9 million or 23.2 percent. On a consolidated basis for the six
months ended June 30, 1999 compared to the six months ended
June 30, 1998, casino revenues increased $15.7 million or 14.9
percent, food and beverage revenues increased $1.1 million or 5.1
percent, and rooms revenues increased $2.3 million or 35.8 percent.
These increases are due to the improved casino results discussed
above, increased prices and additional covers in the food
departments and the operations at Ameristar Hotel in Vicksburg for
a full six months in 1999 compared to only 25 days of operation in
1998.
Casino expenses decreased $1.6 million or 5.3 percent, food
and beverage expenses increased $3.0 million or 60.0 percent, and
rooms expenses increased $0.6 million or 63.0 percent for the
quarter ended
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
June 30, 1999 compared to the 1998 second quarter. For the six
month period ended June 30, 1999 compared to 1998, casino expenses
increased $0.8 million or 1.5 percent, food and beverage expenses
increased $3.2 million or 25.8 percent, and rooms expenses
increased $1.2 million or 57.0 percent. The increase in food and
beverage expenses resulted from higher food costs and increased
covers. The increase in room expenses relates to the Vicksburg
hotel that operated for the last 25 days of the 1998 periods.
Selling, general and administrative expenses (including
utilities and maintenance and business development) increased $3.3
million or 17.4 percent for the quarter ended June 30, 1999
compared to the same quarter of the prior year. For the six-month
period ended June 30, 1999 selling, general and administrative
expenses increased $5.0 million or 13.6 percent compared to the
same period in 1998.
Depreciation expenses for the first six months of 1999
increased primarily due to the inclusion of The Reserve facilities
and the hotel at Vicksburg in the Company's depreciable asset base
for a full six months. However, depreciation expense was down for
the second quarter as compared to 1998 since many of the five-year
assets in Vicksburg are now fully depreciated.
Interest expense was $6.2 million and $12.2 million,
respectively, for the three and six months ended June 30, 1999,
compared to $5.8 million and $10.1 million for the same periods in
1998. The increased interest expense relates primarily to
increased debt incurred to finance construction of The Reserve and
the cessation of capitalized interest for that project.
The Company's effective federal income tax rate for the six
months ended June 30, 1999, was 40.7 percent, versus the federal
statutory rate of 34 percent. The difference between the effective
rate and the statutory rate is due to certain expenses deducted in
the current period for financial reporting purposes which are not
deductible for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operations was $18.5 million for the six
months ended June 30, 1999 compared to $5.2 million for the six
months ended June 30, 1998. The majority of this increase was the
result of improved operations at all of the properties and at The
Reserve, in particular, offset by slightly higher corporate
overhead.
The Company had unrestricted cash of approximately $23.3
million as of June 30, 1999, an increase in cash of $5.1 million
from December 31, 1998. This increase in cash at June 30, 1999, is
a result of improved operations in the current period compared to
the same period in 1998, offset by capital expenditures and
repayments of notes payable, long-term debt and capital leases.
Capital expenditures of $10.9 million for the six months primarily
related to expansion projects at Vicksburg, Council Bluffs and The
Reserve ($3.8 million), additional land purchased at The Reserve
($1.4 million), the purchase of new slot machines at each of the
properties ($2.8 million), and other maintenance capital
expenditures.
The Company maintains a $125 million revolving credit facility
(the "Revolving Credit Facility") pursuant to a Credit Agreement
among Ameristar and its principal subsidiaries (the "Borrowers"), a
syndicate of bank lenders and Wells Fargo Bank, N.A. ("WFB") as
Agent Bank, Arranger and Swingline Lender. The Borrowers do not
include AC Hotel Corp., a subsidiary of ACVI that owns the hotel at
Ameristar Vicksburg, and a purchasing subsidiary. At June 30,
1999, the outstanding principal balance of the Revolving Credit
Facility was $90.0 million.
Under the terms of the Revolving Credit Facility, concurrent
with each loan draw, the Borrowers may select the interest rate
based on either the London Interbank Offering Rate ("LIBOR") or
WFB's
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
prime interest rate. The applicable margins for both LIBOR
draws and prime interest rate draws adjust semiannually based on
the ratio of the Company's consolidated total debt to consolidated
cash flows, as measured by an EBITDA formula. As of June 30, 1999,
the Borrowers have taken LIBOR draws totaling $90.0 million with an
average interest rate of approximately 9.1 percent per annum.
The Company has entered into an interest rate collar agreement
with WFB to manage interest expense, which is subject to
fluctuation due to the variable-rate nature of the debt under the
Company's Revolving Credit Facility. Under the agreement, which
covers $50.0 million of the borrowings on the Revolving Credit
Facility, the Company has a LIBOR floor rate of 5.39 percent and a
LIBOR ceiling rate of 6.75 percent, plus the applicable margin.
For the six months ended June 30, 1999, the Company paid
approximately $106,000 in additional interest as a result of this
agreement. The agreement terminates on June 30, 2003 to coincide
with the maturity of the Revolving Credit Facility.
Under the Revolving Credit Facility, borrowings under the
Revolving Credit Facility may not exceed 2.75 times the Borrowers'
rolling four quarter EBITDA (as defined) and the Borrowers' total
funded debt may not exceed the Borrowers' rolling four-quarter
EBITDA (as defined), multiplied by a factor that varies over time
and which is currently 5.25. As of June 30, 1999, borrowings under
the Revolving Credit Facility and the total funded debt of the
Borrowers were 2.0 times and 4.6 times the Borrowers' rolling four-
quarter EBITDA (as defined), respectively. The Revolving Credit
Facility binds the Borrowers to a number of additional affirmative
and negative covenants, including promises to maintain certain
financial ratios and tests within defined parameters. The covenants
require a Minimum Tangible Net Worth (as defined) of $50.0 million
at June 30, 1999. As of June 30, 1999, the Company was in
compliance with all covenants. Based on the rolling four quarter
EBITDA (as defined) at June 30, 1999, the amount available for
additional borrowing on the Revolving Credit Facility is
approximately $34.1 million.
Ameristar issued $100 million in 10-1/2% Senior Subordinated
Notes due 2004 (the "Senior Subordinated Notes") under an Indenture
dated July 15, 1997 (the "Indenture"). In addition to Ameristar
and the trustee, all of Ameristar's subsidiaries (the "Guarantors")
are parties to the Indenture for the purpose of guaranteeing (the
"Guarantees") payments on the Senior Subordinated Notes.
The Senior Subordinated Notes will mature on August 1, 2004.
Interest is payable semiannually on February 1 and August 1,
commencing February 1, 1998, at the per annum rate of 10.5%. The
Senior Subordinated Notes and the Guarantees are not secured and
are subordinate to all existing and future Senior Indebtedness (as
defined), which includes the Revolving Credit Facility.
The Indenture includes covenants that restrict the ability of
Ameristar and the Restricted Subsidiaries (as defined and which
includes all Guarantors) from incurring future Indebtedness (as
defined); provided, however, that Ameristar or any Guarantor may
incur Indebtedness if the incurrence thereof would not result in
the Consolidated Coverage Ratio (as defined) being greater than 2.0
to 1.0 on a rolling four-quarter basis. The Indenture also permits
Ameristar or a Restricted Subsidiary to incur Indebtedness without
regard to the Consolidated Coverage Ratio test in certain
circumstances, including borrowings of up to $140 million under the
Revolving Credit Facility, as amended or replaced from time to
time, up to $15.0 million in recourse furniture, fixtures and
equipment financings, up to $7.5 million in borrowings for the
construction of the hotel at Ameristar Vicksburg and up to
$5.0 million of other Indebtedness.
The Indenture also includes certain covenants that, among
other things, limit the ability of Ameristar and its Restricted
Subsidiaries to pay dividends or other distributions (excluding
dividends and distributions from a Restricted Subsidiary to
Ameristar or a Guarantor), make investments, repurchase
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
subordinated obligations or capital stock, create certain liens
(except those securing Senior Indebtedness), enter into certain
transactions with affiliates, sell assets, issue or sell subsidiary
stock, create or permit restrictions on distributions from
subsidiaries or enter into certain mergers and consolidations. The
Company was in compliance with the covenants under the Indenture at
June 30, 1999.
At June 30, 1999, The Company had other indebtedness in an
aggregate principal amount of $50.5 million.
No assurance can be given that the Company will be able to
satisfy, when necessary, the financial covenants under the
Revolving Credit Facility, the Senior Subordinated Notes or other
debt instruments for purposes of incurring additional debt,
including additional draws under the Revolving Credit Facility. In
addition, a failure to satisfy the financial covenants under the
Revolving Credit Facility could either require the Company to
reduce the outstanding balance of the Revolving Credit Facility,
which requirements could adversely affect or exceed the Company's
liquidity, or result in an event of default under one or more debt
instruments. Adverse changes in the Company's operations or
operating cash flow may affect the ability of the Company to
satisfy these financial covenants.
Additional information concerning the Revolving Credit
Facility, the Senior Subordinated Notes and the Company's other
indebtedness is set forth under "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" in Ameristar's Report on 10-K/A
for the fiscal year ended December 31, 1998.
Consolidated capital expenditures during the first six months
of 1999 were approximately $10.9 million. Management is proceeding
with several capital expenditure projects at Ameristar Council
Bluffs and Ameristar Vicksburg and has completed remodeling certain
dining and meeting room areas at The Reserve. The projects in
Council Bluffs include building a third level onto the riverboat
casino, which will add 375 gaming positions, and erecting a 1,000-
space parking garage. The Council Bluffs projects have an
estimated budget of $24 million, a portion of which will be paid in
2000. In Vicksburg, projects include casino and restaurant
remodeling that are expected to begin in the fourth quarter of
1999.
The covenants under the Revolving Credit Facility currently
allow the Company to make maximum capital expenditures during 1999
of approximately $13.2 million. The lenders under the Revolving
Credit Facility have advised the Company that they will waive the
maximum capital expenditure limitation under the Revolving Credit
Facility specifically for the above-described projects at Ameristar
Council Bluffs and Ameristar Vicksburg, but the formal waiver has
not been received at the date of this filing. Management currently
estimates that total capital expenditures during 1999 will be
approximately $33.0 million, including approximately $20.0 million
on the specified projects and approximately $13.0 million on other
projects. However, the amount of capital expenditures may vary
based on budget modifications, construction schedule changes or
other factors.
The above-described capital expenditure requirements are
expected to be funded out of draws under the Revolving Credit
Facility, cash on hand, operating cash flow and purchase money and
lease financing related to the acquisition of furniture, fixtures
and equipment (including gaming equipment).
Because the amount of borrowings permitted to be drawn at any
time under the Revolving Credit Facility is determined in part by
the Company's rolling four-quarter EBITDA (as defined), the
Company's anticipated borrowings under the Revolving Credit
Facility to fund a portion of any capital expenditure project will
be dependent upon the level of the Company's aggregate operating
cash flow. The Company experienced an increase of $7.7 million in
cash flow from operations and $4.6 million in EBITDA during the
quarter ended June 30, 1999 over the same quarter in 1998. The
increases resulted largely from operating improvements at The
Reserve as well as improvements at all other properties.
Management anticipates that the operating improvements will
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
continue during the remainder of the year. However, no assurances
can be given with respect to the amount of operating cash flow or
EBITDA of the Company for any future period or the timing, cost or
scope of any project undertaken by the Company. At the present
time, the Company does not anticipate undertaking capital expenditure
projects during 1999 that could not be funded out of amounts
anticipated to be available through anticipated internally
generated cash flow and the Company's borrowing capacity under the
Revolving Credit Facility.
Ameristar has not declared any dividends on its Common Stock
in the past, 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 and the Senior Subordinated Notes
obligate the Company to comply with certain financial covenants
that may restrict or prohibit the payment of dividends.
YEAR 2000 READINESS DISCLOSURE
Background
In the past, many computer software programs were written
using two digits rather than four to define the applicable year.
As a result, date-sensitive computer software may recognize a date
using "00" as the year 1900 rather than the year 2000. This is
generally referred to as the "Year 2000 issue." If this situation
occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt
operations.
Risk Factors
The Company is in many ways involved in a low-technology
business. Nevertheless, the Company does use computers extensively
to assist its employees in providing good service to its guests and
to assist management in monitoring the Company's operations. The
Company's hotel front desks, for example, are highly computerized
so as to expedite check-in and check-out of guests. Similarly, the
Company uses computers in the back-of-the-house to facilitate
purchasing and maintaining inventory records. In the casino,
computers are used to monitor gaming activity and maintain customer
records, such as credit availability and points earned by members
of the Company's players clubs.
Computers on occasion fail, irrespective of the Year 2000
issue. For this reason, where appropriate, the Company maintains
paper and magnetic back-ups and the Company's employees are trained
in the use of manual procedures. When the front desk computer
fails, for example, the Company's employees continue to check
guests in and out using manual methods.
This is not to imply that there is no risk to the Company from
the Year 2000 issue. The risks could be substantial. Most of the
Company's guest rooms, for example, are easily accessed only by
elevator, and most elevators incorporate some computer technology.
Likewise, the Company's heating, ventilation, life safety and air
conditioning systems are highly computerized and, of course,
critical to the Company's operations. The Company is also exposed
to the risk that one or more of its vendors or suppliers could
experience Year 2000 problems that may impact their ability to
provide goods and services. Although this is not considered as
significant a risk with respect to the suppliers of goods due to
the availability of alternative suppliers, the disruption of
certain services, in particular utilities and financial services,
could, depending upon the extent of the disruption, have a material
adverse impact on the Company's operations.
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Strategy
The Company has evaluated its front- and back-of-the-house
computer operations. The majority of the casino and hotel systems
are already Year 2000 compliant according to the vendors. Those
that are not will be upgraded with Year 2000 compliant systems
prior to November 1, 1999. The back-of-the-house accounting
systems have been evaluated and the payroll system and all
financial software programs will be replaced prior to November 1,
1999. Where important to the Company's business, inquiries are
also being made of third parties with whom the Company does
significant business, such as vendors and suppliers, as to their
Year 2000 readiness.
The Company used Year 2000 compliance as one of its criteria
in choosing the computer systems for The Reserve. Some of these
same systems have been or will be installed at the Company's other
properties.
The Company has not developed a comprehensive contingency
plan, although as previously mentioned a number of its critical
hotel and casino systems are currently backed up by manual
procedures that have been utilized during times of system
malfunctions. The Company will continue to assess the need for a
comprehensive contingency plan as implementation of its corrective
action plan continues.
Costs
It is difficult to calculate the cost to the Company of
ensuring that its systems are Year 2000 compliant, in part because
there are many different solutions to various Year 2000 situations.
In the case of the Company's elevators, for example, the Company
has requested that the third parties with whom it contracts for its
elevator maintenance inspect each elevator system, as part of its
normal maintenance, for any Year 2000 issues.
The Company has estimated that total hardware and software for
the back-of-the-house accounting system could cost approximately
$750,000 on a companywide basis. The overall costs of addressing
the Year 2000 issue have not been and are not expected to be
material to the Company's financial condition or results of
operations.
FACTORS AFFECTING FORWARD-LOOKING INFORMATION
This Report contains certain forward-looking statements,
including the plans and objectives of management for the business,
operations and economic performance of the Company. These
forward-looking statements generally can be identified by the
context of the statement or the use of words such as the Company or
its management "believes," "anticipates," "intends," "expects,"
"plans," or words of similar meaning. Similarly, statements that
describe the Company's future operating performance, financial
results, plans, objectives, strategies or goals are forward-looking
statements. Although management believes that the assumptions
underlying the forward-looking statements are reasonable, these
assumptions and the forward-looking statements are subject to
various factors, risks and uncertainties, many of which are beyond
the control of the Company, including but not limited to
uncertainties concerning operating cash flow in future periods, the
Company's borrowing capacity under the Revolving Credit Facility,
the future operating performance of the Company's properties,
particularly the recently opened The Reserve, the ability of the
Company to undertake and complete capital expenditure projects and
the ability of the Company and its vendors and service providers to
successfully and timely resolve Year 2000 issues. Accordingly,
actual results could differ materially from those contemplated by
the forward-looking statements. In addition to the other
cautionary statements relating to certain forward-looking
statements throughout this Report, attention is directed to
"Item 1.- Business - Cautionary Information Regarding
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Forward-Looking Statements" in the Company's Annual Report on Form
10-K/A for the fiscal year ended December 31, 1998 for discussion
of some of the factors, risks and uncertainties that could affect
the outcome of future results contemplated by forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Except for the Revolving Credit Facility, under which
$90.0 million was outstanding at June 30, 1999, and certain other
long-term debt outstanding at June 30, 1999 in the aggregate amount
of $6.4 million (collectively, the "Variable Rate Debt"), all of
the Company's other long-term debt bears interest at fixed rates.
The Variable Rate Debt bears interest equal to the WFB prime
interest rate or LIBOR in effect from time to time, in each case
plus an applicable margin determined by the ratio of the Company's
consolidated total debt to consolidated cash flows, as measured by
an EBITDA formula. At June 30, 1999, the average interest rate
applicable to the Variable Rate Debt was 9.1 percent. An increase
of one percentage point in the average interest rate applicable to
the Variable Rate Debt outstanding at June 30, 1999, would increase
the Company's annual interest costs by approximately $964,500. The
Company has entered into an interest rate collar agreement with WFB
to manage the effects of fluctuations in the interest rate
applicable to up to $50.0 million in LIBOR draws under the
Revolving Credit Facility.
Although the Company manages its short-term cash assets with a
view to maximizing return with minimal risk, the Company does not
invest in market rate sensitive instruments for trading or other
purposes, including so-called derivative securities, and the
Company is not exposed to foreign currency exchange risks or
commodity price risks in its portfolio transactions.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PCL Construction Services, Inc. et al. v. Ameristar Casino Las
Vegas, Inc. This suit was filed in the District Court of Clark
County, Nevada on October 14, 1998 as case number A394783. The
complaint was served on ACLVI on February 4, 1999. An amended
complaint was filed on February 19, 1999 and served on ACLVI on
March 1, 1999. The plaintiffs are PCL Construction Services, Inc.,
Tri-Star Theme Builders, Inc. and a joint venture comprised of
these two firms. The joint venture was the contractor for certain
of the interior work at The Reserve pursuant to a construction
contract dated November 14, 1997. The contract, as amended through
change orders, provided for a guaranteed maximum price not to
exceed $25,482,532, inclusive of fees, to the contractor. The
plaintiffs alleged that ACLVI is obligated to pay them $5,621,098,
plus interest, in excess of the guaranteed maximum price for
additional labor costs they invoiced to ACLVI. This case has been
settled by mutual agreement of the parties, pursuant to which the
guaranteed maximum price has been increased by $667,468, which has
been paid.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The Company's Annual Meeting of Stockholders was
held on June 11, 1999.
b. and c. The following table shows the tabulation of votes
for all matters put to vote at the Company's Annual
Meeting of Stockholders.
Abstentions/
Against/ Broker
Matters Put to Vote For Withheld Non-votes
Election of Class A Director
Larry A. Hodges 20,055,297 37,733
Proposal to approve
1999 Stock Incentive Plan 18,845,784 158,145 1,089,101
The terms of the following directors have continued after the
meeting:
Class B Directors (term expiring in 2000): Thomas M. Steinbauer
and Paul I. Corddry
Class C Director (term expiring in 2001): Craig H. Neilsen
and Warren McCain
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits filed as part of this report
10.1 Amendment to Ground Lease, dated as of May 21, 1999,
between Ameristar Casino Council Bluffs, Inc. ("ACCBI")
and Council Bluffs Hotel Associates, L.C. ("CBHA").
10.2 Ground Lease Agreement, dated as of May 28, 1999, between
ACCBI and River Road Hotel Associates, L.C. ("RRHA").
<PAGE>
10.3 Letter Agreement, dated as of May 28, 1999, between ACCBI
and RRHA.
10.4 Memorandum of Understanding, dated as of June 8, 1999,
among ACCBI, CBHA and RRHA.
10.5 Employment Agreement, dated as of June 14, 1999, between
Ameristar Casinos, Inc. and Jeffrey A. Bouhgrum*
10.6 1999 Stock Incentive Plan of Ameristar Casinos, Inc.*
27 Financial Data Schedule
99.1 Supplemental Agreement of Ameristar Casinos, Inc.
* Denotes a management contract or compensatory plan or
arrangement
b. Reports on Form 8-K
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERISTAR CASINOS, INC.
Registrant
Date: August 13, 1999 /s/Thomas Steinbauer
Thomas Steinbauer
Senior Vice President of Finance
and Treasurer
(Principal Financial Officer)
AMENDMENT TO GROUND LEASE
This Amendment to Ground Lease is made and entered into as
of the 21 day of May, 1999 by and between Ameristar Casino
Council Bluffs, Inc., an Iowa corporation, with an address of 300
West Broadway, Suite 145, P.O. Box 1768, Council Bluffs, Iowa
51501 ("Ameristar") and Council Bluffs Hotel Associates, L.C., an
Iowa limited liability company, with an address of 2 Quail Creek
Circle, North Liberty, Iowa 52317 ("Kinseth").
RECITALS
A. Ameristar, as ground lessor, and Kinseth Hotel
Corporation, as the original ground lessee, entered into an
Amended and Restated Ground Lease Agreement dated September 7,
1995 (the "Ground Lease"). Kinseth Hotel Corporation assigned
its interest in the Ground Lease to Kinseth.
B. The Ground Lease covers approximately .623 acres of
real property in Pottawattamie County, Iowa (the "Leased Land,"
as defined in the Ground Lease), on which Kinseth constructed and
continues to operate a 140 room Holiday Inn franchise hotel (the
"Hotel").
C. The parties amended the Ground Lease as to certain
operational issues pursuant to a letter agreement dated February
14, 1996 (the "Letter Agreement"). Hereafter, the term "Ground
Lease" incorporates the terms of such Letter Agreement. All
other capitalized terms not otherwise defined in this Amendment
shall have the meaning defined in the Ground Lease.
D. The Ground Lease allows Kinseth to expand the Hotel by
up to an additional thirty-five (35) rooms, up to a total of 175
rooms, upon the satisfaction of certain terms and conditions as
described therein.
E. Kinseth desires to expand the Hotel by up to fifty (50)
rooms, for a total of up to 190 rooms, and has requested
Ameristar's consent for such expansion. The expansion will
require an increase in the footprint of the Leased Land under the
Ground Lease.
F. Ameristar is willing to consent to such expansion,
including an increase in the Leased Land, subject to the terms
and conditions as stated below.
NOW THEREFORE, for and in consideration of the mutual
covenants, conditions and promises contained herein, Ameristar
and Kinseth agree to amend the Ground Lease as follows:
1. Consent to Expansion. Section 2.1 of the Ground Lease
is hereby amended to allow an expansion of the Hotel by up to
fifty (50) additional hotel rooms, for a total of up to one
hundred ninety (190) hotel rooms, subject to the following
conditions:
<PAGE>
a) Approval of Plans. Prior to any construction,
Kinseth shall deliver to Ameristar the plans and specifications
for the exterior and interior proposed expansion by Kinseth. In
addition to hotel rooms, such plans and specifications call for
approximately 3000 square feet in additional meeting space,
public area, and support facilities such as kitchen space. The
plans and specifications must also incorporate any landscaping
which may be necessary to blend the expanded Hotel into the
remainder of the Casino Property. The parties acknowledge that a
color rendering of the expansion has been produced by Ameristar
and that the appearance of the exterior shall be substantially
similar to that shown in the rendering. The parties further
acknowledge and agree that the quality and appearance of the
interior of the expansion shall be at least equivalent to and
complimentary of the existing hotel. Any objection by Ameristar
to the proposed plans and specifications for the expansion shall
be made in writing within ten (10) days following the delivery of
said plans and specifications by Kinseth to Ameristar. In the
event of any such objection, each party agrees to cooperate with
the other party and use its best efforts to immediately resolve
the dispute.
b) Description of Additional Land. The description of
any additional land beyond the current Leased Land ("Additional
Land") must be described and shown in a survey conducted by a
licensed surveyor in the State of Iowa. The term "Leased Land"
under the Ground Lease shall be amended to include the Additional
Land effective upon the commencement of construction of the Hotel
expansion. A description of the current proposed description for
the perimeter of the Leased Land to include the Additional Land
is described and shown on Exhibit "A" hereto, which shall
constitute the revised Exhibit A to the Ground Lease. The parties
agree, to the extent necessary, to execute additional addenda or
amendments to the Ground Lease and the Memorandum of Ground Lease
to specifically identify the Additional Land.
c) Gaming Commission and Other Approvals. Ameristar
must obtain any necessary approvals for this Amendment from the
Iowa State Gaming Commission, or its designee, and any other
consents and approvals to the Amendment and the Hotel expansion
from any governmental authorities having jurisdiction over
Ameristar, the Ground Lease or the Casino Property, which
approvals Ameristar will pursue with reasonable diligence. In
addition, Ameristar must satisfactorily complete a background
investigation of Kinseth pursuant to the Ameristar Casinos, Inc.
Gaming Compliance Program as a condition to the effectiveness of
this Amendment, which Ameristar will pursue with reasonable
diligence. Kinseth agrees to cooperate fully with such
investigation to the extent reasonably requested by Ameristar.
d) Kinseth Financing. Kinseth must obtain a
commitment for construction financing by a reputable lender
acceptable to Ameristar, which commitment may be subject only to
conditions and contingencies that are customarily required by
construction lenders. Ameristar shall have reasonable discretion
to determine whether such conditions are acceptable. Subject to
the terms of Section 4.2 of the Ground Lease, Kinseth shall have
the right to refinance its interest in the Ground Lease and the
improvements on the Leased Land, and Ameristar will reasonably
cooperate with Kinseth in its efforts to obtain such financing.
