-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AW8TT7W9v2LCVbnR1AEAkerhb1pXkU4BtIC0x86F0Of722UMJsyKkT85f11q95j+ KlfuHEOk5MZoUPoGSjAofw== 0000912145-00-000005.txt : 20000331 0000912145-00-000005.hdr.sgml : 20000331 ACCESSION NUMBER: 0000912145-00-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERISTAR CASINOS INC CENTRAL INDEX KEY: 0000912145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880304799 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22494 FILM NUMBER: 588936 BUSINESS ADDRESS: STREET 1: 3773 HOWARD HUGHES PKWY STREET 2: SUITE 490 SOUTH CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 702-567-7000 MAIL ADDRESS: STREET 1: 3773 HOWARD HUGHES PKWY STREET 2: SUITE 490 SOUTH CITY: LAS VEGAS STATE: NV ZIP: 89109 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 Identification Incorporation or Organization) No.) 3773 HOWARD HUGHES PARKWAY SUITE 490 SOUTH LAS VEGAS, NEVADA 89109 (Address of Principal Executive Offices) Registrant's Telephone Number: (702) 567-7000 Securities registered pursuant to Section 12(b) of the Act: NONE (Title of Class) Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 15, 2000, 20,375,264 shares of Common Stock of the registrant were issued and outstanding. The aggregate market value of the voting stock of the registrant held by non- affiliates as of March 15, 2000 was approximately $10,621,000, based on the Nasdaq-NMS closing price for the registrant's Common Stock on such date. Portions of the registrant's definitive Proxy Statement for its June 16, 2000 Annual Meeting of Stockholders (which has not been filed as of the date of this filing) are incorporated by reference into Part III. 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. 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 - Risk Factors" below for discussion of some of the factors, risks and uncertainties that could affect the outcome of future results contemplated by forward-looking statements. PART I ITEM 1. BUSINESS INTRODUCTION Ameristar Casinos, Inc. is a multi-jurisdictional gaming company that owns and operates casinos and related hotel, food and beverage, entertainment and other facilities, with five properties in operation in Nevada, Mississippi and Iowa. All of the Company's principal operations are conducted through wholly owned subsidiaries. Unless otherwise indicated, or the context otherwise requires, the term "Ameristar" or "ACI" refers to Ameristar Casinos, Inc., a Nevada corporation, and the term the "Company" or "we" refers to Ameristar and its subsidiaries. The Company's properties are: THE JACKPOT PROPERTIES - Cactus Petes Resort Casino ("Cactus Petes") and The Horseshu Hotel & Casino ("The Horseshu"; and collectively with Cactus Petes, the "Jackpot Properties"), were the Company's first two casino-hotels and are located on U.S. Highway 93 in Jackpot, Nevada at the Idaho border. AMERISTAR VICKSBURG - Ameristar Casino Vicksburg is located in Vicksburg, Mississippi, one-quarter mile north of Interstate 20, the main east-west thoroughfare connecting Atlanta and Dallas, approximately 45 miles west of Jackson, Mississippi. Ameristar Vicksburg includes a permanently moored, dockside casino (the "Vicksburg Casino") and related land-based facilities, including a 150-room hotel which opened in June 1998 (collectively, "Ameristar Vicksburg"). AMERISTAR COUNCIL BLUFFS - Ameristar Casino Hotel Council Bluffs is located near the Nebraska Avenue exit on Interstate 29 in Council Bluffs, Iowa, across the Missouri River from Omaha, Nebraska. Ameristar Council Bluffs includes a cruising riverboat casino (the "Council Bluffs Casino"), an Ameristar hotel and other related land- based facilities (collectively, "Ameristar Council Bluffs"). THE RESERVE - The Reserve Hotel Casino ("The Reserve"), featuring an African safari and big game reserve theme that includes statues of elephants, giraffes and other animals, opened on February 10, 1998 at the junction of Lake Mead Drive and Interstate 515 in Henderson, Nevada, a suburb of Las Vegas. BUSINESS AND MARKETING STRATEGIES The Company's business strategy is to (1) emphasize quality dining, lodging, entertainment and other non-gaming amenities at affordable prices to complement and enhance its gaming operations, (2) promote its properties as entertainment destinations, (3) construct facilities appropriate to individual markets, (4) emphasize courteous and responsive service to develop customer loyalty and (5) utilize marketing programs to promote customer retention. The Company believes this strategy will continue to distinguish the Company from its competitors, many of whom outside of Las Vegas have not emphasized non-gaming amenities in their operations to the same extent as the Company. The Company's properties emphasize slot machine play, and the Company invests on an ongoing basis in new slot equipment to promote customer satisfaction and loyalty. Historically, slot revenues at each property have exceeded 65% of total gaming revenue. All of the Company's properties include table games such as blackjack, craps and roulette. In addition, Cactus Petes and Ameristar Vicksburg offer poker, the Jackpot Properties and The Reserve offer keno and sports book wagering and The Reserve offers bingo. The Company generally emphasizes competitive minimum and maximum betting limits based on each market. The Company's gaming revenues are derived and are expected to continue to be derived from a broad base of customers, and therefore the Company does not depend upon high-stakes players. The Company extends credit to its Nevada and Mississippi gaming customers only in limited circumstances and limited amounts on a short-term basis and in accordance with the credit restrictions imposed by gaming regulatory authorities. The Iowa gaming statutes prohibit the issuance of casino credit. The Company's marketing strategy is to develop a loyal customer base by promoting the quality of the Company's gaming, leisure and entertainment amenities that emphasize high standards of service and customer satisfaction. The Company uses players clubs at each property to identify and retain preferred players and develop promotions and special events to encourage increased gaming activity by these customers. Ameristar introduced the first self-comping players club to the Las Vegas market at The Reserve. The Company's marketing programs also include a number of promotions, designed primarily to increase the frequency of customer visits within local markets particularly tied to gaming activities, as well as tour and travel promotional packages in certain markets. The Company uses a variety of advertising media to market its properties, including print, television, radio, outdoor and internet advertising and direct mail promotions. The level of marketing and promotional efforts varies among properties based on competitive and seasonal factors in each market. EXPANSION STRATEGY The Company seeks to expand its operations through a variety of means, including entering new North American markets created by the legalization of casino gaming, developing new casinos or buying existing casinos in established North American casino gaming markets, expanding through continued growth in its existing facilities, and selectively pursuing expansion projects through Native American reservations in North America. Although the Company's preference is to own and operate each of its gaming properties, the Company also considers expansion opportunities involving management contracts or joint ventures. On October 28, 1999, Ameristar Casino St. Louis, Inc. ("ACSLI"), a newly formed wholly owned subsidiary of ACI, filed an application with the Missouri Gaming Commission seeking a gaming license for a site along the Mississippi River in Lemay, Missouri, a community in South St. Louis County. In conjunction with this application, ACSLI has entered into an agreement with the current lessee of the proposed site for the assignment of the lease. The Company has also recently obtained a commitment to refinance its Revolving Credit Facility, increasing its available borrowing capacity to $265 million to fund a substantial portion of the development costs for this project. The balance of the financing for this project will be provided primarily by operating cash flow. The Company's current plans for the Ameristar Casino St. Louis at Lemay call for a floating barge located within a basin and integrated within a larger main frame structure that is adjacent to the Mississippi River. The Company expects that the project will consist of a single level building of approximately 215,920 square feet and that the casino will consist of 70,000 square feet of floating gaming area with 2,000 slot machines, 50 blackjack tables, two Roulette or big wheel games, eight crap/dice games, one cashier coin cage with slot and table fills and three change booths with beverage dispensing counters. The project is expected to include two casino bars with service stations, including a 50-seat entertainment lounge, as well as several restaurants, meeting rooms, a Missouri retail shop and a VIP lounge. The total cost for the development and construction of the project is expected to be approximately $150 million. The project also calls for a 150-room hotel adjacent to the casino to be built by a strtegic partner. This project is in the preliminary stages and subject to numerous contingencies, including, for example, the satisfactory completion of due diligence concerning the proposed site, the selection of the Company's application for investigation by the Missouri Gaming Commission, obtaining various other regulatory permits and approvals and completing financing arrangements for the project. The project is also subject to various development and construction risks typical of large-scale development projects of this type. The Company recently submitted a revised application for a gaming license to the Missouri Gaming Commission and expects the Missouri Gaming Commission to take action with respect to its application during 2000. See "Risk Factors - Our Potential Development of a Casino in Lemay, Missouri Will Require Significant Capital Expenditure and We Cannot Predict Whether the Casino Will Be Successful" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources." The Company also seeks growth in its business through the expansion and improvement of its existing properties. For example, the Company recently completed restaurant and meeting room enhancements at The Reserve, expanded the casino, remodeled restaurants and added parking at Ameristar Vicksburg and added a third deck to the casino and a parking garage at Ameristar Council Bluffs. Management considers enhancement projects for each of the Company's properties on an ongoing basis. In doing so, management evaluates the operating performance of each property, the anticipated relative costs and benefits of the projects under consideration, the availability of cash flow and debt financing to fund capital expenditures and competitive and other relevant factors. Management believes that the Company's long-term success in its current markets and expanding into new markets will depend in part on the Company's ability to distinguish its operations from those of its competitors. The Company's strategy of including quality non-gaming amenities in its facilities, such as lodging, dining and entertainment, is intended to provide these competitive distinctions. The scope of non-gaming amenities to be offered at existing properties and future expansion projects will be determined in part by competitive factors within a particular market and the nature of the Company's participation in a particular project. In addition, management believes the selection of attractive expansion markets and quality locations within those markets will continue to be important to the growth of the Company. In selecting expansion opportunities, the Company seeks a strong demographic market with a favorable competitive environment and a site in the market with an attractive, prominent location and ease of access that will support the size and scope of the Company's development plans. The timing, cost and scope of any expansion or capital improvement project of the Company will depend on, among other factors, the Company's operating cash flow and the resulting ability of the Company to apply operating cash flow to capital expenditures and to incur additional indebtedness under the Company's Revolving Credit Facility or other debt instruments. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." PROPERTY PROFILES The following table presents selected statistical and other information concerning the Company's properties as of March 1, 2000. AMERISTAR AMERISTAR CACTUS THE VICKSBURG COUNCIL THE PETES HORSESHU (VICKSBUR BLUFFS RESERVE (JACKPOT, (JACKPOT, G, MS) (COUNCIL NV) NV) BLUFFS, (HENDERSON, IA) NV) OPENING 1956 1956 Feb. 1994 Jan. 1996 Feb. 1998 DATE CASINO SQUARE 25,000 3,500 43,000 42,500 41,500 FOOTAGE (APPROX.) SLOT 808 124 1,291 1,446 1,430 MACHINES TABLE 38 8 50 51 26 GAMES HOTEL 300 120 150 348(1) 224 ROOMS NUMBER OF RESTAURANT 4/3 1/1 3/4 4/4 6/3 S/BARS RESTAURANT /BAR 460/80 124/40 564/46 975/93 1,210/110 SEATING CAPACITY GUEST PARKING 908 226 1,730 1,955(4) 1,900 SPACES OTHER 356-Seat Keno; 364-Seat Kids Quest Sports AMENITIES Showroom; Swimming Showroom; Children's Book; Sports Pool; Gift Shop Activity Keno; Book; General Center Meeting Keno; Store; (2); Space; Meeting Service Meeting Swimming Space; Station Space; Pool; Swimming Indoor Bingo; Pool; Swimming Gift Gift Pool & Shop; Shop; Spa; Amusement Amusement Exercise Arcade Arcade Facility; Gift Shop; Amusement Arcade OPERATING Cactus CPI Ameristar Ameristar Ameristar SUBSIDIARY Pete's, Casino Casino Casino OR Inc. Vicksburg Council Las SUBSIDIARI ("CPI") , Inc. Bluffs, Vegas, ES ("ACVI") Inc. Inc. and AC ("ACCBI") ("ACLVI") Hotel Corp. (3) (1) Includes a full service 160-room Ameristar hotel owned and operated by the Company and a limited service 188-room Holiday Inn Suites Hotel owned and operated by a third party under a ground lease from the Company. In addition, a Hampton Inn adjoining the Holiday Inn Suites Hotel with approximately 100 rooms is expected to be completed in the Fall of 2000. (2) Operated by a third party. (3) AC Hotel Corp., a wholly owned subsidiary of ACVI, owns the hotel at Ameristar Vicksburg. (4) ACCBI opened approximately 1,000 additional parking spaces in its new parking garage in March 2000 bringing the total number of guest parking spaces to approximately 3,000. THE JACKPOT PROPERTIES The Jackpot Properties, which have been operating since 1956, have been designed and developed and are marketed to appeal to three separate markets: budget, quality and luxury. The Company sets its prices for hotel rooms, food and other non-gaming amenities at levels that are affordable to its separate customer bases. The Company's objective is to be perceived by its customers as providing good value and high quality for the price charged. The Company promotes Cactus Petes as a destination resort primarily in the northwestern United States and southwestern Canada. The Jackpot Properties are open 24 hours a day, seven days a week. Cactus Petes completed a major expansion project in 1991. In addition, the Company substantially completed a remodeling of the casino at The Horseshu in late 1997. Since 1993, Cactus Petes has annually received a Four Diamond rating from the American Automobile Association. The Horseshu Hotel has a Three Diamond rating from the American Automobile Association. The food and beverage operations at the Jackpot Properties include a buffet, a fine dining restaurant, a 24-hour casual dining restaurant, a coffee shop and a snack bar, a showroom that features nationally known entertainment, and cocktail lounges with entertainment. Market. Management believes that approximately 50% of the customer base of the Jackpot Properties consists of residents of Idaho who generally frequent the properties on an overnight or turnaround basis. The balance of the Jackpot Properties' customers come primarily from Oregon, Washington, Montana, northern California and the southwestern Canadian provinces. Although many of the customers from beyond southern Idaho are tourists traveling to other destinations, a significant portion of these customers come to Jackpot as a final destination. Competition. The Company has developed a dominant share of the market capacity in Jackpot. The Jackpot Properties compete with four other hotels and motels (three of which also have casinos). As of March 15, 2000, the Jackpot Properties accounted for approximately 55% of the lodging rooms, 55% of the slot machines and 77% of the table games in Jackpot. Management believes Cactus Petes offers a more attractive environment and a broader and higher quality range of gaming and leisure activities than those of its competitors. The Company is not aware of any expansion plans by existing or potential competitors in Jackpot. At least two casinos with video lottery terminals ("VLT") similar to slot machines are operated on Native American land in Idaho, including one with approximately 200 VLT machines near Pocatello that has been in operation for approximately five years. Casino gaming began on Native American lands in both western Washington and northeast Oregon in 1995, and casinos also operate in Alberta, Canada. In addition, the Shoshone-Bannock Tribes in Southern Idaho recently signed a Compact with the State of Idaho allowing gaming on the Tribes' lands in the forms to be determined by a federal court. The Compact has been ratified by the Idaho House of Representatives and is now awaiting action in the Idaho Senate. The Company expects to face increased competition depending on the forms of gaming permitted on the Tribes' lands. See "Item 1. - Business - Risk Factors - If We Cannot Compete Successfully with Other Hotel Casino Operators, Our Future Operations May be Materially Adversely Affected." AMERISTAR VICKSBURG Ameristar Vicksburg, which opened in February 1994, represents the Company's first expansion project outside of Jackpot. Management believes Ameristar Vicksburg provides superior and larger facilities than its current competitors in the Vicksburg area and has competitive advantages by virtue of its close proximity to Interstate 20. Nonetheless, Vicksburg is a competitive gaming market and Ameristar Vicksburg's operations to date have been dependent to a substantial degree upon a continuous casino marketing and promotional campaign. The permanently moored, dockside Vicksburg Casino is approximately 315 feet long and approximately 120 feet wide. Due to the width of the Vicksburg Casino, the casino, restaurants and showroom have the spacious feel of a land-based facility. The Vicksburg Casino has three levels, which are connected by escalators and elevators. The casino is on the bottom and middle levels and has wide aisles with an open feel that provides a comfortable and inviting atmosphere. During 1999, the casino floor was upgraded and expanded, with 254 new innovative slot machines being added and 232 older slot machines being replaced with newer slot machines. The Vicksburg Casino has entrances on both the lower and middle levels, with the lower-level entrance providing access from valet parking and the middle-level entrance providing access from the self-parking area. The Vicksburg Casino is open 24 hours a day, seven days a week. The food and beverage operations at the Vicksburg Casino include three restaurants (a new upscale steakhouse, which opened in December 1999, a buffet and a 24-hour casual dining restaurant which was remodeled during 1999), four bars (one of which offers live cabaret- style entertainment) and a showroom (which is used on an intermittent basis for entertainment and players club promotions). In addition, approximately 600 new parking spaces were added during 1999, bringing the total number of guest parking spaces to over 1,700. Management believes Ameristar Vicksburg's competitive advantages include its location, the size and design of the project and the range and quality of its amenities. The primary locational advantages of Ameristar Vicksburg are its proximity to Interstate 20 and its ease of access. As discussed above, the Vicksburg Casino is significantly wider than typical riverboat casinos. As part of a long- term plan to enhance Ameristar Vicksburg, the Company acquired 18 acres of raw land across from the main entrance to the Vicksburg Casino for the future development of additional improvements. The Company constructed a 150-room hotel, which opened in June 1998, on a portion of this parcel. In addition, management believes the overall range and quality of the facilities, food service and entertainment at Ameristar Vicksburg are superior to those available at its existing competitors. Market. The primary market for Ameristar Vicksburg is residents of the Jackson and Vicksburg, Mississippi and Monroe, Louisiana areas; tourists coming to Vicksburg primarily to visit the Vicksburg National Military Park; and other traffic traveling on Interstate 20, a major east-west thoroughfare that connects Atlanta and Dallas. Vicksburg, with a population of approximately 30,000 persons, is located 45 miles west of Jackson, the capital of Mississippi. According to the 1990 U.S. Census, the Jackson and Vicksburg metropolitan areas had a total population of approximately 460,000 persons. Approximately 1.5 million people live within a 100-mile radius of Vicksburg. The Vicksburg National Military Park, located within three miles of Ameristar Vicksburg, draws over 1,000,000 registered visitors a year. Interstate 20 (which connects Atlanta and Dallas) passes directly through Vicksburg. According to the Mississippi Department of Transportation, approximately 8.0 million vehicles drove across the Interstate 20 bridge at Vicksburg during 1999. As of March 1, 2000, Vicksburg had approximately 1,900 lodging rooms. The Vicksburg Chamber of Commerce has estimated that the 1999 average hotel occupancy rate in Vicksburg was approximately 65%. Gaming revenues in Warren County, Mississippi for the 52 weeks ended December 18, 1999, were approximately $213.4 million. Competition. Ameristar Vicksburg is subject to competition from three local competitors, from casinos in Shreveport and Bossier City, Louisiana, and from a Native American casino in Philadelphia, Mississippi. Ameristar Vicksburg has approximately 1,600 gaming positions or 36.7% of the total number of positions in Warren County (the number of gaming positions increased by approximately 200 during 1999). Based on available data, Ameristar Vicksburg is currently the market leader in Warren County and generated gaming revenues in 1998 and 1999 representing approximately 31.5% and 33.4%, respectively, of the total market gaming revenues. Management attributes Ameristar Vicksburg's leading market share position to the effectiveness of the Company's marketing and promotional strategy, the property's proximity to and visibility from Interstate 20, its ease of access, the size and design of the facility and the range and quality of the amenities offered. Several potential gaming sites still exist in Warren County and Vicksburg and from time to time potential competitors propose the development of additional casinos in or near Vicksburg. The Company is currently involved in legal proceedings in which it is alleged that the Company and certain other parties engaged in conduct to oppose the development of a casino between Vicksburg and Jackson in violation of Mississippi's antitrust and gaming regulatory laws. See "Item 1. - Business - Risk Factors - If We Cannot Compete Successfully with Other Hotel Casino Operators, Our Future Operations May be Materially Adversely Affected."- Ameristar Vicksburg." and "Item 3. - Legal Proceedings." AMERISTAR COUNCIL BLUFFS The Company opened Ameristar Council Bluffs in January 1996 under one of three gaming licenses currently issued for Pottawattamie County, Iowa. On the bank of the Missouri River across from Omaha, Nebraska, Ameristar Council Bluffs is adjacent to the Nebraska Avenue exit on Interstate 29 immediately north of the junction of Interstate 29 and Interstate 80. The Company designed Ameristar Council Bluffs as a destination resort intended to serve as an entertainment centerpiece of the region. Ameristar Council Bluffs features architecture reminiscent of a gateway river town in the late 1800s. The design complements existing characteristics of Council Bluffs while giving the facility its own distinctive personality. Ameristar Council Bluffs opened in stages during 1996 and early 1997. The approximately 50-acre Ameristar Council Bluffs site is large enough to accommodate future land-based expansion. In 1999, Ameristar Council Bluffs was awarded the prestigious Four-Diamond designation from the American Automobile Association. The facility is the only riverboat property in the nation to carry this designation. The Council Bluffs Casino is an approximately 52,000 square foot three-level riverboat measuring 272 feet long by 98 feet wide with a casino of approximately 42,500 square feet. The third level addition to the riverboat was completed in November 1999 which increased the number of gaming positions by approximately 400. By building the vessel with high ceilings and making it 98 feet wide, the casino has the spacious feel of a land-based facility. Escalators and an elevator connect all levels of the riverboat. The casino is open 24 hours a day, seven days a week and is required to make a two-hour cruise a minimum of 100 days per year during the "excursion season," which is defined as April 1 through October 31. If the riverboat fails to satisfy this cruising requirement, it will not be allowed to operate during the balance of the year. However, the Company believes that the Iowa Racing and Gaming Commission would grant a release from this requirement should dangerous cruising conditions preclude the riverboat from making the minimum number of cruises. Guests enter the riverboat from shore via an enclosed ramp from the 68,000-square foot Main Street Pavilion and from the newly completed, fully enclosed parking garage. The Main Street Pavilion is a self-contained complex featuring an Ameristar hotel, restaurants and entertainment options for children and adults. The interior of the Pavilion is designed to replicate a Victorian-era main street. The main level of the Pavilion includes a buffet, a 24-hour casual dining restaurant, a steak house and a sports bar cabaret, all of which are operated by the Company. Rising above the Pavilion is a five-story, 160-room, full-service Ameristar hotel that offers a panoramic view of the Missouri River and the Council Bluffs Casino. The Main Street Pavilion also includes a children's activity center operated by New Horizon Kids Quest, Inc. and owned by a joint venture between that company and Ameristar Council Bluffs. A 1,000 space parking garage, adjacent to the pavilion, was substantially completed in March 2000 and will be fully operational by the beginning of April 2000. The Company has leased a portion of the Ameristar Council Bluffs site to an entity controlled by Iowa-based Kinseth Hotel Corporation for a 188-room, limited-service Holiday Inn Suites hotel that opened on March 31, 1997 and was expanded during 1999. The Kinseth Hotel Corporation developed and operates this hotel. The Holiday Inn Suites hotel and the Main Street Pavilion are connected by a climate- controlled walkway that also connects to the indoor pool and spa and the exercise room. The Company has leased another portion of the Ameristar Council Bluffs site to Kinseth Hotel Corporation for the development of an approximately 100-room Hampton Inn hotel. Kinseth Hotel Corporation will also operate this hotel, which will be connected to the Holiday Inn Suites Hotel and/or directly to the Main Street Pavilion by a climate-controlled walkway. The Hampton Inn hotel is expected to be completed in the Fall of 2000. Market. Council Bluffs has a population of approximately 54,000 people. Council Bluffs forms part of the greater Omaha, Nebraska/Council Bluffs, Iowa metropolitan area, which has a population of approximately 690,000. Approximately 1.0 million people live within a 50-mile radius, and approximately 1.7 million people live within a 100-mile radius, of Council Bluffs. The median household income of the greater metropolitan area is approximately $42,000, with an unemployment rate of approximately 2.1%. Based on available data, Council Bluffs is currently the strongest gaming market in Iowa. Gaming revenues in Pottawattamie County, Iowa for the 12 months ended January 31, 2000, were $329.1 million, an increase of $32.4 million over the prior 12-month period. Competition. Three gaming licenses have been issued for Pottawattamie County, Iowa to Iowa West Racing Association. ACCBI operates the Council Bluffs Casino pursuant to an operating agreement with Iowa West Racing Association. The other casinos operating under these licenses are Harveys Casino Hotel ("Harveys"), which operates a riverboat casino in close proximity to Ameristar Council Bluffs, and Bluffs Run Casino ("Bluffs Run"), a year-round dog track and casino owned by a subsidiary of Harveys Casino Resorts, the parent company of Harveys, which acquired the property from Iowa West Racing Association in October 1999. Bluffs Run's gaming license limits the casino to the operation of reel-style and video slot machines that meet the definition of "games of chance" under the Iowa statutes. Bluffs Run, which opened in March 1995, has approximately 1,250 slot machines, a restaurant, a buffet, and lounge entertainment. The Company believes that Bluffs Run will continue to provide significant competition due to its advantage of being the only land-based facility in the market. Management believes Harveys also provides serious competition for Ameristar Council Bluffs. The Harveys casino opened on