<PAGE>
e) Construction Contracts. Kinseth shall have entered
into all necessary contracts for the construction of the
expansion, and provided Ameristar with a true and correct copy of
such contracts.
f) Ameristar Lender Approval. The expansion, and this
Amendment, must be approved in writing by Ameristar's mortgage
lender, and any amendments to agreements previously obtained
under Section 4.1 of the Ground Lease must be obtained and
Ameristar will pursue such approvals and amendments with
reasonable diligence.
g) Time for Satisfaction of Conditions. Kinseth
agrees to use reasonable diligence to satisfy all conditions on
its part stated herein. If the conditions for performance
relating to the expansion are not satisfied within 60 days from
the date of this Amendment, either party shall have the right to
terminate this Amendment upon written notice to the other party.
h) Costs of Construction. All construction costs
relating to the expansion from the curb back shall be Kinseth's
sole responsibility. Costs for new curb and gutter, and costs
relating to changes from the curb forward (e.g., redirection of
drainage, removal of existing improvements including asphalt in
parking areas) necessitated by the expansion shall be Ameristar's
sole responsibility. In addition, Ameristar shall continue to
maintain the access road between the hotel and the river.
However, any necessary alterations or improvements to such access
road shall be the sole responsibility of Kinseth. All other
terms and conditions of the Ground Lease relating to construction
standards, insurance, indemnification and compliance with laws
during construction of the expansion shall remain in full force
and effect.
2. Rent.
a) Section 1.4 (a) of the Ground Lease is hereby
amended such that upon the earlier of Substantial Completion of
the expansion, or two hundred forty (240) days from the date of
the commencement of construction, the annual base rental for the
Leased Land shall increase from $60,000 to $70,000, payable at
$5833.33 per month, with any initial partial month to be
prorated. However, the threshold amount of Gross Sales for
calculating percentage rents in Section 1.4(b) of the Ground
Lease shall remain at $2,000,000, and the percentage figure shall
remain at five percent (5%).
b) The second sentence of Section 1.4(b) of the
Ground Lease is hereby amended to read:
The term "Gross Sales" means the total
price charged for all services and goods
rendered or sold at, in on or from the Leased
Land by Kinseth, whether for cash or on a
charge, credit, time basis or otherwise,
without reserve or deduction for inability or
failure to collect, including without
limitation room charges and rentals, food and
beverage revenues (reduced by the cost of food
and beverage items), but specifically excluding
merchandise sales, telephone and vending
machine revenues, video rental revenues and
other miscellaneous sales.
<PAGE>
3. Franchise Rating. The first sentence of Section 2.3(a)
of the Ground Lease is amended to read as follows: "So long as
Ameristar has gaming operations on the Casino Property, the
Building must be operated as a franchise of Holiday Inn, or such
other franchisor that is acceptable to Ameristar subject to the
terms of Section 3.8(m) below".
4. Use of Marks. Section 3.7 of the Ground Lease is
hereby restated in its entirety as follows:
a) License to Use Ameristar Service Marks
i. Ameristar hereby grants to Kinseth a
nonexclusive worldwide right and license to use the names and
service marks listed on Exhibit B hereto and such other names and
marks as Ameristar may add to Exhibit B from time to time upon
written notice to Kinseth (the "Ameristar Marks") in connection
with the promotion and advertising of the hotel located on the
Leased Land during the term of this Lease, subject to the
limitations described in this paragraph. All other use of the
Ameristar Marks by Kinseth is prohibited.
ii. Each and every use of the Ameristar Marks
shall include the service mark notices, colors, designs, and
proportionate sizes, shapes, and features all precisely as
indicated by Ameristar, from time to time. Kinseth shall submit
to Ameristar for approval all proposed uses of the Ameristar
Marks prior to Kinseth's publication, distribution or use
thereof.
iii. The rights and licenses granted under this
Lease permitting the use of the Ameristar Marks shall not be
assignable or transferable by Kinseth in any manner whatsoever,
nor shall Kinseth have the right to grant any sublicenses, except
by prior written consent of Ameristar, which consent Ameristar
may grant or withhold in its sole discretion. Any unauthorized
assignment or transfer by Kinseth shall be voidable by Ameristar.
iv. Ameristar specifically reserves the right in
its sole discretion to use and without limitation to license
others to use and to license the Ameristar Marks. Kinseth
acknowledges the ownership rights of Ameristar Casinos, Inc. and
the licensed rights of Ameristar in the Ameristar Marks, and
further acknowledges that Kinseth will not challenge such
ownership or licensed rights in the Ameristar Marks.
b) License to Use Kinseth and Franchisor Service
Marks
i. Kinseth hereby grants to Ameristar a
nonexclusive worldwide right and license to use the names and
service marks, including to the extent permissible, its
franchisor's Marks and designations, listed on Exhibit C hereto
and such other names and marks as Kinseth may add to Exhibit C
from time to time upon written notice to Ameristar (the "Kinseth
Marks") in connection with the promotion and advertising of the
Casino during the term of this Lease, subject to the limitations
described herein. All other use of the Kinseth Marks by
Ameristar is prohibited.
ii. Each and every use of the Kinseth Marks shall
include the service mark notices, colors, designs, and
proportionate sizes, shapes and features all precisely as
indicated by Kinseth, from time to time.
<PAGE>
iii. The rights and licenses granted under this
Lease permitting the use of the Kinseth Marks shall not be
assignable or transferable by Ameristar in any manner whatsoever,
nor shall Ameristar have the right to grant any sublicenses,
except by prior written consent of Kinseth. Any unauthorized
assignment or transfer by Ameristar shall be voidable by Kinseth.
iv. Kinseth specifically reserves the right in
its sole discretion to use and without limitation to license
others to use and to license the Kinseth Marks. Ameristar
acknowledges the ownership rights of Kinseth and its franchisor
in the Kinseth Marks and further acknowledges that Ameristar will
not challenge such rights in the Kinseth Marks.
5. Change of Franchisor. Section 3.8(m) is hereby added
to the Ground Lease as follows:
(m) Change of Franchisor. Notwithstanding references
in this Ground Lease to Holiday Inn as franchisor of Kinseth,
Kinseth may change its franchisor, but only upon prior written
consent of Ameristar, which consent shall not be unreasonably
withheld provided that quality standards are not diminished and
the terms of this Ground Lease can be met by Kinseth under the
terms of any new franchise agreement entered into in connection
with such change.
6. Taxes. Article VI of the Ground Lease states that
Kinseth is solely responsible for all taxes and assessments
levied on the Leased Land and the improvements thereon. However,
because the Leased Land is owned by Ameristar and taxed as part
of a larger tract, the Pottawattamie County Assessor's Office
does not tax the Leased Land separately. Thus, Ameristar and
Kinseth agree to negotiate as soon as practicable as to a
mutually acceptable methodology for allocating responsibility for
such taxes, and to reduce such agreement to a letter to be signed
by both parties.
7. Signage. Ameristar grants to Kinseth the right to
erect a sign on Ameristar's property at a location to be approved
by Ameristar in its sole and absolute discretion. The costs of
acquiring, erecting and maintaining the sign shall be borne by
Kinseth. Ameristar agrees to grant to Kinseth all necessary
easements allowing the existence of the sign and access to
Kinseth to maintain the sign. The proposed design of the sign
shall be submitted by Kinseth to Ameristar and it shall not be
inconsistent or interfere with the Ameristar sign or obstruct or
interfere with "view corridors" of any Ameristar facility. In
the event of any dispute with respect to the proposed design or
location of the sign, such party agrees to cooperate with the
other party and use its best efforts to immediately resolve the
dispute.
8. Group Rate Referrals. If Ameristar refers a block of
rooms which are part of a larger group to Kinseth as a result of
an Ameristar generated group sale or promotions (including
promotions designed to increase occupancy by offering specific
hotel packages to potential guests), Kinseth shall match the
group rate offered by Ameristar for such group unless Kinseth's
hotel is or is reasonably expected to be "fully occupied" (i.e.,
more than 95% full). If Ameristar is fully occupied and refers
an entire group to Kinseth, Kinseth will match the group rate
offered by Ameristar for other groups booked in the Ameristar
hotel in the same time period, unless Kinseth's hotel is or is
reasonably expected to be fully occupied. Notwithstanding the
foregoing, Kinseth shall not be obligated to accept hotel guests
referred to Kinseth by Ameristar if the room rate is less than
50% of Kinseth's rack rate on a requested date for standard room
types (i.e., king or double room types).
<PAGE>
9. Option To Purchase. So long as Kinseth is proceeding
with the planning, development and construction of the expansion,
Ameristar agrees not to exercise the option to purchase contained
in Section 11.11 of the Ground Lease until the Substantial
Completion of the expansion. Section 11.11 of the Ground Lease
is hereby amended such that, upon the Substantial Completion of
the expansion the option period shall re-commence for a ten-year
period. The option price shall be the greater of (a) $12,000,000
or (b) the "mean" appraised value (representing 125% of the mean
of the two closest appraised values during the first year of the
re-commenced option period, and 115% of such mean during the
remainder of the option period and otherwise), determined
pursuant to the terms of the Ground Lease.
10. Confidentiality. In addition to the confidentiality
provisions in Section 6 of the Letter Agreement, Kinseth agrees
to reasonably cooperate with Ameristar so as to provide to
Ameristar, upon its request, names and addresses of Kinseth's
hotel guests so that Ameristar can market, by direct mail, its
gaming and dining operations. Kinseth acknowledges that such
information is critical to Ameristar so that proper attention can
be given to preferred customers of Ameristar's casino. Ameristar
recognizes that such information is proprietary and of great
value to Kinseth. Ameristar acknowledges and agrees that such
lists are to be kept separate form other information, and that
Ameristar is not authorized to use such information to market
hotel rooms to individuals on such list without Kinseth's prior
written approval.
11. Marketing. In addition to the provisions regarding
marketing outlined in Section 8 of the Letter Agreement, Kinseth
agrees that it shall have the right to provide marketing
materials for Ameristar's casino in its hotel rooms, but shall
not provide such materials relating to other casino properties.
Ameristar shall have the right to inspect Kinseth's facilities
and hotel rooms at reasonable times to verify that no marketing
materials for competing properties are being distributed.
12. Additional Hotel. It is contemplated that an
additional hotel may be constructed on Ameristar's property by
Kinseth or an entity controlled by Kinseth. In the event of such
construction, both parties agree to cooperate to the extent
necessary with such construction, provided that any new building
does not detrimentally interfere with their current operations,
including driveways, parking areas, ingress, egress and
compliance with local codes. The construction plans of such other
hotel will call for a covered, climate controlled breezeway
connecting the hotels and/or the casino (the "Link"). Kinseth
agrees to use its best efforts to seek its franchisor's approval
for the Link, if such approval is necessary. Ameristar, Kinseth
and the owner of the additional hotel shall share equally in
repairs, maintenance and periodic replacement (e.g., carpets) of
items in the corridor from the Link through the existing hotel.
The cost of constructing and maintaining the Link shall be borne
by the owner of the new hotel. Kinseth and Ameristar shall
cooperate with respect to policing conduct in the Link. Kinseth
agrees that any agreements as to the Link will be structured in
such a way as to continue in full force and effect upon any sale
of the existing hotel or the new hotel.
13. Assignment. Section 10.1 of the Ground Lease is hereby
amended to read as follows:
<PAGE>
Ameristar may assign its interests in this Lease upon
written notice to Kinseth and its Leasehold Lender. Except for
assignment to a Leasehold Lender as contemplated under Article IV
of this Lease, Kinseth may not assign this Lease or sublet its
interest in the Leased Land without the prior written consent of
Ameristar, which consent shall not be unreasonably withheld by
Ameristar provided that the proposed assignee is: (a) of equal
or greater financial capacity and net worth as Kinseth on the
date of such assignment, but in any event having a financial
capacity and net worth reasonable, under the circumstances at the
time of the assignment, to require for a lessee under this Lease;
(b) an experienced manager and/or operator of similar hotel
properties; (c) a franchisee of the same hotel chain as Kinseth
or of another franchisor approved pursuant to Sections 2.3(a) and
3.8(m) above; and (d) highly reputable as a hotel and business
operator. A change of the manager of Kinseth (currently Kinseth
Hotel Corporation), (to an entity other than one in which Bruce
Kinseth, Les Kinseth, Linda Skinner and Gary Kinseth or their
families maintain, directly or indirectly, voting and operating
control) or the failure of Bruce Kinseth, Les Kinseth, Linda
Skinner, and Gary Kinseth or their families to maintain, directly
or indirectly, voting and operating control of the manager of
Kinseth shall be considered an assignment for purposes of this
section. An assignment of 50% or more of the membership
interests in Kinseth in and of itself shall not be considered an
assignment for purposes of this section. In the event Ameristar
gives its consent for any assignment or subletting of this Lease,
the assignee or subtenant shall assume in writing all of
Kinseth's obligations and duties under this Lease and shall be
subject to all of the terms of this Lease, and Ameristar shall be
subject only to those obligations and shall enjoy such rights and
privileges as are set forth in this Lease. Such sublease or
assignment shall not relieve Kinseth from its liability under
this Lease without Ameristar's written consent, which shall be in
Ameristar's sole discretion. The provisions of this Section 10.1
are specifically subject to the provisions of Section 4.5 of this
Lease, and in the event of any conflict, the provisions of
Section 4.5 shall control.
14. Notices. Section 11.7 is amended such that the
addresses for notices are as follows:
If to Ameristar:
Ameristar Casino Council Bluffs, Inc.
Attention: General Manager
2200 River Road
Council Bluffs, Iowa 51501
Fax: (712) 328-8882
with a copy to:
Gordon R. Kanofsky, Esq.
Saunders, Barnet, Goldman, Simons & Mosk
1901 Avenue of the Stars, Suite 850
Los Angeles, CA 90067-6078
Fax: (310) 553-2435
<PAGE>
If to Kinseth:
Council Bluffs Hotel Associates, L.C.
Attention: Bruce Kinseth
2 Quail Creek Circle
North Liberty, Iowa 52317
Fax: (319) 626-8350
with a copy to:
Nicholas H. Roby, Esq.
Davis, Brown, Koehn, Shors & Roberts, P.C.
666 Walnut Street, Suite 2500
Des Moines, Iowa 50309
Fax: (515) 243-0654
15. Continuing Effect. Except as specifically amended
herein, the terms of the Ground Lease shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first written above.
Ameristar:
Ameristar Casino Council
Bluffs, Inc.,
an Iowa corporation
By: /s/ Thomas Steinbauer
Its Vice President
Kinseth:
Council Bluffs Hotel
Associates, L.C.,
an Iowa limited liability company
By: /s/ Leslie B. Kinseth
Its: Member
GROUND LEASE AGREEMENT
<PAGE>
GROUND LEASE AGREEMENT
TABLE OF CONTENTS
Page
RECITALS 1
ARTICLE I 1
DESCRIPTION, TERM, AND RENTAL 1
1.1. Leased Land; Parking and Access Easements 1
1.2. Conditions to Performance 2
(a) Approval of Plans 2
(b) Gaming Commission and Other Approvals 2
(c) Kinseth Financing 2
(d) Kinseth Construction Contracts 2
(e) Ameristar Lender Approval 3
(f) Time For Satisfaction of Conditions 3
1.3. Term 3
1.4. Rental 3
(a) Base Rental 3
(b) Percentage Rental 3
(c) Place of Rental Payments 5
ARTICLE II 5
USE OF LEASED LAND AND TITLE TO IMPROVEMENTS 5
2.1. Use of Leased Land 5
(a) Plans and Specifications; Commencement
of Construction 5
(b) Adjacent Hotel Pavilion 5
(c) Construction of Building 6
(d) Construction Standards 7
(e) Insurance During Construction 6
2.2. Compliance with Laws 6
2.3. Other Terms of Use 7
(a) Franchise and Rating 7
(b) Operations 7
(c) Restaurant 7
(d) Exclusive Right to Advertise 8
2.4. Title to Buildings 7
<PAGE>
ARTICLE III 8
MAINTENANCE, REPAIRS, AND ALTERATIONS 8
3.1. General Maintenance and Repair 8
3.2. Parking; Snow Removal; Landscaping 9
3.3. Utilities 9
3.4. Governmental Authorities 10
3.5. Last Year of Term 10
3.6. Limitation on Ameristar's Responsibilities 10
3.7. Use of Marks 10
(a) License to Use Ameristar Service Marks 10
(b) License to Use Kinseth and Franchisor
Service Marks 11
3.8 Operational Issues 12
(a) Reserving Rooms for Casino Functions 11
(b) Right of First Refusal 13
(c) Comping of Guests 12
(d) Integration of Kinseth's PMS System with
Ameristar's POS System 12
(e) Referrals 12
(f) Group Rate Referrals 13
(g) Confidentiality 14
(h) Employee Parking 13
(i) Marketing Programs 13
(j) Use of Employee Facilities by Kinseth
Employees 15
(k) Integration of Telephone System 14
(l) Food Service 14
(m) Change of Franchisor 14
ARTICLE IV 14
MORTGAGES AND LEASEHOLD LIENS 14
4.1. Encumbrance by Ameristar 14
4.2. Encumbrance by Kinseth 15
4.3. Certificates of Lease Status 17
4.4. Foreclosure of Leasehold Lien -- Option of
Ameristar to Cure 16
4.5. Leasehold Lender Protection Provisions 17
(a) Notice to Ameristar 17
(b) Definitions 19
(c) Consent of Leasehold Lender Required 18
(d) Default Notices 18
(e) Notice to Leasehold Lender 20
(f) Procedure on Default 19
(g) New Lease 22
(h) New Lease Priorities 23
(i) Leasehold Lender Need Not Cure Specified
Defaults 23
(j) Eminent Domain 25
(k) Casualty Loss 24
(l) No Merger 24
(m) Future Amendments 24
(n) Estoppel Certificate 26
(o) Notices 25
(p) Erroneous Payments 25
(q) Ameristar Pay-Off or Assumption 25
ARTICLE V 27
INSURANCE AND INDEMNIFICATION 27
5.1. Duty to Insure 26
5.2. Proceeds of Insurance 26
5.3. Public Liability Insurance 26
5.4. Policy Form; Content; Insurer 26
5.5. Indemnification 27
(a) Defense and Payment of Claims 27
(b) Mechanics' Liens 27
(c) Resisting Claims 29
ARTICLE VI 28
TAXES, ASSESSMENTS, LIENS, AND ENCUMBRANCES 28
ARTICLE VII 29
CONDEMNATION 29
7.1. Definitions 29
7.2. Parties' Rights and Obligations to be
Governed by Lease 29
7.3. Total Taking 29
7.4. Partial Taking 29
7.5. Restoration of Improvements 30
(a) Restoration of Improvements 30
(b) Abatement or Reduction of Rent 30
7.6. Award Distribution 30
<PAGE>
ARTICLE VIII 30
DEFAULT PROVISIONS; REMEDIES; ATTORNEYS' FEES 30
8.1. Default by Kinseth 30
(a) Rent or Other Payments 30
(b) Other Covenants or Conditions 31
(c) Abandonment 31
(d) Insolvency 31
(i) Appointment of Receiver 31
(ii) Voluntary Bankruptcy 31
(iii)Assignment for Creditors 31
(iv) Reorganization or Arrangement 31
(v) Involuntary Petition 31
8.2. Remedies 31
(a) Re-entry 32
(b) Suit for Sums Due 32
(c) Specific Performance 32
(d) Reletting 32
(e) Collection of Rents 32
(f) Termination 32
(g) Terminate Kinseth With Payoff or Assumption
of Leasehold Lien 33
8.3. Cumulative Remedies 34
8.4. Attorneys' Fees 34
ARTICLE IX 34
COVENANTS AND WARRANTIES 34
9.1. No Warranties by Ameristar 34
9.2. Right to Execute 34
9.3. Peaceful Enjoyment 34
ARTICLE X 35
ASSIGNMENT, SUBLETTING AND SALE 35
10.1. Assignment 35
<PAGE>
ARTICLE XI 35
MISCELLANEOUS PROVISIONS 35
11.1. Inspection by Ameristar 36
11.2. Negation of Partnership 36
11.3. Controlling Law 36
11.4. Surrender of Possession 36
11.5. Successors 36
11.6. Headings 36
11.7. Notices 36
11.8. Recording 37
11.9. Competing Hotel 37
11.10.Right of First Offer 37
11.11.Option to Purchase 37
11.13.Signage 38
EXHIBIT A -- Legal Description
EXHIBIT A-1 -- Site Plan
EXHIBIT B -- Ameristar Marks
EXHIBIT C -- Kinseth and Franchisor Marks
EXHIBIT D -- Memorandum of Lease
<PAGE>
GROUND LEASE AGREEMENT
THIS GROUND LEASE AGREEMENT is made and entered into as of
the 28th day of May, 1999, by and between Ameristar Casino
Council Bluffs, Inc., an Iowa corporation, with an address of
2200 River Road, Council Bluffs, Iowa 51501 ("Ameristar"), and
River Road Hotel Associates, L.C., an Iowa limited liability
company, with an address of 2 Quail Creek Circle, North Liberty,
Iowa 52241 ("Kinseth").
RECITALS
A. Ameristar owns certain real property located in Council
Bluffs, Iowa, on which it operates a hotel and a gaming
establishment (the "Casino Property").
B. Ameristar and Council Bluffs Hotel Associates, L.C., an Iowa
limited liability company that is an affiliate of Kinseth, have
previously entered into that certain Amended and Restated Ground
Lease Agreement dated as of September 7, 1995, as amended to date
(the "1995 Ground Lease") with respect to a portion of the Casino
Property, consisting of approximately 0.786 acres on which it
operates a Holiday Inn hotel (sometimes referred to as the
"adjacent hotel").
C. Ameristar wishes to lease to Kinseth another portion of the
Casino Property, which portion consists of approximately 0.426 of
an acre for the construction of another hotel of not less than 96
rooms, and desires to impose certain restrictions on the use of
such parcel of real property, and Kinseth wishes to lease said
portion of the Casino Property for such purpose, subject to
Ameristar's restrictions.
NOW, THEREFORE, for and in consideration of the mutual
covenants, conditions and promises contained herein, Ameristar
and Kinseth agree as follows:
ARTICLE I
DESCRIPTION, TERM, AND RENTAL
1.1 LEASED LAND; PARKING AND ACCESS EASEMENTS. On completion,
satisfaction or written waiver of all conditions precedent set
forth in this Lease, Ameristar hereby leases to Kinseth and
Kinseth hereby leases from Ameristar the real property more
particularly described in Exhibit "A," attached hereto and made a
part hereof, and as generally set forth and located on the Site
Plan attached as Exhibit "A-1" hereto and made a part hereof,
situated in Council Bluffs, Pottawattamie County, Iowa (the
"Leased Land") for the purpose of building and maintaining a
hotel on the Leased Land in accordance with Section 2.1 below
(the "Building"), excepting and reserving to Ameristar and to
Ameristar's successors, assigns, and invitees a perpetual,
nonexclusive easement for vehicular and pedestrian ingress and
egress and for parking of vehicles upon and across roads,
driveways, sidewalks, and parking areas on the Leased Land, as
the same may exist from time to time. Ameristar hereby grants to
Kinseth and to Kinseth's successors, permitted assigns, and
invitees for the term hereof, a nonexclusive easement for
vehicular and pedestrian ingress and egress to and from nearby
public streets and roadways upon and across roads, driveways, and
sidewalks upon Ameristar's adjacent and surrounding lands as the
same may exist from time to time, and for the parking of vehicles
upon nonreserved parking areas located from time
<PAGE>
to time upon such lands. Prior to Kinseth's construction of the
Building, Ameristar may make minor adjustments to the precise
location of the Leased Land and Building, provided that any such
adjustment shall not materially prejudice Kinseth. Ameristar
agrees to make available to Kinseth nonexclusive parking easement
rights on parking spaces on the Casino Property sufficient to
provide the Building with a parking ratio of not less than 1.1
space per hotel room. The nonexclusive easements reserved and
granted herein as set forth on the proposed Site Plan attached
hereto as Exhibit A-1 , shall be set forth in a recorded document
which shall be recorded simultaneously with the memorandum of
Lease referred to in Section 11.8 below, and may be moved or
relocated by Ameristar, provided that such easements shall not be
moved, modified or restricted in a manner which will materially
and unreasonably interfere with Kinseth's operation of a hotel in
the Building. Ameristar will cause any mortgagee of its interest
in the Leased Land to join in the granting of such easements in
favor of Kinseth, to enter into a nondisturbance agreement, or to
subordinate its lien to such easements, to the extent necessary
to assure that such easements would survive a foreclosure by any
mortgagee of Ameristar.
1.2 CONDITIONS TO PERFORMANCE. The following shall be
conditions precedent that must be completed or satisfied before
the obligations of the parties under this Lease shall be
effective:
(A) APPROVAL OF PLANS. This Lease is conditioned on the review
and approval by Ameristar of the plans and specifications for the
construction of the Building by Kinseth, the exterior and
interior appearance of Kinseth's proposed Building, and Kinseth's
proposed contractor or construction manager. Any objection by
Ameristar to the proposed plans and specifications shall be made
in writing within ten (10) days following the delivery of said
plans and specifications by Kinseth to Ameristar. In the event
of any such objection, each party agrees to cooperate with the
other party and to use its best efforts to immediately resolve
the dispute.
(B) GAMING COMMISSION AND OTHER APPROVALS. Ameristar shall have
obtained all necessary approvals of this Lease from the Iowa
Racing and Gaming Commission, or its designee, and any other
consents and approvals to the performance of Ameristar's
obligations under the Lease which may be required from any
governmental authorities having jurisdiction over Ameristar, the
Lease, or the Casino Property which approvals Ameristar will
pursue with reasonable diligence. In addition, Ameristar must
satisfactorily complete a background investigation of Kinseth
pursuant to the Ameristar Casinos, Inc. Gaming Compliance Program
as a condition to the effectiveness of this Lease, which
Ameristar will pursue with reasonable diligence. Kinseth agrees
to cooperate fully with such investigation to the extent
reasonably requested by Ameristar.
(C) KINSETH FINANCING. As a condition to the effectiveness of
this Lease, Kinseth must obtain financing on or before September
1, 1999 for the construction of the Building, which financing
Kinseth agrees to pursue with reasonable diligence. Immediately
upon obtaining such commitment, Kinseth shall provide to
Ameristar a copy of a written commitment for such financing
issued by a reputable lender acceptable to Ameristar, which
commitment must be subject only to conditions and contingencies
that are customarily required by construction lenders in the
issuance of such commitments, with Ameristar having reasonable
discretion to determine whether such conditions or contingencies
are acceptable.
<PAGE>
(D) KINSETH CONSTRUCTION CONTRACTS. Kinseth shall have entered
into all necessary contracts for the construction of the
Building, and provided Ameristar with a true and correct copy of
such contracts, on or before September 1, 1999.
(E) AMERISTAR LENDER APPROVAL. The Lease shall have been
approved in writing by Ameristar's mortgage lender and any
agreements from such lender required by Section 4.1 shall have
been obtained.
(F) TIME FOR SATISFACTION OF CONDITIONS. If these conditions to
performance are not satisfied within ninety (90) days from the
date this Lease is executed or such other earlier or later date
as is provided herein for satisfaction of such condition, either
party shall have the right to terminate this Lease upon written
notice to the other party.
1.3 TERM. The term of this Lease shall be for a period of fifty
(50) years (the "Term"), commencing on the first to occur of July
1, 1999 or the date that Kinseth sends written notice that it is
prepared to commence construction on the Leased Land, or the date
Kinseth actually commences such construction (the "Commencement
Date") and terminating on the fiftieth (50th) anniversary date of
the Commencement Date, unless sooner terminated pursuant to the
provisions hereof.
1.4 RENTAL.
(A) BASE RENTAL. Kinseth agrees to pay an annual base rental to
Ameristar during the Term for the Leased Land and for the rights
and privileges granted Kinseth under this Lease, at the time and
place and in the manner specified herein, in the amount of
Seventy Five Thousand Dollars ($75,000) (the "Base Rental"),
payable Six Thousand Two Hundred Fifty Dollars ($6,250) per month
in advance, with the initial payment to be made on the Rental
Commencement Date. The "Rental Commencement Date" shall be the
earlier of the date on which the Building is substantially
completed or three hundred sixty-five (365) days after the
Commencement Date. The amount of the initial Base Rental payment
due on the Rental Commencement Date shall be pro-rated, if
necessary, for the number of days between The Rental Commencement
Date and the Commencement Date. Thereafter, Base Rental shall be
paid monthly in advance. "Substantial Completion" shall mean
that the Building is ready for occupancy and use as a hotel as
evidenced by a Certificate of Occupancy for the Building or other
like document issued by the appropriate governmental authority,
and any franchisor or licensor's requirements for opening of the
hotel have been met.
In the event that during the initial fifteen (15) years of
the Term, Ameristar ceases to operate a riverboat gaming
operation based from the Casino Property, then for such portion
of said fifteen (15) year period when gaming is not operated,
there shall be a moratorium, in Base Rentals otherwise payable;
provided, however, that during such moratorium if Ameristar
elects at its option to cease to maintain and repair its adjacent
Casino Property, Kinseth may, at its option, assume
responsibility for all maintenance and repairs of the entrances,
exits, parking areas and landscaping on the Casino Property to
the extent Kinseth deems maintenance and repairs desirable in
connection with the operation of Kinseth's Building.
<PAGE>
(B) PERCENTAGE RENTAL. In addition to the Base Rental, Kinseth
shall pay to Ameristar a percentage rent (the "Percentage Rent")
equal to six percent (6%) of the annual "Gross Sales" with
respect to the Leased Land that exceeds the amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000). The term "Gross
Sales" means the total price charged for all services and goods
rendered or sold at, in, on or from the Leased Land by Kinseth,
whether for cash or on a charge, credit, time basis or otherwise,
without reserve or deduction for inability or failure to collect,
including without limitation room charges and rentals, food and
beverage revenues (reduced by the cost of catered food and
beverage items), but specifically excluding merchandise sales,
telephone and vending machine revenues, video rental revenues,
and other miscellaneous sales. Gross Sales shall also include
all of Kinseth's receipts, revenues or rights to payment from
subtenants, licensees and concessionaires. There shall not be
included, or if included in the calculation of Gross Sales, there
shall be deducted, as the case may be, provided that specific
record is made at the time of each transaction: (i) the actual
net amount of refunds, credits or allowances actually made or
allowed by Kinseth in accordance with reasonable business
practices upon transactions included within Gross Sales (provided
that any credit, service or item given in return shall be
included in Gross Sales when used); and (ii) sales, room or
occupancy taxes which are separately added by Kinseth to room
rates or sales prices, paid directly by the customer, collected
by Kinseth, and actually paid over by Kinseth to the governmental
taxing authority, but not deducting from Gross Sales any other
tax of any nature.
The "Gross Sales" and the resulting "Percentage Rent" shall
be calculated and paid quarterly, and reconciled on an annual
basis as of the end of each fiscal year for Kinseth. Kinseth
shall provide within thirty (30) days after each calendar quarter
and fiscal year end a written calculation of the Gross Sales
during that quarter or fiscal year and the amount of Percentage
Rent due for that quarter or year. The Percentage Rent shall be
paid no later than fifteen (15) days after the expiration of that
thirty (30) day period. If the annual reconciliation indicates
that Kinseth has overpaid Percentage Rent, Ameristar shall
promptly refund the amount of such overpayment upon receipt of
the appropriate request, statement, and supporting documentation.
If Kinseth fails to deliver any statement of Gross Sales when due
and does not cure such failure within ten (10) days after the
written notice from Ameristar, in addition to all of Ameristar's
other rights and remedies, (i) Kinseth shall pay to Ameristar, as
additional rent, an amount equal to One Hundred Dollars ($100.00)
for each day such statement is overdue after the aforesaid ten
(10) day period; and (ii) upon not less than two (2) days' prior
notice to Kinseth, Ameristar shall have the right to cause an
audit of all books, records and bank accounts of Kinseth
pertaining to the business conducted on the Leased Land and to
prepare the statements that Kinseth has failed to deliver. The
statements prepared by Ameristar shall be conclusive on Kinseth,
and Kinseth shall promptly pay all expenses incurred in the
preparation of such statements and all sums, if any, as may be
shown by such audit to be due as Percentage Rent.
The business of Kinseth shall be operated so that a
duplicate dated sales slip, dated invoice, register receipt or
similar evidence of payment, serially numbered, shall be issued
with each transaction resulting in Gross Sales or exclusions
therefrom. Kinseth shall keep a general ledger, sales receipts,
sales records and other supporting documentation for at least
three (3) years after the end of the period to which they
pertain. All such documentation shall disclose in detail all
<PAGE>
information required to permit Ameristar to verify Kinseth's
Gross Sales and conform to, and be in accordance with, generally
accepted accounting principles consistently applied.
Ameristar shall have the right at any time during normal
business hours after not less than three (3) days' prior written
notice to Kinseth, to cause an examination or complete audit to
be made of the Kinseth's documentation. If any audit or
examination shall disclose that any statement of Gross Sales
provided to Ameristar understates Gross Sales for the reporting
period (i) Kinseth shall pay to Ameristar upon demand the
resultant deficiency in Percentage Rent, together with interest
at a variable rate equal to two percent (2%) per annum above the
"prime rate" announced by Wells Fargo Bank of Nevada, and (ii) if
the shortfall in Percentage Rent is greater than five percent
(5%) of the total Percentage Rents shown by that audit to be owed
for that period, Kinseth shall pay the costs of the audit and
examination, including travel expenses.
In calculating the Percentage Rent that is due for the
period from the Rental Commencement Date and the last day of that
fiscal year, the $1,250,000 threshold for Percentage Rent
calculation shall be pro-rated for the number of days between
those two dates.
As set forth in Section 4.5 below, Ameristar agrees that
payment of Percentage Rent by Kinseth shall be subordinated to
payment of debt service payments owed by Kinseth to an
Institutional Lender holding a first position Leasehold Lien, to
the extent Kinseth's net operating revenues are not sufficient to
pay both. In such event Percentage Rent shall be deferred as to
Kinseth, and shall be subsequently payable by Kinseth, but not by
any Leasehold Lender and its successors and assigns, in the event
Kinseth subsequently generates sufficient operating revenues over
and above debt service payments to repay deferred Percentage Rent
owed to Ameristar on an cumulative basis. The foregoing
provision shall not be construed to require the refunding by
Ameristar of any rent paid by Kinseth to Ameristar.
(C) PLACE OF RENTAL PAYMENTS. All payments of rental required
to be paid to Ameristar under the terms of this Lease shall be
made in lawful money of the United States, free from all claims,
demands, deductions, abatements, set-offs, prior notices, or
counterclaims of any kind or character, and shall be payable at
Ameristar's above address or at such other place or places as may
from time to time be designated by Ameristar by written notice
given to Kinseth.
ARTICLE II
USE OF LEASED LAND AND TITLE TO IMPROVEMENTS
2.1 USE OF LEASED LAND. So long as Ameristar shall be engaged
in gaming operations on the Casino Property, Kinseth shall use
the Leased Land solely for the purpose of constructing,
maintaining, and operating a hotel with not less than 96 rooms
(the "Building" or the "Hotel"). The Building shall be
constructed and maintained at Kinseth's sole risk and expense in
accordance with the following terms:
(A) PLANS AND SPECIFICATIONS; COMMENCEMENT OF CONSTRUCTION.
Kinseth shall submit construction plans and specifications for
the Building (including signage) to Ameristar for Ameristar's
review and approval on or before July 1, 1999, and on an ongoing
basis throughout the term of this Lease with respect to any
changes, modifications, or new construction, and Kinseth
<PAGE>
shall commence construction of the Building on the earlier of
September 1, 1999 or thirty (30) days after Ameristar has
approved such plans and specifications.
(B) ADJACENT HOTEL PAVILION. Kinseth agrees to connect the
Building to the adjacent hotel and/or pavilion and casino with a
covered, climate controlled breezeway. So long as Ameristar is
engaged in a gaming operation in connection with the Casino
Property, and subject to the nonwaivable requirements of
Kinseth's hotel franchisor or licensor, the exterior and interior
finishes and decor of the Building and of common areas within the
Building shall be in harmony with the finishes and decor of the
adjacent hotel and/or casino. The foregoing provision shall be
deemed to apply to the initial finishes and decor of the casino,
and subsequent to the initial opening the hotel shall not be
required to change finishes and decor merely because the casino
changes its theme, finishes or decor. Kinseth and Ameristar
shall cooperate with respect to security in the breezeway.
Kinseth shall otherwise bear the responsibility and security for
all of the Leased Land and the Building.
(C) CONSTRUCTION OF BUILDING . Once construction is begun,
Kinseth shall, with reasonable diligence, prosecute to completion
all construction of improvements, additions, or alterations of
the Building required to be constructed by Kinseth, and in any
event shall have substantially completed construction of the
Building three hundred sixty-five (365) days after the
Commencement Date. The completion deadline shall be extended for
a time period commensurate with the existence of any "force
majeure," which prevents or hinders ongoing construction
activities such as flood, storm, strikes, or similar occurrences
outside Kinseth's control; provided, however, that in no event
shall such completion deadline be extended longer than six (6)
months. Ameristar shall have sole control of all design and
construction decisions relating to the levee, roadways,
driveways, entrances and exits on the Casino Property. Ameristar
agrees at its expense (to the extent not otherwise provided by
the relevant public or private utility companies) to stub basic
utilities including water, sewer, electricity and telephone to
within one hundred (100) feet of the Leased Land and to provide
preliminary site grading on the Leased Land sufficient to bring
the site to "rough grade." Ameristar shall be responsible for
costs associated with ingress, egress, striping of parking areas,
moving storm sewers, water retention, etc. As a general
presumption, Ameristar will be responsible for costs related to
items outside the "building envelope," which shall be
approximately the "front of the curb." Kinseth will indemnify
Ameristar, and hold Ameristar harmless from, any and all damage
to Ameristar's property, including without limitation the parking
lot, and from any costs, claims and liabilities asserted against
Ameristar, as a result of Kinseth's construction activities.
(D) CONSTRUCTION STANDARDS. All work shall be performed in a
good and workmanlike manner with due regard for and without undue
interference with Ameristar's use of the adjacent real property,
shall comply with plans and specifications approved by Ameristar,
and shall comply with all governmental permits, laws, ordinances,
and regulations. All costs of construction shall be borne by
Kinseth. Construction, staging and materials storage shall be
restricted to certain areas as designated by Ameristar.
(E) INSURANCE DURING CONSTRUCTION. Kinseth shall maintain, at
Kinseth's sole expense, a policy of builder's risk insurance in
effect with respect to the construction of the Building
<PAGE>
until construction has been completed. Policy limits must be
approved by Ameristar, and shall be commensurate with the value
of the Building and the nature of Kinseth's construction
activities. Ameristar shall be named as an additional insured
under the policy.
2.2 COMPLIANCE WITH LAWS. Kinseth shall not bring or cause or
permit to be brought or kept on the Leased Land anything which
will in any way conflict with any law, ordinance, rule, or
regulation, or commit or suffer to be committed any waste upon
the Leased Land, or use or allow the Leased Land or the Building
to be used for any unlawful purpose. Kinseth agrees that
throughout the terms of this Lease Kinseth shall fully comply
with all rules, regulations and laws of any government authority
having jurisdiction over the Leased Land or the Building or
Kinseth, including without limitation, those relating to
environmental quality, hazardous waste or hazardous substances.
2.3 OTHER TERMS OF USE.
(A) FRANCHISE AND RATING. So long as Ameristar has gaming
operations on the Casino Property, the Building must be operated
as a franchise of Hampton Inn, or such other franchisor that is
acceptable to Ameristar subject to the terms of Section 3.8 (m)
below. Kinseth must obtain and maintain a "3 Diamond" or
equivalent designation from the American Automobile Association
or such other designation and rating agency acceptable to
Ameristar with respect to the operation of the Building as a
limited service hotel. All expenses associated with the
operation of the Leased Land shall be borne by Kinseth.
(B) OPERATIONS. So long as Ameristar has gaming operations on
the Casino Property, the Building shall be operated continuously
during the Term as a first class hotel, meeting the highest of
standards set by the franchisor and the industry.
(C) RESTAURANT. So long as Ameristar shall be operating a
restaurant on the Casino Property, the Building cannot include a
restaurant or coffee shop without the prior written consent of
Ameristar which can be refused in Ameristar's sole discretion;
however, Kinseth shall be permitted to provide a "continental
breakfast" for its patrons between the hours of 6:30 a.m. and
10:00 a.m., may obtain its own liquor license, may bring in
catered food and drink in conjunction with its rental of rooms
for conventions and business meetings, and Kinseth may sell
nonperishable snack products in its gift shop or through vending
machines, and may operate a pantry-type warming station for
service of such items.
(D) EXCLUSIVE RIGHT TO ADVERTISE. During the Term and so long
as Ameristar or its successors operates a casino on the Casino
Property, Kinseth agrees that it shall not advertise or permit
another casino to place literature or other material promoting
such other casino on the Leased Land or in the Building.
2.4 TITLE TO BUILDINGS. Title to the Building and appurtenances
thereto on the Leased Land and all other improvements and
fixtures constructed or placed on the Leased Land by Kinseth in
conjunction with the construction, use or occupancy of the
Building shall be and remain in Kinseth or such tenants during
the Term unless otherwise approved or requested by Ameristar.
Kinseth shall have the right to make alterations, changes, and
repairs as provided herein. Title to the
<PAGE>
Building and all such other buildings, permanent improvements,
and fixtures on the Leased Land shall automatically revert to
Ameristar upon the expiration of the Term or other termination of
this Lease. Kinseth covenants and agrees that upon expiration of
the Term or other termination of this Lease it will yield up and
deliver the Leased Land with any such buildings, permanent
improvements, and fixtures upon the Leased Land to Ameristar or
its successor in interest at such time free and clear of all
liens and encumbrances of any kind, subject in the event such
termination results from a default by Kinseth, to the rights of a
Leasehold Lender to obtain a New Lease under the terms of Section
4.5(g) below.
ARTICLE III
MAINTENANCE, REPAIRS, AND ALTERATIONS
3.1 GENERAL MAINTENANCE AND REPAIR. Throughout the Term,
Kinseth shall, at Kinseth's sole cost and expense, maintain the
Building and any other improvements constructed on the Leased
Land in first class condition and repair and in accordance with
all applicable laws, rules, ordinances, orders, and regulations
of (i) federal, state, county, municipal, and other governmental
agencies and bodies having or claiming jurisdiction and all their
respective departments, bureaus, and officials, (ii) the
insurance underwriting board or insurance inspection bureau
having or claiming jurisdiction, (iii) all insurance companies
insuring all or any part of the Building or other improvements on
the Leased Land, (iv) the standards of comparable hotels in
comparable markets and locations, as may be in effect from time
to time, and (v) Kinseth's franchisor and the "3 Diamond" or
equivalent designation from the American Automobile Association
for limited service hotels or other such designation and rating
agency acceptable to Ameristar. Kinseth shall manage and operate
the Building in a first class and professional manner.
If, at any time, Ameristar concludes, in its sole
discretion, that the condition of the Building or the guest
services provided by Kinseth do not meet the criteria listed in
the preceding paragraph, Ameristar will give notice to Kinseth
and shall state with as much specificity as possible the reasons
for Ameristar's dissatisfaction. Ameristar's conclusion may be
based, among other things, on the results of inspections
conducted by Kinseth's franchisor, or the failure of Kinseth's
franchisor to conduct such inspections. Thereafter, Kinseth
shall have not less than ninety (90) days to cure any defects or
faults alleged by Ameristar.
If Ameristar is still dissatisfied with the inspection
report from Kinseth's franchisor, or the failure of such
franchisor to inspect, Ameristar may then request that the
Building and the hotel be inspected by a mutually agreeable
independent inspector, it being agreed that Richey International
is acceptable, who will conduct an inspection using its standards
for the "3 Diamond" hotels report, as certified by the American
Automobile Association or a "3 star" hotels' report as certified
by Mobil. The independent inspector shall then give a rating
based on its inspection, exclusive of administrative matters and
areas completely outside of Kinseth's control, as defined above,
and shall determine whether the Building and the hotel are in
compliance with 90% of the evaluation criteria for receiving a "3
Diamond" or "3 Star" rating. Kinseth shall be deemed to have
failed the inspection if the rating is less than 90% compliant,
provided that Kinseth will not be penalized for areas that are
Ameristar's responsibility, such as maintaining all public areas
and roadways, landscaping (except within the Leased Land) and
parking areas. If Richey International is no longer
<PAGE>
in the business of inspecting and rating hotels, the parties
shall mutually select another company to provide such services.
If the parties cannot agree on such other party, but if they can
agree on a person who is in the hotel business, then that third
person shall select the inspection company. If the parties
cannot agree on either an inspection company or a third person to
select an inspection company, each party shall promptly choose an
independent arbitrator, which two arbitrators shall in turn name
a third arbitrator, and a majority of said arbitrators shall
select an inspection company.
Once Ameristar has requested that Richey International or
another agreed upon independent inspector make inspections
hereunder, such inspector shall make all future inspections for
purposes of this Section 3.1, unless Ameristar gives notice to
Kinseth that it will once again accept the rating and inspection
of Kinseth's franchisor. Ameristar shall pay all costs of Richey
International or the inspector chosen in lieu of Richey
International. Kinseth shall pay all costs of the inspection
conducted by its franchisor.
If Kinseth fails to maintain a 90% compliance rating,
whether such inspection is conducted by Kinseth's franchisor or
another independent inspector, for three (3) consecutive
inspections, but which time period shall in no event be fewer
than twelve (12) months, Kinseth shall have three (3) months to
cure any defect or fault. Thereafter a special inspection shall
be ordered. If either such inspection or the next subsequent
inspection shows that Kinseth has again failed to maintain a 90%
compliance rating, Kinseth shall be in default under this Lease
and Ameristar may terminate the Lease, subject to the provisions
contained herein pertaining to Kinseth's Leasehold Lender.
Ameristar covenants and agrees that so long as it is engaged
in the conduct of a gaming operation in connection with the
Casino Property, Ameristar will keep its public areas up to the
standard described by the American Automobile Association as
necessary to obtain a "3 Diamond" award.
Except as provided in Section 3.5, in the event of damage or
destruction of all or any part of the Building or other
improvements, Kinseth shall promptly and diligently repair,
restore, and replace improvements as required to comply with the
preceding paragraph, or remedy all damage to or destruction of
all or any part of the improvements. After completion of the
repair, restoration, or replacement, the improvements on the
Leased Land shall be at least equal in fair market value,
quality, and use to the condition of the improvements before the
damage or destruction occurred, except as expressly provided to
the contrary in this Lease.
Nothing in this Section defining the general duty of
maintenance and repair shall be construed as limiting any
specific right given elsewhere in this Lease to alter, modify,
demolish, remove, or replace any improvement, or as limiting
provisions relating to condemnation, or to damage or destruction
during the final year or years of the Term. No deprivation,
impairment, or limitation on use resulting from any event or work
contemplated by this Section shall entitle Kinseth to any offset,
abatement, or reduction in rent or to any termination or
extension of the Term.
3.2 PARKING; SNOW REMOVAL; LANDSCAPING. Ameristar shall
maintain the parking areas, and provide lighting for the parking
areas on the Casino Property during the Term. Ameristar shall
also keep parking areas and sidewalks and roadways giving access
to the Building free and clear of ice and snow. Kinseth shall be
responsible for installing and maintaining all landscaping on
<PAGE>
the Leased Land and shall provide for garbage removal. All
landscaping must be approved by Ameristar.
3.3 UTILITIES. The cost of all utility services required for or
provided to the Building or the Leased Land shall be borne by
Kinseth, except that the cost of lighting parking areas on
adjacent property owned by Ameristar shall be borne by Ameristar.
3.4 GOVERNMENTAL AUTHORITIES. During the Term, Kinseth shall
promptly comply with all applicable laws, regulations,
ordinances, requirements, and orders of governmental authorities
relating to the Leased Land and any improvements thereon,
including but not limited to the making, at its sole expense, of
any installation, alteration, modification, change, or repair,
whether structural or otherwise; provided, however, that nothing
in this Section shall be construed to eliminate Kinseth's right
to benefit from any exemption or "grandfather" provision, or its
equivalent, or to challenge the validity, applicability, or
interpretation of any such law, regulation, ordinance,
requirement, or order and to defer compliance until the challenge
is completed.
3.5 LAST YEAR OF TERM. Anything herein to the contrary
notwithstanding, Kinseth shall not have the right during the last
365 days of the Term to alter, remove or demolish, in whole or in
part, any buildings, structures, or other improvements which
exist upon the Leased Land 365 days prior to the end of the Term,
except with the prior written consent of Ameristar.
3.6 LIMITATION ON AMERISTAR'S RESPONSIBILITIES. This Lease
shall not be construed to require Ameristar, under any
circumstances, to furnish any services or facilities or to make
any improvements, repairs, or alterations of any kind in or on
the Leased Land except as expressly provided herein. Ameristar's
election to perform any obligation of Kinseth on Kinseth's
failure or refusal to do so shall not constitute a waiver of any
right or remedy for Kinseth's default, and Kinseth shall promptly
reimburse, defend, and indemnify Ameristar against all liability,
loss, cost, and expense arising from it.
3.7 USE OF MARKS.
(A) LICENSE TO USE AMERISTAR SERVICE MARKS.
i. Ameristar hereby grants to Kinseth a nonexclusive worldwide
right and license to use the names and service marks listed on
Exhibit B hereto and such other names and marks as Ameristar may
add to Exhibit B from time to time upon written notice to Kinseth
(the "Ameristar Marks") in connection with the promotion and
advertising of the hotel located on the Leased Land during the
term of this Lease, subject to the limitations described in this
paragraph. All other use of the Ameristar Marks by Kinseth is
prohibited.
ii. Each and every use of the Ameristar Marks shall include the
service mark notices, colors, designs, and proportionate sizes,
shapes, and features all precisely as indicated by Ameristar,
from time to time. Kinseth shall submit to Ameristar for
approval all proposed uses of the Ameristar Marks prior to
Kinseth's publication, distribution or use thereof.
<PAGE>
iii. The rights and licenses granted under this Lease permitting
the use of the Ameristar Marks shall not be assignable or
transferable by Kinseth in any manner whatsoever, nor shall
Kinseth have the right to grant any sublicenses, except by prior
written consent of Ameristar, which consent Ameristar may grant
or withhold in its sole discretion. Any unauthorized assignment
or transfer by Kinseth shall be voidable by Ameristar.
iv. Ameristar specifically reserves the right in its sole
discretion to use and without limitation to license others to use
and to license the Ameristar Marks. Kinseth acknowledges the
ownership rights of Ameristar Casinos, Inc. and the licensed
rights of Ameristar in the Ameristar Marks, and further
acknowledges that Kinseth will not challenge such ownership or
licensed rights in the Ameristar Marks.
(B) LICENSE TO USE KINSETH AND FRANCHISOR SERVICE MARKS.
i. Kinseth hereby grants to Ameristar a nonexclusive worldwide
right and license to use the names and service marks, including
to the extent permissible, its franchisor's Marks and
designations, listed on Exhibit C hereto and such other names and
marks as Kinseth may add to Exhibit C from time to time upon
written notice to Ameristar (the "Kinseth Marks") in connection
with the promotion and advertising of the Casino during the term
of this Lease, subject to the limitations described herein. All
other use of the Kinseth Marks by Ameristar is prohibited.
ii. Each and every use of the Kinseth Marks shall include the
service mark notices, colors, designs, and proportionate sizes,
shapes and features all precisely as indicated by Kinseth, from
time to time.
iii. The rights and licenses granted under this Lease permitting
the use of the Kinseth Marks shall not be assignable or
transferable by Ameristar in any manner whatsoever, nor shall
Ameristar have the right to grant any sublicenses, except by
prior written consent of Kinseth. Any unauthorized assignment or
transfer by Ameristar shall be voidable by Kinseth.
iv. Kinseth specifically reserves the right in its sole
discretion to use and without limitation to license others to use
and to license the Kinseth Marks. Ameristar acknowledges the
ownership rights of Kinseth and its franchisor in the Kinseth
Marks and further acknowledges that Ameristar will not challenge
such rights in the Kinseth Marks.
3.8 OPERATIONAL ISSUES.
(A) RESERVING ROOMS FOR CASINO FUNCTIONS. Ameristar may from
time to time, and at its option, reserve up to 60 rooms in the
Hotel in advance of the date of actual use, but in no event may
Ameristar reserve more rooms for any date than that number not
previously reserved by other guests. The rate charged by Kinseth
for such rooms shall be the lowest available rate for the date(s)
of the reservation, including package plan rates. If the rate
for the dates reserved have not yet been set, Kinseth shall
advise Ameristar of the rate as soon as it is available.