January 1, 1996, and substantially all the other Harveys facilities opened in May 1996, except for a restaurant that opened in May 1997. A third level addition to the Harveys riverboat in early 1998 added approximately 200 more slot machines. In 1999, a 1,600 space parking garage was added along with a car wash and 70 additional slot machines. The average monthly market share of gaming revenues of Ameristar Council Bluffs was approximately 30.9% for the twelve month period from February 1999 through January 2000, approximately 4.0 and 3.2 percentage points behind Bluffs Run and Harveys, respectively. From the time the third deck of the casino opened on November 22, 1999 through March 19, 2000, Ameristar Council Bluffs' market share was 32.6%, approximately 0.5 and 1.7 percentage points behind Bluffs Run and Harveys, respectively. See also "Item 1. - Business - Risk Factors - If We Cannot Compete Successfully with Other Hotel Casino Operators, Our Future Operations May be Materially Adversely Affected. - Ameristar Council Bluffs." THE RESERVE The Reserve, featuring an African safari and big game reserve theme that includes statues of elephants, giraffes and other animals, opened on February 10, 1998, at the southeast corner of the junction of Lake Mead Drive and Interstate 515 in Henderson, Nevada. The Company acquired The Reserve under construction on October 9, 1996. In connection with the acquisition, the Company redesigned The Reserve to expand and enhance the project. The Reserve, which is open 24 hours a day, seven days a week, includes approximately 42,000 square feet of casino space (with approximately 1,430 slot machines and approximately 26 table games), 224 hotel rooms, six restaurants (a buffet, a 24-hour casual dining restaurant, a steakhouse, an Italian restaurant and two fast food outlets), three bars and lounges, a sports book, keno, bingo, approximately 1,900 surface parking spaces and a swimming pool. In 1999, the Company remodeled the Italian restaurant, expanded the 24- hour casual dining restaurant and added the two fast food outlets. Meeting rooms were also added. The food and beverage operations and back-of-house facilities were designed to support the potential future expansion of The Reserve. The ultimate master plan for The Reserve has been designed for phased expansions of the gaming areas, additional hotel towers, multi- level parking, and other amenities such as additional restaurants as warranted by market and competitive conditions. Market. The gaming market in the greater metropolitan Las Vegas area includes segments for local residents and visitors, and both segments of this market are subject to intense and dynamic competition. The Reserve competes primarily for local customers in the Henderson-Green Valley suburban community. The Company also markets The Reserve to visitors, including persons driving to and from Arizona via Interstate 515, persons driving between California and Lake Mead and other visitors to the Las Vegas area who desire lodging in Henderson-Green Valley. The Las Vegas metropolitan area was the fastest growing metropolitan area, and Henderson was the fastest growing city in the United States, during the first half of the 1990s, with population increases of 26% and 57%, respectively. The population of Clark County increased by 5.0% during 1998 and the population of Henderson increased by 9.6% for the same period. In 1998 the population of Clark County, Nevada was 1.2 million, and the population of Henderson and Boulder City (a community south of Henderson) was 180,000. According to the Nevada Department of Transportation, approximately 80,000 vehicles per day currently pass through the junction of Interstate 515 and Lake Mead Drive, the site of The Reserve. In addition, the Interstate 215 beltway, which will intersect Interstate 515 adjacent to The Reserve, is scheduled for completion in May 2000, though no assurance can be given of the actual completion date. No assurance can be given that the Las Vegas metropolitan area and Henderson-Green Valley will continue to experience population growth or that growth will continue for any particular period of time or at the same rates as in the recent past. Competition. Three large local-market casino hotels are located within 11 miles of The Reserve. This includes Sunset Station, a casino-hotel operated by Station Casinos, Inc. located approximately 3.5 miles north of The Reserve along Interstate 515. Sunset Station is larger than The Reserve and Station Casinos has operated casinos aimed at local Las Vegas residents for many years. Station Casinos has also announced plans for the development of a casino-hotel resort approximately 3.5 miles west of The Reserve, near the junction of Green Valley Parkway and Lake Mead Drive. Station Casinos expects this new development to open in the fourth quarter of 2001. In addition, The Reserve competes to a lesser extent with a number of small, limited service casinos that currently operate within a five- mile radius. Additional competition in this area is anticipated over time. See "Item 1. - Business - Risk Factors - If We Cannot Compete Successfully with Other Hotel Casino Operators, Our Future Operations May Be Materially Adversely Affected - The Reserve." EMPLOYEES As of March 1, 2000, the Company employed approximately 4,300 employees. None of the Company's current employees is employed pursuant to collective bargaining or other union arrangements. Management believes its employee relations are good. RISK FACTORS IF WE CANNOT COMPETE SUCCESSFULLY WITH OTHER HOTEL CASINO OPERATORS, OUR FUTURE OPERATIONS MAY BE MATERIALLY ADVERSELY AFFECTED. General. We compete for customers primarily on the basis of (1) the location and quality of our properties, (2) the quality, range and pricing of non-gaming amenities such as hotels, restaurants and entertainment, and (3) the strength of our marketing and promotional campaigns. Some of our existing competitors have greater name recognition and financial and marketing resources than we have. Other companies with greater name recognition and financial and marketing resources than we have could enter our current markets and become competitors in the future. The entry into our current markets of additional competitors could materially adversely affect our business, financial condition and results of operations. In addition, four out of our five operating properties are located in jurisdictions that restrict gaming to certain areas and/or borders a state that prohibits or restricts gaming operations. These restrictions and prohibitions provide substantial benefits to our business and our ability to attract and retain customers. The legalization or expanded legalization or authorization of gaming within a market area of one of these properties could have a material adverse effect on our business, financial condition and results of operations. The Jackpot Properties. The Jackpot Properties compete with three other casinos in the Jackpot area. We could be materially adversely affected by the renovation or expansion of the existing casinos, or the development of new casinos, in the Jackpot area. We do not currently know of any plans by parties operating in the Jackpot area to expand their existing casinos or by any other parties to develop new casinos in the Jackpot area. In addition to local casinos, the Jackpot Properties compete with casinos in other portions of the Pacific Northwest, including existing casinos on Native American lands near Pocatello, Idaho and in western Washington, northeastern Oregon and Alberta, Canada. We cannot predict the future competitive effects of these casinos on the Jackpot Properties. Any expansion of casino gaming on Native American lands in southern Idaho, eastern Oregon or eastern Washington could have a material adverse effect on the Jackpot Properties and us. The Indian Gaming Regulatory Act of 1988 ("IGRA") restricts gaming operations on Native American land to those allowed under state law, and the Idaho Constitution prohibits all forms of casino gaming. However, video lottery terminal ("VLT") casinos, including one near Pocatello, are currently being operated on Native American lands in Idaho. While these VLT casinos may be in violation of IGRA, federal officials have not taken any enforcement action against these operations. The failure of the federal government to take such enforcement action could lead to the expansion of casino gaming on Native American lands in Idaho. This could have a material adverse effect on the Jackpot Properties and on us. In addition, the Shoshone-Bannock Tribes in Southern Idaho recently signed a Compact with the Idaho Governor that allows the parties to seek a declaratory judgment from federal court to determine what forms of gaming may be conducted on the Tribes' lands. The Compact has been ratified by the Idaho House and is now awaiting action in the Idaho Senate. If the Compact is ratified and a federal court determines that a broad range of gaming is allowed under IGRA and the Idaho Constitution, the Jackpot Properties will likely face increased competition and could be materially adversely affected. Ameristar Vicksburg. Ameristar Vicksburg competes with three local competitors, casinos in Shreveport and Bossier City, Louisiana, and a Native American casino in Philadelphia, Mississippi. Due to the intensity of competition in the Vicksburg market, the success of Ameristar Vicksburg's business depends upon continuous and aggressive marketing and promotional efforts. We believe that competition from the casinos in Shreveport and Bossier City, Louisiana and Philadelphia, Mississippi has resulted in a shrinkage in the territorial size of the Vicksburg gaming market, placing increased competitive pressures on the casinos operating in Vicksburg. Any further reduction in the territorial size of the Vicksburg gaming market could have a material adverse effect on Ameristar Vicksburg and on us. Several potential gaming sites still exist in Warren County and Vicksburg. From time to time, potential competitors propose the development of additional casinos in or near Vicksburg. We cannot assure you that additional competitors will not enter the Vicksburg market, and additional competition in Vicksburg could have a material adverse effect on our business, financial condition and results of operations. In addition, we are aware of potential sites on the Big Black River near Interstate 20 between Jackson and Vicksburg, which, if developed, would provide a significant competitive advantage over Ameristar Vicksburg and other gaming operations in Warren County due to their closer proximity to Jackson. However, there currently is no exit off Interstate 20 in the vicinity of these sites, the area surrounding these sites is undeveloped and lacks any infrastructure and these sites may not meet the requirements of Mississippi law for the development of a casino. In December 1996, the Mississippi Gaming Commission rejected an application for the development of a casino at one of these sites by ruling the site to be unsuitable for a casino. This denial was appealed by an adjoining landowner and the license applicant. In December 1997, a Mississippi circuit court issued an order reversing the decision of the Mississippi Gaming Commission and remanded the application to the Mississippi Gaming Commission for further proceedings. The Mississippi Gaming Commission has appealed this court order to the Mississippi Supreme Court, and we expect the Supreme Court will issue a decision later in 2000. The development of a casino on the Big Black River likely would have a material adverse effect on Ameristar Vicksburg and us. In addition, we are involved in two lawsuits in which it is alleged that we and certain other parties engaged in conduct to oppose the gaming license application for the Big Black River site in violation of Mississippi's antitrust and gaming regulatory laws. One of these lawsuits has been tried in a Mississippi state court in Pike County and resulted in a verdict against us and other defendants in the amount of $3,792,000, of which our pro rata portion is $1,685,333. We have appealed this case to the Mississippi Supreme Court. A second law suit containing similar allegations and claims was filed by other plaintiffs in state court in Pike County, Mississippi in December 1999. We and the other defendants have removed this case to the federal court in Jackson. The plaintiffs are attempting to have the case remanded by the federal court back to the Pike County state court, which we and the other defendants are resisting. We believe that our conduct was a proper exercise of our legal rights, and we are continuing to vigorously defend these lawsuits. If Mississippi law was amended to permit gaming in Hinds County, the development of one or more casinos there would materially adversely affect us. We are not aware of any current proposals that would permit an expansion of gaming into Hinds County. Ameristar Council Bluffs. Ameristar Council Bluffs currently competes in Council Bluffs with two other casinos. One of these casinos, at the Bluffs Run dog racing track, has a significant competitive advantage as a land-based facility. Bluffs Run was the local market leader in gaming revenues for the year ended December 31, 1999 even though its license limits its gaming operations to reel- style and video slot machines that meet the definition of "games of chance". We believe that the other competitor in Council Bluffs, a riverboat casino operated by Harveys Casino Resorts, also provides and will continue to provide serious competition for Ameristar Council Bluffs. Bluffs Run was recently acquired by Harveys Casino Resorts. This consolidation could lead to increased competitive pressures for Ameristar Council Bluffs. In September 1998, the Iowa Racing and Gaming Commission passed a regulation limiting the number of gaming licenses in the State of Iowa to those currently issued. Unless legislative action is taken to overrule or modify that regulation, there will be no more licenses granted in the State of Iowa. However, we cannot assure you that this regulation will not be overruled by the Iowa legislature or modified by the Iowa Racing and Gaming Commission. The development of any new casinos in the Council Bluffs area could have a material adverse effect on Ameristar Council Bluffs and on us. A ballot initiative was proposed in 1996 that would have authorized slot machines and casino gaming at certain locations in Nebraska, including Omaha, which is across the Missouri River from Council Bluffs. This initiative was not placed on the ballot due to the determination by the Nebraska Secretary of State that an insufficient number of petition signatures had been obtained. We believe that it is unlikely that any further legislative action or voting referendum that would authorize casino gaming in Nebraska will be acted upon prior to 2001. However, we cannot assure you that casino gaming will not become permitted in Nebraska at some time in the near future, including before 2001. The introduction of casino gaming in Nebraska, especially in the Omaha area, would likely have a material adverse effect on Ameristar Council Bluffs and on us. The Reserve. Three large local-market casino hotels are located within 11 miles of The Reserve. This includes Sunset Station, a casino-hotel operated by Station Casinos, Inc. located approximately 3.5 miles north of The Reserve along Interstate 515. Sunset Station is larger than The Reserve, and Station Casinos has operated casinos aimed at local Las Vegas residents for many years. Station Casinos has also announced plans for the development of a casino-hotel resort approximately 3.5 miles west of The Reserve, near the junction of Green Valley Parkway and Lake Mead Drive. Station Casinos expects this new development to open in the fourth quarter of 2001. We are aware of several other sites in Henderson-Green Valley that have been zoned for casino-hotels. Additional casino resorts may be developed in Henderson-Green Valley and other portions of the southeastern Las Vegas metropolitan area. The development of additional casino-hotels in Henderson-Green Valley and other portions of the southeastern Las Vegas metropolitan area, including the completion of the project announced by Station Casinos, will place additional competitive pressures on The Reserve and could have a material adverse effect on The Reserve and on us. Other than Station Casinos' announcement described above, to date, no meaningful announcements have been made related to any future casino development in the immediate market in which The Reserve operates. Interstate 215 is expected to be extended from the west to intersect Interstate 515 adjacent to The Reserve. This interchange is currently in the design stages, and we expect that the design will have some adverse effects on The Reserve that may not be overcome by the benefits of the improved roadways. In addition, construction of Interstate 215, which is currently ongoing, has adversely affected and will continue to adversely affect traffic flow on Lake Mead Drive. OUR SUBSTANTIAL LEVERAGE MAY AFFECT OUR ABILITY TO SATISFY DEBT OBLIGATIONS AND MAY CONSTRAIN OUR ABILITY TO OPERATE OUR BUSINESS. We are highly leveraged and have substantial fixed debt service in addition to our operating expenses. The degree to which we are leveraged could have important adverse consequences to the holders of our securities. These effects include, without limitation: Impaired ability to make scheduled payments of principal or interest on our indebtedness, to refinance our indebtedness or to pay premiums (if any) required in connection with our indebtedness; Impaired ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes; Limited flexibility in planning for or reacting to changes in market conditions; and Increased vulnerability to any downturn in the general market or in our operations specifically. Our principal long-term debt instruments contain restrictive covenants. These include limitations on our ability to: incur additional indebtedness; create liens and other encumbrances; make certain payments and investments; enter into transactions with affiliates; and sell or otherwise dispose of assets or merge or consolidate with another entity. Although the covenants are subject to various exceptions that are intended to allow us to operate without undue restraint in certain anticipated circumstances, we cannot assure you that these covenants will not adversely affect our ability to finance future operations or capital needs or to engage in other activities that may be in our best interest. In addition, our long-term debt requires us to maintain certain financial ratios. Our ability to comply with these provisions will depend upon our future performance, which will be affected by prevailing economic conditions and financial, business, competitive, regulatory and other factors. Many of these factors are beyond our control. Accordingly, we cannot assure you that we will maintain a level of operating cash flow that will permit us to service our obligations and to satisfy applicable financial covenants. A breach of any of these covenants or our inability to comply with the required financial ratios could result in us being required to repay outstanding principal and/or an inability to obtain additional borrowings under existing debt facilities. It could also result in a default under one or more of our long-term debt instruments. This would severely limit our ability to improve or expand our existing properties or to develop new properties. Any long-term debt instruments or credit facilities that we enter into in the future will likely contain restrictions similar to those described above. MANY FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL, COULD ADVERSELY AFFECT OUR ABILITY TO SUCCESSFULLY COMPLETE OUR CONSTRUCTION AND DEVELOPMENT PROJECTS AS PLANNED. General Construction Risks - Delays and Cost Overruns. Construction and expansion projects under consideration for our properties entail significant risks. These risks include: shortages of materials (including slot machines or other gaming equipment); shortages of skilled labor or work stoppages; unforeseen construction scheduling, engineering, environmental or geological problems; weather interference; floods, fires or other casualty losses; and unanticipated cost increases. Our anticipated costs and construction periods for construction projects are based upon budgets, conceptual design documents and construction schedule estimates prepared by us in consultation with our architects and contractors. The cost of any construction project undertaken by us may vary significantly from initial current expectations, and we may have a limited amount of capital resources to fund cost overruns on any project. If we cannot finance cost overruns on a timely basis, the completion of one or more projects may be delayed until adequate cash flow from operations or other financing is available. The completion date of any of our construction projects could also differ significantly from initial expectations for construction-related or other reasons. We cannot assure you that any project will be completed, if at all, on time or within established budgets. Significant delays or cost overruns on our construction projects could have a material adverse effect on our business, financial condition and results of operations. We employ "fast-track" design and construction methods in some of our construction and development projects. This involves the design of future stages of construction while earlier stages of construction are underway. Although we believe that the use of fast- track design and construction methods can reduce the overall construction time, these methods may not always result in such reductions, may involve additional construction costs than otherwise would be incurred and may increase the risk of disputes with contractors. Construction Dependent upon Available Financing and Operations. The availability of funds under our principal credit facility at any time is dependent upon the amount of our consolidated EBITDA (as defined) during the preceding four full fiscal quarters. Our future operating performance will be subject to financial, economic, business, competitive, regulatory and other factors, many of which are beyond our control. Accordingly, we cannot assure you that our future consolidated EBITDA and the resulting availability of operating cash flow or borrowing capacity will be sufficient to allow us to undertake or complete future construction projects. As a result of operating risks, including those described in this section, and other risks associated with a new venture, we cannot assure you that, once completed, any development project will increase our operating profits or operating cash flow. OUR POTENTIAL DEVELOPMENT OF A CASINO IN LEMAY, MISSOURI WILL REQUIRE SIGNIFICANT CAPITAL EXPENDITURE AND WE CANNOT PREDICT WHETHER THE CASINO WILL BE SUCCESSFUL. The Ameristar Casino St. Louis at Lemay is currently in the initial planning stages and remains subject to numerous contingencies. These contingencies include, for example, the satisfactory completion of due diligence concerning the proposed site, the selection of our application for investigation by the Missouri Gaming Commission, obtaining various other regulatory permits and approvals and completing financing arrangements for the project. We have already devoted substantial resources to this project and expect to devote significant additional resources during the planning and construction stages of this project. However, we cannot assure you when or if our application for investigation will be selected by the Missouri Gaming Commission or that we will otherwise be able to complete the development of the Ameristar Casino St. Louis at Lemay. If we do complete this project, we cannot assure you that we will be able operate the property profitably or that we will be able to obtain any return on our investment in the project. OUR MAJORITY STOCKHOLDER'S OWNERSHIP RESULTS IN LIMITED LIQUIDITY IN THE MARKET FOR OUR COMMON STOCK. Craig H. Neilsen, our president and chief executive officer, owns approximately 86.9% of our outstanding shares of Common Stock. As a result, Mr. Neilsen controls our management and daily operations and his substantial ownership results in limited liquidity in the market for our Common Stock. A CHANGE IN CONTROL COULD RESULT IN THE ACCELERATION OF CERTAIN OF OUR DEBT OBLIGATIONS. Certain changes in control could result in the acceleration of our principal long-term credit facilities. This acceleration could be triggered in the event of Mr. Neilsen's death if his estate, heirs or devisees must sell a substantial number of shares of our Common Stock to obtain funds to pay inheritance tax liabilities. We cannot assure you that we would be able to repay any indebtedness that is accelerated as a result of a change in control, and this would likely materially adversely affect our financial condition. IF OUR KEY PERSONNEL LEAVES US, OUR BUSINESS WILL BE SIGNIFICANTLY ADVERSELY AFFECTED. We depend on the continued performance of Mr. Neilsen and his management team. The loss of the services of Mr. Neilsen or any of our other executive officers could have a material adverse effect on our business. THE MARKET FOR QUALIFIED OPERATING AND CORPORATE MANAGEMENT PERSONNEL IS SUBJECT TO INTENSE COMPETITION. We have experienced and expect to continue to experience strong competition in hiring and retaining qualified operating and corporate management personnel. We believe that a number of factors have contributed to our difficulties in attracting and retaining qualified management personnel, including: the recent proliferation and expansion of gaming facilities throughout the United States; the additional burdens on our existing management personnel due to the lack of depth in other positions; and our reluctance to match or exceed compensation packages offered by some of our competitors. Recruiting and retaining qualified management personnel is particularly difficult in Vicksburg and Jackpot due to local market conditions. If we are unable to successfully recruit and retain qualified management personnel at our properties and at our corporate level, our results of operations could be materially adversely affected. RESTRICTIONS AND LIMITATIONS IMPOSED BY GAMING REGULATORY AUTHORITIES ADVERSELY AFFECT OUR BUSINESS. The ownership and operation of casino gaming facilities are subject to extensive state and local regulation. The States of Iowa, Mississippi and Nevada and the applicable local authorities require various licenses, findings of suitability, registrations, permits and approvals to be held by us and our subsidiaries. The Iowa Racing and Gaming Commission, the Mississippi Gaming Commission and the Nevada Gaming Commission may, among other things, limit, condition, suspend, revoke or not renew a license or approval to own the stock of any of Ameristar's Iowa, Mississippi or Nevada subsidiaries, respectively, for any cause deemed reasonable by such licensing authority. Our gaming license in Mississippi must be renewed every three years and our gaming license in Iowa must be renewed every year. If we violate gaming laws or regulations, substantial fines could be levied against us, our subsidiaries and the persons involved, and we could be forced to forfeit portions of our assets. The suspension, revocation or non- renewal of any of our licenses or the levy on us of substantial fines or forfeiture of assets would have a material adverse effect on our business, financial condition and results of operations. We are also subject to substantial gaming taxes and fees imposed by various governmental authorities, which are subject to increase. To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of our currently operating gaming activities. However, gaming licenses and related approvals are deemed to be privileges under Iowa, Mississippi and Nevada law. We cannot assure you that our existing licenses, permits and approvals will be maintained or extended. We also cannot assure you that any new licenses, permits and approvals that may be required in the future will be granted to us. Changes in law could restrict or prohibit our gaming operations in any jurisdiction. In addition, certain jurisdictions, including Iowa, require the periodic reauthorization of gaming activities. This reauthorization of gaming activities in Iowa will next occur in 2002. We cannot assure you that gaming operations of the type we conduct will continue to be authorized in any jurisdiction. A change in law restricting or prohibiting our gaming operations or the failure to reauthorize gaming activities in the jurisdiction in which we operate could substantially diminish the value of our assets in those jurisdictions. This could have a material adverse effect on our business, financial condition and results of operations. THE ADOPTION OF CERTAIN ANTI-GAMING INITIATIVES IN MISSISSIPPI WOULD SUBSTANTIALLY DIMINISH THE VALUE OF AMERISTAR VICKSBURG AND WOULD HAVE A MATERIAL ADVERSE EFFECT ON US. In 1998, two referenda were proposed seeking to amend the Mississippi Constitution to ban gaming in Mississippi. Neither of these initiatives were placed on the ballot for public election based on procedural defects. However, it is likely that at some point a revised initiative will be filed that does not suffer procedural defects and therefore is placed on the ballot. The adoption by Mississippi voters of any proposal to ban or significantly limit gaming in Mississippi would substantially diminish the value of Ameristar Vicksburg and would have a material adverse effect on our business, financial condition and results of operations. THE LOSS OF OUR RIVERBOAT AND DOCKSIDE FACILITIES FROM SERVICE COULD MATERIALLY ADVERSELY EFFECT US. Our riverboat and dockside facilities in Mississippi and Iowa could be lost from service due to casualty, mechanical failure, extended or extraordinary maintenance, floods or other severe weather conditions. Cruises of the Council Bluffs Casino are subject to risks generally incident to the movement of vessels on inland waterways, including risks of casualty due to river turbulence and severe weather conditions. In addition, United States Coast Guard regulations set limits on the operation of vessels and require that vessels be operated by a minimum complement of licensed personnel. The United States Coast Guard also requires all US flagged passenger vessels operating exclusively in fresh water to conduct a thorough dry-dock inspection of underwater machinery, valves and hull every five years. Less stringent inspection requirements apply to permanently moored dockside vessels like the Vicksburg Casino. The Ameristar Council Bluffs riverboat is due for its dry-dock inspection in November 2000, but we have been accepted into a United States Coast Guard program that would allow us to obtain a 30-month extension of the dry-dock requirement. To obtain this extension, the Ameristar Council Bluffs riverboat must undergo a thorough underwater inspection in the fall of 2000 after the cruising season. However, if we do not obtain this extension, the Council Bluffs Casino would be out of service for a substantial period of time for its dry-dock inspection. This would have a material adverse effect on Ameristar Council Bluffs and on our business, financial condition and results of operations. We cannot assure you that we will actually obtain an extension of the dry-dock requirement or that similar extensions will be obtained in the future. The Ameristar Vicksburg site has experienced some instability that has required periodic maintenance and improvements. Although we have recently completed the process of reinforcing the cofferdam basin in which the vessel floats, further reinforcements may be necessary. We are also monitoring the site to evaluate what further steps, if any, may be necessary to stabilize the site to permit operations to continue. A site failure would require Ameristar Vicksburg to limit or cease operations. The loss of a riverboat or dockside facility from service for any period of time likely would adversely affect our operating results and borrowing capacity under our long-term debt facilities. It could also result in the occurrence of an event of a default under one or more of our credit facilities or contracts. WE COULD FACE SEVERE PENALTIES AND MATERIAL REMEDIATION COSTS IF WE FAIL TO COMPLY WITH APPLICABLE ENVIRONMENTAL REGULATIONS. As is the case with any owner or operator of real property, we are subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with environmental laws could result in the imposition of severe penalties or restrictions on operations by government agencies or courts of law, which could adversely affect operations. We do not have environmental liability insurance to cover most such events, and the environmental liability insurance coverage we maintain to cover certain events includes significant limitations and exclusions. In addition, if we discover any significant environmental contamination affecting any of our properties, we could face material remediation costs or additional development costs for future expansion activities. SYSTEMS FAILURES RESULTING FROM THE YEAR 2000 ISSUE COULD MATERIALLY ADVERSELY AFFECT OUR OPERATIONS. 