Ameristar shall advise Kinseth of the identity of the person
who shall occupy a room. Except as otherwise provided herein,
Kinseth shall collect its charges and fees directly from that
<PAGE>
guest. If the person is a "no-show", and if Kinseth in fact
denies a person a room that night because there are no vacancies,
Ameristar will pay Kinseth the cost of that room.
Ameristar shall be responsible for the payment of the charge
for rooms reserved by it, provided, however, that Ameristar shall
not be charged for any rooms under the following circumstances:
i. A guest designated by Ameristar actually uses
the room, in which event Kinseth shall collect all fees and
charges from the guest unless Ameristar has advised Kinseth that
Ameristar intends to pay for such room;
ii. A guest designated by Ameristar does not
show, but Kinseth did not deny any person a room for that night
because of unavailability;
iii. Ameristar releases 40 or more reserved rooms
at least 21 days before the scheduled date of use;
iv. Ameristar releases 21 to 39 reserved rooms at
least 14 days before the scheduled date of use;
v. Ameristar releases up to 20 rooms at least 2
days before the scheduled date of use; and
vi. With respect to rooms released by Ameristar
outside of the time limits set forth in paragraphs ii, iii and iv
hereof, Kinseth actually rents such rooms to another guest.
(B) RIGHT OF FIRST REFUSAL. If Kinseth receives a request to
reserve 50 or more rooms from any party, Kinseth shall first
offer such rooms to Ameristar upon the terms specified in
paragraph (a) hereof. Ameristar shall have twenty-four hours
after such offer has been communicated to Ameristar's general
manager or designee to accept or reject such offer. If rejected,
Kinseth may accept the reservation with the third party. If
Ameristar accepts the offer, Kinseth shall reserve the rooms for
Ameristar and shall reject the reservation by the third party.
(C) COMPING OF GUESTS. Ameristar may, at its option, decide to
pay all or part of the bill of a guest of the Hotel. If
Ameristar elects to pay all or part of a bill, it shall inform
Kinseth according to procedures established by Ameristar and
communicated to Kinseth. If Ameristar so notifies Kinseth of a
comp, Kinseth shall not thereafter attempt to collect such amount
from the guest. Kinseth shall bill Ameristar for any such
amounts and Ameristar agrees to pay such amounts to Kinseth
within 30 days.
(D) INTEGRATION OF KINSETH'S PMS SYSTEM WITH AMERISTAR'S POS
SYSTEM. At such time as it becomes technologically feasible, and
subject to Kinseth's franchisor's approval, Kinseth agrees to
cooperate with Ameristar to integrate its property management
computer system ("PMS System") with Ameristar's point of sale
system ("POS System"), and
<PAGE>
Ameristar agrees to cooperate with Kinseth in all reasonable
respects with respect to such integration. Ameristar shall pay
all out-of-pocket costs necessary to complete such integration.
Until an integration of Kinseth's PMS system with Ameristar's POS
System can be reasonably accomplished, Ameristar and Kinseth
agree to devise a system where such charges can be handled in a
manner mutually agreeable to both parties.
(E) REFERRALS. Provided that Kinseth has not defaulted in the
quality standards required to be maintained by it under the Lease
Agreement between Kinseth and Ameristar, and to the extent
permitted by law, Ameristar agrees to refer any guests it cannot
accommodate to the Hotel. Provided that Ameristar maintains
quality standards in its hotel at least equal to those maintained
by Kinseth in its Hotel and to the extent permitted by law,
Kinseth agrees to refer any guests it cannot accommodate in the
Hotel or the adjacent hotel (so long as Kinseth or its affiliate
owns the adjacent hotel) to Ameristar's hotel. Kinseth hereby
grants Ameristar reasonable access to the Hotel from time to time
for the purpose of inspecting the Hotel. Ameristar hereby grants
Kinseth reasonable access to its hotel from time to time for the
purpose of inspection Ameristar's hotel.
(F) GROUP RATE REFERRALS. If Ameristar refers a block of rooms
which are part of a larger group to Kinseth as a result of an
Ameristar generated group sale (including promotions designed to
increase occupancy by offering specific hotel packages to
specific groups), Kinseth shall match the group rate offered by
Ameristar for such groups unless Kinseth's hotel is or is
reasonably expected to be "fully occupied" (i.e., more than 95%
full). If Ameristar is or is reasonably expected to be fully
occupied and refers an entire group to Kinseth, Kinseth will
match the group rate offered by Ameristar for other groups booked
in the Ameristar hotel in the same period, unless Kinseth's hotel
is or is reasonably expected to be fully occupied.
Notwithstanding the foregoing, Kinseth shall not be obligated to
accept hotel guests referred to Kinseth by Ameristar if the room
rate is less than 50% of Kinseth's rack rate on a requested date
for standard room types (i.e. king or double room types).
(G) CONFIDENTIALITY. Kinseth acknowledges and agrees that the
identity of guests or patrons of the casino and Ameristar's
willingness to provide complementary services to a guest or
patron are valuable trade secrets of Ameristar. Kinseth
covenants and agrees that it shall not use, during the course of
Kinseth's lease with Ameristar or thereafter, any such
confidential or proprietary information or divulge such
information to any person, unless Kinseth is compelled to
disclose such information by a governmental process.
Ameristar acknowledges and agrees that the identity of
guests or patrons of the Hotel and the identity of any such
guests as members of Hampton Inn's frequent traveler/guest
program, if any, are valuable trade secrets of Kinseth and/or
Hampton Inn. However, Kinseth also acknowledges that such
information is critical to Ameristar so that proper attention can
be given to preferred customers of Ameristar's casino. Kinseth
agrees to reasonably cooperate with Ameristar so as to provide to
Ameristar, upon its request, the names and addresses of Kinseth's
hotel guests. Ameristar shall keep such lists separate from
other information. Ameristar is not authorized to use such
information to market hotel rooms to individuals on such list
without Kinseth's prior approval. Except as permitted herein,
Ameristar covenants and agrees that it
<PAGE>
shall not use, during the course of Kinseth's lease with
Ameristar or thereafter, any such confidential or proprietary
information or divulge such information to any person without the
prior consent of Kinseth, unless Ameristar is compelled to
disclose such information by a governmental process.
Notwithstanding the foregoing, Kinseth acknowledges that
Ameristar may compile a list of gaming customers from sources
independent of Ameristar's access to Kinseth's PMS system and
that such list may include guests of the Hotel. Kinseth agrees
that Ameristar's use of such independently compiled information
will not violate the covenant of Ameristar hereunder.
(H) EMPLOYEE PARKING. Kinseth agrees to use for employee
parking only such spaces in the parking lot as Ameristar may
designate for Hotel employee parking. Such spaces may be in a
separate lot that is off-site and designated solely for Hotel
employee parking.
(I) MARKETING PROGRAMS. Ameristar and Kinseth agree to
cooperate on any marketing programs that either party may desire
to implement and, including proposals for joint marketing
programs; provided, however, that such cooperation shall not be
deemed to require a party to pay for the cost of a program beyond
what it desires to pay. Kinseth shall have the right to provide
marketing materials for Ameristar's casino in its hotel room, but
shall not provide materials relating to other casinos. Ameristar
shall have the right to inspect Kinseth's facilities and hotel
rooms at reasonable times to verify that no marketing materials
for competing casino properties are being distributed.
(J) USE OF EMPLOYEE FACILITIES BY KINSETH EMPLOYEES. Ameristar
may, at its option, require that all employees of the Hotel be
out-of-uniform when they visit Ameristar's facilities. Employees
of the Hotel shall not be eligible for promotions, programs,
perquisites and other benefits offered to Ameristar employees.
Hotel employees using such facilities must abide by all policies
and procedures implemented by Ameristar, including, without
limitation, all non-solicitation policies. Ameristar may deny
use of the facilities to any Hotel employee for any or no reason.
(K) INTEGRATION OF TELEPHONE SYSTEM. The parties will explore
the possibility of integrating their respective telephone systems
so that calls can be switched from one system to the other. If
either party reasonably concludes that such integration is not
feasible, Kinseth shall provide, to the extent permitted by its
franchisor, and at Ameristar's cost, one of its PMS System
terminals to Ameristar for installation in Ameristar's PBX room.
The parties agree to divide equally the cost of any wiring
required to attach such terminal to the PMS System. Such
terminal shall be in addition to the terminal described in
paragraph 3 above.
(L) FOOD SERVICE. Kinseth has the right under Section 2.3(c)
above of the Lease Agreement to offer the guests of the Hotel a
continental breakfast between the hours of 6:30 a.m. and 10:00
a.m.
From time to time Ameristar may also offer guests of the
Hotel discounts on food at restaurants operated by Ameristar or
gaming information and promotional items. If Ameristar desires
to make these discounts available to guests of the Hotel, Kinseth
agrees to make such offers available to its guests by allowing
Ameristar to display information and promotional
<PAGE>
materials in public areas and in guest rooms. Kinseth shall have
the right to approve all such material, provided that such
consent shall not be unreasonably withheld.
(M) CHANGE OF FRANCHISOR. Notwithstanding references in this
Ground Lease to Hampton Inn as franchisor of Kinseth, Kinseth may
change its franchisor, but only upon prior written consent of
Ameristar, which consent shall not be unreasonably withheld
provided that quality standards are not diminished and the terms
of this Ground Lease can be met by Kinseth under the terms of any
new franchise agreement entered into in connection with such
change.
ARTICLE IV
MORTGAGES AND LEASEHOLD LIENS
4.1 ENCUMBRANCE BY AMERISTAR. Ameristar may, as security for
its own obligations, encumber its interests in the Leased Land
and assign its right to receive rentals and its interest as
landlord under this Lease. Kinseth agrees that its interest in
the Leased Land under this Lease shall be subordinate to existing
or future liens in favor of Ameristar's lender(s), provided that
Ameristar obtains from its lender a recognition, nondisturbance
and attornment agreement in favor of Kinseth, whereby the
interests of Kinseth under this Lease are and shall be
subordinated to the lien granted by Ameristar, upon the condition
that such lender or lienholder agrees to recognize Kinseth's
interests under this Lease and to not disturb Kinseth and to
attorn to Kinseth and any permitted successors and assigns and
any Leasehold Lenders of Kinseth. Ameristar's lender or
lienholder shall not claim any lien on or interest in the
Building, except by virtue of its receipt of a collateral
assignment of Ameristar's interest as landlord under this Lease,
and the reversionary interest of Ameristar pursuant to Sections
2.4 and 11.4 herein. The parties agree to execute ordinary and
customary documentation acknowledging and confirming their
agreements in this Section 4.1 within fifteen (15) days of
receipt of a written request by the other party or its lender
that it do so.
4.2 ENCUMBRANCE BY KINSETH. So long as Kinseth shall not be in
default under the terms of this Lease at the time of the
granting, and subject to the terms hereof, Kinseth shall have the
right to grant to an "Institutional Lender" as that term is
defined in Section 4.5 below, a mortgage or trust deed lien upon
or a security interest in its leasehold estate under this Lease
and in the Building and any other improvements constructed by
Kinseth on the Leased Land (a "Leasehold Lien"), and to refinance
such Leasehold Lien; provided that each such Leasehold Lien shall
be subordinate and subject to Ameristar's reversionary interest
in the Building and Leased Land. The amount, terms and
conditions of the obligations secured by or contained in a
Leasehold Lien as defined by Section 4.5 below shall be subject
to Ameristar's prior written approval, which shall not be
unreasonably withheld or delayed. Any Leasehold Lien shall not
be for a period exceeding the Term. In no event shall
Ameristar's fee title or reversionary interest be encumbered by
or be subject to the Leasehold Lien. Kinseth shall make payment
when due and before delinquency of all principal, interest, and
other charges for which Kinseth may be or become obligated under
any obligations secured by or contained in a Leasehold Lien. In
the event Kinseth grants such Leasehold Lien, the Leasehold
Lender Protection Provisions set forth in Section 4.5 below, and
the option set forth in Section 4.4 below of Ameristar to cure
defaults in the monetary obligation secured by the Leasehold
Lien, shall both apply. The aggregate amount of all Leasehold
Liens shall
<PAGE>
not, at any time, exceed the greater of Four Million Five Hundred
Thousand Dollars ($4,500,000) or seventy five percent (75%) of
the then current appraised value of the Building and improvements
(existing or to be constructed with the proceeds of the Leasehold
Lien) on the Leased Land (the "Aggregate Principal Amount"). In
the event such Leasehold Lien is collateralized by other assets
of Kinseth or its affiliates, or proceeds of such financing are
used for any assets or purposes unrelated to the Leased Land and
Building, the Leasehold Lender shall agree to a fair and
equitable allocation of such indebtedness and debt service
between the Leased Land and Building and such other assets, and a
specific "release price" to release the Leasehold Lien on the
Leased Land and Building not to exceed at any time the Aggregate
Principal Amount plus accrued interest and costs of collection
attributable to the Leasehold Lien on the Leased Land, such that
in the event of default by Kinseth hereunder or under the
Leasehold Lien, Ameristar may exercise its rights pursuant to
Sections 4.4, 4.5(f)(vii), and/or 11.11 herein to pay off or
assume such portion of the financing attributable to the
Building, the Leased Land, or the improvements located on the
Leased Land. Notwithstanding anything herein to the contrary,
the Aggregate Principal Amount of the "Initial Leasehold Lien"
shall not exceed Four Million Five Hundred Thousand Dollars
($4,500,000). As used in this Lease, the term "Initial Leasehold
Lien" shall mean the first permanent term loan, or the first
combination construction-permanent "mini-perm" loan, placed by
Kinseth on its leasehold interest in the Leased Land and on its
interest in the Building, provided that the Initial Leasehold
Lien shall have a term of not less than five (5) years following
completion of construction of the Building on the Leased Land.
4.3 CERTIFICATES OF LEASE STATUS. Kinseth agrees, at any time
and from time to time, upon receipt of not less than twenty (20)
days' prior written request therefor from Ameristar to execute,
acknowledge, and deliver to Ameristar a statement in writing,
certifying, if such is the case, that this Lease is then
unmodified and unamended and that the Lease is in full force and
effect. If there have been modifications or amendments to this
Lease, said statement shall certify that the Lease is in full
force and effect as then modified and amended, and shall set
forth or attach such modifications and amendments in full. Said
statement shall further state the dates to which the basic rental
or other charges have been paid, and whether or not there is any
existing default by Kinseth with respect to any covenant,
promise, or agreement on the part of Kinseth under this Lease.
Ameristar agrees to provide similar statements upon the written
request of Kinseth.
4.4 FORECLOSURE OF LEASEHOLD LIEN -- OPTION OF AMERISTAR TO CURE.
Prior to commencing any action to foreclose a Leasehold Lien, the
holder thereof (the "Leasehold Lender") shall notify Ameristar in
writing of the default by Kinseth with a statement of the amount
then due and offer to withhold any acceleration of maturity of
the obligation, payment of which is secured by the Leasehold
Lien, if Ameristar remedies such default within thirty (30) days
of receipt of such notice. Ameristar shall have the option, but
shall not be obligated, to cure Kinseth's default by making
payment to the holder of all sums due and by curing any other
defaults reasonably susceptible to cure by Ameristar within
thirty (30) days of receipt of the notice. In the event
Ameristar shall cure Kinseth's default, the Leasehold Lender
shall reinstate the Leasehold Lien in all respects as if no
default had occurred. If a default is not reasonably susceptible
to cure by Ameristar within thirty (30) days, the Leasehold
Lender shall not accelerate or exercise remedies so long as
Ameristar has commenced to cure, and diligently pursues efforts
to cure until completed, and all
<PAGE>
sums required to be paid under the Leasehold Lien are timely paid
during the time periods provided in this Section 4.4.
Any sums paid by Ameristar to the Leasehold Lender shall be
considered additional rental immediately due and payable to
Ameristar by Kinseth under this Lease, and the failure of Kinseth
to pay such amounts in full within ten (10) days after Ameristar
shall have sent written notice to Kinseth demanding payment shall
be an event of default under this Lease.
Any exercise of Ameristar's option to cure a default in a
Leasehold Lien shall not constitute an assumption by Ameristar of
the obligation nor a waiver of Kinseth's obligations to make
payments and perform in full under the terms of any obligations
secured by a Leasehold Lien. Subsequent and successive defaults
by Kinseth in making payments required by any Leasehold Lien
shall be subject to the foregoing provisions each time any such
default occurs.
In the event of a default by Kinseth on a Leasehold Lien, in
addition to Ameristar's option to cure such default as set forth
above without assuming the obligation of Kinseth under the
Leasehold Lien, Ameristar shall, upon written notice to Kinseth
and to Leasehold Lender and the failure of Kinseth to cure such
default within the applicable time period specified herein, have
the option to terminate, forfeit and/or acquire Kinseth's
interest in the Leased Land and preserve this Lease in effect and
may substitute itself as lessee under this Lease and assume the
Leasehold Lien on the same "nonrecourse" basis as set forth in
Section 4.5(f)(vii)(2) below, provided such actions shall not
terminate this Lease nor extinguish the lien of the Leasehold
Lender in the Leased Land and Ameristar obtains an opinion of
Iowa legal counsel acceptable to Leasehold Lender that no
"merger" of the leasehold interest in the Leased Land into the
fee interest of Ameristar shall occur.
Any judgment foreclosing a Leasehold Lien and the
foreclosure sale thereunder shall not release Kinseth from any of
Kinseth's obligations under this Lease. Kinseth shall ensure
that all provisions contained in this Lease requiring the
agreement of a Leasehold Lender shall be incorporated into
documents to which such Lender is a party and that executed
copies of all documents relating to the creation of a Leasehold
Lien or an obligation secured thereby shall be delivered to
Ameristar within ten (10) days of execution thereof.
4.5 LEASEHOLD LENDER PROTECTION PROVISIONS. In the event that
Kinseth shall grant a Leasehold Lien to an Institutional Lender
as contemplated pursuant to Section 4.2 above, the following
provisions shall apply for the benefit of such Leasehold Lender,
its successors and assigns (including any purchaser at a
foreclosure sale or deed in lieu thereof) notwithstanding any
contrary provisions in this Lease:
(A) NOTICE TO AMERISTAR.
i. (1) If Kinseth shall, on one or more occasions,
grant a Leasehold Lien to an Institutional Lender and if the
holder of such Leasehold Lien shall provide Ameristar with notice
of such Leasehold Lien together with a true copy of such
Leasehold Lien and the name and address of such Leasehold Lender,
Ameristar and Kinseth agree that, following receipt of such
notice by Ameristar the provisions of this Section 4.5 shall
apply in respect to such Leasehold Lien.
<PAGE>
(2) In the event of any assignment of a
Leasehold Lien or in the event of a change of address of a
Leasehold Lender or of an Assignee of such Leasehold Lien, notice
of the new name and address shall be provided to Ameristar.
ii. Ameristar shall promptly upon receipt of a communication
provided for by subsection (a)(i) above acknowledge by a written
instrument receipt of such communication as constituting the
notice provided for by subsection (a)(i) above or, in the
alternative, notify Kinseth and the Leasehold Lender of the
rejection of such communication as not conforming with the
provisions of subsection (a)(i) and specify the specific basis of
such rejection.
iii. After Ameristar has received the notice provided for by
subsection (a)(i) above, Kinseth if it has not already done so,
shall with reasonable promptness provide Ameristar with copies of
the note or other obligation secured by such Leasehold Lien and
of any other documents pertinent to the Leasehold Lien as
specified by Ameristar. Kinseth shall thereafter also provide
Ameristar from time to time with a copy of each amendment or
other modification or supplement to such instruments. All
documents shall be accompanied by a certification by Kinseth that
such documents are true and correct copies of the originals.
From time to time, Kinseth shall notify Ameristar of the date and
place of recording and other pertinent recording data with
respect to such instruments as have been recorded.
(B) DEFINITIONS.
i. The Term "Institutional Lender" as used in this Article IV
shall refer to a savings bank, savings and loan association,
commercial bank, trust company, credit union, investment bank,
insurance company, college, university, real estate investment
trust or pension fund, investment banker, mortgage banker, or
agents for any of the foregoing. The term "Institutional Lender"
shall also include other lenders of substance which perform
functions similar to any of the foregoing, and which have assets
in excess of One Hundred Million Dollars ($100,000,000) at the
time the obligation secured by the Leasehold Lien is made.
ii. The term "Leasehold Lien" as used in this Article IV shall
include a mortgage, a deed of trust, a deed to secure debt, or
other security instrument by which Kinseth's leasehold estate is
mortgaged, conveyed, assigned, or otherwise transferred, to
secure a debt or other obligation.
iii. The term "Leasehold Lender" as used in this Article IV shall
refer to a holder of a Leasehold Lien in respect to which the
notice is provided for by subsection (a) of this Section 4.5 has
been given and received and as to which the provisions of this
Section 4.5 are applicable.
(C) CONSENT OF LEASEHOLD LENDER REQUIRED.
No cancellation, surrender or modification of this Lease
shall be effective as to any Leasehold Lender unless consented to
in writing by such Leasehold Lender, which consent shall not be
unreasonably withheld or delayed.
<PAGE>
(D) DEFAULT NOTICES.
Ameristar, upon providing Kinseth any notice of:
(i) default under this Lease or (ii) a termination of this Lease,
or (iii) a matter on which Ameristar may predicate or claim a
default shall at the same time provide a copy of such notice to
Leasehold Lender. No such notice by Ameristar to Kinseth shall
be deemed to have been duly given unless and until a copy thereof
has been so provided to Leasehold Lender. From and after such
notice has been given to a Leasehold Lender, such Leasehold
Lender shall have the same period, after the giving of such
notice upon it, for remedying any default or acts or omissions
which are the subject matter of such notice or causing the same
to be remedied, as is given Tenant after the giving of such
notice to Tenant, plus in each instance, the additional periods
of time specified in subsections (e) and (f) of this Section 4.5
to remedy, commence remedying or cause to be remedied the
defaults or acts or omissions which are the subject matter of
such notice specified in any such notice. Ameristar shall accept
such performance by or at the instigation of such Leasehold
Lender as if the same had been done by Kinseth. Kinseth
authorizes each Leasehold Lender to take any such action at such
Leasehold Lender's option and does hereby authorize entry upon
the premises by the Leasehold Lender for such purpose.
(E) NOTICE TO LEASEHOLD LENDER.
i. Anything contained in this Lease to the contrary
notwithstanding, if any default shall occur which entitles
Ameristar to terminate this Lease, Ameristar shall have no right
to terminate this Lease unless, following the expiration of the
period of time given Kinseth to cure such default, Ameristar
shall notify Leasehold Lender of Ameristar's intent to so
terminate at least thirty (30) days in advance of the proposed
effective date of such termination if such default is capable of
being cured by the payment of money, and at least forty-five (45)
days in advance of the proposed effective date of such
termination if such default is not capable of being cured by the
payment of money. The provisions of subsection (f) below of this
Section 4.5 shall apply if, during such thirty (30) or forty-five
(45) day Termination Notice Period, any Leasehold Lender shall:
(1) notify Ameristar of such Leasehold Lender's desire to
nullify such notice, and
(2) pay or cause to be paid all rent, additional rent, and other
payments then due and in arrears as specified in the Termination
Notice to such Leasehold Lender and which may become due during
such thirty (30) or forty-five (45) day period, and
(3) comply or in good faith, with reasonable diligence and
continuity, commence to comply with all nonmonetary requirements
of this Lease then in default and reasonably susceptible of being
complied with by Leasehold Lender; provided, however, that such
Leasehold Lender shall not be required during such forty-five
(45) day period to cure or commence to cure any default
consisting of Kinseth's failure to satisfy and discharge any
payment due to such Leasehold Lender on the Leasehold Lien, or
any lien, charge or encumbrance against Kinseth's interest in
this Lease or the Leased Land junior in priority to the Leasehold
Lien held by such Leasehold Lender.
<PAGE>
ii. Any notice to be given by Ameristar to a Leasehold Lender
pursuant to any provision of this Section 4.5 shall be deemed
properly addressed if sent to the Leasehold Lender who served the
notice referred to in subsection (a)(i)(1) unless notice of a
change of Mortgage ownership has been given to Landlord pursuant
to subsection (a)(i)(2).
(F) PROCEDURE ON DEFAULT.
i. If Ameristar shall elect to terminate this Lease by reason
of any default of Kinseth, and a Leasehold Lender shall have
proceeded in the manner provided by subsection (e) of this
Section 4.5, the specified date for the termination of this Lease
as fixed by Ameristar in its Termination Notice shall be extended
for a period of six (6) months, provided that such Leasehold
Lender shall, during such six (6) month period:
(1) Pay or cause to be paid the rent, additional rent and other
monetary obligations of Kinseth under this Lease as the same
become due and continue its good faith efforts to perform all of
Kinseth's other obligations under this Lease, excepting
(A) Kinseth's obligations to pay any percentage rents to
Ameristar pursuant to Section 1.4(b) herein, at any time during
which Kinseth is delinquent on its monetary obligations to
Leasehold Lender; (B) obligations of Kinseth to satisfy or
otherwise discharge any payment due to Leasehold Lender on its
Leasehold Lien, or any lien, charge or encumbrance against
Kinseth's interest in this Lease or the Leased Land junior in
priority to the lien of the mortgage held by such Leasehold
Lender; (C) reimbursement of amounts advanced by Ameristar to
Leasehold Lender on behalf of Kinseth to cure monetary defaults
by Kinseth on the obligation secured by the Leasehold Lien; and
(D) past nonmonetary obligations then in default and not
reasonably susceptible of being cured by such Leasehold Lender;
and
(2) if not enjoined or stayed, take steps to acquire or sell
Kinseth's interest in this Lease by foreclosure of the Leasehold
Lien or other appropriate means and prosecute the same to
completion with due diligence.
ii. If at the end of such six (6) month period such Leasehold
Lender is complying with subsection (f)(i), this Lease shall not
then terminate, and the time for completion by such Leasehold
Lender of its proceedings shall continue so long as such
Leasehold Lender is enjoined or stayed and thereafter for so long
as such Leasehold Lender proceeds to complete steps to acquire or
sell Kinseth's interest in this Lease by foreclosure of the
Leasehold Lien or by other appropriate means with reasonable
diligence and continuity. Nothing in this subsection (f) of this
Section 4.5, however, shall be construed to extend this Lease
beyond the original term thereof, nor to require a Leasehold
Lender to continue such foreclosure proceedings after the default
has been cured. If the default shall be cured and the Leasehold
Lender shall discontinue such foreclosure proceedings, this Lease
shall continue in full force and effect as if Kinseth had not
defaulted under this Lease.
iii. If a Leasehold Lender is complying with subsection (f)(i) of
this Section 4.5, upon the acquisition of Kinseth's interest
herein by such Leasehold Lender or its designee or any other
purchaser at a foreclosure sale or otherwise, this Lease shall
continue in full force and effect as if Kinseth had not defaulted
under this Lease.
<PAGE>
iv. For the purposes of this Section 4.5 the making of a
Leasehold Lien shall not be deemed to constitute an assignment or
transfer of this Lease or of the leasehold estate hereby created,
nor shall any Leasehold Lender, as such, be deemed to be an
assignee or transferee of this Lease or of the leasehold estate
hereby created so as to require such Leasehold Lender, as such,
to assume the performance of any of the terms, covenants or
conditions on the part of Kinseth to be performed hereunder, but
the purchaser at any sale of this Lease and of the leasehold
estate hereby created in any proceedings for the foreclosure of
any Leasehold Lien, or the assignee or transferee of this Lease
and of the leasehold estate hereby created under any instrument
of assignment or transfer in lieu of the foreclosure of any
Leasehold Lien shall be deemed to be an assignee or transferee
within the meaning of this Section 4.5, and shall be deemed to
have agreed to perform all of the terms, and covenants and
conditions on the part of Kinseth to be performed hereunder from
and after the date of such purchase and assignment, but only for
so long as such purchaser or assignee is the owner of the
leasehold estate. If the Leasehold Lender or its designee shall
become the holder of the leasehold estate and if the buildings
and improvements on the premises shall have been or become
materially damaged on, before or after the date of such purchase
and assignment, the Leasehold Lender or its designee shall be
obligated to repair, replace or reconstruct the building or other
improvements only to the extent of the net insurance proceeds
received by the Leasehold Lender or its designee by reason of
such damage. However, should such net insurance proceeds be
insufficient to repair, replace or reconstruct the building or
other improvements to the extent required by Articles III and V
and should the Leasehold Lender or its designee choose not to
fully reconstruct the building or other improvements to the
extent required by Articles III and V such failure shall
constitute an event of default under this Lease.
v. Any Leasehold Lender or other acquirer of the leasehold
estate of Kinseth pursuant to foreclosure, assignment in lieu of
foreclosure or other proceedings may, upon acquiring Kinseth's
leasehold estate, without further consent of Ameristar, sell and
assign the leasehold estate on such terms and to such persons and
organizations as are acceptable to such Leasehold Lender or
acquirer and thereafter be relieved of all obligations under this
Lease; provided that such assignee has delivered to Ameristar its
written agreement to be bound by all of the provisions of this
Lease.
vi. Notwithstanding any other provisions of this Lease, any sale
of this Lease and of the leasehold estate hereby created in any
proceedings for the foreclosure of any Leasehold Lien, or the
assignment or transfer of this Lease and of the Leasehold Estate
hereby created in lieu of the foreclosure of any Leasehold Lien
shall be deemed to be a permitted sale, transfer or assignment of
Kinseth's interest in this Lease and of the leasehold estate
hereby created.
vii. In the event of a default under the Leasehold Lien Leasehold
Lender will notify Ameristar of such default and shall afford
Ameristar the following rights:
(1) In the event Leasehold Lender acquires Kinseth's interest in
the Leased Land by foreclosure or deed in lieu of foreclosure,
Ameristar shall have the exclusive option for a period of sixty
(60) days from such notice, but not the obligation, to acquire
the Leased Land from Leasehold Lender for the outstanding
principal amount of the Leasehold Lien on the Leased Land (not to
exceed the greater of (x) Four Million Five Hundred Thousand
Dollars
<PAGE>
($4,500,000) or (y) seventy five percent (75%) of the appraised
value of the Leased Land, plus accrued interest and costs of
collection, including foreclosure costs attributable to the
Leasehold Lien on the Leased Land ("Option Price").
(2) In the event Leasehold Lender shall commence a foreclosure
proceeding and at any time prior to the foreclosure sale and
provided Ameristar has acquired, forfeited or terminated all of
Kinseth's right, title and interest in the Leased Land, then at
any time prior to the foreclosure sale and upon presentation to
Leasehold Lender of reasonable evidence that it has acquired,
forfeited or terminated Kinseth's interest in the Leased Land
free of any lien, adverse interest or claim including rights
available to Kinseth in bankruptcy, Ameristar shall have the
right to bring all defaults current, including cost of collection
and foreclosure costs attributable to the Leasehold Lien on the
Leased Land, and to assume the Leasehold Lien for its then unpaid
principal balance attributable to the Leased Land, said principal
balance not to exceed the Aggregate Principal Amount, together
with pro-rata interest, attorneys' fees and costs of collection
attributable to the Leased Land. Ameristar, at its cost and
expense, will execute such "nonrecourse" assumption documents as
Leasehold Lenders may reasonably require to confirm the
nonrecourse assumption of the Leasehold Lien and deliver to
Leasehold Lender an endorsement to Leasehold Lender's loan policy
of title insurance insuring Ameristar to be the owner of the
leasehold interest in the Ground Lease free of any lien, adverse
interest or claim including rights available to Kinseth in
bankruptcy and continuing the insured priority of the Leasehold
Lien on the Leased Land free of any exceptions to coverage other
than as set forth in Leasehold Lender's existing loan policy. To
the extent the Leasehold Lien encumbers property other than the
Leased Land, upon such assumption, Leasehold Lender agrees to
bifurcate and separate the Leasehold Lien documents into two
separate sets of documents, one encumbering and creating a
security interest upon the Leased Land and the other encumbering
and creating a security interest in the other property and
provided that the amount of the Leasehold Lien on the Leased Land
will not exceed the Aggregate Principal Amount in principal
indebtedness, together with pro-rata interest, attorneys' fees
and costs of collection attributable to the Leased Land. The
bifurcated loan applicable to the Leased Land shall have the same
interest rate, amortization period, and remaining installment
payment periods as under the Leasehold Lien. This right is
subject to Leasehold Lender receiving an opinion satisfactory to
it from Iowa counsel acceptable to Leasehold Lender that such
bifurcation may accomplish the aforementioned results under Iowa
law without affecting the Leasehold Lien security (other than the
bifurcation) and does not create any impediment or obstacle to
exercising the remedies available to Leasehold Lender under the
Leasehold Lien documents. This right is personal only to
Ameristar under the Ground Lease (and to Ameristar's mortgage
lender) and shall not benefit any other party, including Kinseth,
its successors and assigns.
(G) NEW LEASE.
In the event of the termination of this Lease as a result of
Kinseth's default Ameristar shall, in addition to providing the
notices of default and termination as required by subsections (d)
and (e) above of this Section 4.5, provide each Leasehold Lender
with written notice that the Lease has been terminated, together
with a statement of all sums which would at that time be due
under this Lease but for such termination, and of all other
defaults, if any, then known to Ameristar. Subject to the
provisions of Section 4.5 (f)(vii) above, Ameristar agrees to
enter into a new lease ("New
<PAGE>
Lease") of the Leased Land with such Leasehold Lender or its
designee for the remainder of the term of this Lease, effective
as of the date of termination, at the rent and additional rent,
and upon the terms, covenants and conditions (but excluding
requirements which are not applicable or which have already been
fulfilled) of this Lease, provided:
i. Such Leasehold Lender shall make written request upon
Ameristar for such New Lease within sixty (60) days after the
date such Leasehold Lender receives Ameristar's Notice of
Termination of this Lease given pursuant to this subsection (g).
ii. Such Leasehold Lender or its designee shall pay or cause to
be paid to Ameristar at the time of the execution and delivery of
such New Lease, any and all sums which would at the time of
execution and delivery thereof be due pursuant to this Lease but
for such termination and, in addition thereto, all reasonable out-
of-pocket expenses, including reasonable attorneys' fees, which
Ameristar shall have incurred at such time or during such sixty
day period by reason of such termination and the execution and
delivery of the New Lease and which have not otherwise been
received by Ameristar from Kinseth or other party in interest
under Kinseth. Upon the execution of such New Lease, Ameristar
shall allow to the tenant named therein as an offset against the
sums otherwise due under this subsection (g)(ii) or under the New
Lease, an amount equal to the net income derived by Ameristar
from the Leased Land during the period from the date of
termination of this Lease to the date of the beginning of the
Lease term of such New Lease. In the event of a controversy as
to the amount to be paid to Landlord pursuant to this subsection
(g)(ii), the payment obligation shall be satisfied if Ameristar
shall be paid the amount not in controversy, and the Leasehold
Lender or its designee shall agree to pay any additional sum
ultimately determined to be due plus interest at the rate of ten
percent (10%) per annum and such obligation shall be adequately
secured.
iii. Such Leasehold Lender or its designee shall agree to remedy
any of Kinseth's defaults of which said Leasehold Lender was
notified by Ameristar's Notice of Termination and which are
reasonably susceptible of being so cured by Leasehold Lender or
its designee.
iv. It shall be the intention and agreement of the parties that
any New Lease made pursuant to this subsection (g) shall have the
same priority and rights in relation to any mortgage or other
lien, charge or encumbrance on the fee of the Leased Land and the
tenant under such New Lease shall have the same right, title and
interest in and to the Leased Land and the buildings and
improvements thereon as Kinseth had under this Lease.
v. The tenant under any such New Lease shall be liable to
perform the obligations imposed on the tenant by such New Lease
only during the period such person has ownership of such
leasehold estate.
(H) NEW LEASE PRIORITIES.
If more than one Leasehold Lender shall request a New Lease
pursuant to subsection (g)(i) of this Section 4.5, Ameristar
shall enter into such New Lease with the Leasehold Lender whose
mortgage is prior in lien, or with the designee of such Leasehold
Lender. Ameristar, without
<PAGE>
liability to Kinseth or any Leasehold Lender with an adverse
claim, may rely upon a mortgagee title insurance commitment
issued by a responsible title insurance company or licensed
attorney or governmental agency performing such services or doing
business within the state in which the Leased Land located as the
basis for determining the appropriate Leasehold Lender who is
entitled to such New Lease.
(I) LEASEHOLD LENDER NEED NOT CURE SPECIFIED DEFAULTS.
Nothing herein contained shall require any Leasehold Lender
or its designee as a condition to its exercise of rights
hereunder to cure any default of Kinseth not reasonably
susceptible of being cured by such Leasehold Lender or its
designee, or otherwise excluded by agreement herein, including
but not limited to: (i) the defaults referred to in Section
8.1(d); (ii) the franchise rating and operation covenants set
forth in Sections 2.3(a) and (b) and 3.1(v); and (iii) the
requirement of a minimum of 96 in-service hotel rooms, if
Leasehold Lender determines in its reasonable business judgment
that it cannot economically operate 96 in-service rooms in order
to comply with the provisions of subsections (e) or (f) of this
Section 4.5, or as a condition of entering into the New Lease
provided for by subsection (g) of this Section 4.5.
(J) EMINENT DOMAIN.
Kinseth's share, as provided by Section 7.6 of this Lease,
of the proceeds arising from an exercise of the power of Eminent
Domain shall, subject to the provisions of such Section 7.6 be
disposed of as provided for by the Leasehold Lien and shall be
subject to the prior right of the Leasehold Lender to repay the
indebtedness secured by the Leasehold Lien out of the award.
(K) CASUALTY LOSS.
A Standard Mortgagee Clause naming each Leasehold Lender may
be added to any and all insurance policies required to be carried
by Kinseth hereunder on condition that the insurance proceeds are
to be applied in the manner specified in this Lease and the
Leasehold Lien shall so provide; except that the Leasehold Lien
may provide a manner for the disposition of such proceeds, if
any, otherwise payable directly to Kinseth (but not such
proceeds, if any, payable jointly to Ameristar and Kinseth)
pursuant to the provisions of this Lease.
The Leasehold Lien may condition the application of
Kinseth's insurance proceeds to repair and restoration of the
improvements as contemplated by Section 5.2 below, on reasonable
requirements such as: (i) Kinseth not being in monetary default
to the Leasehold Lender; (ii) the adequacy of such insurance
proceeds, together with such other funds as may be provided by
Kinseth, to pay for all costs of repair and restoration of the
improvements; (iii) that the improvements, after repair and
restoration, shall have an economic utility and fair market value
equal to that which existed prior to the casualty;
(iv) compliance with procedures for disbursement of such proceeds
to insure application of the funds to repair and restoration,
similar to those utilized in construction lending by
Institutional Lenders; and (v) that the proceeds be held by the
Leasehold Lender pending their disbursement to pay costs of
repair and restoration.
(L) NO MERGER.
<PAGE>
So long as any Leasehold Lien is in existence, unless all
Leasehold Lenders shall otherwise expressly consent in writing
the fee title to the Leased Land and the Leasehold Estate of
Kinseth therein created by this Lease shall not merge but shall
remain separate and distinct, notwithstanding the acquisition of
said fee title and said leasehold estate by Ameristar, by
Kinseth, or by a third party, by purchase or otherwise.
(M) FUTURE AMENDMENTS.
In the event on any occasions hereafter Kinseth seeks to
mortgage its leasehold estate, Ameristar agrees to amend this
Lease from time to time to the extent reasonably requested by an
Institutional Lender proposing to make Kinseth a loan secured by
a first lien upon Kinseth's leasehold estate, provided that such
proposed amendments do not materially and adversely affect the
rights of Ameristar or his interest in the Leased Land and all
other Institutional Lenders consent in writing to such charge.
All reasonable expenses incurred by Ameristar in connection with
any such amendment shall be paid by Kinseth. The foregoing
provisions shall be subject to reasonable approval rights in
favor of Ameristar's lender.
(N) ESTOPPEL CERTIFICATE.
Ameristar shall, without charge, at any time and from time
to time hereafter, but not more frequently than twice in any one-
year period (or more frequently if such request is made in
connection with any sale or mortgaging of Kinseth's leasehold
interest or permitted subletting by Kinseth) within twenty (20)
business days after written request of Kinseth to do so, certify
by written instrument duly executed and acknowledged to any
mortgagee or purchaser, or proposed mortgagee or proposed
purchaser, or any other person, form or corporation specified in
such request: (A) as to whether this Lease has been supplemented
or amended, and if so, the substance and manner of such
supplement or amendment; (B) as to the validity and force and
effect of this Lease, in accordance with its tenor; (C) as to the
existence of any default hereunder; (D) as to the existence of
any offsets, counterclaims or defenses hereto on the part of
Kinseth; (E) as to the commencement and expiration dates of the
term of this Lease; and (F) as to any other matters as may be
reasonably so requested. Any such certificate may be relied upon
by Kinseth and any other person, firm or corporation to whom the
same may be exhibited or delivered, and the contents of such
certificate shall be binding on Ameristar.
(O) NOTICES.
Notice from Ameristar to the Leasehold Lender shall be
mailed to the address furnished Ameristar pursuant to subsection
(b) of this Section 4.5 and those from the Leasehold Lender to
Ameristar shall be mailed to the address designated pursuant to
the provisions of Section 11.7 hereof. Such notices, demands and
requests shall be given in the manner described in Section 11.7
and shall in all respects be governed by the provisions of that
Section.
(P) ERRONEOUS PAYMENTS.
Unless otherwise agreed in writing by a Leasehold Lender, no
payment made to Ameristar by a Leasehold Lender shall constitute
agreement that such payment was, in fact, due under the
<PAGE>
terms of this Lease; and a Leasehold Lender having made any
payment to Ameristar pursuant to Ameristar's wrongful, improper
or mistaken notice or demand shall be entitled to the return of
any such payment or portion thereof provided he shall have made
demand therefor not later than one (1) year after the date of its
payment.
(Q) AMERISTAR PAY-OFF OR ASSUMPTION.
The foregoing provisions of this Section 4.5 limiting
Ameristar's rights to terminate, forfeit or acquire Kinseth's
interest in this Lease are expressly subject to, and shall be
deemed to be consistent with, Ameristar's remedies for default by
Kinseth under this Lease as set forth in Section 8.2(g) below
relating to Ameristar's pay-off or assumption of a Leasehold Lien
related to the Leased Land.
ARTICLE V
INSURANCE AND INDEMNIFICATION
5.1 DUTY TO INSURE. Throughout the Term, at Kinseth's sole cost
and expense, Kinseth shall keep or cause to be kept insured for
the mutual benefit of Ameristar and Kinseth as loss payees and
with Ameristar as an additional insured, all improvements erected
by Kinseth on the Leased Land against loss or damage by fire or
such other risks as Ameristar may require. The amount of the
insurance shall be sufficient to prevent either Ameristar or
Kinseth from becoming a coinsurer under the provisions of the
policies, but in no event shall the amount be less than the then
actual replacement cost excluding costs of replacing excavations
and foundations but without deduction for depreciation (herein
called full insurable value). If any dispute whether the amount
of insurance complies with the above requirements cannot be
resolved by agreement, Ameristar may, not more often than once
every twelve (12) months, request the carrier of the insurance
then in force to determine the full insurable value, and the
resulting determination shall be conclusive between the parties
for the purpose of this Section.
5.2 PROCEEDS OF INSURANCE. Ameristar shall, at Kinseth's cost
and expense, cooperate fully with Kinseth to obtain the largest
possible recovery, and all policies of fire and extended coverage
insurance required by the previous paragraph shall provide that
the proceeds shall be paid directly to Kinseth and to Ameristar
as their interests may appear, subject to the provisions of
subsection 4.5(k) above. Where no right to terminate this Lease
exists or is exercised by reason of any damage or destruction,
Ameristar shall make the proceeds available to Kinseth (or, in
Ameristar's discretion, shall apply the proceeds) for the sole
purpose of reconstructing damaged improvements as stated in
Section 3.1, above, and any insurance proceeds remaining after
reconstruction shall, be shared equally by Ameristar and Kinseth.
The foregoing provisions of this Section 5.2 are subject to the
Leasehold Lender Protection Provisions in Section 4.5 above.
5.3 PUBLIC LIABILITY INSURANCE. Throughout the Term, at
Kinseth's sole cost and expense, Kinseth shall keep or cause to
be kept in force, for the mutual benefit of Ameristar and Kinseth
as coinsureds, comprehensive broad form general public liability
insurance against claims and liability for personal injury,
death, or property damage arising from the use, occupancy,
disuse, or condition of the Leased Land, improvements, or
adjoining areas or ways, providing protection of at least Ten
Million Dollars ($10,000,000) for bodily injury or death to any
one person, at least Ten
<PAGE>
Million Dollars ($10,000,000 for any one accident or occurrence,
and at least Five Million Dollars ($5,000,000) for property
damage. The amounts of coverage set forth herein shall be
subject to appropriate commercially reasonable increases every
five (5) years upon written notice from Ameristar to Kinseth
specifying the new policy limits.
5.4 POLICY FORM; CONTENT; INSURER. All insurance required by
express provisions of this Lease shall be carried only by
responsible insurance companies licensed to do business in the
State of Iowa rated no lower than "AXII" in the most recent
addition of A.M. Best's and "AA" in the most recent addition of
Standard & Poor's. All such policies shall be nonassessable and
shall contain language, to the extent obtainable, to the effect
that (1) any loss shall be payable notwithstanding any act or
negligence of Ameristar that might otherwise result in a
forfeiture of the insurance, (2) the insurer waives the right of
subrogation against Ameristar and against Ameristar's agents and
representatives, (3) the policies are primary and noncontributory
with any insurance that may be carried by Ameristar, and (4) the
policies cannot be canceled or materially changed except after
thirty (30) days' written notice by the insurer to Ameristar.
Kinseth shall furnish Ameristar with copies of all such policies
promptly on receipt of the copies, or with certificates
evidencing the insurance. Before the Commencement Date, Kinseth
shall furnish Ameristar with binders representing all insurance
required by this Lease. At the expiration of the Term, if
permitted by the insurer, Kinseth shall assign to Ameristar all
Kinseth's right, title and interest in insurance required to be
maintained by Kinseth and Ameristar shall reimburse Kinseth pro-
rata for all prepaid premiums on such insurance. Kinseth may
obtain for its own account any insurance not required under this
Lease. Kinseth may provide any insurance required or permitted
under this Lease by blanket policy covering the Leased Land,
including improvements thereon, and any other properties.
Ameristar agrees to use its best efforts to name Kinseth as
an additional insured, as its interest may appear, on any public
liability insurance policies obtained by Ameristar with respect
to the Casino Property.
5.5 INDEMNIFICATION.
(A) DEFENSE AND PAYMENT OF CLAIMS. Kinseth agrees to defend,
indemnify, and hold Ameristar harmless together with all of its
servants, agents, or employees, from and against all liability,
loss or costs incurred, including reasonable attorneys' fees,
arising out of or relating to injuries or deaths of persons or
damages to property caused by Kinseth's acts or omissions to act,
use of, or occupancy of the Leased Land, or as the result of
Kinseth's operations on the Leased Land. Each party hereto shall
give to the other parties prompt and timely notice of any claim
or suit instituted coming to its knowledge which in any way,
directly or indirectly, contingently or otherwise, affects or
might affect the other party, and all parties shall have the
right to participate in the defense of the same to the extent of
each party's own interest.
(B) MECHANICS' LIENS. In the event any mechanics' or other
liens or orders for the payment of money shall be filed against
the Leased Land or the Building or any other improvements thereon
by reason of or arising out of any labor, material furnished or
alleged to have been furnished, or to be furnished to, for or at
the request of, Kinseth or its agents or contractors on
<PAGE>
the Leased Land, Kinseth shall, within thirty (30) days after it
receives notice or knowledge thereof, either pay or bond against
the same or provide for the discharge thereof in such manner as
may be provided by law. Kinseth shall also defend on behalf of
Ameristar at Kinseth's sole expense, any action, suit or
proceeding which may be brought thereon, or for the enforcement
of such liens or orders, and Kinseth shall pay any damage and
discharge any judgment entered therein and save harmless
Ameristar from any and all claims or damages resulting therefrom.
Ameristar reserves the right, however, to defend or to direct the
defense of any such suit or proceedings. Kinseth shall pay all
expenses of such defense, including reasonable attorneys' fees,
and shall pay any damage and discharge any judgment entered
therein and save Ameristar harmless from any and all claims or
damages resulting therefrom.
(C) RESISTING CLAIMS. In the event Kinseth shall desire to
resist any mechanics' or materialmen's liens, or any other claim
against the hereinabove described premises on account of
building, rebuilding, repairing, reconstructing or otherwise
improving the Leased Land, Kinseth shall have the right to do so,
provided Kinseth shall first place funds into escrow in an amount
sufficient to pay said claim or lien, with said escrow directed
to pay such claim or lien in the event of a result adverse to
Kinseth, or provide for a bond or other financial arrangement
sufficient to assure payment of the claim or lien. The foregoing
requirements to post a bond or escrow for claims or liens shall
not apply to claims or liens under Twenty-Five Thousand Dollars
($25,000) individually or in the aggregate unless such claims or
liens threaten a foreclosure of any interest in the Leased Land
or the Building.
ARTICLE VI
TAXES, ASSESSMENTS, LIENS, AND ENCUMBRANCES
Kinseth shall be responsible for and shall pay and discharge
all taxes and assessments to the extent accrued, levied, or
coming into existence after the Commencement Date which may
become a lien upon or which may be levied by the State, County,
or any other tax levying body upon the Leased Land, the Building,
or improvements thereon erected by Kinseth or property located
thereon or therein. Ameristar shall promptly forward any tax or
assessment notices received by Ameristar relating to the Leased
Land to Kinseth. In the event that the taxing body with
jurisdiction over the Leased Land does not segregate the Leased
Land for taxation as a separate parcel, Kinseth and Ameristar
shall agree on a mutually acceptable methodology for allocating
responsibility for such taxes. Except as otherwise provided
herein, Kinseth shall also be responsible for and shall pay all
insurance premiums, and or all liabilities, charges, fees,
obligations, liens, and encumbrances associated with or relating
to the existence and use by Kinseth of this Lease, the Leased
Land or the Building, including, but not limited to, all
assessment installments due or payable after the date of this
Lease. All payments of taxes or assessments or both, except
permitted installment payments, shall be prorated between
Ameristar and Kinseth for the initial lease year and for the year
in which the Lease terminates. Kinseth may, in its own name, or
to the extent necessary under Ameristar's name, contest in good
faith by all appropriate proceedings, the amount, applicability,
or validity of any lien, tax, assessment, or fine pertaining to
the Leased Land, or to any improvement on the Leased Land, and in
the event Kinseth does in good faith contest the applicability or
validity of any lien, tax, assessment, or fine, Ameristar will
cooperate in such contest whenever possible with Kinseth;
provided that such contest will not subject any part of the
Leased Land to risk of forfeiture
<PAGE>
or loss. If at any time payment of the whole or any part of such
lien, tax, assessment, or fine shall become necessary in order to
prevent any such forfeiture or loss, Kinseth shall pay the same
or cause the same to be paid in time to prevent such forfeiture
or loss.
Ameristar and Kinseth shall utilize their reasonable best
efforts to obtain separate assessment of taxes from all taxing
authorities having jurisdiction with respect to the Leased Land,
the Building, and the remainder of the Casino Property, and to
the extent necessary under applicable law, to constitute the
Leased Land as a separate legal parcel.
ARTICLE VII
CONDEMNATION
7.1 DEFINITIONS.
(a) "Condemnation" means (i) the exercise of any governmental
power, whether by legal proceedings or otherwise, by any
condemnor and (ii) a voluntary sale or transfer by Ameristar to
any condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending.
(b) "Date of taking" means the date the condemnor has the right
to possession of the property being condemned.
(c) "Award" means all compensation, sums, or anything of value
awarded, paid, or received on a total or partial condemnation.