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. Prior to the rollover to the Year 2000, we evaluated all of our computer systems, including our front- and back-of-the-house computer operations, our back-of-the-house accounting systems and our financial software programs, and upgraded these systems as necessary to ensure that, according to the applicable vendors, all of our computer systems were Year 2000 compliant. We also made appropriate inquiries of third parties with whom we do significant business, such as vendors and suppliers, as to their Year 2000 readiness. Although we have not experienced any significant Year 2000 problems to date, it is still possible for Year 2000-related problems to occur. In the event that we or any of our third party vendors or service providers suffer system failures due to the Year 2000 issue, our operations could be substantially adversely affected. GOVERNMENT REGULATIONS The ownership and operation of casino gaming facilities are subject to extensive state and local regulations. The Company is required to obtain and maintain gaming licenses in each of the jurisdictions in which the Company conducts gaming. The limitation, conditioning or suspension of gaming licenses could (and the revocation or non-renewal of gaming licenses, or the failure to reauthorize gaming in certain jurisdictions, would) materially adversely affect the operations of the Company in that jurisdiction. In addition, changes in law that restrict or prohibit gaming operations of the Company in any jurisdiction could have a material adverse effect on the Company. NEVADA. The ownership and operation of casino gaming facilities in Nevada are subject to (1) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, "Nevada Act"); and (2) various local regulations. The Company's operations are subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board"), and, in the case of the Jackpot Properties, the Liquor Board of Elko County. The Company's operations at The Reserve are subject to the licensing and regulatory control of the City of Henderson. The Nevada Commission, the Nevada Board, the City of Henderson and the Liquor Board of Elko County are collectively referred to in this section as the "Nevada Gaming Authorities." The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things, (1) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (2) the establishment and maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, (3) providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (4) the prevention of cheating and fraudulent practices; and (5) providing a source of state and local revenues through taxation and licensing fees. Change in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations. CPI, which operates the Jackpot Properties, and ACLVI, which operates The Reserve, are required to be licensed by the Nevada Gaming Authorities. The gaming licenses require the periodic payment of fees and taxes and are not transferable. Ameristar is registered by the Nevada Commission as a publicly traded corporation (a "Registered Corporation") and has been found suitable to own the stock of CPI and ACLVI, which are corporate licensees (each a "Corporate Licensee") under the terms of the Nevada Act. As a Registered Corporation, Ameristar is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, a Corporate Licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company, CPI and ACLVI have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses currently required in order to engage in gaming activities in Nevada. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, CPI, ACLVI or Ameristar in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of CPI and ACLVI must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of Ameristar who are actively and directly involved in gaming activities of CPI or ACLVI may be required to be reviewed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause that they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities, and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with CPI, ACLVI or Ameristar, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require CPI, ACLVI or Ameristar to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. CPI, ACLVI and Ameristar are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by Ameristar, CPI and ACLVI must be reported to, or approved by, the Nevada Commission. If it were determined that the Nevada Act was violated by CPI or ACLVI, the gaming licenses it holds or has applied for could be limited, denied, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, CPI, ACLVI, Ameristar and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate CPI's or ACLVI's gaming properties and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and denial or revocation of any gaming license would) materially adversely affect Ameristar's gaming operations. Any beneficial holder of Ameristar's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of Ameristar's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policy of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a Registered Corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Registered Corporation's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor", as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered Corporation's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Registered Corporation, any change in the Registered Corporation's corporate charter, bylaws, management, policies or operations of the Registered Corporation, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Registered Corporation's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include (1) voting on all matters voted on by stockholders; (2) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (3) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. Ameristar is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with Ameristar, CPI or ACLVI, Ameristar, (1) pays that person any dividend or interest upon voting securities of Ameristar, (2) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by the person, (3) pays remuneration in any form to that person for services rendered or otherwise, or (4) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities including, if necessary, the immediate purchase of said voting securities by Ameristar, for cash at fair market value. Additionally, the Liquor Board of Elko County and the City of Henderson have the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license within their jurisdictions. The Nevada Commission may, at its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation if it has reason to believe that such holder's acquisition of such ownership would otherwise be inconsistent with the declared policy of the State of Nevada. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it (1) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (2) recognizes any voting right by such unsuitable person in connection with such securities; (3) pays the unsuitable person remuneration in any form; or (4) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction. Ameristar is required to maintain a current stock ledger in Nevada, which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. Ameristar is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require Ameristar stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. However, to date, the Nevada Commission has not imposed such a requirement on Ameristar. Ameristar may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. In addition, restrictions on the transfer of an equity security issued by a Corporate Licensee, and agreements not to encumber such securities (collectively, "Stock Restrictions") are ineffective without the prior approval of the Nevada Commission. Any such approvals do not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. The Company has obtained all such approvals required to date. Changes in control of Ameristar through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada Corporate Licensee gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to (1) assure the financial stability of Corporate Licensees and their affiliates; (2) preserve the beneficial aspects of conducting business in the corporate form; and (3) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Registered Corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Registered Corporation's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable monthly, quarterly or annually and are based upon either (1) a percentage of the gross revenues received; (2) the number of gaming devices operated; or (3) the number of table games operated. The license fee payable to the State of Nevada is based upon "gaming receipts" (generally defined as gross receipts less payouts to customers as winnings) and equals 3% of gaming receipts of $50,000 or less per month, 4% of gaming receipts over $50,000 and less than $134,000 per month, and 6.25% of gaming receipts over $134,000 per month A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling or serving of food and refreshments, or the selling of merchandise. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs, contracts with or associates with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of unsuitability. MISSISSIPPI. The ownership and operation of casino facilities in Mississippi are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission (the "Mississippi Commission") and the Mississippi State Tax Commission. The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized dockside casino gaming in Mississippi, is similar to the Nevada Gaming Control Act. The Mississippi Commission has adopted regulations which are also similar in many respects to the Nevada gaming regulations. The laws, regulations and supervisory procedures of Mississippi and the Mississippi Commission seek to (1) prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity; (2) establish and maintain responsible accounting practices and procedures; (3) maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and making periodic reports to the Mississippi Commission; (4) prevent cheating and fraudulent practices; (5) provide a source of state and local revenues through taxation and licensing fees; and (6) ensure that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the Mississippi Commission. Changes in Mississippi law or regulations may limit or otherwise materially effect the types of gaming that may be conducted and could have an adverse effect on the Company and the Company's Mississippi gaming operations. The Mississippi Act provides for legalized dockside gaming at the discretion of the 14 eligible counties that border either the Mississippi Gulf Coast or the Mississippi River, but only if the voters in such counties have not voted to prohibit gaming in that county. Certain amendments to the Mississippi Constitution have been proposed for adoption through the initiative and referendum process which, if a sufficient number of signatures are gathered to place the matter on the ballot and if adopted by the voters of the state, would prohibit gaming in Mississippi. See "Item 1. Risk Factors - The Adoption of Certain Anti-Gaming Initiatives in Mississippi Would Substantially Diminish the Value of Ameristar Vicksburg and Would Have a Material Adverse Effect on Us." As of March 1, 2000, dockside gaming was permissible in nine of the 14 eligible counties in the State and gaming operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren and Washington counties. Under Mississippi law, gaming vessels must be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River, or in the waters of the State of Mississippi lying south of the State in eligible counties along the Mississippi Gulf Coast. In December 1996, the Mississippi Commission rejected an application for the development of a casino on a site on the Big Black River in Warren County near Interstate 20 between Jackson and Vicksburg, which was appealed by an adjoining landowner and the license applicant. In December 1997, a Mississippi circuit court issued an order reversing the decision of the Mississippi Commission and remanded the application to the Mississippi Commission for further proceedings. The decision of the court was appealed by the Mississippi Commission to the Mississippi Supreme Court and an oral argument was heard by the Supreme Court on March 6, 2000. It is expected that the Supreme Court will issue its decision in 2000. The Mississippi Commission has also adopted a regulation that prohibits gaming on the Big Black River; however, the Mississippi Commission has taken the position that the Mississippi Commission may be prohibited from applying the regulation to the existing applicant which appealed the initial siting decision. In addition, the Company is involved in legal proceedings in which it is alleged that the Company and certain other parties engaged in conduct to oppose this application in violation of Mississippi's antitrust and gaming regulatory laws. See "Item 3. - Legal Proceedings." The Mississippi Act permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. The Mississippi Act permits substantially all traditional casino games and gaming devices. Ameristar, and each subsidiary of Ameristar that operates a casino in Mississippi (a "Gaming Subsidiary"), is subject to the licensing and regulatory control of the Mississippi Commission. Ameristar is registered as a publicly traded holding company of ACVI under the Mississippi Act. Ameristar is required periodically to submit detailed financial and operating reports to the Mississippi Commission and furnish any other information that the Mississippi Commission may require. If Ameristar is unable to continue to satisfy the registration requirements of the Mississippi Act, Ameristar and its Gaming Subsidiaries cannot own or operate gaming facilities in Mississippi. Each Gaming Subsidiary must obtain a gaming license from the Mississippi Commission to operate casinos in Mississippi. A gaming license is issued by the Mississippi Commission subject to certain conditions, including continued compliance with all applicable state laws and regulations and physical inspection of the casinos prior to opening. There are no limitations on the number of gaming licenses that may be issued in Mississippi. Gaming licenses are not transferable, are issued for a three- year period (and may by continued for two additional three year periods) and must be renewed periodically thereafter. ACVI was granted a renewal of its gaming license by the Mississippi Commission on December 18, 1999. No person may become a stockholder of or receive any percentage of profits from a gaming licensee subsidiary of a holding company without first obtaining licenses and approvals from the Mississippi Commission. Ameristar has obtained such approvals in connection with ACVI's gaming license. Certain officers and employees of Ameristar and the officers, directors and certain key employees of each Gaming Subsidiary must be found suitable or be licensed by the Mississippi Commission. The Company believes it has obtained or applied for all necessary findings of suitability with respect to such persons associated with Ameristar or ACVI, although the Mississippi Commission, in its discretion, may require additional persons to file applications for findings of suitability. Employees associated with gaming must obtain work permits that are subject to immediate suspension under certain circumstances. In addition, any person having a material relationship or involvement with the Company may be required to be found suitable, in which case those persons must pay the costs and fees associated with such investigation. The Mississippi Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Changes in certain licensed positions must be reported to the Mississippi Commission. In addition to its authority to deny an application for a license, the Mississippi Commission has jurisdiction to disapprove a change in a licensed position. The Mississippi Commission has the power to require any Gaming Subsidiary or Ameristar to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. Employees associated with gaming must obtain work permits that are subject to immediate suspension. The Mississippi Commission will refuse to issue a work permit to a person convicted of a felony and it may refuse to issue a work permit to a gaming employee if the employee has committed various misdemeanors or knowingly violated the Mississippi Act or for any reasonable cause. At any time, the Mississippi Commission has the power to investigate and require the finding of suitability of any record or beneficial stockholder of Ameristar. Mississippi law requires any person who acquires more than 5% of Ameristar's common stock to report the acquisition to the Mississippi Commission, and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than 10% of Ameristar's common stock, as reported to the Securities and Exchange Commission, must apply for a finding of suitability by the Mississippi Commission and must pay the costs and fees that the Mississippi Commission incurs in conducting the investigation. The Mississippi Commission has generally exercised its discretion to require a finding of suitability of any beneficial owner of more than 5% of a public company's common stock. However, the Mississippi Commission has adopted a policy that may permit certain institutional investors to own beneficially up to 15% of a public company's common stock without a finding of suitability. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. Any person who fails or refuses to apply for a finding of suitability or a license within thirty (30) days after being ordered to do so by the Mississippi Commission may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Management believes that compliance by Ameristar with the licensing procedures and regulatory requirements of the Mississippi Commission will not affect the marketability of its securities. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of the securities of Ameristar beyond such time as the Mississippi Commission prescribes, may be guilty of a misdemeanor. Ameristar is subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with Ameristar or its Gaming Subsidiaries, Ameristar: (1) pays the unsuitable person any dividend or other distribution upon the voting securities of Ameristar; (2) recognizes the exercise, directly or indirectly, of any voting rights conferred by securities held by the unsuitable person; (3) pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or (4) fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value. Ameristar may be required to disclose to the Mississippi Commission, upon request, the identities of debt security holders. In addition, the Mississippi Commission under the Mississippi Act may, in its discretion, (1) require holders of debt securities of Ameristar to file applications, (2) investigate such holders, and (3) require such holders to be found suitable to own such debt securities or receive distributions thereon. If the Mississippi Commission determines that a person is unsuitable to own such security, then the issuer may be sanctioned, including the loss of its approvals, if without the prior approval of the Mississippi Commission, it (1) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (2) recognizes any voting right by such unsuitable person in connection with such securities; (3) pays the unsuitable person remuneration in any form; or (4) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. Although the Mississippi Commission generally does not require the individual holders of obligations such as notes to be investigated and found suitable, the Mississippi Commission retains the discretion to do so for any reason, including but not limited to, a default, or where the holder of the debt instrument exercises a material influence over the gaming operations of the entity in question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Commission in connection with such an investigation. ACVI must maintain in its principal office in Mississippi a current stock ledger with respect to its equity securities and Ameristar must maintain in the principal office of ACVI a current list of stockholders, which must reflect the record ownership of each outstanding share of any class of equity security issued by Ameristar. The ledger and stockholder lists must be available for inspection by the Mississippi Commission at any time. If any securities of Ameristar are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Commission. A failure to make such disclosure may be grounds for finding the record holder unsuitable. Ameristar must also render maximum assistance in determining the identity of the beneficial owner. The Mississippi Act requires that the certificates representing securities of a publicly traded corporation that has a Gaming Subsidiary bear a legend to the general effect that such securities are subject to the Mississippi Act and the regulations of the Mississippi Commission. Ameristar has received an exemption from this legend requirement from the Mississippi Commission. The Mississippi Commission has the power to impose additional restrictions on the holders of Ameristar's securities at any time. Substantially all loans, leases, sales of securities and similar financing transactions by a Gaming Subsidiary must be reported to or approved by the Mississippi Commission. A Gaming Subsidiary may not make a public offering of its securities but may pledge or mortgage casino facilities. Ameristar may not make an issuance or a public offering of its securities without the prior approval of the Mississippi Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for one or more such purposes. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering. Ameristar has received a waiver of the prior approval requirement for its securities offerings, subject to certain conditions. Under the regulations of the Mississippi Commission, a Gaming Subsidiary may not guarantee a security issued by an affiliated company pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by the affiliated company, without the prior approval of the Mississippi Commission. The pledge of the stock of a Gaming Subsidiary and the foreclosure of such a pledge is ineffective without the prior approval of the Mississippi Commission. Moreover, restrictions on the transfer of an equity security issued by a Gaming Subsidiary and agreements not to encumber such securities (the "Stock Restrictions") are ineffective without the prior approval of the Mississippi Commission. The Company has obtained approvals from the Mississippi commission for such guarantees, pledges and restrictions, subject to certain restrictions. Changes in control of Ameristar through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover, and certain recapitalizations and stock repurchases by Ameristar, cannot occur without the prior approval of the Mississippi Commission. Entities seeking to acquire control of a registered corporation must satisfy the Mississippi Commission in a variety of stringent standards prior to assuming control of such registered corporation. The Mississippi Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Mississippi legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Mississippi and corporations whose stock is publicly traded that are affiliated with those licensees, may be injurious to stable and productive corporate gaming. The Mississippi Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Mississippi's gaming industry and to further Mississippi's policy to (1) assure the financial stability of corporate gaming operations and their affiliates; (2) preserve the beneficial aspects of conducting business in the corporate form; and (3) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Mississippi Commission before Ameristar may make exceptional repurchases of voting securities in excess of the current market price of its common stock (commonly called "greenmail") or before a corporate acquisition opposed by management may be consummated. Mississippi's gaming regulations will also require prior approval by the Mississippi Commission if Ameristar adopts a plan of recapitalization proposed by its Board of Directors opposing a tender offer made directly to the stockholders for the purpose of acquiring control of Ameristar. Neither Ameristar nor any subsidiary may engage in gaming activities in Mississippi while also conducting gaming operations outside of Mississippi without approval of the Mississippi Commission or a waiver of such approval. The Mississippi Commission may require determinations that, among others, there are means for the Mississippi Commission to have access to information concerning the out-of-state gaming operations of the Company and its affiliates. Ameristar has previously obtained a waiver of foreign gaming approval from the Mississippi Commission for operations in other states in which Ameristar conducts gaming operations and will be required to obtain the approval or a waiver of such approval from the Mississippi Commission prior to engaging in any additional future gaming operations outside of Mississippi. If the Mississippi Commission decides that a Gaming Subsidiary violated a gaming law or regulation, the Mississippi Commission could limit, condition, suspend or revoke the license of the Gaming Subsidiary. In addition, a Gaming Subsidiary, Ameristar and the persons involved could be subject to substantial fines for each separate violation. Because of such a violation, the Mississippi Commission could seek to appoint a supervisor to operate the casino facilities. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect Ameristar's and the Gaming Subsidiary's gaming operations. License fees and taxes, computed in various ways depending on the type of gaming involved, are payable to the State of Mississippi and to the counties and cities in which a Gaming Subsidiary's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon (1) a percentage of the gross gaming revenues received by the casino operation, (2) the number of slot machines operated by the casino or (3) the number of table games operated by the casino. The license fee payable to the State of Mississippi is based upon "gaming receipts" (generally defined as gross receipts less payouts to customers as winnings) and equals 4% of gaming receipts of $50,000 or less per month, 6% of gaming receipts over $50,000 and less than $134,000 per month, and 8% of gaming receipts over $134,000 per month. The foregoing license fees are allowed as a credit against the Company's Mississippi income tax liability for the year paid. The gross revenue fee imposed by the City of Vicksburg equals approximately 4% of the gaming receipts. The Mississippi Commission's regulations require as a condition of licensure or license renewal that an existing licensed gaming establishment's plan include a 500-car parking facility in close proximity to the casino complex and infrastructure facilities which amount to at least 25% of the casino cost. The Company believes that ACVI is in compliance with this requirement with the opening of a 150- room hotel at Ameristar Vicksburg in June 1998. The Mississippi Commission recently adopted a regulation that requires any new licensee to spend 100% of its casino cost on land-based infrastructure facilities, but this increase does not apply to operators that were already licensed at the time the regulation was adopted such as Ameristar Vicksburg. Both the City of Vicksburg and the Alcoholic Beverage Control Division of the Mississippi Tax Commission (the "ABC") license, control and regulate the sale of alcoholic beverages by ACVI. ACVI is in an area designated as a special resort, which allows ACVI to serve alcoholic beverages on a 24-hour basis. The ABC has the full power to limit, condition, suspend or revoke any license for the serving of alcoholic beverages or to place a licensee on probation with or without conditions. Any disciplinary action could, and revocation would, have a material adverse effect upon ACVI's operations. ACVI's key officers and managers must be investigated by the ABC in connection with AVCI's liquor permits and changes in key positions must be approved by the ABC. IOWA. The Company's Council Bluffs operations are conducted by ACCBI and are subject to Chapter 99F of the Iowa Code and the regulations promulgated thereunder. The Company's gaming operations are subject to the licensing and regulatory control of the Iowa Racing and Gaming Commission (the "Iowa Gaming Commission"). Under Iowa law, wagering on a "gambling game" is legal, when conducted by a licensee on an "excursion gambling boat." An "excursion gambling boat" is a self-propelled excursion boat. "Gambling game" means any game of chance authorized by the Iowa Gaming Commission. The excursion season is from April 1st through October 31st of each calendar year. The vessel must operate at least one excursion each day for 100 days during the excursion season to operate during the off season. Each excursion must consist of a minimum of two hours. The Council Bluffs Casino satisfied the requirements of Iowa law for the conduct of off-season operations during each of 1997, 1998 and 1999. The legislation permitting riverboat gaming in Iowa authorizes the granting of licenses to "qualified sponsoring organizations." A "qualified sponsoring organization" is defined as a person or association that can show to the satisfaction of the Iowa Gaming Commission that the person or association is eligible for exemption from federal income taxation under sec. 501(c)(3), (4), (5), (6), (7), (8), (10) or (19) of the Internal Revenue Code (hereinafter "not- for-profit corporation"). The not-for-profit corporation is permitted to enter into operating agreements with persons qualified to conduct riverboat gaming operations. Such operators must be approved and licensed by the Iowa Gaming Commission. On January 27, 1995, the Iowa Gaming Commission authorized the issuance of a license to conduct gambling games on an excursion gambling boat to the Iowa West Racing Association, a not-for-profit corporation organized for the purpose of facilitating riverboat gaming in Council Bluffs, Iowa (the "Association"). The Association entered into an agreement with ACCBI authorizing ACCBI to operate riverboat gaming operations in Council Bluffs under the Association's gaming license (the "Operator's Contract"). The Iowa Gaming Commission approved this contract. The term of the Operator's Contract runs until December 31, 2002, with two five-year renewal options. The current license awarded by the Iowa Gaming Commission for the Ameristar Council Bluffs Casino expires on March 31, 2001. Under Iowa law, a license to conduct gambling games may be issued in a county only if the county electorate has approved such gambling games. Although the electorate of Pottawattamie County, which includes the City of Council Bluffs, approved by referendum the gambling games conducted by ACCBI, a reauthorization referendum must be submitted to the electorate in the general election to be held in 2002 and each eight years thereafter. Each such referendum requires the vote of a majority of the persons voting thereon. If any such reauthorization referendum is defeated, Iowa law provides that any previously issued gaming license will remain valid and subject to periodic renewal for a total of nine years from the date of original issuance, subject to earlier revocation as discussed below. The original issuance date of the gaming license for Ameristar Council Bluffs was January 27, 1995. Substantially all of ACCBI's material transactions are subject to review and approval by the Iowa Gaming Commission. All contracts or business arrangements, verbal or written, with any related party or in which the term exceeds three years or the total value of the contract exceeds $50,000 must be submitted in advance to the Iowa Gaming Commission for approval. Additionally, contracts negotiated between ACCBI and a related party must be accompanied by economic and qualitative justification. ACCBI is required to notify the Iowa Gaming Commission of the identity of each director, corporate officer and owner, partner, joint venturer, trustee or any other person who has a beneficial interest of five percent (5%) or more, direct or indirect, in ACCBI. The Iowa Gaming Commission may require ACCBI to submit background information on such persons. The Iowa Gaming Commission may request ACCBI to provide a list of persons holding beneficial ownership interests in ACCBI of less than five percent (5%). For purposes of these rules, "beneficial interest" includes all direct and indirect forms of ownership or control, voting power or investment power held through any contract, lien, lease, partnership, stockholding, syndication, joint venture, understanding, relationship, present or reversionary right, title or interest, or otherwise. The Iowa Gaming Commission may suspend or revoke the license of a licensee in which a director, corporate officer or holder of a beneficial interest includes or involves any person or entity which is found to be ineligible as a result of want of character, moral fitness, financial responsibility, professional responsibility or due to failure to meet other criteria employed by the Iowa Gaming Commission. ACCBI must submit detailed financial, operating and other reports to the Iowa Gaming Commission. ACCBI must file monthly gaming reports indicating adjusted gross receipts received from gambling games and the total number and amount of money received from admissions. Additionally ACCBI must file annual financial statements covering all financial activities related to its operations for each fiscal year. ACCBI must also keep detailed records regarding its equity structure and owners. Iowa has a graduated wagering tax equal to five percent (5%) of the first $1.0 million of annual adjusted gross receipts, ten percent (10%) on the next $2.0 million of annual adjusted gross receipts and twenty percent (20%) on annual adjusted gross receipts over $3.0 million. In addition, the state charges other fees on a per customer basis. Additionally, ACCBI pays to the City of Council Bluffs a fee equal to $0.50 per passenger. Under the Operator's Contract, ACCBI also pays the Association an admissions fee of $1.50 per passenger. ACCBI has interpreted the Operator's Contract to mean that a person may leave and re-enter Council Bluffs Casino (for example, to visit the restaurants at Ameristar Council Bluffs) without ACCBI being obligated to pay an additional admissions fee to the Association. ACCBI received a letter from the Association in August 1996 in which the Association asserted that an additional fee is due each time a person enters the Council Bluffs Casino, including re-entries. The Association has advised the Company that the board of directors of the Association discussed a proposal to settle this dispute at an October 1997 meeting but declined to take any action either to approve the proposed settlement or to pursue the previously threatened claim. Accordingly, the Association has advised ACCBI that it does not currently intend to pursue this claim, but the Association has not formally waived or released the claim. If the Iowa Gaming Commission decides that a gaming law or regulation has been violated, the Iowa Gaming Commission has the power to assess fines, revoke or suspend licenses or to take any other action as may be reasonable or appropriate to enforce the gaming rules and regulations. REGULATORY REQUIREMENTS APPLICABLE TO OWNERS OF CERTAIN NOTES. A record or beneficial owner of the promissory notes issued by the Company in connection with the acquisition of The Reserve (the "Gem Notes") could be required by one or more gaming regulatory authorities to be found suitable, and such owner would be required to apply for a finding of suitability within 30 days after request of such gaming authority or within such other time period prescribed by such gaming authority. If such a record or beneficial owner is required to be found suitable and is not found suitable by such gaming regulatory authority, such owner may be required by law to dispose of the Gem Notes. If any gaming regulatory authority determines that a person is unsuitable to own the Gem Notes, then the Company may be subject to sanctions, including the loss of its regulatory approvals, if, without the prior approval of the applicable gaming regulatory authorities, it (1) pays interest on the Gem Notes to the unsuitable person, (2) pays the unsuitable person remuneration in any form or (3) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction. In denying applications for findings of suitability for certain purposes in early 1997 submitted by the persons to whom the Gem Notes were issued, the Nevada Commission did not find either of them to be unsuitable to hold any debt obligations of Ameristar, and, as of the date of this report, no gaming regulatory authority has required either of such persons to apply for a finding of suitability to own the Gem Notes. However, one or more gaming regulatory authorities could require a holder of the Gem Notes to submit such an application in the future. These regulatory requirements are applicable with respect to other debt securities issued by the Company, including the Company's Senior Subordinated Notes. However, unlike the Gem Notes, the Senior Subordinated Notes include provisions requiring a holder who is found to be unsuitable to dispose of its Senior Subordinated Notes. In certain circumstances, the Company is permitted to redeem Senior Subordinated Notes of an unsuitable holder. OTHER JURISDICTIONS. The Company expects to be subject to similar rigorous regulatory standards in each jurisdiction in which it seeks to conduct gaming operations, including in Missouri where the Company is currently seeking a license to develop a casino in Lemay. See "Item 1. Business - Expansion Strategy." There can be no assurance that regulations adopted or taxes imposed by other jurisdictions will permit profitable operations by the Company. FEDERAL REGULATION OF SLOT MACHINES. The Company is required to make annual filings with the U.S. Attorney General in connection with the sale, distribution or operation of slot machines. All requisite filings for the most recent year and the current year have been made. CURRENCY TRANSACTION REPORTING REQUIREMENTS. Pursuant to a 1985 agreement between the State of Nevada and the United States Department of the Treasury (the "Treasury"), the Nevada Commission and the Nevada Board have authority to enforce their own cash transaction reporting laws applicable to casinos, which substantially parallel the Federal Bank Secrecy Act. Under the Money Laundering Suppression Act of 1994, which was passed by Congress, the Secretary of the Treasury retained the ability to permit states, including Nevada, to continue to enforce their own cash transaction reporting laws applicable to casinos. The Nevada Act and related regulations require most gaming licensees to file reports with respect to various gaming-related and other cash transactions if such transactions aggregate more than $10,000 in a 24-hour period. Casinos are required to monitor receipts and disbursements of currency in excess of $10,000 and report them to the Treasury. Although it is not possible to quantify the full impact of these requirements on the Company's business, the changes are believed to have had some adverse effect on results of operations since inception. On November 28, 1994, the Treasury enacted amendments (effective December 1, 1994) to the federal regulations under the Bank Secrecy Act. The amendments require casinos subject to the Bank Secrecy Act to implement written programs no later than June 1, 1995 to assure and monitor compliance with the Bank Secrecy Act. Such programs must include "know your customer" and suspicious transaction reporting components. Although Nevada casinos are exempt from Title 31, the Nevada Commission has adopted regulations under the Nevada Act that parallel in several respects the amendments to the Bank Secrecy Act. In June 1998, ACVI received a letter from the Financial Crimes Enforcement Network ("FinCEN") of the Department of Treasury identifying 26 alleged currency transaction reporting failures or errors that were discovered in an audit by the Internal Revenue Service covering an approximately 13-month period following the opening of Ameristar Vicksburg. In early 2000, the Company settled this matter with FinCEN by agreeing to pay a civil monetary penalty. In addition to paying the civil penalty, ACVI has implemented various steps intended to improve compliance with the currency transaction reporting requirements. POTENTIAL CHANGES IN TAX AND REGULATORY REQUIREMENTS. From time to time, federal and state legislators and officials have proposed changes in tax law, or in the administration of such laws, affecting the gaming industry. Recent proposals have included a federal gaming tax and increases in state or local gaming taxes. They have also included limitations on the federal income tax deductibility of the cost of furnishing complimentary promotional items to customers, as well as various measures that would require withholding on amounts won by customers or on negotiated discounts provided to customers on amounts owed to gaming companies. It is not possible to determine with certainty the likelihood of possible changes in tax law or in the administration of such law. Such changes, if adopted, could have a materially adverse effect on the Company's financial results. A National Gambling Impact Study Commission (the "National Commission") has been established by the United States Congress to conduct a comprehensive study of the social and economic impact of gaming in the United States. On April 28, 1999, the National Commission issued a final report of its findings and conclusions, together with recommendations for legislature and administrative actions. Below are some of those recommendations: Legal gaming should be restrictive to those at least 21 years of age; Betting on college and amateur sports should be banned; The introduction of casino-style gambling at pari-mutual racing facilities for the primary purpose of saving the pari-mutual facility should be prohibited; The types of gaming activities allowed by Indian tribes within a given state should not be inconsistent with the gaming activities allowed to other persons in that state; and State, local and tribal governments should recognize that casino gaming provides economic development, particularly for economically depressed areas. The National Commission differentiated casino gaming from stand-alone slot machines (i.e. in convenience stores), Internet gaming and lotteries which the commission stated do not provide the same economic development. Any additional regulation of the gaming industry which may result the National Commission's report may have an adverse effect on the gaming industry, including Ameristar. NON-GAMING REGULATIONS. The sale of alcoholic beverages by the Company is subject to the licensing, control and regulation in Jackpot by the Liquor Board of Elko County, in Henderson by the City of Henderson, in Vicksburg by both the City of Vicksburg and the Alcoholic Beverage Control Division of the Mississippi State Tax Commission, and in Council Bluffs by the Alcoholic Beverage Division of the Iowa Department of Commerce (collectively, the "Liquor License Authorities"). In Mississippi, Ameristar Vicksburg has been designated as a special resort area, which allows ACVI to serve alcoholic beverages on a 24-hour basis. In Nevada, the applicable liquor laws allow 24-hour service of alcoholic beverages without any additional permits. In Iowa, the applicable liquor laws allow the sale of liquor during legal hours which are Monday through Saturday from 6 a.m. to 2 a.m. and Sunday from 8 a.m. to 2 a.m. All licenses are revocable and not transferable. The Liquor License Authorities have the full power to limit, condition, suspend or revoke any such license or to place a liquor licensee on probation with or without conditions. Any such disciplinary action could (and revocation would) have a material adverse effect upon the operations of the Company's business. Certain officers and managers of ACVI and ACLVI must be investigated by the applicable Liquor License Authorities in connection with ACVI's and ACLVI's liquor permits. The applicable Liquor License Authorities must approve any changes in licensed positions. All cruising vessels operated by the Company must comply with U.S. Coast Guard requirements as to safety and must hold a Certificate of Inspection. These requirements set limits on the operation of the vessel and require that each vessel be operated by a minimum complement of licensed personnel. Loss of the vessel's Inspection Certificate would preclude its use as a riverboat. Every five years, US flagged passenger vessels operating exclusively in fresh water must conduct a thorough dry-dock inspection of underwater machinery, valves and hull. The Ameristar Council Bluffs riverboat is due for its dry-dock inspection in November 2000. This dry-dock inspection could result in a loss of service that may have a material adverse effect on the Company. The Company has been accepted into a United States Coast Guard program that would allow it to obtain a 30- month extension of the dry-dock requirement. To obtain this extension, the Ameristar Council Bluffs riverboat must undergo a thorough underwater inspection in the fall of 2000 after the cruising season. The Company expects that its underwater inspection will satisfy the United States Coast Guard requirement and expects to obtain an extension of the dry-dock interval, but there can be no assurance that such an extension will actually be obtained or that future extensions will be obtained. Currently, Ameristar Council Bluffs is the only property that operates a cruising vessel subject to these requirements. Less stringent rules apply to permanently moored vessels. In order to comply with the federal Merchant Marine Act of 1936, as amended, and the federal Shipping Act of 1916, as amended, and applicable regulations thereunder, the Company's Bylaws contain provisions designed to prevent persons who are not citizens of the United States from holding, in the aggregate, more than 24.9% of the Company's outstanding common stock. All shipboard employees of the Company employed on U.S. Coast Guard-approved vessels, even those who have nothing to do with the actual operations of the vessel, such as dealers, waiters and security personnel, may be subject to the Jones Act, which, among other things, exempts those employees from state limits on workers' compensation awards. The Company is also required to comply with various environmental regulations. ITEM 2. PROPERTIES JACKPOT. Cactus Petes is located on a 35-acre site and The Horseshu is located on a 30-acre site. The Cactus Petes and The Horseshu sites are across from each other on U.S. Highway 93. The Company also owns 204 housing units in Jackpot, including 90 units in two apartment complexes developed as United States Department of Agriculture Rural Economic and Community Development Services Multi- Family Housing Program ("USDA") projects. These housing units support the primary operations of the Jackpot Properties. The Jackpot Properties are subject to deeds of trust securing the Company's obligations under its Revolving Credit Facility, and the USDA housing projects are subject to mortgage loans in favor of the USDA. The Company owns a gas station adjacent to Highway 93 in Jackpot, which it operates under a franchise from Chevron. Management believes that this facility is in material compliance with applicable environmental and other regulatory requirements. The Company has previously operated two other gas stations at the Jackpot Properties, one of which was abandoned prior to the adoption of modern environmental abandonment standards. Although management believes that all tanks for this gas station were removed in the mid- 1970s, the Company has not conducted tests for the presence of any environmental contamination from this gas station. Management believes that the likelihood of a material unfavorable outcome with respect to potential environmental liabilities relating to this former gas station is remote. VICKSBURG. In connection with the development of Ameristar Vicksburg, the Company has acquired eight parcels in Vicksburg along Washington Street near Interstate 20. These parcels comprise approximately 48 acres, approximately 34 of which are developable. The Company owns six of the parcels and leases the remaining two. The Company plans to exercise the option for one of the leasehold parcels within the next year. The Vicksburg Casino and substantially all of the Company's leasehold and fee interests comprising the Ameristar Vicksburg site serve as collateral for the Company's obligations under its Revolving Credit Facility and other indebtedness. The hotel at Ameristar Vicksburg and the underlying property are subject to a deed of trust securing the loan that funded a portion of the hotel construction costs. In addition, the Company has developed a 20-acre mobile home park with 30 single- and 20 double-wide mobile homes. This mobile home park is located seven miles from Ameristar Vicksburg and sites are available for rent by employees and other persons. The mobile home park rental rates are competitive with the local market. COUNCIL BLUFFS. Ameristar Council Bluffs is on an approximately 50-acre site along the bank of the Missouri River and adjacent to the Nebraska Avenue exit on Interstate 29 immediately north of the junction of Interstates 29 and 80. The Company owns approximately 27 acres of this site and has rights to use the remaining portion of the site that is owned by the State of Iowa for a 50-year term. The Company has leased 0.623 acres of the Ameristar Council Bluffs site to Kinseth Hotel Corporation for the development and operation by Kinseth of a 188-room limited service Holiday Inn Suites Hotel that opened on March 31, 1997 and was expanded during 1999. The Company has also leased 0.426 acres of the Ameristar Council Bluffs site to Kinseth Hotel Corporation for the development and operation of an approximately 100-room Hampton Inn hotel, which is expect to be completed in the Fall of 2000. All of the Company's interests in Ameristar Council Bluffs serve as collateral for the Company's obligations under its Revolving Credit Facility and other indebtedness. THE RESERVE. The Reserve is at the southeastern corner of the junction of Lake Mead Drive and Interstate 515 in Henderson, Nevada on a site containing approximately 33 acres, substantially all of which is developable. The Reserve site was previously used for surface waste disposal activities for approximately 50 years. Prior to 1994, the site had large areas of debris, rubble and some stained soils resulting from these waste activities. Site studies revealed asbestos, lead and pesticide concentrations in the surface soils. Following a surface remediation program by a third party in 1994, the Nevada Division of Environmental Protection approved a closure of the remediation and indicated that no further work was required. A 1995 Phase I environmental assessment on the site owned by the Company showed that some rubble remained on portions of the property, but that all hazardous material had been removed. A 1997 Phase I environmental assessment indicated that the property did not appear to have been adversely impacted since the completion of the 1994 remediation program. Phase I environmental assessments involve the conduct of limited procedures and may not identify the existence or extent of actual environmental conditions. OTHER. The Company leases approximately 29,400 square feet of office space in various locations, including for its executive offices in Las Vegas, Nevada. ITEM 3. LEGAL PROCEEDINGS E. L. Pennebaker, Jr., et. al. v. ACI, et. al. On February 23, 1998, E. L. Pennebaker, Jr. filed a complaint in the Circuit Court of Pike County, Mississippi against ACI, Harrah's Vicksburg Corporation ("HVC"), Riverboat Corporation of Mississippi-Vicksburg ("RCMV"), and Deposit Guaranty National Bank ("DGNB"). The matter is pending as case number 98-0047-B (the "Pennebaker case"). The complaint was amended in February 1998 to add James F. Belisle, Multi Gaming Management, Inc. and Multi Gaming Management of Mississippi, Inc. as additional plaintiffs. The complaint was further amended in March 1999 to modify the specific claims alleged by the plaintiffs. The plaintiffs are property owners or claim to have contract rights in a proposed casino/racetrack development along the Big Black River in Warren County, Mississippi. They allege they would have profited if the Mississippi Gaming Commission had found suitable for a casino a location along that river that was controlled by Horseshoe Gaming, Inc. or its affiliates. The plaintiffs further allege that the defendants entered into an agreement to hinder trade and restrain competition in the gaming industry in violation of the antitrust laws and the gaming laws of Mississippi. Specifically, the plaintiffs allege the defendants conducted an aggressive campaign in opposition to the application of Horseshoe Gaming, Inc. for a gaming site on the Big Black River. The plaintiffs also allege that the defendants tortiuously interfered with the plaintiffs' business relations. The plaintiffs allege compensatory damages of $38 million and punitive damages of $200 million. The trial in this case was held in October 1999, following which the jury rendered joint and several verdicts in favor of the plaintiffs against ACI, HVC and DGNB on the conspiracy count and against ACI and HVC on the restraint of trade and tortious interference counts. RCMV settled with the plaintiffs prior to trial, and the damage amounts have been reduced by the settlement amount paid by RCMV. The net damages awarded to the plaintiffs total $3,792,000, of which ACI's pro rata portion is $1,685,333. These damages are compensatory only as the court did not allow the jury to consider an award of punitive damages. Judgment was entered on November 8, 1999, and ACI has appealed the case to the Mississippi Supreme Court and otherwise intends to vigorously defend against the plaintiffs' claims. Post-judgment interest on the damages will accrue at the rate of 8 percent per annum, and if an appeal is unsuccessful, the plaintiffs would also be entitled to a premium of 15% of the damages amount. Mr. Pennebaker has also filed a petition with the Mississippi Gaming Commission requesting that the Mississippi Gaming Commission order ACI, HVC and RCMV to stop opposing the approval and construction of a casino on the Big Black River and for such other corrective and punitive action that the Mississippi Gaming Commission might find appropriate. ACI has been advised that no action is required by it in connection with this petition unless requested by the Mississippi Gaming Commission. Walter H. Gibbes, Jr. and Margaret S. Dozier v. ACI et al. On November 22, 1999, Mr. Gibbes and Ms. Dozier filed a complaint in the Circuit Court of Pike County, Mississippi against ACI, HVC, Isle of Capri Casinos, Inc. (the parent company of RCMV; "ICC") and DGNB. The matter is pending as cause no. 99-0157-B. ACI believes that the plaintiffs were partners with Mr. Pennebaker in a partnership that held an option to a real estate parcel along the Big Black River that is adjacent to the parcel that was the subject of the Horseshoe Gaming, Inc. application. The allegations in the complaint are substantially the same as those in the complaint in the case previously brought by the plaintiffs in the Pennebaker case. The plaintiffs seek $4,567,500 in actual damages and an unspecified amount of punitive damages. The defendants have removed this case to the United States District Court for the Southern District of Mississippi on diversity jurisdiction and federal question grounds. The case is now pending in federal court as cause no. 3:99cv911WS. The plaintiffs have filed a motion to remand the case back to the Pike County circuit court, which has not yet been ruled on by the federal court. ACI intends to continue to vigorously defend against this cause of action. Bryan K. and Dawn H. Hafen v. Steven W. Rebeil, et al. This lawsuit was filed in the Clark County District Court as case number A347722. A named defendant in the amended complaint, filed on January 29, 1996, action is Gem Gaming, Inc. ("Gem"). ACLVI is the successor-in-interest by merger to Gem. The case arises out of the purchase of land in Mesquite, Nevada by Steven W. Rebeil, a former Gem stockholder, pursuant to which a jointly owned corporation was to develop real property contributed by the plaintiffs as a hotel- casino. The plaintiffs allege that Gem's former stockholders and their controlled entities (including Gem) engaged in a conspiracy to defraud the plaintiffs in connection with the plaintiff's contribution of the land and its subsequent sale to a third party. The plaintiffs allege violations of Nevada's racketeering statutes, fraud and unjust enrichment. The plaintiffs do not allege any improper conduct by Gem following its acquisition by The Company. The complaint seeks an unspecified amount of damages, although the plaintiffs have otherwise claimed total compensatory damages of approximately $10 million. Gem's former stockholders are contractually required to indemnify ACLVI against the claims in the Hafen litigation. This case was resolved by settlement in late 1999. ACLVI did not contribute any amount to the settlement, but the Company did agree as part of the settlement to take certain actions to facilitate the settlement between the plaintiffs and the other defendants. The plaintiffs have acknowledged in the settlement documents that the Company did not commit any wrongdoing against the plaintiffs and that ACLVI was named in the suit only because it is the successor by merger to Gem. Other Legal Proceedings and Claims. From time to time, the Company is a party to litigation which arises in the ordinary course of business. Except for the matters described or referred to above, the Company is not currently a party to any litigation that management believes would be likely to have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Ameristar's Common Stock is traded on the Nasdaq National Market System ("Nasdaq-NMS") under the symbol "ASCA." The following table sets forth, for the fiscal quarter indicated, the high and low sale prices for the Common Stock, as reported by Nasdaq: High Low 1998 First Quarter $ 6.50 $ 4.88 Second Quarter 5.75 5.00 Third Quarter 5.13 2.63 Fourth Quarter 3.25 1.88 1999 First Quarter $ 3.63 $ 2.13 Second Quarter 3.88 2.31 Third Quarter 4.44 3.00 Fourth Quarter 4.31 3.25 On March 15, 2000, there were 285 holders of record of Ameristar's Common Stock. No dividends on Ameristar's Common Stock have been declared during the last two fiscal years. The Company intends to retain all earnings for use in the development of its business and does not anticipate paying any cash dividends in the foreseeable future. In addition, the Company's Revolving Credit Facility and Senior Subordinated Notes obligate the Company to comply with certain financial covenants that place limitations on the payment of dividends. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." ITEM 6. SELECTED FINANCIAL DATA The following data has been derived from the audited financial statements of the Company and should be read in conjunction with those statements, certain of which are included in this Report. AMERISTAR CASINOS, INC. CONSOLIDATED SELECTED FINANCIAL DATA For the year ended December 31, INCOME STATEMENT DATA: 1995 1996 1997 1998 1999 (amounts in thousands, except per share data) REVENUES: Casino $ 99,364 $161,377 $173,019 $216,319 $247,416 Food and beverage 19,303 24,250 30,672 45,853 49,142 Rooms 7,861 7,641 9,685 14,201 17,257 Other 7,756 7,760 8,275 10,401 11,089 134,284 200,989 221,709 286,774 324,904 Less: Promotional 10,417 12,524 15,530 22,092 24,618 allowances Net revenues 123,867 188,465 206,179 264,682 300,286 COSTS AND EXPENSES: Casino 44,503 75,685 78,733 103,387 114,357 Food and beverage 11,747 16,773 19,784 31,698 33,207 Rooms 2,404 2,368 3,130 5,809 6,372 Other 8,211 7,054 7,546 10,044 10,203 Selling, general and 29,197 47,758 51,958 75,604 86,142 administrative Depreciation and 9,721 14,135 16,358 24,191 24,460 amortization Abandonment loss - - 646 - - Preopening costs - 7,379 - 10,611 - Total costs and 105,783 171,152 178,155 261,344 274,741 expenses INCOME FROM OPERATIONS 18,084 17,313 28,024 3,338 25,545 OTHER INCOME (EXPENSE): Interest income 205 354 445 296 300 Interest expense (3,958) (8,303) (12,107) (22,699) (24,449) Other - (77) (35) (13) (851) Income (loss) before income tax provision 14,331 9,287 16,327 (19,078) 545 (benefit) Income tax provision 5,236 3,390 5,959 (6,363) 340 (benefit) Income (loss) before 9,095 5,897 10,368 (12,715) 205 extraordinary loss Extraordinary loss on (657) - (673) - - early retirement of debt, net of income tax benefit of $353 and $387, respectively NET INCOME (LOSS) $ 8,438 $ 5,897 $ 9,695 $(12,715) $ 205
AMERISTAR CASINOS, INC. CONSOLIDATED SELECTED FINANCIAL DATA (CONTINUED) For the year ended December 31, INCOME STATEMENT DATA: 1995 1996 1997 1998 1999 (amounts in thousands, except per share data) EARNINGS PER SHARE: Income (loss) before extraordinary item Basic and diluted $ 0.45 $ 0.29 $ 0.51 $(0.62) $ 0.01 Net income (loss) Basic and diluted 0.42 0.29 0.48 (0.62) 0.01 WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360 20,360 20,360 20,362 December 31, BALANCE SHEET AND OTHER 1995 1996 1997 1998 1999 DATA: Cash $ 14,787 $ 10,724 $ 13,310 $ 18,209 $ 15,531 Total assets 202,220 270,052 336,186 351,773 378,645 Total notes payable, long-term debt and 101,869 143,893 193,113 230,399 242,890 capital lease obligations, net of current maturities Stockholders' equity 65,047 70,944 80,639 67,924 68,169 Capital expenditures 63,559 43,087 72,932 32,312 57,590
Certain revenues and expenses were reclassified beginning in 1998 to be consistent with classifications used in 1999. The selected financial data for periods prior to 1998 have not been reclassified, but the reclassifications are deemed not to be material to the presentation, The Council Bluffs Casino opened in mid-January 1996. Portions of the land-based facilities at Ameristar Council Bluffs opened in June, November and December 1996. Ameristar Council Bluffs' remaining land- based facilities opened in February and March 1997. The Reserve opened February 10, 1998. The Ameristar Vicksburg hotel opened in June 1998. Casino expansions at Ameristar Council Bluffs and Ameristar Vicksburg were completed on November 22, 1999 and December 29, 1999, respectively. No dividends were paid in 1995, 1996, 1997, 1998 and 1999. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included in this Report. The information in this section and in this Report generally includes forward-looking statements. See "Item 1. - Business - Risk Factors." OVERVIEW Ameristar Casinos, Inc. ("Ameristar" or "ACI") owns and operates five casino-hotels in four markets through its wholly owned subsidiaries. Ameristar and its subsidiaries are collectively referred to herein as the "Company." The Company's properties consist of the following: Cactus Petes Resort Casino and The Horseshu Hotel & Casino (collectively, the "Jackpot Properties"), two casino-hotels that have been operating in Jackpot, Nevada at the Idaho border since 1956. Ameristar Casino Vicksburg ("Ameristar Vicksburg"), located in Vicksburg, Mississippi, a riverboat-themed dockside casino and related land-based facilities, including a hotel which opened in June 1998. The remainder of Ameristar Vicksburg opened in February and May 1994. On December 29, 1999, Ameristar Vicksburg completed its casino expansion with 8,000 square feet of additional gaming space becoming fully operational. Additional parking facilities also became operational on December 29, 1999. Ameristar Casino Hotel Council Bluffs ("Ameristar Council Bluffs"), a riverboat casino and related land-based hotel and other facilities in Council Bluffs, Iowa across the Missouri River from Omaha, Nebraska. The casino opened on January 19, 1996, portions of the land-based Main Street Pavilion opened on June 17, 1996, the hotel opened on November 1, 1996, and the remainder of Ameristar Council Bluffs opened in early 1997. The third deck of the riverboat opened on November 22, 1999 and a new parking garage will be fully operational by the beginning of April 2000. The Reserve Hotel Casino ("The Reserve"), in Henderson, Nevada at the intersection of Interstate 515 and Lake Mead Drive, which opened on February 10, 1998. The Company acquired The Reserve on October 9, 1996 through a merger of the initial developer of the property into a subsidiary of Ameristar. Certain of the Company's operations are seasonal in nature. In particular, in Jackpot, the months of March through October are the strongest. As a result, the second and third calendar quarters typically produce a disproportionate amount of the income from operations of the Jackpot Properties. In addition, adverse weather conditions may adversely affect the business of the Jackpot Properties, and operations during the winter months typically vary from year to year based on the severity of the winter weather conditions in the northwestern United States. To date, operations in Council Bluffs have experienced some seasonality, with the winter months being the slower periods. To date, operations at both Ameristar Vicksburg and The Reserve have not experienced any material seasonality. 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 are not necessarily comparable and may not be indicative of results to be expected for future periods. The following table highlights the consolidated cash flow information and results of operations of Ameristar's operating subsidiaries for its principal properties Year Ended December 31, 1997 1998 1999 Consolidated cash flow information: Cash flows from operations $ 33,641 $ 23,123 $ 34,287 Cash flows used in investing (63,417) (53,863) (50,048) Cash flows from financing 32,083 35,918 13,083 Net revenues: Jackpot Properties $ 54,455 $ 54,671 $ 58,294 Ameristar Vicksburg 63,961 68,538 76,930 Ameristar Council Bluffs 87,763 97,672 112,047 The Reserve - 43,578 52,832 Corporate and other - 223 183 Consolidated net revenues $206,179 $264,682 $300,286 Adjusted operating income (1): Jackpot Properties $ 10,308 $ 9,638 $ 10,619 Ameristar Vicksburg 13,165 13,562 15,392 Ameristar Council Bluffs 14,251 17,230 20,714 The Reserve - (16,092) (7,089) Corporate and other (9,054) (10,389) (14,091) Consolidated operating income $ 28,670 $ 13,949 $ 25,545 Adjusted operating income margins (1): Jackpot Properties 18.9% 17.6% 18.2% Ameristar Vicksburg 20.6% 19.8% 20.0% Ameristar Council Bluffs 16.2% 17.6% 18.5% The Reserve - (36.9%) (13.4%) Consolidated operating income margin 13.9% 5.3% 8.5% EBITDA (2): Jackpot Properties $ 13,208 $ 13,163 $ 13,743 Ameristar Vicksburg 19,350 20,231 21,092 Ameristar Council Bluffs 21,090 24,322 28,430 The Reserve - (9,519) 426 Corporate and other (8,621) (10,057) (13,686) Consolidated EBITDA $ 45,027 $ 38,140 $ 50,005 EBITDA Margins (2): Jackpot Properties 24.3% 24.1% 23.6% Ameristar Vicksburg 30.3% 29.5% 27.4% Ameristar Council Bluffs 24.0% 24.9% 25.4% The Reserve - (21.8%) 0.8% Consolidated EBITDA margin 21.8% 14.4% 16.7%
____________________________ (see following page for footnotes) (1) Adjusted operating income is income from operations (as reported) before an abandonment loss at Ameristar Vicksburg in 1997 related to the demolition of an existing budget motel for the construction of a hotel and The Reserve preopening costs in 1998. (2) EBITDA consists of income from operations plus depreciation and amortization. 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 flows 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 calculate EBITDA in the same manner as the Company. RESULTS OF OPERATIONS RECENT OPERATING PERFORMANCE TRENDS As discussed above, the Company completed significant expansions of the casinos at Ameristar Council Bluffs and Ameristar Vicksburg in late 1999. Parking improvements at both of these properties have also been developed and are substantially complete, including approximately 1,000 new covered parking spaces at Ameristar Council Bluffs. Ameristar Vicksburg has also made some restaurant improvements. In addition, a number of new generation slot machines have been installed at the Company's properties and some new marketing programs have been introduced aimed at increasing revenues and profitability. The initial operating results from these developments have been positive, and the Company expects to announce record levels of consolidated net revenues and EBITDA for the first quarter of 2000. An improvement in operating performance is being experienced at each of the Company's operating properties. Although no assurances can be given, the Company expects that this trend will continue through the end of 2000 as a result of these developments. In addition, the Company expects to continue to make improvements at its existing properties and to purchase new slot products. YEAR ENDED DECEMBER 31, 1999 VERSUS YEAR ENDED DECEMBER 31, 1998 SUMMARY Strong improvements in operations at The Reserve and the continued growth at Ameristar Council Bluffs and Ameristar Vicksburg brought a year of record growth in Ameristar's consolidated net revenues and a significant increase in income from operations over the prior year. Consolidated net revenues increased by 13.5% to $300.3 million in 1999 compared to $264.7 million in 1998. The increase was due to increases in revenues at each of the properties. Consolidated income from operations increased 83.1% to $25.5 million in 1999 compared to an adjusted income from operations of $13.9 million in 1998 (before the $10.6 million charge for preopening costs associated with the opening of The Reserve). The increase was due to improved operating results at all of the properties, with The Reserve generating the greatest improvement. Consolidated income from operations after preopening costs was $3.3 million in 1998. Total operating expenses as a percentage of net revenues were 91.5% in 1999 versus 98.7% (94.7% before The Reserve's preopening costs) in 1998. The improvement in this margin is primarily a result of the improved operating performance at The Reserve, partially offset by an increase in corporate overhead related to increased corporate staffing levels and the greater centralization of certain management functions. Net income in 1999 was $0.2 million compared to a net loss of $12.7 million in 1998, an increase of $12.9 million. If 1998 net income were adjusted for preopening costs and their related tax benefit, the loss for the year ended December 31, 1998 would have been $5.7 million. Earnings per share were $0.01 for 1999 compared to a 1998 loss per share of $0.62, or $0.28 adjusted to exclude preopening costs. REVENUES Ameristar Council Bluffs had total net revenues of $112.0 million for the year ended December 31, 1999 compared to $97.7 million in 1998, an increase of 14.7%. The increase is attributed to the popularity of, and the resulting increased revenues from, the enhanced slot product placed in service during the fourth quarter of 1998 and the first quarter of 1999, the completion of the third level casino expansion in the fourth quarter of 1999, which increased the number of gaming positions by approximately 400, as well as continued growth in the gaming market. Net revenues for Ameristar Vicksburg were $76.9 million for the year ended December 31, 1999 compared with $68.5 million for the prior year, an increase of 12.2%. This increase in revenues in 1999 compared to 1998 is due primarily to an increase in slot revenue and an increase in hotel revenue from a full year of operating the new hotel facility. The hotel contributed $2.8 million in net revenues for 1999 compared to $1.3 million for 1998 when it was opened for a partial year beginning in June 1998. Management believes Ameristar Vicksburg will continue to experience growth due to its superior hotel, casino and restaurant facilities relative to the competing properties in the Vicksburg market. The Jackpot Properties produced net revenues of $58.3 million for the year ended December 31, 1999 compared to $54.7 million in the prior year, an increase of 6.6%. The improvement was due primarily to an increase in casino revenues resulting from a higher hold percentage on table games and upgrades to the slot product. The Reserve produced net revenues of $52.8 million for the year ended December 31, 1999 compared to revenues of $43.6 million in the 325 days in 1998 following its opening, an increase of 21.2%. In addition to the additional days open in 1999, the increase in revenue was attributable to increased direct-mail marketing and other marketing programs. As a result of these programs, The Reserve generated improved play from both slot machines and table games and increased its hotel occupancy rate. The Company is continuing to seek further operating improvement for additional revenue enhancement. COSTS AND EXPENSES The operating expense ratio for 1999 improved to 91.5% of net revenues compared to 98.7% of net revenues in 1998 (94.7% before The Reserve preopening costs). The improvement in this ratio is primarily the result of the improved operating performance at The Reserve, partially offset by an increase in corporate overhead related to increased corporate staffing levels and development costs, and the greater centralization of certain management functions. Casino costs and expenses for the year ended December 31, 1999 increased by $11.0 million or 10.6% to $114.4 million from $103.4 million in 1998. As a percentage of casino revenues, casino expenses decreased to 46.2% in 1999 compared to 47.8% in 1998. The decrease was due primarily to the improved performance of The Reserve casino operations compared to the startup operational inefficiencies experienced in the prior year, partially offset by a slight increase in casino expenses at Ameristar Council Bluffs relating to increases in employee compensation and benefits. The Company's food and beverage costs and expenses increased $1.5 million to $33.2 million in 1999 compared to $31.7 million in 1998 primarily due to increased revenue. The Company's food and beverage expense-to-revenue ratio decreased to 67.5% in 1999 compared to 69.1% in 1998. This improvement is primarily related to the improved operational efficiencies experienced during 1999 at The Reserve. Rooms expenses increased by $0.6 million to $6.4 million in 1999 from $5.8 million in 1998. The increase was primarily due to increases in costs resulting from a full year of operations of the hotels in Vicksburg and at The Reserve, compared to a partial year of operations at both properties in 1998. Selling, general and administrative costs and expenses (including utilities and maintenance and business development costs) increased $10.5 million or 13.9% from 1998 to 1999. The increase was due primarily to an increase in corporate overhead related to increased corporate staffing levels and future business development costs and increases in marketing costs and employee compensation at Ameristar Council Bluffs, Ameristar Vicksburg and the Jackpot Properties, partially offset by a decrease in such costs at The Reserve. Depreciation expense increased $0.3 million or 1.1% from 1998 to 1999 as the Company's depreciable base increased by including The Reserve and the Ameristar Vicksburg hotel for the entire year, partially offset by certain five-year assets in Vicksburg that are now fully depreciated and are no longer included in depreciation expense in 1999. Interest expense, net of capitalized interest of $1.4 million in 1998 and $0.6 million in 1999, increased $1.8 million or 7.7% from 1998 to 1999. This increase primarily reflects the additional debt incurred to finance the Company's various expansion projects (such as adding a third level to the casino at Ameristar Council Bluffs, completing restaurant and meeting room enhancements at The Reserve, and completing an expansion to the casino, remodeling restaurants and completing other site improvements at Ameristar Vicksburg) and higher interest rates on those borrowings. With the opening of The Reserve in February 1998 and the Ameristar Vicksburg Hotel in June 1998, the capitalization of interest on funds borrowed to construct these projects was discontinued. Interest was capitalized on borrowings for construction related to Ameristar Vicksburg and Ameristar Council Bluffs improvements during 1999. The Company's average borrowing rate was 9.84% in 1999 compared to 10.25% in 1998. The borrowing rate decreased due to the favorable effect of lower interest rates during the first half of 1999 (See "- Liquidity and Capital Resources"). The Company's effective tax rate on income was 62.4% in 1999 and the tax benefit on losses was 33.4% in 1998 versus the Federal statutory rate of 34% and 35%, respectively. The differences from the statutory rates are due to the effects of certain expenses incurred by the Company which are not deductible for Federal income tax purposes. The total of these expenses did not vary significantly between periods, however the lower absolute level of income before taxes in 1999 caused a greater impact to the effective tax rate for 1999. YEAR ENDED DECEMBER 31, 1998 VERSUS YEAR ENDED DECEMBER 31, 1997 SUMMARY The completion of The Reserve in early 1998 brought another year of record growth in Ameristar's consolidated net revenues and presented challenges in operations. Consolidated net revenues increased by 28.4% to $264.7 million in 1998 compared to $206.2 million in 1997. Income from operations was $13.9 million in 1998 before the $10.6 million charge for preopening costs associated with the opening of The Reserve. This is a decline of $14.8 million or 51.7% from income from operations in 1997 before the abandonment loss and is due to an operating loss of $16.1 million before preopening costs at The Reserve. Income from operations after preopening costs was $3.3 million in 1998. Total operating expenses as a percentage of net revenues were 86.4% in 1997 versus 98.7% (94.7% before The Reserve preopening costs) in 1998. The decline in this margin is primarily a result of operating inefficiencies associated with the opening of The Reserve and lower than expected revenues in the intensely competitive "locals" market in which it operates. On a year-to-year comparable basis (i.e., before an extraordinary charge in 1997 and preopening costs in 1998), adjusted income decreased $16.0 million to a loss of $5.6 million in 1998 compared to net income of $10.4 million in 1997. After the extraordinary charge and preopening costs, net loss for the year ended December 31, 1998 was $12.7 million versus net income for the year ended December 31, 1997 of $9.7 million. Loss per share before preopening costs was $0.28 for 1998 ($0.62 after preopening costs). Earnings per share were $0.48 for 1997 after an extraordinary charge of $0.03 per share for the refinancing of the Company's credit line. REVENUES Ameristar Council Bluffs had total net revenues of $97.7 million in 1998 compared to $87.8 million in 1997, an increase of 11.3%. This represents growth in the market share of Ameristar Council Bluffs and in the Council Bluffs gaming market in general. Net revenues for Ameristar Vicksburg were $68.5 million for the year ended December 31, 1998 compared with $64.0 million for the prior year, an increase of 7.0%. This increase in revenues in 1998 compared to 1997 is due to an increase in casino revenue of $3.4 million and a $1.1 million increase in hotel revenue due to the new hotel facility. Management believes Ameristar Vicksburg maintained and will continue to hold its leading position in the Vicksburg market through effective promotional strategies and by continuing to provide customers with superior service and quality gaming and non- gaming products. The Jackpot Properties produced stable net revenues of $54.7 million and $54.5 million for the years ended December 31, 1998 and 1997, respectively. A 2.0% increase in casino revenue in 1998 was offset by minimal decreases in food and beverage, rooms and other revenues. The Reserve produced net revenues of $43.6 million from its opening on February 10, 1998 to December 31, 1998. COSTS AND EXPENSES The operating expense ratio for 1998 increased to 98.7% (94.7% before preopening) compared to 86.4% of net revenues in 1997. The increase in this ratio is primarily a result of the initial operating performance of The Reserve. Excluding the $34.6 million of revenues and $70.3 million in operating expenses at The Reserve, operating expenses were 86.4% of net revenue, which is comparable to 1997. Casino costs and expenses increased by $24.7 million or 31.3% from $78.7 million in 1997 to $103.4 million in 1998. As a percentage of casino revenues, casino expenses increased to 47.8% in 1998 compared to 45.5% in 1997. The majority of the increase in expense ($19.4 million) was associated with the opening of The Reserve and an increase of $4.6 million in expenses at Ameristar Council Bluffs associated with additional gaming revenue of $8.4 million. The Company's food and beverage costs and expenses increased $11.9 million in 1998 compared to 1997 primarily due to the opening of The Reserve and partially offset by improvements in this area at the Jackpot Properties and Ameristar Vicksburg. The Company's food and beverage expense-to-revenue ratio increased to 69.1% in 1998 compared to 64.5% in 1997. This increase is directly related to the startup operational inefficiencies experienced in 1998 at The Reserve. Rooms expenses increased by $2.7 million to $5.8 million in 1998 from $3.1 million in 1997. The increase was the result of seven months of operations of the new hotel in Vicksburg and almost 11 months of operations at The Reserve. Selling, general and administrative costs and expenses (including utilities and maintenance and business development costs) increased $23.6 million or 45.5% from 1997 to 1998. Most of the increase was a result of the opening of The Reserve and additional expenses associated with salaries, marketing and professional fees at the corporate level. Depreciation expense increased $7.8 million or 47.9% from 1997 to 1998 as the Company's depreciable base increased with the opening of The Reserve and the Ameristar Vicksburg hotel. Preopening costs of $10.6 million were expensed during 1998 related to the opening of The Reserve. Interest expense, net of capitalized interest of $4.7 million in 1997 and $1.4 million in 1998, increased $10.6 million or 87.5% from 1997. This increase primarily reflects the additional debt outstanding to finance the Company's expansion and higher interest rates on those borrowings. With the opening of The Reserve in February 1998 and the Ameristar Vicksburg Hotel in June 1998, the capitalization of interest on funds borrowed to construct these projects was discontinued. Subsequent interest costs were reflected as an expense on the statement of operations rather than as an additional cost of the projects on the balance sheet. Interest was capitalized on borrowings to construct The Reserve and the Ameristar Vicksburg hotel during 1997 and 1998 until the projects commenced operations. The Company's average borrowing rate was 10.25% in 1998 compared to 9.9% in 1997. The borrowing rate increased due to the issuance of $100 million in Senior Subordinated Notes in mid-1997 and an increase in LIBOR (See "- Liquidity and Capital Resources"). The Company's effective tax rate on income was 36.5% in 1997 and the tax benefit on losses was 33.4% in 1998 versus the Federal statutory rate of 35%. The differences from the statutory rates are due to the effects of certain expenses incurred by the Company which are not deductible for Federal income tax purposes. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows from operations increased $11.2 million to $34.3 million for the year ended December 31, 1999, as compared to $23.1 million for the year ended December 31, 1998. The increase was due primarily to the increase in net income from improved operations at all of the Company's properties. The Company had unrestricted cash of approximately $15.5 million as of December 31, 1999 compared to $18.2 million at December 31, 1998, a decrease of $2.7 million. This decrease in cash was due primarily to net capital expenditures of $50.0 million exceeding proceeds from net borrowings and capital leases of $13.0 million and cash flow from operations of $34.3 million during the year. The Company's current assets decreased by approximately $2.2 million from December 31, 1998 to December 31, 1999. This was primarily the result of decreases in cash and income taxes receivable, partially offset by increases in accounts receivable and prepaid expenses. The Company historically has funded its daily operations through net cash provided by operating activities and its significant capital expenditures primarily through bank debt and other debt financing. The Company's cash flows used for investing activities decreased $3.8 million to $50.0 million in 1999 from $53.9 million in 1998. In 1998, the Company made capital expenditures primarily on the completion of The Reserve and the hotel at Ameristar Vicksburg. In 1999, the Company made capital expenditures primarily for slot machines, the third deck of the riverboat and parking garage at Ameristar Council Bluffs, and a new restaurant, casino expansion, additional parking and coffer dam repair at Ameristar Vicksburg. Cash flows from financing activities decreased $22.8 million from $35.9 million in 1998 to $13.1 million in 1999 as a result of a reduced amount of borrowings required to fund capital expenditure projects. Capital expenditures for the year ended December 31, 1999 were approximately $57.6 million, consisting of approximately $26.9 million at Ameristar Council Bluffs including adding a third deck onto the casino and erecting a 1,000 space parking garage, $16.6 million at Ameristar Vicksburg including expanding the casino, remodeling restaurants and other site improvements, $10.3 million at The Reserve, including remodeling certain dining and meeting room areas and the purchase of additional land and approximately $3.0 million for normal capital improvement and maintenance projects at the Jackpot Properties. The Company funded these capital expenditures primarily from net cash provided by operating activities and borrowings. The Company intends to make capital expenditures of at least approximately $17.0 million in 2000, including the completion of the parking garage at Ameristar Council Bluffs. Management believes that these capital expenditure requirements will 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). Management considers enhancement projects for each of the Company's properties on an ongoing basis. In doing so, management evaluates the operating performance of each property, the anticipated relative costs and benefits of the projects under consideration, the availability of cash flow and debt financing to fund capital expenditures and competitive and other relevant factors. Management is currently considering several additional capital expenditure projects at the Company's properties and expects to undertake additional property improvements in 2000. On July 15, 1997, the Company refinanced its long-term debt through a new $125 million revolving bank credit facility with Wells Fargo Bank, N.A. ("WFB") and a syndicate of banks (the "Revolving Credit Facility") and the sale of $100 million aggregate principal amount of 10-1/2% Senior Subordinated Notes due 2004 (the "Senior Subordinated Notes"). The Revolving Credit Facility was entered into on July 8, 1997, pursuant to a Credit Agreement among Ameristar and its principal subsidiaries (the "Borrowers"), a syndicate of bank lenders and WFB as Agent Bank, Arranger and Swingline Lender. The Borrowers do not include AC Hotel Corp., which owns the hotel at Ameristar Vicksburg, and a purchasing subsidiary. The Borrowers made an initial draw of $114.5 million under the Revolving Credit Facility on July 15, 1997, which was used to repay $94.5 million in borrowings outstanding under a prior bank credit facility and a $20.0 million short-term loan from WFB. The Senior Subordinated Notes were issued by Ameristar at par, and the net proceeds from the sale of the Senior Subordinated Notes were used to repay $82.4 million in borrowings and interest under the Revolving Credit Facility, $13.1 million in other indebtedness and $0.8 million in loan fees for the Revolving Credit Facility. Following the application of the net proceeds from the sale of the Senior Subordinated Notes, the Company made additional draws under the Revolving Credit Facility to fund a portion of the capital expenditures for the development of The Reserve and other capital expenditure projects. At December 31, 1999, the outstanding principal balance of the Revolving Credit Facility was $107.0 million. Following the completion of Phase I of The Reserve, the Revolving Credit Facility proceeds may be used only for working capital purposes of the Borrowers and funding ongoing capital expenditures for existing facilities. The Borrowers and the lenders amended the Revolving Credit Facility effective June 30, 1998 and March 31, 1999. Under the amended Revolving Credit Facility, borrowings under the Revolving Credit Facility may not exceed 2.75 times the Borrowers' rolling four quarter EBITDA, and the Borrowers' total funded debt may not exceed the Borrowers' rolling four-quarter EBITDA multiplied by a factor as follows: 4.75 commencing December 31, 1999; 4.5 commencing March 31, 2000; and 4.0 commencing September 30, 2000. For purposes of the Revolving Credit Facility, the Borrowers' EBITDA is generally defined as net income before interest expense, income taxes, depreciation and amortization, preopening costs and certain extraordinary and non-cash items. As of December 31, 1999, the total funded debt of the Borrowers was 4.38 times the Borrowers' rolling four-quarter EBITDA. The maximum amount available under the Revolving Credit Facility reduces semi-annually commencing July 1, 1999 on a sliding scale (ranging from $2.5 million to $10.0 million in reductions) with a final reduction of $75.0 million at maturity on June 30, 2003. The maximum amount available under the Revolving Credit Facility as of December 31, 1999 was $120.0 million. The Revolving Credit Facility, as amended, requires the Borrowers to maintain a gross fixed charge coverage ratio (as defined) of at least 1.25 to 1.0 until September 30, 1999 and 1.50 to 1.0 thereafter. For purposes of these covenants, principal payments on the Gem Notes (as defined below) will be included only to the extent actually paid in the applicable period. As of December 31, 1999, the Company's fixed charge coverage ratio was 1.65. The Revolving Credit Facility prohibits Ameristar from making any dividend or other distribution on its capital stock during any period in which the Borrowers' rolling four-quarter ratio of total funded debt to EBITDA is greater than 2.0 to 1.0. The amended Revolving Credit Facility also limits the Borrower's aggregate capital expenditures in each year to an amount equal to 5% of their consolidated net revenue for the preceding year and prohibits the Borrowers from incurring any additional secured indebtedness without the approval of the lenders. However, the lenders under the Revolving Credit Facility have waived the maximum capital expenditure limitation under the Revolving Credit Facility specifically for certain projects at Ameristar Council Bluffs, Ameristar Vicksburg and The Reserve. The waiver permits fiscal 1999 and 2000 capital expenditure projects to exceed the 5% limit by approximately $43.3 million in total. The amended Revolving Credit Facility requires the Borrowers to maintain a tangible net worth of at least $50.0 million, plus 90% of net income (without any reduction for net losses) as of the end of each quarter beginning March 31, 1999 plus 90% of the net proceeds of certain future equity offerings. As of December 31, 1999, the Company's tangible net worth was $3.8 million more than required by this covenant. 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 prime interest rate. The maximum number of outstanding draws at any time using LIBOR is five, with a minimum draw amount of $5.0 million per draw. A LIBOR draw can be for a one-, two-, three- or six-month term with interest accruing monthly and due at the end of the term, but in no event less frequently than quarterly. The interest rate is fixed throughout the term of a LIBOR-based draw and, as amended, ranges from LIBOR plus 1.5 percentage points to LIBOR plus 4.0 percentage points. On a prime interest rate draw, the interest rate is variable and, as amended, ranges from a minimum of prime plus 0.25 percentage points to a maximum of prime plus 2.75 percentage points with interest payable monthly in arrears. As of December 31, 1999, the Borrowers have taken LIBOR draws totaling $107.0 million with an average interest rate of approximately 9.94 percent per annum. 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. 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. In 1998, the Company paid approximately $49,000 in additional interest as a result of this agreement. The Company did not incur any additional interest in connection with this agreement in 1999. The agreement terminates on June 30, 2003 to coincide with the maturity of the Revolving Credit Facility. The Revolving Credit Facility is secured by liens on substantially all of the real and personal property of the Borrowers. The Revolving Credit Facility prohibits any future secondary liens on these properties without the prior written approval of the lenders. Certain changes in control of Ameristar may constitute a default under the Revolving Credit Facility. 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. As of December 31, 1999, the Company was in compliance with these covenants, as amended. The Senior Subordinated Notes were issued under an Indenture dated July 15, 1997 (the "Indenture"). In addition to Ameristar and the trustee, all of Ameristar's subsidiaries other than Ameristar Casino St. Louis, Inc. (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. Ameristar may redeem the Senior Subordinated Notes, in whole or in part, at any time on or after August 1, 2001, at redemption prices that decline over time from 105.25% to 101.75%. Senior Subordinated Notes may also be redeemed if the holder or beneficial owner thereof is required to be licensed, qualified or found suitable under applicable Gaming Laws (as defined) and is not so licensed, qualified or found suitable. Ameristar may also be required to redeem a portion of the Senior Subordinated Notes in the event of certain asset sales or the loss of a material gaming license, and each holder of the Senior Subordinated Notes will have the right to require Ameristar to redeem such holder's Senior Subordinated Notes upon a Change of Control (as defined) of Ameristar. The Senior Subordinated Notes are not subject to any mandatory redemption or sinking fund obligations. 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 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 constructed a 150-room hotel at Ameristar Vicksburg, which cost approximately $10.3 million, including capitalized construction period interest and preopening costs. The Company has obtained a nonrecourse loan facility for $7.5 million with a private lender for the purpose of funding a portion of the construction costs, with the balance provided out of operating cash flow. The loan was to originally mature on July 1, 1998 but was amended to mature on June 30, 2000 and requires periodic interest payments at the rate of 15% per annum. The Company is required to pay a non-usage fee at the rate of 3% per annum on the undrawn loan balance, and draws are subject to the satisfaction of various conditions typically applicable to construction loans. As of December 31, 1999, the outstanding balance on the loan was approximately $7.5 million. The Company is currently seeking another lender to refinance this loan facility. On June 20, 1997, as part of the consideration for the acquisition of The Reserve, Ameristar issued unsecured subordinated promissory notes to the former stockholders of Gem Gaming, Inc., the original developer of The Reserve, in an aggregate principal amount of $28.7 million (the "Gem Notes"). The per annum interest rate on the Gem Notes is 8%, subject to increases up to a maximum of 18% per annum, following one or more failures to make payments under the Gem Notes by scheduled dates. Any interest not paid when scheduled will thereafter accrue interest as principal. The Gem Notes require annual principal reduction payments ranging from $2.0 million to $3.0 million commencing in November 1998. The Gem Notes mature on December 31, 2004 and may be prepaid in whole or in part without penalty at any time. The Gem Notes are not subject to acceleration or other collection efforts upon failure to make a scheduled payment prior to maturity, and the only remedy for such a failure to make a scheduled payment is an increase in interest rate as described above. The Gem Notes are subordinate to the Revolving Credit Facility, the Senior Subordinated Notes and other long-term indebtedness of Ameristar specified by Ameristar up to a maximum of $250 million. At December 31, 1999, the Company had other indebtedness, including obligations under capitalized leases, in an aggregate principal amount of $15.8 million. 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. At the present time, the Company does not anticipate undertaking capital expenditure projects during 2000 that could not be funded out of amounts anticipated to be available through internally generated cash flow and the Company's borrowing capacity under the Revolving Credit Facility. On October 28, 1999, Ameristar Casino St. Louis, Inc., a newly formed wholly owned subsidiary of ACI, filed an application with the Missouri Gaming Commission seeking a gaming license for a site along the Mississippi River in Lemay, Missouri, a community in South St. Louis County. If awarded the license, the Company's current plans call for it to spend approximately $150 million to construct the first phase of the new casino property. The Company has recently obtained a commitment to refinance its Revolving Credit Facility, increasing its available borrowing capacity to $265.0 million to fund a substantial portion of the development costs for this project. The balance of the financing for this project will be provided primarily by operating cash flow. Ameristar has not declared any dividends on its Common Stock during the last two fiscal years, and the Company intends for the foreseeable future to retain all earnings for use in the development of its business instead of paying cash dividends. In addition, as described above, the Revolving Credit Facility obligates the Company to comply with certain financial covenants that may restrict or prohibit the payment of dividends. YEAR 2000 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 were to occur, the potential exists for computer system failures or miscalculations by computer programs, which could disrupt operations. Prior to the rollover to the Year 2000, the Company evaluated all of its computer systems, including its front- and back-of-the- house computer operations, its back-of-the-house accounting systems and its financial software programs, and upgraded these systems as necessary to ensure that, according to the applicable vendors, all of the Company's computer systems were Year 2000 compliant. The Company also made appropriate inquiries of third parties with whom the Company does significant business, such as vendors and suppliers, as to their Year 2000 readiness. To date, the Company has not experienced any significant Year 2000 problems with its mission-critical systems, including those relating to providing service to its guests and monitoring operations, or those of any third parties on which the Company depends. Although the Company has not experienced any significant year 2000 problems to date, it is still possible for Year 2000- related problems to occur and management therefore plans to continue to monitor the situation closely. Although it is difficult to calculate the costs the Company incurred in connection with the Year 2000 issue, management believes that these costs have not been and are not expected to be material to the Company's financial condition or results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Except for the Revolving Credit Facility, under which $107.0 million was outstanding at December 31, 1999, and certain other long-term debt outstanding at December 31, 1999 in the aggregate amount of $6.8 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 December 31, 1999, the average interest rate applicable to the Variable Rate Debt was 9.84%. An increase of one percentage point in the average interest rate applicable to the Variable Rate Debt outstanding at December 31, 1999, would increase the Company's annual interest costs by approximately $1.1 million. 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of the Company's Independent Public Accountants appears at page F-1 hereof, and the Consolidated Financial Statements and Notes to Consolidated Financial Statements of the Company appear at pages F-2 through F-29 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is set forth under the captions "Item 1 - Election of Directors - Information Concerning the Nominees" and "- Directors and Executive Officers" in the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission and is incorporated herein by this reference as if set forth in full. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth under the caption "Executive Compensation" in the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission and is incorporated herein by this reference as if set forth in full. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth under the caption "Item 1 - Election of Directors - Security Ownership of Certain Beneficial Owners and Management" in the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission and is incorporated herein by this reference as if set forth in full. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is set forth under the caption "Certain Transactions" in the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission and is incorporated herein by this reference as if set forth in full. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following are filed as part of this Report: (a)1. Financial Statements Report of Independent Public Accountants. Consolidated Balance Sheets as of December 31, 1998 and 1999. Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998 and 1999. Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999. Notes to Consolidated Financial Statements. (a)2. Financial Statement Schedules All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under related instructions or are inapplicable and therefore have been omitted. (a)3. Exhibits The following exhibits listed are filed or incorporated by reference as part of this Report. Certain of the listed exhibits are incorporated by reference to previously filed reports of the registrant under the Securities Exchange Act of 1934, as amended, including Forms 10-K, 10-Q and 8-K. These reports have been filed with the Securities and Exchange Commission under file number 0- 22494. EXHIBI T DESCRIPTION OF EXHIBIT METHOD OF FILING NUMBER 3.1 Articles of Incorporation of Incorporated by reference Ameristar Casinos, Inc. to Exhibit 3.1 to ("ACI"). Registration Statement on Form S-1 filed by ACI under the Securities Act of 1933, as amended (File No. 33-68936) (the "Form S- 1"). 3.2 Bylaws of ACI. Incorporated by reference to Exhibit 3.2 to ACI's Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 10-K"). 4.1 Specimen Common Stock Incorporated by reference Certificate to Exhibit 4 to Amendment No. 2 to the Form S-1. 4.2(a) Credit Agreement, dated as of Incorporated by reference July 8, 1997, among ACI, to Exhibits 4.1 and 99.1 Cactus Pete's, Inc. ("CPI"), to the Current Report on Ameristar Casino Vicksburg, Form 8-K of ACI filed on Inc. ("ACVI"), Ameristar July 30, 1997 (the "July Casino Council Bluffs, Inc. 1997 8-K"). ("ACCBI") and Ameristar Casino Las Vegas, Inc. ("ACLVI"), as Borrowers, the Lenders named therein, and Wells Fargo Bank, National Association ("WFB") as Arranger, Agent Bank and Swingline Lender, together with a list describing omitted schedules and exhibits thereto. 4.2(b) First Amendment to Credit Incorporated by reference Agreement, dated as of to Exhibit 4.2(b) to ACI's September 9, 1998, among ACI, Annual Report on Form 10-K CPI, ACVI, ACCBI, ACLVI, the for the year ended lenders named therein and December 31, 1998 (the WFB, as Swingline Lender and "1998 10-K"). Agent Bank. 4.2(c) Interest Rate Collar Incorporated by reference Agreement, dated August 10, to Exhibit 4.2(b) to the 1998, between ACI and WFB. 1998 10-K. 4.3(a) Indenture, dated as of July Incorporated by reference 15, 1997, among ACI, ACLVI, to Exhibit 4.2 to the July ACVI, A.C. Food Services, 1997 8-K. Inc. ("ACFSI"), AC Hotel Corp. ("ACHC"), ACCBI and First Trust National Association, including the forms of Notes and Subsidiary Guarantees issued thereunder. 4.3(b) Supplemental Indenture, dated Incorporated by reference as of October 24, 1997, among to Exhibit 4.1(c) to ACI, CPI, ACLVI, ACVI, ACFSI, Amendment No. 1 to ACHC, ACCBI and First Trust Registration Statement on National Association. Form S-4 filed by ACI, CPI, ACVI, ACCBI, ACLVI, ACFSI and ACHC under the Securities Act of 1933, as amended (File No. 333- 34381) (the "Form S-4"). 4.4 Other Long-Term Debt. See Exhibits 10.9(e)-(j) See Exhibits 10.9(e)-(j) and and 99.1. 99.1. *10.1 Employment Agreement, dated Incorporated by reference (a) November 15, 1993, between to Exhibit 10.1(a) to ACI and Thomas M. Steinbauer. ACI's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 10-K"). *10.1 Employment Agreement, dated Incorporated by reference (b) as of August 23, 1999, to Exhibit 10.1 to ACI's between Ameristar Casinos, Quarterly Report on Form Inc. and Gordon R. Kanofsky 10-Q for the quarter ended September 30, 1999. *10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference Non-Employee Director Stock to Exhibit 10.2 to ACI's Option Plan, as amended and Quarterly Report on Form restated. 10-Q for the quarter ended June 30, 1994. *10.3 Ameristar Casinos, Inc. Incorporated by reference Management Stock Option to Exhibit 10.3 to ACI's Incentive Plan, as amended Quarterly Report on Form and restated. 10-Q for the quarter ended September 30, 1996. *10.4 1999 Stock Incentive Plan of Incorporated by reference Ameristar Casinos, Inc. to Exhibit 10.6 to ACI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. *10.5 Form of Indemnification Incorporated by reference Agreement between ACI and to Exhibit 10.33 to each of its directors and Amendment No. 2 to the officers. Form S-1. *10.6 Housing Agreement, dated Incorporated by reference November 15, 1993 between CPI to Exhibit 10.17 to the and Craig H. Neilsen. 1994 10-K. 10.7 Plan of Reorganization, dated Incorporated by reference November 15, 1993, between to Exhibit 2.1 to the 1994 ACI and Craig H. Neilsen in 10-K. his individual capacity and as trustee of the testamentary trust created under the last will and testament of Ray Neilsen dated October 9, 1963. 10.8 Excursion Boat Sponsorship Incorporated by reference and Operations Agreement, to Exhibit 10.15 to the dated September 15, 1994, 1995 10-K. between Iowa West Racing Association and ACCBI. 10.9 Merger Agreement, dated as of Incorporated by reference (a) May 31, 1996, among Gem to Exhibits 10.1 and 99.1 Gaming, Inc. ("Gem"), ACI, to ACI's Quarterly Report ACLVI, Steven W. Rebeil on Form 10-Q for the ("Rebeil") and Dominic J. quarter ended June 30, Magliarditi ("Magliarditi"), 1996 (the "June 1996 10- together with a list Q"). describing omitted schedules and exhibits thereto. 10.9 First Amendment to Merger Incorporated by reference (b) Agreement, dated July 2, to Exhibit 10.5 to the 1996, among Gem, ACI, ACLVI, June 1996 10-Q. Rebeil and Magliarditi. 10.9 Second Amendment to Merger Incorporated by reference (c) Agreement, dated as of to Exhibits 10.1 and 99.1 September 27, 1996, among to the Current Report on Gem, ACI, ACLVI, Rebeil and Form 8-K of ACI filed on Magliarditi, together with a October 24, 1996. list describing omitted schedules and exhibits thereto. 10.9 Settlement Agreement, dated Incorporated by reference (d) as of May 3, 1997, among ACI, to Exhibit 10.1 to ACI's ACLVI, Rebeil, Magliarditi, Quarterly Report on Form Gem Air, Inc. and NVAGAIR. 10-Q for the quarter ended March 31, 1997. 10.9 Promissory Note, dated as of Incorporated by reference (e) June 1, 1997, made by ACI to Exhibit 10.8(k) to the payable to the order of Form S-4. Rebeil in the original principal amount of $13,232,146. 10.9 Promissory Note, dated as of Incorporated by reference (f) June 1, 1997, made by ACI to Exhibit 10.8(k) to the payable to the order of Form S-4. Magliarditi in the original principal amount of $417,854. 10.9 Non-Negotiable Promissory Filed electronically (g) Note, dated as of November herewith. 11, 1999, made by ACI payable to Magliarditi in the original principal amount of $179,080. 10.9 Non-Negotiable Promissory Filed electronically (h) Note, dated as of November herewith. 11, 1999, made by ACI payable to Magliarditi in the original principal amount of $280,100. 10.9 Non-Negotiable Promissory Filed electronically (i) Note, dated as of November herewith. 11, 1999, made by ACI payable to Rebeil in the original principal amount of $5,670,920. 10.9 Non-Negotiable Promissory Filed electronically (j) Note, dated as of November herewith. 11, 1999, made by ACI payable to Rebeil in the original principal amount of $8,869,900. 10.10 Lease, dated December 11, Incorporated by reference (a) 1992, between Martha Ker to Exhibit 10.4 to the Brady Lum et. al. And ACVI as Form S-4. the assignee of Craig H. Neilsen. 10.10 First Amendment to Lease Incorporated by reference (b) Agreement, dated June 1, to Exhibit 10.4(b) to the 1995, between Lawrence O. 1995 10-K. Branyan, Jr., as trustee of the Brady-Lum Family Trust dated May 15, 1993 and ACVI. 10.11 Settlement, Use and Incorporated by reference Management Agreement and DNR to Exhibits 10.12 and 99.1 Permit, dated May 15, 1995, to ACI's Annual Report on between the State of Iowa Form 10-K for the year acting through the Iowa ended December 31, 1996. Department of Natural Resources and ACCBI as the assignee of Koch Fuels, Inc. 10.12**Asset Purchase and Sale Filed electronically Agreement, dated as of herewith. February 15, 2000, between Futuresouth, Inc., Southboat Lemay, Inc., Southboat Limited Partnership and Ameristar Casino St. Louis, Inc. 21.1 Subsidiaries of ACI. Filed electronically herewith. 23.1 Consent of Arthur Andersen Filed electronically LLP. herewith. 27.1 Financial Data Schedule Filed electronically herewith. 99.1 Agreement to furnish the Filed electronically Securities and Exchange herewith. Commission certain instruments defining the rights of holders of certain long-term debt. _________________________________ * Denotes a management contract or compensatory plan or arrangement. ** Portions of this Exhibit have been deleted pursuant to the Company's request for confidential treatment pursuant to Rule 24b-2 promulgated under the Securities Exchange Act. (B) REPORTS ON FORM 8-K None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERISTAR CASINOS, INC. (Registrant) March 29, 2000 By: /s/ Craig H. Neilsen Craig H. Neilsen President, Chairman of the Board and CEO Pursuant to the requirements of the Securities Exchanges Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE NAME AND TITLE DATE Craig H. Neilsen, /s/ Craig H. Neilsen President, Chairman of March 29, 2000 the Board and CEO (principal executive officer) Thomas M. Steinbauer, Senior Vice President of /s/ Thomas M. Steinbauer Finance and March 29, 2000 Administration (principal financial officer and principal accounting officer) and Director /s/ Paul I. Corddry Paul I. Corddry, Director March 29, 2000 /s/ Larry A. Hodges Larry A. Hodges, Director March 29, 2000 /s/ Warren E. McCain Warren E. McCain, Director March 29, 2000 On this 29th of March, 2000, Craig H. Neilsen directed Chris Hinton, in his presence as well as our own, to sign the foregoing document as "Craig H. Neilsen." Upon viewing the signatures as signed by Chris Hinton and in our presence, Craig H. Neilsen declared to us that he adopted them as his own signatures. /s/Karen Ahmad Witness /s/Susan Viccairelli Witness STATE OF NEVADA ) ):ss. COUNTY OF CLARK ) I, Margene M. Otten, Notary Public in and for said county and state, do hereby certify that Craig H. Neilsen personally appeared before me and is known or identified to me to be the President and Chief Executive Officer of Ameristar Casinos, Inc., the corporation that executed the within instrument or the person who executed the instrument on behalf of said corporation. Craig H. Neilsen, who being unable due to physical incapacity to sign his name or offer his mark, did direct Chris Hinton, in his presence, as well as my own, to sign his name to the foregoing document. Craig H. Neilsen, after viewing his name as signed by Chris Hinton, thereupon adopted the signatures as his own by acknowledging to me his intention to so adopt them as if he had personally executed the same both in his individual capacity and on behalf of said corporation, and further acknowledged to me that such corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 29th day of March, 2000. /s/Margene M. Otten Notary Public My Commission Expires: July 23, 2002 Residing at: Las Vegas, NV REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Ameristar Casinos, Inc.: We have audited the accompanying consolidated balance sheets of Ameristar Casinos, Inc. (a Nevada corporation) and subsidiaries as of December 31, 1998 and 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ameristar Casinos, Inc. and subsidiaries as of December 31, 1998 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. As explained in Note 1 of the notes to the consolidated financial statements, effective January 1, 1999, Ameristar Casinos, Inc. changed its method of accounting for start-up activities in accordance with the American Institute of Certified Public Accountants' Statement of Position 98-5, "Reporting on the Costs of Start-up Activities." ARTHUR ANDERSEN LLP Las Vegas, Nevada February 18, 2000 (except with respect to the matter discussed in Note 12, as to which the date is March 1, 2000) AMERISTAR CASINOS, INC. CONSOLIDATED BALANCE SHEETS ASSETS (Amounts in Thousands) December 31, 1998 1999 CURRENT ASSETS: Cash and cash equivalents $18,209 $15,531 Restricted cash 118 142 Accounts receivable, net 1,490 2,080 Income tax refund receivable 2,815 1,450 Inventories 3,037 3,268 Prepaid expenses 4,569 5,162 Deferred income taxes 3,906 3,717 Total current assets 34,144 31,350 PROPERTY AND EQUIPMENT, at cost: Buildings and improvements 260,720 284,518 Building under capitalized lease 800 800 Furniture, fixtures and equipment 91,325 100,615 Furniture, fixtures and equipment under capitalized leases 3,907 4,060 356,752 389,993 Less: Accumulated depreciation and amortization 92,708 108,949 264,044 281,044 Land 26,485 27,949 Land under capitalized leases 4,865 4,865 Construction in progress 2,426 14,759 297,820 328,617 EXCESS OF PURCHASE PRICE OVER FAIR MARKET VALUE OF NET ASSETS ACQUIRED 15,046 14,651 DEPOSITS AND OTHER ASSETS 4,763 4,027 $351,773 $378,645
The accompanying notes are an integral part of these consolidated balance sheets. AMERISTAR CASINOS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY (Amounts in Thousands, Except Share Data) December 31, 1998 1999 CURRENT LIABILITIES: Accounts payable $ 6,339 $ 9,204 Construction contracts payable 897 6,341 Accrued liabilities 26,395 29,539 Current obligations under capitalized leases 2,398 2,413 Current maturities of notes payable and long-term debt 9,924 10,615 Total current liabilities 45,953 58,112 OBLIGATIONS UNDER CAPITALIZED LEASES, net of current maturities 13,196 11,037 NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities 217,203 231,853 DEFERRED INCOME TAXES 7,497 9,474 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value: Authorized - 30,000,000 shares; Issued - None - - Common stock, $.01 par value: Authorized - 30,000,000 shares; Issued and outstanding - 20,360,000 shares at December 31, 1998 and 20,375,264 shares at December 31, 1999 204 204 Additional paid-in capital 43,043 43,083 Retained earnings 24,677 24,882 67,924 68,169 $351,773 $378,645