(d) "Condemnor" means any public or quasi-public authority or
private corporation or individual having the power of
condemnation.
7.2 PARTIES' RIGHTS AND OBLIGATIONS TO BE GOVERNED BY LEASE.
If, during the Term or during the period of time between the
execution of this Lease and the Commencement Date, there is any
taking of all or any part of the Building, other improvements, or
Leased Land or any interest in this Lease by condemnation, the
rights and obligations of the parties shall be determined
pursuant to the following paragraphs.
7.3 TOTAL TAKING. If the Leased Land and all improvements
thereon are totally taken by condemnation, this Lease shall
terminate on the date of taking.
7.4 7.4. PARTIAL TAKING. If only a portion of the Leased Land
or of any improvements is taken by condemnation, this Lease shall
remain in effect, except that Kinseth may elect to terminate this
Lease if: (i) the remaining Leased Land or improvements could
not be economically and feasibly used by Kinseth, and (ii) a
reasonable amount of reconstruction (taking into account costs
associated therewith, including unavoidable loss of use of
portions of the Leased Land and rentals accruing hereunder during
reconstruction) would not make the remaining Leased Land and
improvements reasonably suited for Kinseth's continued occupancy
for the uses and purposes for which the Leased Land has been
leased; or, if (iii) Kinseth is unable to fulfill its covenants
to
<PAGE>
Ameristar pursuant to Article II of this Lease, unless such
particular covenants which cannot reasonably be fulfilled by
virtue of such partial taking are waived by Ameristar in writing.
If Kinseth elects to terminate this Lease, Kinseth must
exercise its right to terminate pursuant to this Section by
giving notice to Ameristar within thirty (30) days after the
nature and the extent of the taking have been finally determined.
If Kinseth elects to terminate this Lease as provided in this
Section, Kinseth shall also notify Ameristar of the date of
termination, which date shall not be earlier than ninety (90)
days nor later than one hundred eighty (180) days after Kinseth
has notified Ameristar of its election to terminate; except that
this Lease shall terminate on the date of taking if the date of
taking falls on a date before the date of termination as
designated by Kinseth. If Kinseth does not terminate this Lease
within the thirty (30) day period, this Lease shall continue in
full force and effect, except that Rental from and after the
effective date of the taking shall be reduced by a proportion
equal to the ratio of the area of the Leased Land taken to the
total area of the Leased Land immediately prior to the taking and
that Base Rental shall be similarly reduced for purposes of
future Rental adjustments.
7.5 RESTORATION OF IMPROVEMENTS.
(A) RESTORATION OF IMPROVEMENTS. If there is a partial taking
of the Leased Land and improvements located thereon and this
Lease remains in full force and effect pursuant to Section 7.4
above, Kinseth, at its cost, shall accomplish all repair or
restoration necessary to render the remaining improvements usable
for the uses and purposes for which the Leased Land has been
leased.
(B) ABATEMENT OR REDUCTION OF RENT. To the extent specific
rooms are damaged and thereby rendered unrentable, Rent shall be
abated during the period of restoration, but all other
obligations of Kinseth under this Lease shall remain in full
force and effect.
7.6 AWARD DISTRIBUTION. If proceeds of condemnation are awarded
separately to Ameristar and Kinseth based on their respective
interests in the Leased Land, the Building, and any improvements,
each party shall retain its own award, subject to the obligations
of Kinseth under any Leasehold Lien. In the event of a single
condemnation award, however, the award shall be apportioned
between the parties as follows: first, to the unpaid principal
and interest owed on the obligations secured by any Leasehold
Liens; second Ameristar shall be entitled to the value of any
portion of the Leased Land taken determined based on its highest
and best use, but as if the Leased Land were unencumbered by this
Lease; and third, the balance of any award, subject to the rights
of any Leasehold Lender, shall go to Kinseth; provided, however,
that in the event of any taking during the last ten (10) years of
the Term, Ameristar shall also be entitled to receive a
percentage of the remainder of the award equal to ten percent
(10%) in the event of a taking in the tenth (10th) Lease year
prior to the end of the Initial Term and an additional ten
percent (10%) for each Lease year thereafter, and provided
further that Ameristar shall be entitled to keep the entire
condemnation proceeds in the event of a taking in the last two
(2) years of the Initial Term.
ARTICLE VIII
DEFAULT PROVISIONS; REMEDIES; ATTORNEYS' FEES
<PAGE>
8.1 DEFAULT BY KINSETH. Each of the following shall be deemed
an event of default by Kinseth and a breach of this Lease:
(A) RENT OR OTHER PAYMENTS. If Kinseth shall default in the
payment of rent or other payments hereunder when due according to
the terms of this Lease and shall not have fully corrected the
same within ten (10) days after Kinseth's receipt of written
notice from Ameristar.
(B) OTHER COVENANTS OR CONDITIONS. If Kinseth shall default in
the performance or observance of any other covenant or condition
of this Lease or of any note, deed of trust, or other document
relating to a Leasehold Lien to be performed or observed by
Kinseth, whether or not Ameristar is a party to any such
documents, and Kinseth shall not have fully corrected the same
within thirty (30) days after notice thereof has been sent by
Ameristar to Kinseth, or such other specific period of notice and
opportunity to cure as may be expressly provided herein.
(C) ABANDONMENT. Total abandonment by Kinseth of the Leased
Land and any improvements constructed by Kinseth on the Leased
Land.
(D) INSOLVENCY. If during the Term of this Lease:
I. APPOINTMENT OF RECEIVER. Kinseth shall apply for or consent
in writing to the appointment of a receiver, trustee, or
liquidator of Kinseth or of all or substantially all of Kinseth's
assets or shall not obtain the termination of any such
receivership or trusteeship involuntarily ordered; or
II. VOLUNTARY BANKRUPTCY. Kinseth shall file a voluntary
petition for relief under the United States Bankruptcy Code as
that now exists or under amendment or successor law thereto or
any other law dealing with the subject of bankruptcy or admit in
writing its inability to pay its debts as they become due; or
III. ASSIGNMENT FOR CREDITORS. Kinseth shall make a general
assignment for the benefit of creditors; or
IV. REORGANIZATION OR ARRANGEMENT. Kinseth shall enter into any
reorganization, composition, or other arrangement with any or all
of its creditors pursuant to any insolvency law or the common
law; or
V. INVOLUNTARY PETITION. Any creditor of Kinseth shall have
commenced an involuntary proceeding under the United States
Bankruptcy Code or any successor law or other law dealing with
the subject of bankruptcy and Kinseth shall not have obtained the
dismissal of the proceeding within ninety (90) days after its
commencement.
8.2 REMEDIES. In the event of any breach or default of this
Lease by Kinseth and so long as such breach or default is
continuing, then subject to the rights of any Leasehold Lender
under Article IV of the Lease, Ameristar, in addition to any
other rights or remedies Ameristar may have, shall have the
right, with or without notice to take any or all of the following
actions:
<PAGE>
(A) RE-ENTRY. Immediately re-enter and take possession of the
Leased Land, Building, and any other improvements and remove all
persons and property from the Leased Land or the Building. Any
property may be stored on the Leased Land or in any other place,
for the account of and at the expense and at the risk of Kinseth.
Except in the case of gross negligence or willful misconduct on
the part of Ameristar, Kinseth hereby waives all claims for
damages which may be caused by the re-entry of Ameristar and
taking possession of the Leased Land, Building and other
improvements or removing or storing the property as herein
provided, and will save Ameristar harmless from any loss, costs
or damages occasioned Ameristar thereby. No such re-entry shall
be considered or construed to be a forceful entry. No such re-
entry or taking possession of the premises by Ameristar shall be
construed as an election on Ameristar's part to terminate this
Lease unless a written notice of such intention is given to
Kinseth; or
(B) SUIT FOR SUMS DUE. Collect by suit or otherwise from time
to time any unpaid rents or other sums due as they become due for
the account of Kinseth; or
(C) SPECIFIC PERFORMANCE. Enforce by suit any term of the Lease
required to be kept or performed by Kinseth; or
(D) RELETTING. Without terminating this Lease, relet the Leased
Land or any part thereof, or any space in the Building for the
account of Kinseth for such term or terms and at such rental or
rentals and upon such other terms and conditions as Ameristar in
Ameristar's sole discretion may deem advisable, with the right to
make alterations and repairs to any improvements located on the
Leased Land. Rentals received by Ameristar from such reletting
shall be applied as follows; First, to the payment of any costs
of such reletting; second, to the payment of the cost of any
alterations and repairs to the Leased Land or improvements
thereon made necessary by Kinseth's breach of the provisions of
this Lease; third, to payment of any indebtedness, other than
rent, due Ameristar hereunder from Kinseth; fourth, to the
payment of rent due and unpaid hereunder; and the residue, if
any, shall be held by Ameristar and applied in payment of future
rent as the same may become due and payable hereunder. Should
such rental received from such reletting be less than the rental
agreed to be paid that quarter by Kinseth hereunder, then Kinseth
shall pay such deficiency to Ameristar. Notwithstanding any such
reletting without termination, Ameristar may at any time
thereafter elect to terminate this Lease for such previous
breach; or
(E) COLLECTION OF RENTS. Without terminating this Lease,
collect all rents, revenues and room charges from payable
Building, with any such revenues to be applied in the manner set
forth in subparagraph (d) immediately preceding; or
(F) TERMINATION. Terminate this Lease. Should Ameristar at any
time terminate this Lease for any breach, in addition to any
other remedy Ameristar may have, Ameristar may recover from
Kinseth all damages Ameristar may incur by reason of such breach,
including without limitation the following:
<PAGE>
i. the worth at the time of award of any unpaid rent or other
sums which had been earned or which were due at the time of such
termination; plus
ii. the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until
the time of award exceeds the amount of rent loss that Kinseth
proves could have been reasonably avoided; plus
iii. the worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award
exceeds the amount of rent loss that Kinseth proves could be
reasonably avoided; plus
iv. any other amount necessary to compensate Ameristar for all
the detriment proximately caused by Kinseth's failure to perform
its obligations under this Lease or which in the ordinary course
of things would be likely to result therefrom (but excluding
consequential damages from lost profits to Ameristar's gaming
operations), including, but not limited to, any costs or expenses
incurred by Kinseth in retaking possession of the Leased Land and
improvements thereon, including reasonable attorneys' fees,
maintaining or preserving the Leased Land or improvements thereon
after such default, preparing the Leased Land and other
improvements thereon for reletting to a new tenant, including
repairs or alterations to any improvements for such reletting,
leasing commissions, or any other costs necessary or appropriate
to relet the Leased Land; plus
v. at Ameristar's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time
by the laws of the State of Iowa.
As used in subparagraphs (i) and (ii), above, the "worth at
the time of award" is computed by charging interest on each
installment of rent or other sum from the due date at a variable
rate which shall be equal to five percent (5%) per annum over the
"prime rate" as announced by First Interstate Bank of Nevada.
(G) TERMINATE KINSETH WITH PAYOFF OR ASSUMPTION OF LEASEHOLD
LIEN. Terminate, forfeit or acquire Kinseth's interest in this
Lease and the Leased Land as set forth herein, free of any lien,
adverse interest or claim including rights available to Kinseth
in bankruptcy, conditioned upon Ameristar concurrently therewith
doing one of the following:
i. pay off in full Leasehold Lenders for the lesser of then
outstanding aggregate principal amount of the Leasehold Lien
attributable to the Leased Land (not to exceed the greater of (x)
Four Million Five Hundred Thousand Dollars ($4,500,000) or (y)
seventy five percent (75%) of the appraised value of the Leased
Land), plus accrued interest and costs attributable to the
Leasehold Lien on the Leased Land; or
ii. provided that Ameristar obtains an opinion of the Iowa legal
counsel acceptable to Leasehold Lender that no "merger" of the
leasehold interest and the fee interest in the Leased Land will
occur, novate and substitute Ameristar itself as lessee under
this Lease, and assume the Leasehold Lien for its then unpaid
principal balance attributable to the Leased Land, said principal
balance not to exceed the Aggregate Principal Amount as defined
in Section 4.2 above, together with accrued interest, attorneys'
fees and costs of collection attributable to the Leasehold Lien
on the Leased Land. In such event, Ameristar, at its cost and
expense, will execute such "nonrecourse" assumption documents as
Leasehold Lenders may reasonably require to confirm
<PAGE>
the nonrecourse assumption of the Leasehold Lien and deliver to
Leasehold Lender an endorsement to Leasehold Lender's loan policy
of title insurance insuring Ameristar to be the owner of the
leasehold interest in the Ground Lease free of any lien, adverse
interest or claim including rights available to Kinseth in
bankruptcy and continuing the insured priority of the Leasehold
Lien on the Leased Land free of any exceptions to coverage other
than as set forth in Leasehold Lender's existing loan policy. To
the extent the Leasehold Lien encumbers property other than the
Leased Land, upon such assumption, Leasehold Lender agrees to
bifurcate and separate the Leasehold Lien documents into two
separate sets of documents, one encumbering and creating a
security interest upon the Leased Land and the other encumbering
and creating a security interest in the other property and
provided that the amount of the Leasehold Lien on the Leased Land
will not exceed the lesser of the then outstanding balance of
principal, and unpaid interest, costs and fees attributable to
the Leased Land, or the Aggregate Principal Amount in principal
indebtedness. The bifurcated loan applicable to the Leased Land
shall have the same interest rate, amortization period, and
installment payment periods as under the Leasehold Lien. This
right is subject to Leasehold Lender receiving an opinion
satisfactory to it from Iowa counsel acceptable to Leasehold
Lender that such bifurcation may accomplish the aforementioned
results under Iowa law without affecting the Leasehold Lien
security (other than the bifurcation) and does not create any
impediment or obstacle to exercising the remedies available to
Leasehold Lender under the Leasehold Lien documents. This right
is personal only to Ameristar under the Ground Lease (and to
Ameristar's mortgage lender) and shall not benefit any other
party, including Kinseth, its successors and assigns.
8.3 CUMULATIVE REMEDIES. The remedies herein given to Ameristar
shall be cumulative, and the exercise or nonexercise of any one
remedy by Ameristar on any occasion shall not exclude or
constitute a waiver of any other remedy on the same or any other
occasion. Without any previous notice or demand, separate
actions may be maintained by Ameristar against Kinseth from time
to time to recover any rent or damages which, at the commencement
of any such action, have become due and payable to Ameristar,
without waiting until the end of the Term.
8.4 ATTORNEYS' FEES. In the event of any default by Kinseth,
Ameristar shall be entitled to recover from Kinseth, in addition
to any other remedies, relief, or damages to which the Ameristar
may be entitled hereunder or under applicable law, all costs,
including reasonable attorneys' fees, incurred in enforcing its
rights hereunder, recovering possession of the Leased Land or any
improvements, or recovering damages for the breach hereof,
whether incurred through litigation or otherwise.
ARTICLE IX
COVENANTS AND WARRANTIES
9.1 NO WARRANTIES BY AMERISTAR. Ameristar makes no warranties
or representations whatsoever, express or implied, regarding the
condition of the Leased Land, its value, its marketability, or
its fitness for a particular use or development. Kinseth agrees
to take possession of the Leased Land in an "as is" condition.
Ameristar's right, title, and interest in and to the Leased Land,
except for this Lease, shall not be subordinated or subject to
any other claim or interest of Kinseth or to any other claim or
interest of any mortgagee or other creditor in connection with
the financing of the improvements to be constructed on the Leased
Land.
<PAGE>
9.2 RIGHT TO EXECUTE. The parties represent that each has full
right and power to execute and perform this Lease and to grant
the estate leased herein and the rights, easements, privileges,
appurtenances, and hereditaments belonging or pertaining thereto.
9.3 PEACEFUL ENJOYMENT. Kinseth, on paying the rent herein
reserved and performing the covenants and provisions hereof on
its part to be performed, shall peacefully and quietly have and
enjoy the Leased Land, and all such existing rights, easements,
privileges, appurtenances, and hereditaments belonging or
pertaining thereto, during the Term; provided, however, that
Ameristar does not warrant that a governmental authority may not
at some time during the Term, without the consent or permission
of Ameristar, pass ordinances or perform acts which may be
prejudicial to Kinseth through no fault of Ameristar. Ameristar
shall provide to Kinseth's customers, guests and invitees,
nonexclusive parking rights sufficient for the operation of the
hotel on the designated parking areas as they exist from time-to-
time on Ameristar's Casino Property, however, Kinseth shall have
no right to designate or require a particular location or
configuration with respect to such parking, or to interfere in
any way with Ameristar's use and designation of parking areas.
ARTICLE X
ASSIGNMENT, SUBLETTING AND SALE
10.1 ASSIGNMENT. Ameristar may assign its interests in this
Lease upon written notice to Kinseth and its Leasehold Lender.
Except for assignment to a Leasehold Lender as contemplated under
Article IV of this Lease, Kinseth may not assign this Lease or
sublet its interest in the Leased Land without the prior written
consent of Ameristar, which consent shall not be unreasonably
withheld by Ameristar provided that the proposed assignee is:
(a) of equal or greater financial capacity and net worth as
Kinseth on the date of such assignment, but in any event having a
financial capacity and net worth reasonable, under the
circumstances at the time of the assignment, to require for a
lessee under this Lease; (b) an experienced manager and/or
operator of similar hotel properties; (c) a franchisee of the
same hotel chain as Kinseth or of another franchisor approved
pursuant to Sections 2.3(a) and 3.8(m) above; and (d) highly
reputable as a hotel and business operator. A change of the
manager of Kinseth (currently Kinseth Hotel Corporation) (to an
entity other than one in which Bruce Kinseth, Les Kinseth, Linda
Skinner and Gary Skinner or their families maintain, directly or
indirectly, voting and operating control), or the failure of
Bruce Kinseth, Les Kinseth, Linda Skinner, and Gary Kinseth or
their families to maintain, directly or indirectly, voting and
operating control of the manager of Kinseth shall be considered
an assignment for purposes of this section. An assignment of 50%
or more of the membership interests in Kinseth in and of itself
shall not be considered an assignment for purposes of this
section. In the event Ameristar gives its consent for any
assignment or subletting of this Lease, the assignee or subtenant
shall assume in writing all of Kinseth's obligations and duties
under this Lease and shall be subject to all of the terms of this
Lease, and Ameristar shall be subject only to those obligations
and shall enjoy such rights and privileges as are set forth in
this Lease. Such sublease or assignment shall not relieve
Kinseth from its liability under this Lease without Ameristar's
written consent, which shall be in Ameristar's sole discretion.
The provisions of this Section 10.1 are specifically subject to
the provisions of Section 4.5 of this Lease, and in the event of
any conflict, the provisions of Section 4.5 shall control.
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 INSPECTION BY AMERISTAR. Ameristar may enter upon the
Leased Land at any reasonable time for any purpose necessary,
incidental to, or connected with verification of the performance
of Kinseth's obligations hereunder, but subject to any provisions
with respect thereto otherwise contained herein.
11.2 NEGATION OF PARTNERSHIP. Nothing in this Lease shall be
construed to render Ameristar in any way or for any purpose a
partner, joint venturer, or associate in any relationship with
Kinseth other than that of landlord and tenant, nor shall this
Lease be construed to authorize either to act as agent for the
other except as expressly provided to the contrary in this Lease.
11.3 CONTROLLING LAW. This Lease shall be deemed to be made and
shall be construed in accordance with the laws of the State of
Iowa.
11.4 SURRENDER OF POSSESSION. Kinseth agrees to yield and
deliver to Ameristar possession of the Leased Land, the Building,
and all other improvements on the Leased Land at the termination
of this Lease, or as otherwise provided herein, in good condition
and in accordance with the express obligations provided herein,
except for reasonable wear and tear, and, although not required
to effectuate a surrender, Kinseth shall execute and deliver to
Ameristar a good and sufficient document of relinquishment, if
and when requested.
11.5 SUCCESSORS. This Lease shall bind and inure to the benefit
of any successor or assignee of Ameristar and any successors or
permitted assignees of Kinseth, whether resulting from any
merger, consolidation, reorganization, assignment, foreclosure,
or otherwise.
11.6 HEADINGS. The article and section headings contained herein
are for convenience and reference and are not intended to define
or limit the scope of any provision of this Lease.
11.7 NOTICES. All notices, requests, consents and demands shall
be given to or made upon the parties at their respective
addresses set forth below, or at such other address as a party
may designate in writing delivered to the other party. Unless
otherwise agreed in this Lease, all notices, requests, consents
and demands shall be given or made by personal delivery, by
confirmed air courier, by facsimile transmission ("fax"), or by
postage prepaid first class mail, to the party addressed as
aforesaid. If sent by confirmed air courier, such notice shall
be deemed to be given upon the earlier to occur of the date upon
which it is actually received by the addressee or the business
day upon which delivery is made at such address, as confirmed by
the air courier (or if the date of such confirmed delivery is not
a business day, the next succeeding business day). If mailed,
such notice shall be deemed to be given upon the earlier to occur
of the date upon which it is actually received by the addressee
or the third (3rd) business day following the date upon which it
is deposited in a first-class postage-prepaid envelope in the
United States mail addressed to such address. If given by fax,
such notice shall be deemed to be given upon the date it is
actually received by the addressee, as confirmed by a return fax
signed by the addressee.
<PAGE>
If to Ameristar:
Ameristar Casino Council Bluffs, Inc.
Attention: General Manager
2200 River Road
Council Bluffs, Iowa 51501
Fax; (712) 328-8882
with a copy to:
Gordon R. Kanofsky, Esq.
Sanders, Barnet, Goldman, Simons & Mosk
1901 Avenue of the Stars, Suite 850
Los Angeles, CA 90067-6078
Fax: (310) 553-2435
If to Kinseth:
River Road Hotel Associates, L.C.
Attention: Bruce Kinseth
2 Quail Creek Circle
North Liberty, Iowa 52317
Fax (319) 626-8350
with a copy to:
Nicholas H. Roby, Esq.
Davis, Brown, Koehn, Shors & Roberts, P.C.
666 Walnut Street, Suite 2500
Des Moines, Iowa 50309
Fax: (515) 243-0654
11.8 RECORDING. Ameristar and Kinseth agree to execute and have
acknowledged, and Kinseth agrees to deliver to Ameristar, a
memorandum of this Lease in the form attached hereto as
Exhibit D. Such memorandum shall be recorded with the County
recorder or clerk.
11.9 COMPETING HOTEL. Kinseth acknowledges that Ameristar
operates, and may construct or permit the construction of another
hotel or hotels on or near the Casino Property and that such
hotel(s) will be entitled to compete with Kinseth's hotel.
Nothing in this Lease shall be deemed to be a covenant by
Ameristar not to compete with Kinseth or not to permit such
competition by other hotel owners or operators, or to permit
other hotel owners or operators or other third-parties to utilize
parking areas on the Casino Property on a nonexclusive basis.
11.10 RIGHT OF FIRST OFFER. In the event that during the
first fifteen (15) years of the Term Ameristar determines to sell
or lease any portion of the Casino Property to any third-party
for the
<PAGE>
construction of a hotel facility in which Ameristar has no
ownership interest in the hotel operation and which would compete
with the hotel in Kinseth's Building, Ameristar agrees to so
notify Kinseth in writing, and for a period of thirty (30) days
thereafter, Kinseth shall have a right to make an offer with
respect to such additional hotel and if Kinseth makes such offer,
for a period of thirty (30) days after such offer Ameristar will
negotiate in good faith to determine if an acceptable transaction
can be structured and agreed to with Kinseth. If no written
agreement is reached between Ameristar and Kinseth during such
subsequent thirty (30) day period, Ameristar shall be free to
negotiate with any other party. The foregoing shall not apply to
any transaction wherein Ameristar sells substantially all of the
Casino Property to a third-party.
11.11 OPTION TO PURCHASE. Kinseth hereby grants Ameristar an
irrevocable option to purchase all of Kinseth's right, title and
interest in and to the Leased Land, the Lease, the Building, any
other improvements on the Leased Land, fixtures, equipment,
personal property, contract rights and general intangibles, and
any and all appurtenances thereto necessary to operate the hotel
(the "Property Interests"), which option period shall commence
three (3) years after the hotel opens for business in the
Building, and the option shall terminate without further notice
ten (10) years after the hotel opens for business in the
Building. The option price shall be the greater of Seven Million
Dollars ($7,000,000), or the "mean" appraised value, which shall
be determined by taking the "mean" value of the two (2) closest
of three (3) MAI appraisals of the foregoing Property Interests
valued as an operating hotel. Upon Ameristar's giving written
notice to Kinseth of its intention to exercise this option,
unless Ameristar and Kinseth agree on an option price within
thirty (30) days of such notice, Ameristar and Kinseth shall each
choose an MAI appraiser, which appraisers shall then in turn
select a third appraiser. For purposes of this Section 11.11,
the "mean appraised value" shall mean during the first year of
the option period one hundred twenty-five percent (125%) of the
mean of the two (2) closest appraised fair market values of the
Property Interests, and during the remainder of the option period
the option price shall be equal to one hundred fifteen percent
(115%) of such mean of the two (2) closest appraisals; provided,
however, that in any event throughout the term of the option the
option price shall not be less than the lesser of the outstanding
balance owed on any Leasehold Lien(s) on the Property Interests
subject to this option, or the Aggregate Principal Amount (plus
accrued interest and costs of collection related to the Leased
Land). Upon receipt of the appraisals necessary to determine the
option price, Ameristar shall have sixty (60) days to determine
whether to proceed in exercising the option. If Ameristar elects
not to proceed with a closing under the option, it shall
reimburse Kinseth for the out-of-pocket costs incurred by Kinseth
for the appraisals. Any future notice of intention by Ameristar
with respect to the option shall require new appraisals unless
otherwise agreed by the parties. Ameristar agrees that in the
event of any foreclosure sale by a Leasehold Lender under a
Leasehold Lien, this option in favor of Ameristar shall be deemed
to be subordinate to such Leasehold Lien, provided that prior to
the time of such foreclosure sale, Ameristar shall have the
rights specified in Sections 4.4, 4.5(f)(vii), and this Section
11.11 of this Lease. After the expiration of the option period
set forth herein, through the remainder of the Ground Lease term
Ameristar shall have, and is hereby granted by Kinseth, a right
of first refusal for a period of sixty (60) days after
Ameristar's receipt of notice from Kinseth to purchase the
Property Interests for the same price and terms as Kinseth is
willing to sell to any third-party offer Kinseth intends to
accept. Kinseth agrees to provide Ameristar with a true and
complete copy of any such offer at the same time as it gives
Ameristar written notice pursuant to this right of first refusal.