The accompanying notes are an integral part of these consolidated balance sheets. AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data) Years ended December 31, 1997 1998 1999 REVENUES: Casino $173,077 $216,319 $247,416 Food and beverage 30,672 45,853 49,142 Rooms 9,685 14,201 17,257 Other 8,275 10,401 11,089 221,709 286,774 324,904 Less: Promotional allowances 15,530 22,092 24,618 Net revenues 206,179 264,682 300,286 OPERATING EXPENSES: Casino 78,733 103,387 114,357 Food and beverage 19,784 31,698 33,207 Rooms 3,130 5,809 6,372 Other 7,546 10,044 10,203 Selling, general and administrative 51,958 75,604 86,142 Depreciation and amortization 16,358 24,191 24,460 Abandonment loss 646 - - Preopening costs - 10,611 - Total operating expenses 178,155 261,344 274,741 Income from operations 28,024 3,338 25,545 OTHER INCOME (EXPENSE): Interest income 445 296 300 Interest expense (12,107) (22,699) (24,449) Other (35) (13) (851) INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) 16,327 (19,078) 545 Income tax provision (benefit) 5,959 (6,363) 340 INCOME (LOSS) BEFORE EXTRAORDINARY LOSS 10,368 (12,715) 205 EXTRAORDINARY LOSS ON EARLY RETIREMENT OF DEBT, net of income tax benefit of $387, $0 and $0, respectively (673) - - NET INCOME (LOSS) $ 9,695 $(12,715) $ 205
AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) (Amounts in Thousands, Except Per Share Data) Years ended December 31, 1997 1998 1999 EARNINGS (LOSS) PER SHARE: Income (loss) before extraordinary loss Basic and diluted $ 0.51 $(0.62) $ 0.01 Net income (loss) Basic and diluted $ 0.48 $(0.62) $ 0.01 WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360 20,362
The accompanying notes are an integral part of these consolidated financial statements. AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Amounts in Thousands, Except Number of Shares) Capital Stock Additional No. of Paid-In Retained Shares Balance Capital Earnings Total Balance, December 31, 1996 20,360,000 $ 204 $43,043 $27,697 $70,944 Net income - - - 9,695 9,695 Balance, December 31, 1997 20,360,000 204 43,043 37,392 80,639 Net loss - - - (12,715) (12,715) Balance, December 31, 1998 20,360,000 204 43,043 24,677 67,924 Net income - - - 205 205 Issuance of shares upon exercise of stock options 15,264 - 40 - 40 Balance, December 31, 1999 20,375,264 $ 204 $43,083 $24,882 $68,169
The accompanying notes are an integral part of these consolidated financial statements. AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) Years ended December 31, 1997 1998 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $9,695 $(12,715) $ 205 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 16,358 24,191 24,460 Change in deferred income taxes 2,964 (3,898) 2,166 Net loss on disposition of assets 505 11 852 Amortization of debt issuance costs 424 661 668 Preopening costs - 10,611 - Extraordinary loss on early retirement of debt 1,060 - - Changes in current assets and liabilities: Restricted cash 265 34 (24) Accounts receivable, net (643) 561 (590) Income taxes, net (2,152) (712) 1,365 Inventories 85 (1,314) (231) Prepaid expenses (374) (669) (593) Accounts payable (2,531) 1,552 2,865 Accrued liabilities 7,985 4,810 3,144 Total adjustments 23,946 35,838 34,082 Net cash provided by operating activities 33,641 23,123 34,287 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (72,932) (32,312) (57,590) Increase (decrease) in construction contracts payable 14,055 (18,478) 5,444 Proceeds from sale of assets 126 - 2,029 Decrease (increase) in deposits and other assets (4,666) (3,073) 69 Net cash used in investing activities (63,417) (53,863) (50,048)
AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Amounts in Thousands) Years ended December 31, 1997 1998 1999 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt $150,786 $42,606 $19,047 Debt issuance costs (4,439) - - Minority interest income (16) - - Principal payments of long- term debt and capitalized leases (114,248) (6,688) (6,004) Proceeds from exercise of stock options - - 40 Net cash provided by financing activities 32,083 35,918 13,083 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,307 5,178 (2,678) CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR 10,724 13,031 18,209 CASH AND CASH EQUIVALENTS -- END OF YEAR $13,031 $18,209 $15,531
The accompanying notes are an integral part of these consolidated financial statements. AMERISTAR CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation and basis of presentation The consolidated financial statements of Ameristar Casinos, Inc. ("ACI" or the "Company"), a Nevada corporation, include the accounts of the Company and its wholly-owned subsidiaries, Cactus Petes, Inc. ("CPI"), Ameristar Casino Vicksburg, Inc. ("ACVI"), Ameristar Casino Council Bluffs, Inc. ("ACCBI") and Ameristar Casino Las Vegas, Inc. ("ACLVI"). ACI also operates A.C. Food Services, Inc., a purchasing subsidiary. ACVI has a wholly owned subsidiary, AC Hotel Corp., created for the purpose of constructing and operating a hotel in Vicksburg, Mississippi. The Company has also formed Ameristar Casino St. Louis, Inc., a Missouri corporation and a wholly owned subsidiary ("ACSLI"), for the purpose of potentially developing a new casino in the South St. Louis County, Missouri area. CPI owns and operates two casino-hotels in Jackpot, Nevada - Cactus Petes Resort Casino and The Horseshu Hotel and Casino. ACVI owns and operates Ameristar Vicksburg, a riverboat-themed dockside casino, and related land-based facilities in Vicksburg, Mississippi. ACCBI owns and operates Ameristar Council Bluffs, a riverboat casino and associated hotel and other land-based facilities in Council Bluffs, Iowa. ACLVI owns and operates The Reserve Hotel Casino ("The Reserve") in the Henderson-Green Valley suburban area of Las Vegas, Nevada. The gaming licenses granted to ACVI and ACCBI must be periodically renewed by the respective state gaming authorities to continue gaming operations. In addition, ACCBI's gaming operations are subject to a county-wide reauthorizing referendum every eight years, commencing in 2002. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material intercompany accounts and transactions have been eliminated from the accompanying consolidated financial statements. Cash and cash equivalents The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents are carried at cost, which approximates market, due to the short-term maturities of these instruments. Accounts receivable Gaming receivables are included as part of the Company's accounts receivable balance. An allowance of $304,000 and $731,000 at December 31, 1998 and 1999, respectively, has been applied to reduce receivables to amounts anticipated to be collected. Inventories Inventories are stated at the lower of cost or market. Cost is determined principally on the weighted average basis. Interest rate collar agreement The Company uses an interest rate collar agreement to assist in managing interest incurred on its long-term debt. The difference between amounts received and amounts paid under such agreement, as well as any costs or fees, is recorded as a reduction of, or addition to, interest expense as incurred over the life of the collar agreement. Depreciation and capitalization Property and equipment is recorded at cost, including interest charged on funds borrowed to finance construction. Interest of $4,654,000, $1,434,000 and $561,000 was capitalized for the years ended December 31, 1997, 1998 and 1999, respectively. Depreciation is provided on both the straight-line and accelerated methods in amounts sufficient to relate the cost of depreciable assets to operations. Amortization of building and furniture, fixtures and equipment under capitalized leases is provided over the shorter of the estimated useful life of the asset or the term of the associated lease (including lease renewal or purchase options the Company expects to exercise). Depreciation and amortization is provided over the following estimated useful lives: Buildings and improvements 5 to 40 years Building under capitalized lease 39 years Furniture, fixtures and equipment 3 to 15 years Furniture, fixtures and equipment under capitalized leases 3 to 5 years Betterments, renewals and repairs that extend the life of an asset are capitalized. Ordinary maintenance and repairs are charged to expense as incurred. Excess of purchase price over fair market value of net assets acquired The excess of purchase price over fair market value of net assets acquired resulting from the Gem Gaming merger (see note 10) is being amortized over its estimated useful life of 39 years using the straight line method. Dividends The Company intends to retain future earnings for use in the development of its business and does not anticipate paying any cash dividends in the foreseeable future. Gaming revenues and promotional allowances In accordance with industry practice, the Company recognizes as gaming revenues the net win from gaming activities, which is the difference between gaming wins and losses. Gross revenues include the retail value of complimentary food, beverage and lodging services furnished to customers. The retail value of these promotional allowances is deducted to compute net revenues. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses and consist of the following: Years ended December 31, 1997 1998 1999 (Amounts in Thousands) Food and beverage $12,283 $20,399 $20,189 Room 708 1,024 1,336 Other 644 958 1,382 $13,635 $22,381 $22,907 Advertising The Company expenses advertising costs the first time the advertising takes place. Advertising expense included in selling, general and administrative expenses was approximately $5,453,000, $9,966,000, and $10,690,000 for the years ended December 31, 1997, 1998 and 1999, respectively. Business development expenses Business development expenses are general costs incurred in connection with identifying, evaluating and pursuing opportunities to expand into existing or emerging gaming jurisdictions. Such costs include, among others, legal fees, land option payments and fees for applications filed with regulatory agencies and are expensed as incurred. Preopening costs Preopening costs primarily represent direct personnel and other operating costs incurred prior to the opening of new facilities. The Company changed its method for accounting for preopening costs effective January 1, 1999 in accordance with the provisions of American Institute of Certified Public Accountants issued Statement of Position No. 98-5 "Reporting on the Costs of Start-up Activities." Prior to 1999, the Company capitalized preopening costs and expensed such costs upon the commencement of operations. The adoption of SOP 98-5 did not have a material impact on the Company's operations in 1999 since the Company was not developing any new facilities. Federal income taxes Income taxes are recorded in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Earnings Per Share In 1997, the Company adopted SFAS No. 128 - Earnings Per Share. SFAS 128 replaces previously reported earnings per share with "basic" earnings per share and "diluted" earnings per share. Basic earnings per share are computed by dividing reported earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options. Basic and diluted earnings per share are equal for the years ended December 31, 1997 and 1998 as the outstanding stock options were antidilutive. Basic and diluted earnings per share are equal in 1999 because the dilution was not significant enough to reduce basic earnings per share as reported. Reclassifications Certain reclassifications, having no effect on net income, have been made to the prior periods' consolidated financial statements to conform with the current year presentation. NOTE 2 - ACCRUED LIABILITIES Accrued liabilities consist of the following: December 31, 1998 1999 (Amounts in Thousands) Compensation and related benefits $ 7,164 $8,059 Taxes other than income taxes 5,649 5,822 Progressive slot machine jackpots 1,753 1,436 Interest 6,013 6,320 Deposits and other accruals 5,816 7,902 $26,395 $29,539 NOTE 3 - FEDERAL INCOME TAXES The components of the income tax provision are as follows: Years ended December 31, 1997 1998 1999 (Amounts in Thousands) Current $2,371 $(5,312) $(1,250) Deferred 3,588 (1,051) 1,540 Provision (benefit) on income before extraordinary item 5,959 (6,363) 340 Tax benefit of extraordinary item (387) - - $5,572 $(6,363) $ 340 The reconciliation of income tax at the Federal statutory rates to income tax expense is as follows: Years ended December 31, 1997 1998 1999 Federal statutory rate 35.0% (34.0)% 34.0% Nondeductible political and lobbying costs 0.3 0.2 11.0 Nondeductible meals and entertainment 0.3 0.1 4.2 Other nondeductible expenses 0.9 0.3 13.2 36.5% (33.4)% 62.4% Under SFAS No. 109, deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's net deferred tax liability consisted of the following: December 31, 1998 1999 (Amounts in Thousands) Deferred tax assets: Preopening costs $ 4,290 $ 3,019 Accrued book expenses not currently deductible 2,769 2,757 Alternative minimum tax credit 1 4,716 2,882 Project development costs 1,118 841 Net operating loss carry forward 2 3,745 10,433 Other 519 615 Total deferred tax assets 17,157 20,547 Deferred tax liabilities: Tax depreciation in excess of book depreciation (18,482) (22,697) Book capitalized interest in excess of tax (451) (444) Other (1,814) (3,163) Total deferred tax liabilities (20,747) (26,304) Net deferred tax liability $(3,590) $(5,757) _____________ 1 The excess of the alternative minimum tax over regular Federal income tax is a tax credit which can be carried forward indefinitely to reduce future Federal income tax liabilities. 2 The Company has available at December 31, 1999, $30,686,000 of an unused operating loss carryforward that may be applied against future taxable income. Of the total $11,016,000 of the unused operating loss carryforward will expire in the year 2018 and $19,670,000 will expire in the year 2019. NOTE 4 - SUPPLEMENTAL CASH FLOW DISCLOSURES The Company made cash payments for interest, net of amounts capitalized, of $8,223,000, $22,515,000 and $23,474,000 for the years ended December 31, 1997, 1998, and 1999, respectively. The Company made cash payments for Federal income taxes of $4,760,000, $350,000, and $200,000 for the years ended December 31, 1997, 1998 and 1999, respectively. The Company acquired assets through capitalized leases of $2,998,000, $7,180,000, and $153,000 during the years ended December 31, 1997, 1998 and 1999, respectively. The Company acquired assets through the issuance of notes payable of $704,000, $0, and $0 during the years ended December 31, 1997, 1998 and 1999, respectively. The Company retired the balance of $94,500,000 under the 1995 Revolving Credit Facility by entering into a new Revolving Credit Facility (see Note 5) during the year ended December 31, 1997. Adjustments to the excess of purchase price over fair market value of net assets acquired as of December 31, 1997 due to the Gem Settlement Agreement (see Note 10) are as follows (amounts in thousands): Reduction in value of Gem Notes $(2,725) Deferred taxes on land purchase (1,784) Dissolution of NVAGAIR subsidiary 418 Return of aviation asset 271 Miscellaneous receivables 185 Total change in excess purchase price $(3,635) NOTE 5 - NOTES PAYABLE AND LONG-TERM DEBT Notes payable and long-term debt consist of the following: December 31, 1998 1999 (Amounts in Thousands) Revolving Credit Facility (see below) $90,000 $107,000 10.5 percent Senior Subordinated Notes, interest only payable semiannually, principal due August 1, 2004 100,000 100,000 Notes payable issued to former stockholders of Gem Gaming, Inc. with interest at 8 percent, interest payable quarterly beginning July 1997 through October 1998 and then monthly thereafter, periodic principal payments beginning November 1998, due December 31, 2004 (See Note 10) 26,650 25,650 Note payable to lender, with interest at 15 percent, secured by a deed of trust on the hotel at ACVI, interest payable in periodic payments, principal due June 30, 2000. 7,453 7,453 Mortgages payable to United States Department of Agriculture Rural Economic and Community Development Services Multi- Housing Program with variable interest (effective rate of approximately 4.2 percent and 4.0 percent for the years ended December 31, 1998 and 1999, respectively), collateralized by a first deed of trust on certain apartment units and land, due in variable monthly payments of not less than $4,725, including interest, through November 2016 and October 2033. 1,292 1,248 Note payable to financing company, with interest at 10.75 percent, collateralized by certain equipment, due in monthly principal and interest payments of $53,177 through June 2000. 877 309 Other 855 808 227,127 242,468 Less: Current maturities 9,924 10,615 $ 217,203 $231,853 On July 5, 1995, the Company, as borrower, and its principal operating subsidiaries, as guarantors, entered into a Revolving Credit Facility (the "1995 Revolving Credit Facility") with Wells Fargo Bank, N.A. ("WFB") and a syndicate of banks. On July 8, 1997, the Company, as borrower, and its principal operating subsidiaries, as guarantors, entered into a new $125 million Revolving Credit Facility (the "Revolving Credit Facility") with WFB and a syndicate of banks. As a result of the retirement of the 1995 Revolving Credit Facility, the Company incurred an extraordinary pre-tax loss (related primarily to the write-off of unamortized loan costs) of $1,060,000. As of December 31, 1999, the Company had drawn $107.0 million on the Revolving Credit Facility. These borrowings were used to repay the 1995 Revolving Credit Facility, to fund the development of The Reserve and to fund certain other capital expenditures. The proceeds from the Senior Subordinated Notes offering were used to repay a portion of the Revolving Credit Facility and fees to Revolving Credit Facility lenders. Originally, the Company could not borrow under the Revolving Credit Facility in excess of 3.25 times its rolling four-quarter EBITDA (earnings before interest, taxes, depreciation and amortization). The Company was also limited to borrowing no more than 5.0 times EBITDA in total debt as adjusted per the Revolving Credit Facility. The Company and the lenders amended the Revolving Credit Facility effective June 30, 1998 and March 31, 1999. Under the amended Revolving Credit Facility, borrowings under the Revolving Credit Facility may not exceed 2.75 times the Company's rolling four-quarter EBITDA (earnings before interest, taxes, depreciation and amortization), and the Company's total funded debt may not exceed the Company's rolling four-quarter EBITDA multiplied by a factor as follows: 5.25 commencing June 30, 1998; 5.5 commencing September 30, 1998; 5.25 commencing June 30, 1999; 4.75 commencing December 31, 1999; 4.5 commencing March 31, 2000; and 4.0 commencing September 30, 2000. As of December 31, 1999, the total funded debt of the Company was 4.38 times the Company's rolling four-quarter EBITDA. The maximum amount available under the Revolving Credit Facility reduces semiannually commencing July 1, 1999 on a sliding scale (ranging from $2.5 million to $10.0 million in reductions) with a final reduction of $75.0 million at maturity on June 30, 2003. The Revolving Credit Facility, as amended, requires the Company to maintain a gross fixed charge coverage ratio (as defined) of 1.25 to 1.0 until September 30, 1999, and 1.50 to 1.0 thereafter. As of December 31, 1999, the Company's fixed charge coverage ratio was 1.65. The amended Revolving Credit Facility also limits the Company's aggregate capital expenditures in each year to an amount equal to 5 percent of its consolidated net revenue for the preceding year and prohibits the Company from incurring any additional secured indebtedness without the approval of the lenders. Until March 31, 1999, the amended Revolving Credit Facility also required the Company to maintain a tangible net worth of at least $56,000,000, plus 90 percent of net income (without any reduction for net losses) as of the end of each quarter beginning September 30, 1998, plus 90 percent of the net proceeds of certain future equity offerings. The Revolving Credit Facility was further amended in 1999 to reduce the minimum tangible net worth requirement commencing March 31, 1999 to $50.0 million, plus 90% of net income (without any reduction for net losses) as of the end of each quarter beginning March 31, 1999, plus 90% of the net proceeds of certain future equity offerings. As of December 31, 1999, the Company's tangible net worth plus 90% of net income was $3.8 million more than required by this covenant. Under the terms of the Revolving Credit Facility, concurrent with each loan draw, the Company may select the interest rate based on either the London Interbank Offering Rate ("LIBOR") or WFB's prime interest rate. The maximum number of outstanding draws at any time using LIBOR is five, with a minimum draw amount of $5.0 million per draw. A LIBOR draw can be for a one-, two-, three- or six-month term with interest accruing monthly and due at the end of the term, but in no event less frequently than quarterly. The interest rate is fixed throughout the term of a LIBOR-based draw and, as amended, ranges from LIBOR plus 1.5 percentage points to LIBOR plus 4.0 percentage points. On a prime interest rate draw, the interest rate is variable and, as amended, ranges from a minimum of prime plus 0.25 percentage points to a maximum of prime plus 2.75 percentage points with interest payable monthly in arrears. As of December 31, 1999, the Company has taken LIBOR draws totaling $107.0 million with an average interest rate of approximately 9.95 percent per annum. 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. The Revolving Credit Facility is secured by liens on substantially all of the real and personal property of the Company and its subsidiaries. The Revolving Credit Facility prohibits any secondary liens on these properties without the prior written approval of the lenders. Certain changes in control of the Company may constitute a default under the Revolving Credit Facility. The Revolving Credit Facility also requires the Company to expend a maximum of 5 percent of the consolidated net revenues for the preceding year on capital maintenance annually. However, the lenders under the Revolving Credit Facility have waived the maximum capital expenditure limitation under the Revolving Credit Facility specifically for certain projects at Ameristar Council Bluffs, Ameristar Vicksburg and The Reserve. The waiver permits fiscal 1999 and 2000 capital expenditure projects of approximately $43.3 million in addition to expenditures limited to 5% of net revenues. The Revolving Credit Facility binds the Company to a number of other affirmative and negative covenants. These include promises to maintain certain financial ratios within defined parameters, not to engage in new businesses without lender approval and to make certain reports to the lenders. As of December 31, 1999, the Company was in compliance with these covenants. 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. As of December 31, 1999, the Company had paid approximately $49,000 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. On July 15, 1997, the Company completed an offering of $100 million in principal amount of 10 1/2% Senior Subordinated Notes due 2004 (the "Senior Subordinated Notes"). The Senior Subordinated Notes have a coupon rate of 10.5 percent and were sold at par. Interest is due semiannually on February 1 and August 1 of each year, and the maturity date is August 1, 2004. Proceeds of the offering were used to retire and refinance existing debt. The Senior Subordinated Notes are not secured and are subordinate to all existing and future Senior Indebtedness (as defined), which includes the Revolving Credit Facility. The indenture governing the Company's Senior Subordinated Notes (the "Indenture") contains certain customary financial and other covenants, which among other things, govern the ability of the Company and its subsidiaries to incur indebtedness (except as specifically allowed) unless, after giving effect thereto, a 2.0 to 1.0 pro forma Consolidated Coverage Ratio (as defined in the Indenture) has been met. As of December 31, 1999, the Company was in compliance with these covenants. The Senior Subordinated Notes were issued by ACI, and all of ACI's current subsidiaries other than ACSLI (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 ACI, and the Guarantors constitute all of ACI's direct and indirect subsidiaries except for ACSLI, which is in the development stage and has no operations and no material assets or liabilities. ACI is a holding company with no operations or material assets independent of those of the Guarantors, other than its investment 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 presented because, in the opinion of management, such information is not 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 ACI in the form of cash dividends, loans or advances. In August 1997, AC Hotel Corp. entered into a loan agreement providing for borrowings of up to $7.5 million for the purpose of funding a portion of the construction costs of a 150-room hotel at Ameristar Vicksburg. This nonrecourse loan from a private lender is secured by a deed of trust on the hotel and the underlying land senior in priority to the liens securing the Revolving Credit Facility. Borrowings under this loan bear interest at 15 percent per annum, payable in periodic installments. The loan was originally due to mature in July 1998, but has been amended to extend the maturity to June 30, 2000. The Company is required to pay a non-usage fee at the rate of 3 percent per annum on the undrawn loan balance, and draws are subject to the satisfaction of various conditions typically applicable to construction loans. As of December 31, 1999, the balance on this loan was approximately $7.5 million. The mortgages payable to United States Department of Agriculture Rural Economic and Community Development Services Multi-Housing Program provide long-term financing for low income housing facilities constructed by the Company. Monthly principal and interest payments are determined by a formula based upon demographics of the tenants. Interest rates on the mortgages may vary from 1.0 percent to 11.88 percent. Provisions of the loan agreements require that rents received be used to fund operating and maintenance expenses, debt service and reserve accounts. The book value of the Company's long-term debt approximates fair value due to the predominantly variable-rate nature of the obligations. Also, fixed rate obligations are at rates that approximate the Company's incremental borrowing rate for debt with similar terms and remaining maturities. Maturities of the Company's borrowings for the next five years as of December 31, 1999 are as follows (amounts in thousands): 2000 $10,615 2001 6,545 2002 20,545 2003 88,046 2004 115,696 Thereafter 1,021 $242,468 NOTE 6 - LEASES The Company has entered into capitalized lease agreements for land on which Ameristar Vicksburg is situated. Such leases contained initial terms for rental payments covering the period of project development and were converted to the primary lease terms (as defined below) upon the opening of the project. Ameristar Vicksburg opened on February 27, 1994, at which time the primary terms of the leases for four parcels of land became effective. The primary terms of the leases, expiring from 5 to 30 years from the opening date, require total payments of approximately $655,000 per year. Each lease contains a purchase option exercisable at various times during the term of the lease generally in varying amounts based on the time of exercise. The purchase options lapse in conjunction with the expiration dates of the primary terms of the corresponding leases. The Company exercised an option to purchase one of the leasehold parcels for $50,000 which closed in December 1999 and exercised options for two of the leasehold parcels for approximately $4.6 million which closed in March 2000. The monthly rent under the remaining lease at March 1, 2000 is approximately $11,000. Assuming the Company defers the exercise of its purchase option under the remaining lease to the expiration of the purchase option, the Company will pay approximately $1.5 million in 2004. If the Company were to accelerate its exercise of the purchase option to the earliest possible date, the Company would pay approximately $1.3 million in 2000. The Company plans to exercise the option for this lease within the next year. The Company entered into a lease for another parcel, which became effective January 1, 2000. The initial term of the lease is 3 years and the lease includes renewal options for an additional 24 years. The initial term of the lease requires quarterly payments of approximately $20,000. The lease contains a purchase option exercisable at various times during the term of the lease that ranges from approximately $1.3 million in 2000 to approximately $1.9 million in 2020. The Company generally may terminate each lease upon the payment of