If Ameristar does not exercise its right of first refusal, and
the proposed
<PAGE>
transaction does not close, or is modified in any way,
Ameristar's right of first refusal shall continue as to the
modified offer and any future or other offers which Kinseth would
intend to accept. This right of first refusal granted by Kinseth
herein shall expire immediately prior to any foreclosure sale
conducted by Leasehold Lender, or upon Leasehold Lender's
recording of a deed in lieu of foreclosure.
11.12 SIGNAGE. Ameristar grants to Kinseth the right to
erect a sign on Ameristar's property at a location to be approved
by Ameristar in its sole and absolute discretion. The costs of
acquiring, erecting and maintaining the sign shall be borne by
Kinseth. Ameristar agrees to grant to Kinseth all necessary
easements allowing the existence of the sign and access to
Kinseth to maintain the sign. The proposed design of the sign
shall be submitted by Kinseth to Ameristar and it shall not be
inconsistent or interfere with the Ameristar sign or obstruct or
interfere with "view corridors" of any Ameristar facility. In
the event of any dispute with respect to the proposed design or
location of the sign, such party agrees to cooperate with the
other party and use its best efforts to immediately resolve the
dispute.
IN WITNESS WHEREOF, the parties have caused this Ground
Lease Agreement to be executed as of the above stated date.
AMERISTAR:
Ameristar Casino Council Bluffs, Inc.
By: /s/Thomas Steinbauer
Its: Vice President
KINSETH:
River Road Hotel Associates, L.C.
By: /s/Leslie B. Kinseth
Its: Member
<PAGE>STATE OF NEVADA )
: ss.
COUNTY OF Clark )
The foregoing instrument was acknowledged before me this
28th day of May, 1999, by Thomas Steinbauer, the Vice President
of Ameristar Casino Council Bluffs, Inc., an Iowa corporation.
My commission expires: /s/Barbara Jean Miller
Notary Public
10/23/00 Residing at: Las Vegas, NV
STATE OF IOWA )
: ss.
COUNTY OF Cerro Gordo )
The foregoing instrument was acknowledged before me this
28th day of May, 1999, by Leslie Kinseth, the Member of River
Road Hotel Associates, L.C., an Iowa limited liability company.
My commission expires: /s/ Donald Jackson, Jr.
Notary Public
9/26/2000 Residing at: 9 Plaza Dr. Clear Lake, IA
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT A-1
SITE PLAN
<PAGE>
EXHIBIT B
AMERISTAR MARKS
<PAGE>
EXHIBIT C
KINSETH AND FRANCHISOR MARKS
<PAGE>
EXHIBIT D
MEMORANDUM OF LEASE
[To be recorded in County Records.]
May 28, 1999
Bruce Kinseth
Kinseth Hotel Corporation
River Road Hotel Associates, L.C.
2 Quail Creek Circle
North Liberty, Iowa 52317
Re: Ground Lease dated May 28, 1999 between Ameristar
Casino Council Bluffs, Inc. ("Ameristar") and River
Road Hotel Associates, L.C. ("River Road")
This is to confirm our understanding with respect to the
Ground Lease Agreement dated May 28, 1999. Ameristar is willing
to give River Road approval to enter onto the Leased Land (as
defined in the Ground Lease) to begin preliminary site work for
the construction of a Hampton Inn hotel. Pending the
effectiveness of the Ground Lease, Sections 2.1 (d) (Construction
Standards), 2.1(e) Insurance During Construction), 2.2
(Compliance with Laws), 3.4 (Governmental Authorities), 3.6
(Limitation on Ameristar's Responsibilities), 5.3 (Public
Liability Insurance), 5.4 (Form of Insurance), and 5.5
(Indemnification) and Article VI (Taxes, Assessments, Liens and
Encumbrances) of the Ground Lease shall apply to Kinseth's
activities with respect to such preliminary site work. Such
provisions of the Ground Lease will be applicable notwithstanding
the existence of conditions precedent to the effectiveness of the
Ground Lease and regardless of whether the Ground Lease becomes
effective or is terminated. River Road will provide evidence of
liability insurance in an amount satisfactory to Ameristar for
such indemnity.
River Road and Ameristar shall proceed with diligence to
satisfy the Conditions to Performance in Section 1.2 of the
Ground Lease. If the conditions to be satisfied by River Road
are not satisfied within the applicable time periods and
Ameristar terminates the Ground Lease, River Road will be
responsible for all costs and expenses necessary to promptly
restore the Leased Land to its condition prior to the execution
of the Ground Lease and the commencement of the site work.
Likewise, if the conditions to be satisfied by Ameristar are not
satisfied within the applicable time periods and River Road
terminates the Ground Lease, Ameristar will be responsible for
all costs and expenses necessary to promptly restore the Leased
Land to its condition prior to the execution of the Ground Lease
and the commencement of the site work.
<PAGE>
Until the Ground Lease becomes effective, if ever, Kinseth
Hotel Corporation shall be jointly and severally liable with
River Road for the obligations under this letter.
Please indicate your agreement to the above by signing in
the space below.
Ameristar Casino Council
Bluffs, Inc., an
Iowa corporation
By: /s/Thomas Steinbauer
Its: Vice President
Agreed and Accepted
River Road Hotel Associates, L.C., an Iowa
limited liability corporation by its Manager
Kinseth Hotel Corporation, an Iowa corporation
By: /s/ Leslie B. Kinseth
Its President
Date May 28, 1999
Kinseth Hotel Corporation, an Iowa corporation
By: /s/ Leslie B. Kinseth
Its President
Date May 28, 1999
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding made as of June 8, 1999 is
between AMERISTAR CASINO COUNCIL BLUFFS, INC. ("AMERISTAR"),
COUNCIL BLUFFS HOTEL ASSOCIATES, L.C. ("CBHA") and RIVER ROAD
HOTEL ASSOCIATES, L.C. ("RRHA").
WHEREAS, Ameristar and CBHA's predecessor-in-interest have
entered into that certain Amended and Restated Ground Lease
Agreement dated as of September 7, 1995 (as amended, the "HOLIDAY
INN LEASE"), pursuant to which CBHA leases from Ameristar certain
land at Ameristar's riverboat casino complex in Council Bluffs,
Iowa (the "AMERISTAR CASINO COMPLEX") and on which CBHA has
constructed and operates, and intends to expand, a Holiday Inn
Hotel & Suites (the "HOLIDAY INN"); and
WHEREAS, Ameristar and RRHA have entered into that certain
Ground Lease Agreement dated as of May 28, 1999 (the "HAMPTON INN
LEASE"), pursuant to which RRHA will lease from Ameristar certain
land at the Ameristar Casino Complex and on which RRHA intends to
construct and operate a Hampton Inn (the "HAMPTON INN"); and
WHEREAS, Section 2.1(b) of the Holiday Inn Lease provides in
pertinent part as follows (references to Kinseth in the Holiday
Inn Lease are references to CBHA):
"Kinseth agrees to permit Ameristar, at
Ameristar's cost, to connect the Building to
an adjacent pavilion or docking facility with
a covered breezeway, and Ameristar agrees to
construct such breezeway, and a pavilion or
docking facility.";
WHEREAS, Section 11.12 of the Holiday Inn Lease provides as
follows:
"Concurrently with its execution of this
Lease, Ameristar does hereby grant Kinseth an
irrevocable license for a term concurrent
with this Lease, and any renewals, to utilize
the swimming pool and related facilities and
appurtenances thereto to be constructed by
Ameristar on its property adjacent to the
Leased Land. Ameristar agrees to obtain
Kinseth's prior written approval of the
construction plans and specifications related
to the pool, and the contractor bids for the
pool, which approval shall not be
unreasonably withheld or delayed. Kinseth
agrees to reimburse one-half (1/2) of the
initial cost of construction of the pool
facilities (including necessary site work) to
a maximum reimbursement by Kinseth of Three
Hundred Seventy-Five Thousand Dollars
($375,000), and one-half (1/2) of the actual
operating expenses of the pool on an ongoing
annual basis. This license shall survive any
foreclosure of the interest of Ameristar or
Kinseth or any permitted successor, by any
fee mortgage holder or any Leasehold
Lender.";
WHEREAS, Section 11.9 of the Holiday Inn Lease provides as
follows:
"Kinseth acknowledges that Ameristar may
construct or permit the construction of
another hotel or hotels on or near the Casino
Property and that such hotel(s) will be
entitled to compete with Kinseth's hotel.
Nothing in this Lease shall be deemed to be a
covenant by Ameristar not to compete with
Kinseth or not to permit such competition by
other hotel owners or
<PAGE>operators, or to permit other hotel
owners or operators or other third-parties to
utilize parking areas on the Casino Property
on a nonexclusive basis.";
WHEREAS, Section 2.1(b) of the Hampton Inn Lease provides in
pertinent part as follows (references in the Hampton Inn Lease
are references to RRHA):
"Kinseth agrees to connect the Building to
the adjacent hotel and/or pavilion and casino
with a covered, climate controlled
breezeway.";
WHEREAS, Section 11.9 of the Hampton Inn Lease provides as
follows:
"Kinseth acknowledges that Ameristar
operates, and may construct or permit the
construction of another hotel or hotels on or
near the Casino Property and that such
hotel(s) will be entitled to compete with
Kinseth's hotel. Nothing in this Lease shall
be deemed to be a covenant by Ameristar not
to compete with Kinseth or not to permit such
competition by other hotel owners or
operators, or to permit other hotel owners or
operators or other third-parties to utilize
parking areas on the Casino Property on a
nonexclusive basis.";
WHEREAS, Ameristar has informed CBHA and RRHA that, under
Ameristar's pre-existing master plan for the Ameristar Casino
Complex, Ameristar may, at some time in the future, desire to
build additional hotel rooms at the place (the "FUTURE
DEVELOPMENT SITE") where the pool and fitness center shared by
Ameristar and CBHA and the indoor walkway between the Holiday Inn
and the pavilion at Ameristar Casino Complex (the "CURRENT
FACILITIES") currently exist, and in connection with such
construction Ameristar would intend to demolish and reconstruct
the Current Facilities;
WHEREAS, CBHA and RRHA have each advised Ameristar that they
do not believe that Ameristar has any right to demolish the
Current Facilities in connection with any such future development
and construction;
WHEREAS, Ameristar has requested that CBHA and RRHA waive
any rights they may have that would restrict or prohibit
Ameristar from demolishing and reconstructing the Current
Facilities; provided, however, that Ameristar neither admits nor
denies that CBHA and/or RRHA have any such rights; and
WHEREAS, CBHA and RRHA are willing to agree in principle
that Ameristar may demolish and reconstruct the Current
Facilities without breaching either the Holiday Inn Lease or the
Hampton Inn Lease subject to certain conditions, and Ameristar is
willing to agree in principle to such conditions.
NOW, THEREFORE, the parties hereto state that their mutual
understanding and agreement in principle with respect to the
subject matter hereof is as follows:
1. CBHA and RRHA acknowledge that Ameristar has right under
the terms of the Holiday Inn Lease and the Hampton Inn Lease,
respectively, to build additional hotel rooms and related
facilities at the Ameristar Casino Complex, including without
limitation at the Future Development Site.
2. Subject to the other provisions of this Memorandum of
Understanding, Ameristar agrees (a) for the benefit of CBHA, and
its lenders and other permitted assigns, to maintain a pool and
fitness center for
<PAGE>the benefit of the Holiday Inn; and (b) for the benefit of
CBHA and RRHA, and each of their respective lenders and other
permitted assigns, to maintain an indoor walkway from the Holiday
Inn to the Pavilion.
3. Ameristar acknowledges construction of additional rooms
will not be contemplated until there is market justification to
build additional rooms. Market justification will include a
study that would indicate there will not be a materially adverse
impact on occupancy and average daily rate for each of the
Holiday Inn and the Hampton Inn in comparison to the then current
averages for comparable properties in the greater Omaha/Council
Bluffs market. Ameristar further acknowledges that since each of
the Holiday Inn Lease and the Hampton Inn Lease provide for
percentage rentals, the level of rentals to be paid by CBHA and
RRHA to Ameristar is materially dependent upon the ability to
drive lodging demand through the existing and future amenities at
the Ameristar Casino Complex. Ameristar currently contemplates
that future amenities to be developed may include expanded gaming
operations (it is acknowledged that development of a third level
addition to the existing riverboat will commence in the near
future), additional parking facilities (it is acknowledged that
development of a parking structure in replacement of surface
parking will commence in the near future), conference or meeting
facilities, arcades, bowling alleys, movie theatres, restaurants,
lounges, shopping outlets and other entertainment, food &
beverage and retail facilities. The parties mutually contemplate
that the development of future amenities will be necessary to
warrant a market justification for the development of additional
hotel rooms at the Ameristar Casino Complex; provided, however,
that Ameristar does not commit to develop in the future any
particular amenities.
4. If Ameristar does develop, or causes to be developed,
additional hotel rooms at the Future Development Site that
disturbs any of the Current Facilities, Ameristar agrees that it
will, at a minimum:
4.1 If required to satisfy non-waivable requirements
of CBHA's current franchisor, build a temporary or permanent
swimming pool that will satisfy such requirements. Subject to
such franchisor requirements, it is contemplated that any such
pool may be an outdoor pool, with an adequate shelter to permit
guest use during the cold weather seasons of the construction
period, if any, or thereafter in the case of a permanent pool.
Any such pool will be conveniently accessible to the Holiday Inn.
If any such pool is constructed, Ameristar may either demolish it
after construction or leave it in place as an additional outdoor
pool for use by Holiday Inn guests.
4.2 Construct and maintain an alternative indoor
walkway between the Holiday Inn and the Ameristar Casino Complex
pavilion; provided, however, that if such an alternative indoor
walkway is not feasible during any portion of the construction
period, Ameristar may instead provide access to the Ameristar
Casino Complex pavilion from the Holiday Inn and the Hampton Inn
via continuously operating shuttle vans operated by Ameristar at
its own expense.
4.3 Compensate CBHA and RRHA for lost operating
profits. The lost operating profits will be determined based
upon the monthly operating results experienced by CBHA and RRHA
during the period of construction of the new hotel, pool, fitness
center and/or indoor walkway, plus an additional three months
immediately following the completion of such construction, as
compared to the monthly operating profits for the corresponding
calendar month immediately preceding the commencement of such
construction; provided, however, that each of CBHA and RRHA shall
have an obligation to seek to maximize operating profits during
these time periods in accordance with their past business
practices; and provided, further, that the aggregate compensation
to CBHA and RRHA for lost operating profits during the three-
month period immediately following completion of construction
will not exceed $150,000. In addition Ameristar will pay CBHA
and RRHA a marketing allowance of $40,000 and $10,000,
respectively, to be used to assist in rebuilding its business.
The payments under this paragraph will be the
<PAGE>only financial consideration payable by Ameristar to CBHA
and RRHA for the impact of the construction and operation by
Ameristar of additional hotel rooms on the Future Development
Site.
4.4 The design plan for any new facilities built in
replacement of any Current Facilities must meet with CBHA, its
permitted assigns, lender and current franchisor approval, such
approvals not to be unreasonably withheld or delayed. In
addition, the design plan for any new walkway in between the
Holiday Inn and the Ameristar Casino Complex pavilion that may be
built in replacement of the current walkway must meet with RRHA,
its permitted assigns, lender and current franchisor approval,
such approvals not to be unreasonably withheld or delayed. Any
such new facilities will be of equal or better quality as the
applicable Current Facilities, and the pool and fitness center
shall have similar amenities to the Current Facilities and be
sized to accommodate guests from the Holiday Inn and all other
hotels utilizing such facilities. The location of any such new
pool and fitness center will be within the footprint of the new
facilities constructed on the Future Development Site, will be
conveniently accessible to the Holiday Inn guests and will be
readily identifiable as facilities shared by the Holiday Inn and
Ameristar hotels. Any such new walkway will provide as
convenient and as comfortable access as the current walkway and
will provide access as direct as reasonably possible between the
Holiday Inn and the Ameristar Casino Complex pavilion.
4.5 The development of the new hotel, including the
construction thereof, will not unreasonably interfere with
ingress, egress or parking of the Holiday Inn or Hampton Inn
guests, employees or suppliers. Ameristar will at all times
maintain the roadways, ingress, egress and parking so that the
Holiday Inn and Hampton Inn guests, employees and suppliers have
access to the respective hotels generally as convenient as in
existence prior to the commencement of construction. Ameristar
will cooperate with CBHA and RRHA so that construction times will
not unreasonably interfere with their respective guests peaceful
enjoyment of their hotel stay. Notwithstanding the foregoing,
CBHA and RRHA acknowledge and agree that there may be some
interference resulting from construction, and the provisions of
Section 4.3 are intended as the sole compensation to CBHA and
RRHA for such interference.
4.6 The cost of construction and opening the new
facilities will be entirely paid by Ameristar. The cost of
operation of the temporary and/or permanent pool(s) and fitness
center will be split between CBHA and Ameristar on a per room pro-
rata basis, except that if the new pool facilities require
lifeguards or other supervision during operating hours then
Ameristar will pay for all of those costs.
<PAGE> 5. The parties hereto agree that this represents a
Memorandum of Understanding and that the specific terms relating
to the general principles will be contained in one or more
definitive agreements and that each party agrees to participate,
in good faith, in negotiating and creating such agreements with
terms consistent with the provisions and intent of this
Memorandum of Understanding.
Dated as of the date first above written.
AMERISTAR CASINO COUNCIL BLUFFS, INC.
By: /s/ Thomas Steinbauer
COUNCIL BLUFFS HOTEL ASSOCIATES, L.C.
By: /s/ Leslie B. Kinseth
RIVER ROAD HOTEL ASSOCIATES, L.C.
By: /s/ Leslie B. Kinseth
EXECUTIVE EMPLOYMENT AGREEMENT
AMERISTAR CASINOS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement is made and entered into
this 10th day of May, 1999, by and between JEFFREY A. BOUGHRUM
("Employee") and AMERISTAR CASINOS, INC. ("Company"), a Nevada
corporation.
WHEREAS, the Company has offered and the Employee has
accepted a position of employment as CORPORATE SENIOR VICE
PRESIDENT OF DEVELOPMENT;
NOW, THEREFORE, for good and valuable consideration and in
consideration of the mutual promises and mutual covenants
contained herein, Company and Employee agree as follows:
1. EMPLOYMENT TERM
This is a one (1) year Agreement commencing as of the 10th
day of May, 1999, and continuing for one (1) year until the 9th
day of May, 2000, unless terminated as hereinafter provided in
Paragraphs 6-9. This Agreement will include a six (6) month
severance package if terminated involuntarily without cause.
This Agreement shall automatically renew from year to year unless
either party gives written notice of their desire to terminate
the Agreement thirty days prior to the expiration of the then-
present term.
As required by the Nevada Gaming Control Board and pursuant
to Ameristar Casinos, Inc. Compliance Program, Employee is
advised that this employment offer is subject to the satisfactory
completion of an investigative process.
2. DUTIES
Employee will perform the duties of the Corporate Senior
Vice President of Development in accordance with the Company's
bylaws and will perform such other duties and services as, from
time to time, are required by the Company's Corporate Management
Team. Employee will become an officer of Ameristar Casinos,
Inc..
3. OTHER SERVICES AND ACTIVITIES
Employee will devote substantially all of his or her efforts
to the Company's business. During the term of this Agreement,
Employee will not engage in any other employment or business
activity or hold any office or position in other companies or
organizations that would pose a conflict of interest with the
Company's business. Employee will obtain the express written
consent of the Company's Corporate Management Team before
engaging in any such activity.
<PAGE>
4. COMPENSATION AND BENEFITS
Employee will be paid an annual salary of Two Hundred
Thousand Dollars ($200,000.00), payable in bi-weekly installments
of Seven Thousand Six Hundred Ninety Two Dollars and 31/100th
Dollars ($7,692.31). Upon Employee's hire date, Company will pay
Employee a sign-on bonus of $15,000.00 less applicable taxes. If
Employee voluntarily terminates his/her employment within one (1)
year of Employee's hire date, immediate reimbursement of the sign-
on bonus is required.
Employee shall also receive 60,000 stock options with a unit
value to be determined by the Board of Directors' Compensation
Committee. The vesting schedule for all stock options will be
five (5) years at the rate of 20% each year.
All subsequent salary increases and/or discretionary
incentive bonuses will be based on Employee's merit performance
and the Company's financial performance in accordance with
Company policy. For Employee's annual discretionary incentive
bonus, Employee will be eligible for up to 35% of Employee's
annual base salary.
Employee will be eligible to participate in the Company's
401 (K) Plan in accordance with the Plan's guidelines.
On the first day of employment, Employee will be eligible to
enroll in the Company's Group Health Benefits Program in
accordance with the Program's guidelines. In addition, Employee
will be enrolled in the Company's Exec-U-Care Program in
accordance with the Program's guidelines.
In accordance with Company policy, Employee will receive
food and beverage complimentary privileges for business and
personal use.
In accordance with Company policy, Employee will be eligible
for complimentary use of the Company's condominiums in Sun
Valley, Idaho.
5. ILLNESS OR DISABILITY OF EMPLOYEE
If Employee is unable to perform services for the Company
for a period of more than 90 days, Company may terminate this
Agreement upon not less than 30 days written notice to the
Employee. In the event of such termination, all of the Company's
obligations hereunder will terminate immediately.
6. DEATH OF EMPLOYEE
This Agreement will terminate immediately upon the death of
the Employee. If Employee dies during the term of this
Agreement, Company will pay to Employee's estate the compensation
that would otherwise be payable to Employee through the end of
the month of Employee's death.
<PAGE>
7. TERMINATION FOR CAUSE
Company may terminate this Agreement and all of its
obligations hereunder upon occurrence of any of the following
events: (a) Employee's material breach of this Agreement; (b)
Employee's gross negligence or willful misperformance of his or
her duties; (c) Employee's conviction of a felony or any other
crime involving moral turpitude or dishonesty which, in the good
faith opinion of the Company, would impair Employee's ability to
perform his or her duties or the Company's business reputation;
(d) Employee's failure or refusal to comply with Company
policies, standards or regulations; (e) Employee's unauthorized
disclosure of Company trade secrets and other confidential
business information; (f) Employee's unsatisfactory job
performance; (g) Employee's breach of his or her duty of loyalty;
or (h) Employee's act of fraud, misrepresentation, theft or
embezzlement or the misappropriation of corporate assets.
8. TERMINATION WITHOUT CAUSE
SHOULD THE COMPANY TERMINATE EMPLOYEE WITHOUT CAUSE DURING
THE TERM OF THE AGREEMENT, THE TOTAL AMOUNT OWING OF
COMPENSATION, BENEFITS, AND WAGES SHALL BE SIX MONTHS' WORTH OF
EMPLOYEE'S ANNUAL SALARY AT THE TIME OF TERMINATION. NO OTHER
COMPENSATION, BENEFITS, OR WAGES WILL BE DUE AND OWING TO
EMPLOYEE.
9. COVENANT NOT TO COMPETE
If Employee voluntarily terminates employment with Company
before the expiration of any employment contract, Employee is
subject to a "non-compete" clause in companies that operate
casinos for one (1) year from the date of Employee's voluntary
termination. This non-compete clause will cover properties in
the Las Vegas area.
The parties agree that the restrictions and limitations
contained in this Paragraph are reasonable as to scope and
duration and are necessary to protect the Company's interests and
to preserve for the Company the competitive advantage derived
from maintaining such information as secret. In the event that
any of the restrictions and limitations contained in this
Paragraph are deemed to exceed the time or geographic limitations
permitted by Nevada law, then such provisions of this Paragraph
shall be reformed to the maximum time and geographical
limitations permitted by Nevada law.
10. CONFIDENTIAL INFORMATION
Employee agrees that he/she will not use or disclose
(directly or indirectly) any Confidential Information and Trade
Secrets of the Company whether in written, verbal, or model form,
at any time or in any manner, except as required and authorized
by the Company in the course of employment with the Company. The
obligations of this Agreement are continuing and survive the
termination of Employee's employment relationship with the
Company. Employee acknowledges and agrees that such trade
secrets and other confidential information constitute the
Company's sole and exclusive property. For purposes of this
Paragraph, the term "confidential information and trade secrets"
refers to any information that is not generally known to persons
engaged in business similar to that conducted or contemplated by
the Company and includes,
<PAGE>
without limitation: know how, trade secrets, business
plans, copyrights, inventions, patents, intellectual property,
data, process, process parameters, methods, practices, products,
product design information, research and development data,
financial records, operational manuals, pricing, technical plans,
computer programs, customer information, customer lists, price
lists, supplier lists, marketing plans, financial information,
and/or all other compilations of information which relate to the
business of the Company, and any other propriety material of the
Company, which have not been released by the Company to the
general public.
Upon termination of his or her employment, Employee shall
turn over to the Company the originals, plus all copies, of any
and all files, Rolodex cards, phone books, papers, notes, price
lists, customer contracts, bids, customer lists, files,
notebooks, books, memoranda, drawings, or other documents made,
compiled by or delivered to him/her concerning any customer
served by the Company or any product, apparatus, or process
manufactured, used, developed or investigated by the Company or
containing any Confidential Information or Trade Secrets or
otherwise relating to Employee's performance of duties under this
Agreement. Employee further acknowledges and agrees that all
such documents are the Company's sole and exclusive property.
11. INDEMNIFICATION
Employee will keep, save, protect, defend, indemnify and
hold Company harmless from and against any and all costs, claims,
expenses, damages, or deficiencies resulting from any
misrepresentation, breach, default or non-fulfillment of any
agreement or covenant set forth in this Agreement.
12. BREACH OF THE AGREEMENT
In the event of any claimed breach of this Agreement, the
party claimed to have committed the breach will be entitled to
written notice of the alleged breach and a period of 10 days in
which to remedy such breach. Employee acknowledges and agrees
that a breach of any of the covenants contained in this Agreement
will result in irreparable and continuing harm to the Company for
which there will be no adequate remedy at law. The Company will
be entitled to preliminary and permanent injunctive relief to
restrain Employee from violating the terms and conditions of this
Agreement in addition to other valuable remedies, at law and in
equity.
13. DISPUTE RESOLUTION
Except for a claim by either Employee or Company for
injunctive relief, any dispute or difference of opinion between
Employee and Company involving the meaning, interpretation, and
application of any provision of this Agreement shall be adjusted
exclusively through binding arbitration pursuant to the National
Rules for the Resolution of Employment Disputes. The arbitrator
shall have no authority, jurisdiction, or power to amend, modify,
nullify, or add to the provisions of this Agreement. The
arbitrator shall have no authority to award noneconomic damages
or punitive damages except where such relief is specifically
authorized by an applicable state or federal statute which
creates a cause of action in the employment context. In such a
situation, the arbitrator shall specify in his or her award the
specific statute under which he or she
<PAGE>
has granted such relief. Costs shall be awarded to the
prevailing party by the arbitrator. Each party shall pay their
own attorney's fees. No request to arbitrate will be entertained
or processed unless it is received in writing by either party to
this Agreement within thirty (30) calendar days after the
occurrence of the event giving rise to the dispute. In the event
a request to arbitrate is made by a party, the parties to this
Agreement hereby agree to select an arbitrator from the following
list by mutual strike:
Gerald R. McKay
Geraldine M. Randall
Randall Jones
Sal Gugino
Kirk Harrison
Franklin Silver
In the event that none of these designated arbitrators may serve,
the parties agree to have the Las Vegas office of the American
Arbitration Association furnish them a panel of seven (7)
arbitrators all of whom are members of the National Academy of
Arbitrators and who reside in Southern California or Southern
Nevada from which an arbitrator shall be selected between the
parties by mutual strike.
14. NOTICES
Any notice required or desired to be given under this
Agreement by either party to the other shall be in writing and
may be effected by personal delivery or by registered or
certified mail at the addresses listed below or at such other
addresses as either party may notify the other:
A. If to the Company, to: Corporate Vice President of Human
Resources, or designee
Ameristar Casinos, Inc.
3773 Howard Hughes Parkway, Suite 490S
Las Vegas, Nevada 89109
B. If to the Employee, to: 1804 Crystal Glen Court
Las Vegas, NV 89117
Notices personally delivered will be deemed effective upon
receipt. Notices sent by registered or certified mail will be
deemed effective three (3) days after mailing.
<PAGE>
15. ENFORCEMENT
This Agreement shall be construed in accordance with and
governed for all purposes by the laws of the State of Nevada. In
case any one or more provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been
contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be
excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and
reducing it, so as to be enforceable to the maximum extent
compatible with the applicable law as it shall then appear.
16. AMENDMENTS
This Agreement may be amended or modified only by a writing
executed and agreed upon by both parties.
17. WAIVER
Waiver by either party of any term or condition of this
Agreement or any breach hereof will not operate or be construed
as a waiver of any other term or condition or subsequent breach.
No waiver shall be binding unless executed in writing by the
parties making the waiver.
18. ASSIGNMENT
Employee acknowledges that his or her services are unique
and personal and, accordingly, that Employee may not assign his
or her rights or delegate his or her duties and obligations under
this Agreement. The Company's rights and obligations under this
Agreement will inure to the benefit of, and be binding upon, the
Company's successors and assigns.
19. MERGER
This Agreement constitutes the entire agreement of the
parties and supersedes all prior agreements, arrangements and
communications between the parties, whether oral or written.
20. HEADINGS
The headings of the Paragraphs of this Agreement are for
convenience only and shall not affect the construction or
interpretation of any of its provisions.
<PAGE>
21. REVIEW/UNDERSTANDING OF AGREEMENT
Each party to this Agreement has reviewed the Agreement with
legal counsel of their choice and has had the opportunity to
modify or eliminate any ambiguous provisions. Therefore, it is
agreed that each party hereto is considered a drafter of this
Agreement and that the contract interpretation rule which holds
ambiguities are to be interpreted against the original drafter of
a document is expressly waived by the parties
22. COUNTERPARTS
This Agreement may be executed in any number of counterparts
conformed by facsimile signatures transmitted by telephone, each
of which shall be deemed a duplicate original.
COMPANY: EMPLOYEE:
BY: /s/ John R. Sims BY: /s/ Jeffrey A. Boughrum
ITS: Corp VP of Human Resources
DATE: June 14, 1999 DATE: June 14, 1999
AMERISTAR CASINOS, INC.
1999 STOCK INCENTIVE PLAN
SECTION 1. Purposes.
The purposes of the Ameristar Casinos, Inc. 1999 Stock
Incentive Plan (the "Plan") are to (i) enable Ameristar Casinos,
Inc. (the "Company") and Related Companies (as defined below) to
attract, motivate and retain top-quality directors, officers,
employees, consultants, advisers and independent contractors
(including without limitation dealers, distributors and other
business entities or persons providing services on behalf of the
Company or a Related Company), (ii) provide substantial
incentives for such directors, officers, employees, consultants,
advisers and independent contractors of the Company or a Related
Company ("Participants") to act in the best interests of the
stockholders of the Company and (iii) reward extraordinary effort
by Participants on behalf of the Company or a Related Company.
For purposes of the Plan, a "Related Company" means any
corporation, partnership, joint venture or other entity in which
the Company owns, directly or indirectly, at least a twenty
percent (20%) beneficial ownership interest.
SECTION 2. Types of Awards. Awards under the Plan may be
in the form of (i) Stock Options or (ii) Restricted Stock.
SECTION 3. Administration.
3.1 Except as otherwise provided herein, the Plan shall be
administered by the Compensation Committee of the Board of
Directors of the Company (the "Board") or such other committee of
directors as the Board shall designate, which committee in either
such case shall consist solely of not less than two "non-employee
directors" (as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any
successor rule ("Rule 16b-3")) who shall serve at the pleasure of
the Board, each of whom shall also be an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code
and Section 1.162-27 of the Treasury Regulations or any successor
provision(s) thereto ("Section 162(m)"); provided, however, that
if there are not two persons on the Board who meet the foregoing
qualifications, any such committee may be comprised of two or
more directors of the Company, none of which is an officer (other
than a non-employee Chairman of the Board of the Company) or an
employee of the Company or a Related Company. If no such
committee has been appointed by the Board, the Plan shall be
administered by the Board, and the Plan shall be administered by
the Board to the extent provided in the last sentence of this
Section. Such committee as shall be designated to administer the
Plan, if any, or the Board is referred to herein as the
"Committee." Notwithstanding any other provision of the Plan to
the contrary, if such a committee has been designated to
administer the Plan, all actions with respect to the
administration of the Plan in respect of the members of such
committee shall be taken by the Board.
<PAGE>
3.2 The Committee shall have the following authority with
respect to awards under the Plan to Participants: to grant
awards to eligible Participants under the Plan; to adopt, alter
and repeal such administrative rules, guidelines and practices
governing the Plan as it shall deem advisable; to interpret the
terms and provisions of the Plan and any award granted under the
Plan; and to otherwise supervise the administration of the Plan.
In particular, and without limiting its authority and powers, the
Committee shall have the authority:
(a) to determine whether and to what extent any
award or combination of awards will be granted
hereunder;
(b) to select the Participants to whom awards
will be granted;
(c) to determine the number of shares of the
common stock of the Company, $0.01 par value (the
"Stock"), to be covered by each award granted
hereunder, provided that no Participant will be granted
Stock Options on or with respect to more than 200,000
shares of Stock in any calendar year;
(d) to determine the terms and conditions of any
award granted hereunder, including, but not limited to,
any vesting or other restrictions based on performance
and such other factors as the Committee may determine,
and to determine whether the terms and conditions of
the award are satisfied;
(e) to determine the treatment of awards upon a
Participant's retirement, disability, death,
termination for cause or other termination of
employment or other qualifying relationship with the
Company or a Related Company;
(f) to determine that amounts equal to the amount
of any dividends declared with respect to the number of
shares covered by an award (i) will be paid to the
Participant currently or (ii) will be deferred and
deemed to be reinvested or (iii) will otherwise be
credited to the Participant, or that the Participant
has no rights with respect to such dividends;
(g) to determine whether, to what extent, and
under what circumstances Stock and other amounts
payable with respect to an award will be deferred
either automatically or at the election of a
Participant, including providing for and determining
the amount (if any) of deemed earnings on any deferred
amount during any deferral period;
(h) to provide that the shares of Stock received
as a result of an award shall be subject to a right of
first refusal, pursuant to which the Participant shall
be required to offer to the Company any shares that the
Participant wishes to sell, subject to such terms and
conditions as the Committee may specify;
<PAGE>
(i) to amend the terms of any award,
prospectively or retroactively; provided, however, that
no amendment shall impair the rights of the award
holder without his or her consent; and
(j) to substitute new Stock Options for
previously granted Stock Options, or for options
granted under other plans, in each case including
previously granted options having higher option prices.
3.3 All determinations made by the Committee pursuant to
the provisions of the Plan shall be final and binding on all
persons, including the Company and all Participants.
3.4 The Committee may from time to time delegate to one or
more officers of the Company any or all of its authorities
granted hereunder except with respect to awards granted to
persons subject to Section 16 of the Exchange Act. The Committee
shall specify the maximum number of shares that the officer or
officers to whom such authority is delegated may award, and the
Committee may in its discretion specify any other limitations or
restrictions on the authority delegated to such officer or
officers.
SECTION 4. Stock Subject to Plan.
4.1 The total number of shares of Stock reserved and
available for distribution under the Plan shall be 2,600,000
(subject to adjustment as provided in Section 4.3); provided,
however, that no award of a Stock Option or Restricted Stock may
be made at any time if, after giving effect to such award,
(i) the total number of shares of Stock issued upon the exercise
of options under the Plan and the Company's Management Stock
Option Incentive Plan, as amended and restated through
September 4, 1996 (the "Prior Plan") plus (ii) the total number
of shares of Stock issuable upon exercise of all outstanding
options of the Company under the Plan and the Prior Plan plus
(iii) the total number of shares of Stock underlying awards of
Restricted Stock under the Plan (whether or not the applicable
restrictions have lapsed) would exceed 2,600,000 shares (subject
to adjustment as provided in Section 4.3). Shares of Stock
issuable in connection with any award under the Plan may consist
of authorized but unissued shares or treasury shares.
4.2 To the extent a Stock Option terminates without having
been exercised, or shares awarded are forfeited, the shares
subject to such award shall again be available for distribution
in connection with future awards under the Plan, subject to the
limitations set forth in Section 4.1, unless the forfeiting
Participant received any benefits of ownership such as dividends
from the forfeited award.
4.3 In the event of any merger, reorganization,
consolidation, sale of substantially all assets,
recapitalization, Stock dividend, Stock split, spin-off, split-
up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, a substitution or
adjustment, as may be determined to be appropriate by the
Committee in its sole discretion, shall be made in the aggregate
number of shares reserved for issuance under the Plan, the number
of shares subject to outstanding awards and the amounts to be
paid by award holders
<PAGE>
or the Company, as the case may be, with respect to outstanding
awards; provided, however, that no such adjustment shall increase
the aggregate value of any outstanding award. In the event any
change described in this Section 4.3 occurs and an adjustment is
made in the outstanding Stock Options, a similar adjustment shall
be made in the maximum number of shares covered by Stock Options
that may be granted to any employee pursuant to Section 3.2(c).
SECTION 5. Eligibility.
Participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those
eligible.
SECTION 6. Stock Options.
6.1 The Stock Options awarded to officers and employees
under the Plan may be of two types: (i) Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code or
any successor provision thereto ("Section 422"); and (ii) Non-
Qualified Stock Options. If any Stock Option does not qualify as
an Incentive Stock Option, or the Committee at the time of grant
determines that any Stock Option shall be a Non-Qualified Stock
Option, it shall constitute a Non-Qualified Stock Option. Stock
Options awarded to any Participant who is not an officer or
employee of the Company or a Related Company shall be Non-
Qualified Stock Options.
6.2 Subject to the following provisions, Stock Options
awarded to Participants under the Plan shall be in such form and
shall have such terms and conditions as the Committee may
determine:
(a) Option Price. The option price per share of
Stock purchasable under a Stock Option shall be
determined by the Committee.
(b) Option Term. The term of each Stock Option
shall be fixed by the Committee, but in no event longer
than one hundred twenty (120) months after the date of
grant of such Stock Option.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such
terms and conditions as shall be determined by the
Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the
Committee may waive such installment exercise
provisions at any time in whole or in part.
(d) Method of Exercise. Stock Options may be
exercised in whole or in part at any time during the
option period by giving written notice of exercise to
the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase
price. Payment of the purchase price shall be made in
such manner as the Committee may provide in the award,
which may include cash (including cash equivalents),
delivery of shares of Stock acceptable to the
<PAGE>
Committee already owned by the optionee or subject to
awards hereunder, any other manner permitted by law as
determined by the Committee, or any combination of the
foregoing. The Committee may provide that all or part
of the shares received upon the exercise of a Stock
Option which are paid for using Restricted Stock shall
be restricted in accordance with the original terms of
the award in question.
(e) No Stockholder Rights. An optionee shall
have no rights to dividends or other rights of a
stockholder with respect to shares subject to a Stock
Option until the optionee has given written notice of
exercise and has paid for such shares.
(f) Surrender Rights. The Committee may provide
that Stock Options may be surrendered for cash upon any
terms and conditions set by the Committee.
(g) Non-Transferability; Limited Transferability.
A Stock Option Agreement may permit an optionee to
transfer the Stock Option to his or her children,
grandchildren or spouse ("Immediate Family"), to one or
more trusts for the benefit of such Immediate Family
members, or to one or more partnerships or limited
liability companies in which such Immediate Family
members are the only partners or members if (i) the
agreement setting forth such Stock Option expressly
provides that such Stock Option may be transferred only
with the express written consent of the Committee, and
(ii) the optionee does not receive any consideration in
any form whatsoever for such transfer other than the
receipt of an interest in the trust, partnership or
limited liability company to which the non-qualified
option is transferred. Any Stock Option so transferred
shall continue to be subject to the same terms and
conditions as were applicable to such Stock Option
immediately prior to the transfer thereof. Any Stock
Option not (x) granted pursuant to any agreement
expressly allowing the transfer of such Stock Option or
(y) amended expressly to permit its transfer shall not
be transferable by the optionee otherwise than by will
or by the laws of descent and distribution, and such
Stock Option shall be exercisable during the optionee's
lifetime only by the optionee.
(h) Termination of Relationship. If an
optionee's employment or other qualifying relationship
with the Company or a Related Company terminates by
reason of death, disability, retirement, voluntary or
involuntary termination or otherwise, the Stock Option
shall be exercisable to the extent determined by the
Committee; provided, however, that unless employment or
such other qualifying relationship is terminated for
cause (as may be defined by the Committee in connection
with the grant of any Stock Option), the Stock Option
shall remain exercisable (to the extent that it was
otherwise exercisable on the date of termination) for
(A) at least six (6) months from the date of
termination if termination was caused by death or
disability or (B) at least
<PAGE>
ninety (90) days from the date of termination if
termination was caused by other than death or
disability. The Committee may provide that,
notwithstanding the option term fixed pursuant to
Section 6.2(b), a Stock Option which is outstanding on
the date of an optionee's death shall remain
outstanding for an additional period after the date of
such death.
(i)
Option Grants to Participants Subject to Section 16.
If for any reason any Stock Option granted to a
Participant subject to Section 16 of the Exchange Act
is not approved in the manner provided for in
clause (d)(1) or (d)(2) of Rule 16b-3, neither the
Stock Option (except upon its exercise) nor the Stock
underlying the Stock Option may be disposed of by the
Participant until six months have elapsed following the
date of grant of the Stock Option, unless the Committee
otherwise specifically permits such disposition.
6.3 Notwithstanding the provisions of Section 6.2, no
Incentive Stock Option shall (i) have an option price which is
less than one hundred percent (100%) of the Fair Market Value (as
defined below) of the Stock on the date of the award of the Stock
Option (or less than one hundred ten percent (110%) of the Fair
Market Value of the Stock on the date of award of the Stock
Option if the Participant owns, or would be considered to own by
reason of Section 424(d) of the Internal Revenue Code or any
successor provision thereto, more than ten percent (10%) of the
total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company at the time of
the grant of the Stock Option), (ii) be exercisable more than
ten (10) years after the date such Incentive Stock Option is
awarded (five (5) years after the date of award if the
Participant owns, or would be considered to own by reason of
Section 424(d) of the Internal Revenue Code or any successor
provision thereto, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
any parent or subsidiary of the Company at the time of the grant
of the Stock Option), (iii) be awarded more than ten (10) years
after the effective date of the Plan (or the latest restatement
of the Plan) or (iv) be transferable other than by will or by the
laws of descent and distribution. In addition, the aggregate
Fair Market Value (determined as of the time a Stock Option is
granted) of Stock with respect to which Incentive Stock Options
granted after December 31, 1986 are exercisable for the first
time by a Participant in any calendar year (under the Plan and
any other plans of the Company or any subsidiary or parent
corporation) shall not exceed $100,000. For purposes of the
Plan, "Fair Market Value" in relation to a share of the Stock
means, if the Stock is publicly traded, the mean between the
highest and lowest quoted selling prices of the Common Stock on
such date or, if not available, the mean between the bona fide
bid and asked prices of the Common Stock on such date. In any
situation not covered above, the Fair Market Value shall be
determined by the Committee in accordance with one of the
valuation methods described in Section 20.2031-2 of the Federal
Estate Tax Regulations (or any successor provision thereto).
SECTION 7. Restricted Stock.
Subject to the following provisions, all awards of
Restricted Stock to Participants shall be in such form and shall
have such terms and conditions as the Committee may determine:
<PAGE>
(a) The Restricted Stock award shall specify the
number of shares of Restricted Stock to be awarded, the
price, if any, to be paid by the recipient of the
Restricted Stock and the date or dates on which, or the
conditions upon the satisfaction of which, the
Restricted Stock will vest. The vesting of Restricted
Stock may be conditioned upon the completion of a
specified period of service with the Company or a
Related Company, upon the attainment of specified
performance goals or upon such other criteria as the
Committee may determine.
(b) Stock certificates representing the
Restricted Stock awarded to an employee shall be
registered in the Participant's name, but the Committee
may direct that such certificates be held by the
Company on behalf of the Participant. Except as may be
permitted by the Committee, no share of Restricted
Stock may be sold, transferred, assigned, pledged or
otherwise encumbered by the Participant until such
share has vested in accordance with the terms of the
Restricted Stock award. At the time Restricted Stock
vests, a certificate for such vested shares shall be
delivered to the Participant (or his or her designated
beneficiary in the event of death), free of all
restrictions.
(c) The Committee may provide that the
Participant shall have the right to vote or receive
dividends, or both, on Restricted Stock. The Committee
may provide that Stock received as a dividend on, or in
connection with a stock split of, Restricted Stock
shall be subject to the same restrictions as the
Restricted Stock.
(d) Except as may be provided by the Committee,
in the event of a Participant's termination of
employment or other qualifying relationship with the
Company or a Related Company before all of his or her
Restricted Stock has vested, or in the event any
conditions to the vesting of Restricted Stock have not
been satisfied prior to any deadline for the
satisfaction of such conditions set forth in the award,
the shares of Restricted Stock which have not vested
shall be forfeited, and the Committee may provide that
the lower of (i) any purchase price paid by the
Participant and (ii) the Restricted Stock's aggregate
Fair Market Value on the date of forfeiture shall be
paid in cash to the Participant.
(e) The Committee may waive, in whole or in part,
any or all of the conditions to receipt of, or
restrictions with respect to, any or all of the
Participant's Restricted Stock.
(f) If for any reason any Restricted Stock
awarded to a Participant subject to Section 16 of the
Exchange Act is not approved in the manner provided for
in clause (d)(1) or (d)(2) of Rule 16b-3, the
Restricted Stock may not be disposed of by the
Participant until six months have elapsed following the
date of award of the Restricted Stock, unless the
Committee otherwise specifically permits such
disposition.
SECTION 8. Election to Defer Awards.
The Committee may permit a Participant to elect to defer
receipt of an award for a specified period or until a specified
event, upon such terms as are determined by the Committee.
SECTION 9. Tax Withholding.
9.1 Each Participant shall, no later than the date as of
which the value of an award first becomes includible in such
person's gross income for applicable tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee
(which may include delivery of shares of Stock already owned by
the optionee or subject to awards hereunder) regarding payment
of, any federal, state, local or other taxes of any kind required
by law to be withheld with respect to the award. The obligations
of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company (and, where applicable,
any Related Company), shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
9.2 To the extent permitted by the Committee, and subject
to such terms and conditions as the Committee may provide, a
Participant may elect to have the withholding tax obligation, or
any additional tax obligation with respect to any awards
hereunder, satisfied by (i) having the Company withhold shares of
Stock otherwise deliverable to such person with respect to the
award or (ii) delivering to the Company shares of unrestricted
Stock.
SECTION 10. Amendments and Termination.
No awards may be granted under the Plan more than ten (10)
years after the date of approval of the Plan by the stockholders
of the Company. The Board may discontinue the Plan at any
earlier time and may amend it from time to time. No amendment or
discontinuation of the Plan shall adversely affect any award
previously granted without the award holder's written consent.
Amendments may be made without stockholder approval except (i) if
and to the extent necessary to satisfy any applicable mandatory
legal or regulatory requirements (including the requirements of
any stock exchange or over-the-counter market on which the Stock
is listed or qualified for trading and any requirements imposed
under any state securities laws or regulations as a condition to
the registration of securities distributable under the Plan or
otherwise), or (ii) as required for the Plan to satisfy the
requirements of Section 162(m), Section 422 or any other non-
mandatory legal or regulatory requirements if the Board of
Directors deems it desirable for the Plan to satisfy any such
requirements.
SECTION 11. Acceleration of Vesting in Certain
Circumstances.
Notwithstanding any other provision of the Plan, upon the
dissolution or liquidation of the Company or upon any
reorganization, merger or consolidation with one or more
corporations or other entities as a result of which the Company
is not the surviving entity, or upon a sale of all or
substantially all of the assets of the Company to another
corporation or
<PAGE>
entity, the Committee may take such action, if any, as it in its
discretion may deem appropriate: (i) to accelerate the time
within which and the extent to which Options may be exercised, to
terminate Options at or prior to the date of any such event or to
provide for the assumption of Options by surviving, consolidated,
successor or transferee corporations or entities; or (ii) to
waive any restrictions applicable to any outstanding Restricted
Stock awards under the Plan, following which such shares shall be
deemed fully vested, or to provide that any securities or other
consideration issuable to the Participant in respect of such
Restricted Stock by the surviving, consolidated, successor or
transferee corporations or entities shall remain subject to the
restrictions applicable to such Restricted Stock award.
SECTION 12. General Provisions.
12.1 If the granting of any award under the Plan or the
issuance, purchase or delivery of Stock thereunder shall require,
in the determination of the Committee from time to time and at
any time, (i) the listing, registration or qualification of the
Stock subject or related thereto upon any securities exchange or
over-the-counter market or under any federal or state law or
(ii) the consent or approval of any government regulatory body,
then any such award shall not be granted or exercised, in whole
or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained on
conditions, if any, as shall be acceptable to the Committee. In
addition, in connection with the granting or exercising of any
award under the Plan, the Committee may require the recipient to
agree not to dispose of any Stock issuable in connection with
such award, except upon the satisfaction of specified conditions,
if the Committee determines such agreement is necessary or
desirable in connection with any requirement or interpretation of
any federal or state securities law, rule or regulation.
12.2 Nothing set forth in this Plan shall prevent the Board
from adopting other or additional compensation arrangements.
Neither the adoption of the Plan nor any award hereunder shall
confer upon any employee of the Company, or of a Related Company,
any right to continued employment, and no award under the Plan
shall confer upon any director any right to continued service as
a director.
12.3 Determinations by the Committee under the Plan relating
to the form, amount, and terms and conditions of awards need not
be uniform, and may be made selectively among persons who receive
or are eligible to receive awards under the Plan, whether or not
such persons are similarly situated.
12.4 No member of the Board or the Committee, nor any
officer or employee of the Company acting on behalf of the Board
or the Committee, shall be personally liable for any action,
determination or interpretation taken or made with respect to the
Plan, and all members of the Board or the Committee and all
officers or employees of the Company acting on their behalf
shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action,
determination or interpretation.
<PAGE>
SECTION 13. Effective Date of Plan.
The Plan shall be effective upon the approval of the Plan by
(i) the Board of Directors of the Company and (ii) the
stockholders of the Company acting by a majority of the votes
cast at a duly held meeting of stockholders at which a quorum
representing at least a majority of the outstanding shares is,
either in person or by proxy, present and voting on the Plan.
The Plan was duly approved by the Board of Directors of the
Company on April 26, 1999 and by stockholders of the Company on
June 11, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This data should be reviewed in conjunction with the financial statements
included in this filing.
</LEGEND>
<CIK> 0000912145
<NAME> AMERISTAR CASINOS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 23,279
<SECURITIES> 0
<RECEIVABLES> 1,554
<ALLOWANCES> 0
<INVENTORY> 3,339
<CURRENT-ASSETS> 39,134
<PP&E> 398,533
<DEPRECIATION> 102,890
<TOTAL-ASSETS> 353,359
<CURRENT-LIABILITIES> 48,195
<BONDS> 100,000
0
0
<COMMON> 204
<OTHER-SE> 68,386
<TOTAL-LIABILITY-AND-EQUITY> 353,359
<SALES> 146,207
<TOTAL-REVENUES> 146,207
<CGS> 0
<TOTAL-COSTS> 132,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,247
<INCOME-PRETAX> 1,124
<INCOME-TAX> 458
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 666
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
EXHIBIT 99.1
SUPPLEMENTAL AGREEEMENT 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 omitted exhibits and schedules to
Exhibits10.1 and 10.2 to ACI's Quarterly Report on Form 10-Q
dated August 13, 1999, relating to the ground leases at
Ameristar Casino Council Bluffs. Each such Exhibit includes
a list setting forth a description of the omitted exhibits
and schedules.