termination penalties. In addition, if the leases were terminated, the Company may be required to restore certain parcels to their condition prior to the lease commencement date, including the removal of the cofferdam and other improvements lying below the water. However, the Company has no plans to abandon the site. ACVI has entered into a seven-year capitalized lease for restaurant equipment, due in monthly payments totaling approximately $118,000 per year, through April 2001. ACVI also entered into a five-year capitalized lease for a computer system that was amended in October 1999. Monthly payments are required totaling approximately $84,000 per year through September 2002. CPI has entered into a four-year equipment lease for the financing of slot equipment at the facility. Monthly principal payments of $44,000 plus interest are required through May 2001 with a balloon payment in June 2001. ACLVI has entered into a ten-year capitalized lease agreement for signage at The Reserve, with monthly payments totaling approximately $210,000 per year through December 2006. ACLVI has entered into a four-year equipment lease for the financing of slot equipment at the facility. Monthly principal payments of $111,000 plus interest are required through January 2002 with a balloon payment in February 2002. ACVI also entered into a five-year capitalized lease for a telephone system. Monthly payments are required totaling approximately $123,000 per year through February 2003. Future minimum lease payments required under capitalized leases for the five years subsequent to December 31, 1999 are as follows (amounts in thousands): 2000 $3,486 2001 4,694 2002 2,438 2003 756 2004 735 Thereafter 10,484 22,593 Less: Amount representing 9,144 interest Present value of minimum $ 13,449 lease payments ACCBI, as lessor, has leased a portion of the Ameristar Council Bluffs site to an independent hospitality company, which operates a 188-room hotel on the property. The lease is for a period of 50 years beginning March 1, 1996. The lease requires the hospitality company to pay ACCBI base rent of $5,000 per month and percentage rent equal to 5 percent of the hotel's gross sales in excess of $2.0 million per year. ACI has leased office space located in Las Vegas, Nevada to serve as its corporate offices. The office space is leased under two operating lease agreements. The agreements require aggregate monthly payments of approximately $52,500, plus the Company's share of certain common area maintenance expenses. Payments under the leases are subject to annual escalation clauses corresponding to increases in the cost of living. The first lease agreement, covering approximately 90 percent of the office space leased by the Company, contains two three-year renewal options. The initial term of the first lease is through December 2001. The second lease agreement, covering approximately 10 percent of the office space leased by the Company, contains two two-year renewal options. The initial term of the second lease was through January 1998 and the first two-year option was exercised with a new expiration date in January 2000. The Company recorded rental expense of approximately $533,000 and $552,000 under these leases in the years ended December 31, 1998, and 1999, respectively. NOTE 7 - BENEFIT PLANS 401(k) plan The Company instituted a defined contribution 401(k) plan in March 1996 which covers all employees who meet certain age and length of service requirements and allows an employer contribution up to 50 percent of the first four percent of each participating employee's compensation. Plan participants can elect to defer before-tax compensation through payroll deductions. These deferrals are regulated under Section 401(k) of the Internal Revenue Code. The Company's matching contribution were $570,000, $485,000 and $585,000 for the fiscal years ended December 31, 1997, 1998, and 1999, respectively. Insurance plan The Company has a qualified employee insurance benefit trust covering all employees on a regular basis who work an average of 32 hours or more per week on a regular basis. The Trust Committee determines amount of the Company's contribution. The plan also requires contributions from eligible employees and their dependents. The Company's contribution expense for the plan was approximately $3,834,000, $4,950,000 and $6,958,000 for the years ended December 31, 1997, 1998 and 1999, respectively. Stock Option Plans On June 11, 1999, the Company's stockholders approved the Ameristar Casinos, Inc. 1999 Stock Incentive Plan (the "1999 Stock Incentive Plan"), which had previously been adopted by the Board of Directors subject to stockholder approval. The 1999 Stock Incentive Plan provides for the grant of options to purchase Common Stock intended to qualify as incentive stock options or non-qualified options and also provides for grants of "restricted stock." All officers, directors, employees, consultants, advisors, independent contractors and agents are eligible to receive options and/or restricted stock under the 1999 Stock Incentive Plan, except that only employees may receive incentive stock options. The maximum number of shares available for issuance under the 1999 Stock Incentive Plan is 2,600,000; 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, (1) the total number of shares of stock issued upon the exercise of options under the 1999 Stock Incentive Plan and the Company's existing Management Stock Option Incentive Plan, as amended and restated through September 4, 1996 (the "Management Option Plan" and together with the 1999 Stock Incentive Plan, the "Stock Incentive Plans"), plus (2) the total number of shares of stock issuable upon exercise of all outstanding options of the Company under the Stock Incentive Plans, plus (3) the total number of shares of stock underlying awards of restricted stock under the 1999 Stock Incentive Plan (whether or not the applicable restrictions have lapsed) would exceed 2,600,000 shares. No person eligible to receive options under the 1999 Stock Incentive Plan may receive options for the purchase of more than 200,000 shares in any calendar year. The 1999 Stock Incentive Plan is administered by the Board of Directors or, in its discretion, by a Committee of the Board of Directors. Upon the approval of the 1999 Stock Incentive Plan by the Company's stockholders, the issuance of options under the Company's existing Management Stock Option Incentive Plan (the "Management Option Plan" and together with the 1999 Stock Incentive Plan, the "Stock Incentive Plans") was terminated. The Management Option Plan provided for the grant of options to purchase Common Stock intended to qualify as incentive stock options or non-qualified options. All officers, directors, employees, consultants, advisors, independent contractors and agents were eligible to receive options under the Management Option Plan, except that only employees were eligible to receive incentive stock options. At the time the Management Option Plan was terminated, 1,262,700 options remained outstanding thereunder. The maximum number of shares available for issuance under the Management Option Plan was 1,600,000, and no person was eligible to receive options under the Management Option Plan for the purchase of more than an aggregate of 200,000 shares. The Management Option Plan is administered by the Board of Directors or, in its discretion, by a Committee of the Board of Directors. The exercise price of incentive stock options granted under the Option Plans must be at least equal to the fair market value of the shares on the date of grant (110 percent of fair market value in the case of participants who own shares possessing more than 10 percent of the combined voting power of the Company) and may not have a term in excess of 10 years from the date of grant (five years in the case of participants who are more than 10 percent stockholders). With certain limited exceptions, options granted under the Option Plans are not transferable other than by will or the laws of descent and distribution. In December 1998, certain stock options granted under the Management Option Plan were amended to reduce the per share exercise prices to $2.64 (the market price on the date of amendment) from initial exercise prices ranging from $2.78 to $6.13. Other than the exercise price, the option terms remained the same with respect to the vesting date and the remaining contractual life. The Company previously maintained a Non-Employee Director Stock Option Plan ("Director Plan") which provided for the grant of non-qualified options to purchase Common Stock to the non- employee members of the Company's Board of Directors. The issuance of new stock options under the Director Plan was terminated in June 1997. The Director Plan is administered by the Board of Directors. Under the Director Plan, each non- employee director was automatically granted an initial option to purchase 1,000 shares of Common Stock and automatically granted an option to purchase an additional 1,000 shares of Common Stock on each anniversary of such date if he remained a non-employee director on that anniversary date. Options granted under the Director Plan have an exercise price equal to the fair market value of the shares on the date of grant and have a term of 10 years from the date of grant. Options granted under the Director Plan become exercisable one year from the date of grant and are not transferable other than by will or the laws of descent and distribution. Options exercisable for 8,000 shares of Common Stock remain outstanding under the Director Plan. The Company accounts for its stock option plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, "Accounting for Stock- Based Compensation," the Company's net income (loss) and earnings (loss) per share would have been reduced to the following pro forma amounts: Years ended December 31, 1997 1998 1999 (Amounts in Thousands, Except Per Share Data) Net income (loss): As reported $ 9,695 $(12,715) $ 205 Pro forma 9,491 (13,002) (246) Earnings (loss) per share: As reported $ 0.48 $ (0.62) $ 0.01 Pro forma 0.47 (0.64) (0.01) The fair value of each option granted (or repriced during the period for which SFAS 123 is effective) is estimated on the date of grant (or repricing) using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants (or repricings) in 1997, 1998 and 1999, respectively: risk-free interest rates of 6.2, 4.5, and 5.8 percent; expected volatility of 63, 58 and 58 percent. The expected lives of the options are 5 years for 1997, 1998 and 1999. No dividends are expected to be paid. Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. Summarized information for the stock option plans is as follows: 1997 1998 1999 Wtd. avg. Wtd. avg. Wtd.avg. Shares ex. price Shares ex. price Shares ex. price Options outstanding, beginning of year 566,000 $ 6.25 594,500 $ 6.12 1,140,110 $ 2.68 Granted 150,000 5.32 833,610 2.69 579,170 3.52 Exercised - - (15,264) 2.64 Canceled (121,500) 9.57 (288,000) 6.22 (262,506) 2.86 Options outstanding, end of year 594,500 6.12 1,140,110 2.68 1,441,510 2.99 Options available for grant 1,013,500 467,890 1,158,490 Options exercisable, end of year 233,800 6.25 184,300 2.75 382,184 2.78 Weighted average fair value of options granted $ 3.14 $ 1.18 $ 1.94
At December 31, 1999, 932,840 of the 1,441,510 options outstanding have an exercise price of $2.64, with a weighted average exercise price of $2.64 and a weighted average remaining contractual life of 7.9 years. 500,670 options outstanding have exercise prices between $2.75 and $4.14, with a weighted average exercise price of $3.54 and a weighted average remaining contractual life of 9.5 years. 6,000 options outstanding have exercise prices between $5.13 and $6.50, with a weighted average exercise price of $5.88 and a weighted average remaining contractual life of 6.2 years. The remaining 2,000 options have an outstanding exercise price of $16.00, with a remaining contractual life of 4.2 years. NOTE 8 - COMMITMENTS AND CONTINGENCIES Litigation The Company is engaged in several legal actions arising in the ordinary course of business. With respect to these legal actions, the Company believes that it has adequate legal defenses, insurance coverage or indemnification protection and believes that the ultimate outcome(s) will not have a material adverse impact on the Company's financial position. In June 1998, ACVI received a letter from the Financial Crimes Enforcement Network ("FinCEN") of the Department of Treasury identifying 26 alleged currency transaction reporting failures or errors that were discovered in an audit by the Internal Revenue Service covering an approximately 13-month period following the opening of Ameristar Vicksburg. In early 2000, the Company settled this matter with FinCEN by agreeing to pay a civil monetary penalty. In addition to paying the civil penalty, ACVI has implemented various steps intended to improve compliance with the currency transaction reporting requirements. E. L. Pennebaker, Jr., et. al. v. ACI, et. al. On February 23, 1998, E. L. Pennebaker, Jr. filed a complaint in the Circuit Court of Pike County, Mississippi against ACI, Harrah's Vicksburg Corporation ("HVC"), Riverboat Corporation of Mississippi- Vicksburg ("RCMV"), and Deposit Guaranty National Bank ("DGNB"). The matter is pending as case number 98-0047-B (the "Pennebaker case"). The complaint was amended in February 1998 to add James F. Belisle, Multi Gaming Management, Inc. and Multi Gaming Management of Mississippi, Inc. as additional plaintiffs. The complaint was further amended in March 1999 to modify the specific claims alleged by the plaintiffs. The plaintiffs are property owners or claim to have contract rights in a proposed casino/racetrack development along the Big Black River in Warren County, Mississippi. They allege they would have profited if the Mississippi Gaming Commission had found suitable for a casino a location along that river that was controlled by Horseshoe Gaming, Inc. or its affiliates. The plaintiffs further allege that the defendants entered into an agreement to hinder trade and restrain competition in the gaming industry in violation of the antitrust laws and the gaming laws of Mississippi. Specifically, the plaintiffs allege the defendants conducted an aggressive campaign in opposition to the application of Horseshoe Gaming, Inc. for a gaming site on the Big Black River. The plaintiffs also allege that the defendants tortiously interfered with the plaintiffs' business relations. The plaintiffs allege compensatory damages of $38 million and punitive damages of $200 million. The trial in this case was held in October 1999, following which the jury rendered joint and several verdicts in favor of the plaintiffs against ACI, HVC and DGNB on the conspiracy count and against ACI and HVC on the restraint of trade and tortious interference counts. RCMV settled with the plaintiffs prior to trial, and the damage amounts have been reduced by the settlement amount paid by RCMV. The net damages awarded to the plaintiffs total $3,792,000, of which ACI's pro rata portion is $1,685,333. These damages are compensatory only as the court did not allow the jury to consider an award of punitive damages. Judgment was entered on November 8, 1999, and ACI has appealed the case to the Mississippi Supreme Court and otherwise intends to vigorously defend against the plaintiffs' claims. Post-judgment interest on the damages will accrue at the rate of 8 percent per annum, and if an appeal is unsuccessful, the plaintiffs would also be entitled to a premium of 15% of the damages amount. Mr. Pennebaker has also filed a petition with the Mississippi Gaming Commission requesting that the Mississippi Gaming Commission order ACI, HVC and RCMV to stop opposing the approval and construction of a casino on the Big Black River and for such other corrective and punitive action that the Mississippi Gaming Commission might find appropriate. ACI has been advised that no action is required by it in connection with this petition unless requested by the Mississippi Gaming Commission. Walter H. Gibbes, Jr. and Margaret S. Dozier v. ACI et al. On November 22, 1999, Mr. Gibbes and Ms. Dozier filed a complaint in the Circuit Court of Pike County, Mississippi against ACI, HVC, Isle of Capri Casinos, Inc. (the parent company of RCMV; "ICC") and DGNB. The matter is pending as cause no. 99-0157-B. ACI believes that the plaintiffs were partners with Mr. Pennebaker in a partnership that held an option to a real estate parcel along the Big Black River that is adjacent to the parcel that was the subject of the Horseshoe Gaming, Inc. application. The allegations in the complaint are substantially the same as those in the complaint in the case previously brought by the plaintiffs in the Pennebaker case. The plaintiffs seek $4,567,500 in actual damages and an unspecified amount of punitive damages. The defendants have removed this case to the United States District Court for the Southern District of Mississippi on diversity jurisdiction and federal question grounds. The case is now pending in federal court as cause no. 3:99cv911WS. The plaintiffs have filed a motion to remand the case back to the Pike County circuit court, which has not yet been ruled on by the federal court. ACI intends to continue to vigorously defend against this cause of action. NOTE 9 - RELATED PARTY TRANSACTIONS The Company engages Neilsen and Company to provide certain construction and professional services, office space and other equipment and facilities. Neilsen and Company is controlled by the principal stockholder and President of the Company. Total payments to Neilsen and Company were $43,000, $33,000 and $44,000 for the years ended December 31, 1997, 1998 and 1999, respectively. The Company also leases office space from the Lynwood Shopping Center which until recently was controlled by the principal stockholder and President of the Company. Total payments to the Lynwood Shopping Center were $31,000, $23,000 and $7,000 for the years ended December 31, 1997, 1998 and 1999, respectively. In September 1999, the Lynwood Shopping Center was sold to an unrelated party. In management's opinion, at the time the above described transactions were entered into, they were in the best interest of the Company and on terms as fair to the Company as could have been obtained from unaffiliated parties. NOTE 10 - GEM GAMING, INC. MERGER On October 9, 1996, Gem Gaming, Inc. ("Gem"), a Nevada Corporation, was merged with and into ACLVI, pursuant to a merger agreement entered into on May 31, 1996, as amended in July and October, 1996 (the "Merger Agreement"). Gem was originally established to develop The Reserve. Activities relating to The Reserve have been included in the consolidated financial statements of the Company since October 9, 1996. The merger of Gem into ACLVI was recorded using the purchase method of accounting. In connection with the closing of the Merger Agreement, the Company originally issued notes payable to the former stockholders of Gem (the "Gem Stockholders") in the principal amount of $35,375,000. Due to certain disputes between the Gem Stockholders and the Company surrounding the Merger Agreement, an arbitration proceeding brought by the Company was settled by mutual agreement (the "Gem Settlement Agreement") in June 1997. The Gem Settlement Agreement provides that the Company will pay to the Gem Stockholders $32.7 million in installments, plus interest, in lieu of the consideration provided for in the Merger Agreement. The Company made an initial payment of $4.0 million to the Gem Stockholders and issued unsecured subordinated promissory notes for the balance of $28.7 million (the "Gem Notes" - See Note 5). The Gem Notes are subordinate to the Revolving Credit Facility, the Senior Subordinated Notes and other long-term indebtedness of ACI specified by ACI up to a maximum of $250 million. NOTE 11 - OTHER INFORMATION On October 28, 1999, ACSLI, a newly formed wholly owned subsidiary of ACI, filed an application with the Missouri Gaming Commission seeking a gaming license for a site along the Mississippi River in Lemay, Missouri, a community in South St. Louis County. In conjunction with this application, ACSLI has entered into an agreement with the current lessee of the proposed site for the assignment of the lease. The Company has also recently obtained a commitment to refinance its Revolving Credit Facility, increasing its available borrowing capacity to $265 million to fund a substantial portion of the development costs for this project. The balance of the financing for this project will be provided primarily by operating cash flow. The Company's current plans for the Ameristar Casino St. Louis at Lemay call for a floating barge located within a basin and integrated within a larger main frame structure that is adjacent to the Mississippi River. The Company expects that the project will consist of a single level building of approximately 215,920 square feet and that the casino will consist of 70,000 square feet of floating gaming area with 2,000 slot machines, 50 blackjack tables, two Roulette or big wheel games, eight crap/dice games, one cashier coin cage with slot and table fills and three change booths with beverage dispensing counters. The project is expected to include two casino bars with service stations, including a 50-seat entertainment lounge, as well as several restaurants, meeting rooms, a Missouri retail shop and a VIP lounge. The total cost for development and construction of the project is expected to be approximately $150 million. The project also calls for a 150-room hotel adjacent to the casino to be built by a strategic partner. This project is in the preliminary stages and subject to numerous contingencies, including, for example, the satisfactory completion of due diligence concerning the proposed site, the selection of the Company's application for investigation by the Missouri Gaming Commission, obtaining various other regulatory permits and approvals and completing financing arrangements for the project. The project is also subject to various development and construction risks typical of large-scale development projects of this type. Accordingly, there can be no assurances concerning the success of the Company's efforts to obtain a gaming license and to pursue the development of this project. The Company recently submitted a revised application for a gaming license to the Missouri Gaming Commission and expects the Missouri Gaming Commission to take action with respect to its application during 2000. NOTE 12 - SUBSEQUENT EVENTS In June 1998, ACVI received a letter from the Financial Crimes Enforcement Network ("FinCEN") of the Department of Treasury identifying 26 alleged currency transaction reporting failures or errors that were discovered in an audit by the Internal Revenue Service covering an approximately 13-month period following the opening of Ameristar Vicksburg. In early 2000, the Company settled this matter with FinCEN by agreeing to pay a civil monetary penalty. In addition to paying the civil penalty, ACVI has implemented various steps intended to improve compliance with the currency transaction reporting requirements. The Company entered into a lease for 4.3 acres of land adjacent to the Ameristar Vicksburg Casino site, which became effective January 1, 2000. The initial term of the lease is 3 years and the lease includes renewal options for an additional 24 years. The initial term of the lease requires quarterly payments of approximately $20,000. The lease contains a purchase option exercisable at various times during the term of the lease that ranges from approximately $1.3 million in 2000 to approximately $1.9 million in 2020. On March 1, 2000, ACVI exercised its purchase option on one of the parcels of the Ameristar Vicksburg site that had previously been under lease. The purchase price for the parcel was $4,579,725.85 and was paid for by ACVI entering into two promissory notes in favor of the Seller of the parcels, one in the principal amount of $250,000 and the second in the principal amount of $4,329,725.85. The $250,000 promissory note bears interest at the rate of 10.0% per annum, with principal and interest payable in 12 equal monthly installments. The $4,329,725.85 promissory note bears interest at the rate of 10.0% per annum, with principal and interest payable in equal monthly installments through February 1, 2024. EXHIBIT DESCRIPTION OF EXHIBIT METHOD OF FILING NUMBER 3.1 Articles of Incorporation of Incorporated by reference Ameristar Casinos, Inc. to Exhibit 3.1 to ("ACI"). Registration Statement on Form S-1 filed by ACI under the Securities Act of 1933, as amended (File No. 33-68936) (the "Form S- 1"). 3.2 Bylaws of ACI. Incorporated by reference to Exhibit 3.2 to ACI's Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 10-K"). 4.1 Specimen Common Stock Incorporated by reference Certificate to Exhibit 4 to Amendment No. 2 to the Form S-1. 4.2(a) Credit Agreement, dated as of Incorporated by reference July 8, 1997, among ACI, to Exhibits 4.1 and 99.1 Cactus Pete's, Inc. ("CPI"), to the Current Report on Ameristar Casino Vicksburg, Form 8-K of ACI filed on Inc. ("ACVI"), Ameristar July 30, 1997 (the "July Casino Council Bluffs, Inc. 1997 8-K"). ("ACCBI") and Ameristar Casino Las Vegas, Inc. ("ACLVI"), as Borrowers, the Lenders named therein, and Wells Fargo Bank, National Association ("WFB") as Arranger, Agent Bank and Swingline Lender, together with a list describing omitted schedules and exhibits thereto. 4.2(b) First Amendment to Credit Incorporated by reference Agreement, dated as of to Exhibit 4.2(b) to ACI's September 9, 1998, among ACI, Annual Report on Form 10-K CPI, ACVI, ACCBI, ACLVI, the for the year ended lenders named therein and December 31, 1998 (the WFB, as Swingline Lender and "1998 10-K"). Agent Bank. 4.2(c) Interest Rate Collar Incorporated by reference Agreement, dated August 10, to Exhibit 4.2(b) to the 1998, between ACI and WFB. 1998 10-K. 4.3(a) Indenture, dated as of July Incorporated by reference 15, 1997, among ACI, ACLVI, to Exhibit 4.2 to the July ACVI, A.C. Food Services, 1997 8-K. Inc. ("ACFSI"), AC Hotel Corp. ("ACHC"), ACCBI and First Trust National Association, including the forms of Notes and Subsidiary Guarantees issued thereunder. 4.3(b) Supplemental Indenture, dated Incorporated by reference as of October 24, 1997, among to Exhibit 4.1(c) to ACI, CPI, ACLVI, ACVI, ACFSI, Amendment No. 1 to ACHC, ACCBI and First Trust Registration Statement on National Association. Form S-4 filed by ACI, CPI, ACVI, ACCBI, ACLVI, ACFSI and ACHC under the Securities Act of 1933, as amended (File No. 333- 34381) (the "Form S-4"). 4.4 Other Long-Term Debt. See Exhibits 10.9(e)-(j) See Exhibits 10.9(e)-(j) and and 99.1. 99.1. *10.1 Employment Agreement, dated Incorporated by reference (a) November 15, 1993, between to Exhibit 10.1(a) to ACI and Thomas M. Steinbauer. ACI's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 10-K"). *10.1 Employment Agreement, dated Incorporated by reference (b) as of August 23, 1999, to Exhibit 10.1 to ACI's between Ameristar Casinos, Quarterly Report on Form Inc. and Gordon R. Kanofsky 10-Q for the quarter ended September 30, 1999. *10.2 Ameristar Casinos, Inc. 1993 Incorporated by reference Non-Employee Director Stock to Exhibit 10.2 to ACI's Option Plan, as amended and Quarterly Report on Form restated. 10-Q for the quarter ended June 30, 1994. *10.3 Ameristar Casinos, Inc. Incorporated by reference Management Stock Option to Exhibit 10.3 to ACI's Incentive Plan, as amended Quarterly Report on Form and restated. 10-Q for the quarter ended September 30, 1996. *10.4 1999 Stock Incentive Plan of Incorporated by reference Ameristar Casinos, Inc. to Exhibit 10.6 to ACI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. *10.5 Form of Indemnification Incorporated by reference Agreement between ACI and to Exhibit 10.33 to each of its directors and Amendment No. 2 to the officers. Form S-1. *10.6 Housing Agreement, dated Incorporated by reference November 15, 1993 between CPI to Exhibit 10.17 to the and Craig H. Neilsen. 1994 10-K. 10.7 Plan of Reorganization, dated Incorporated by reference November 15, 1993, between to Exhibit 2.1 to the 1994 ACI and Craig H. Neilsen in 10-K. his individual capacity and as trustee of the testamentary trust created under the last will and testament of Ray Neilsen dated October 9, 1963. 10.8 Excursion Boat Sponsorship Incorporated by reference and Operations Agreement, to Exhibit 10.15 to the dated September 15, 1994, 1995 10-K. between Iowa West Racing Association and ACCBI. 10.9 Merger Agreement, dated as of Incorporated by reference (a) May 31, 1996, among Gem to Exhibits 10.1 and 99.1 Gaming, Inc. ("Gem"), ACI, to ACI's Quarterly Report ACLVI, Steven W. Rebeil on Form 10-Q for the ("Rebeil") and Dominic J. quarter ended June 30, Magliarditi ("Magliarditi"), 1996 (the "June 1996 10- together with a list Q"). describing omitted schedules and exhibits thereto. 10.9 First Amendment to Merger Incorporated by reference (b) Agreement, dated July 2, to Exhibit 10.5 to the 1996, among Gem, ACI, ACLVI, June 1996 10-Q. Rebeil and Magliarditi. 10.9 Second Amendment to Merger Incorporated by reference (c) Agreement, dated as of to Exhibits 10.1 and 99.1 September 27, 1996, among to the Current Report on Gem, ACI, ACLVI, Rebeil and Form 8-K of ACI filed on Magliarditi, together with a October 24, 1996. list describing omitted schedules and exhibits thereto. 10.9 Settlement Agreement, dated Incorporated by reference (d) as of May 3, 1997, among ACI, to Exhibit 10.1 to ACI's ACLVI, Rebeil, Magliarditi, Quarterly Report on Form Gem Air, Inc. and NVAGAIR. 10-Q for the quarter ended March 31, 1997. 10.9 Promissory Note, dated as of Incorporated by reference (e) June 1, 1997, made by ACI to Exhibit 10.8(k) to the payable to the order of Form S-4. Rebeil in the original principal amount of $13,232,146. 10.9 Promissory Note, dated as of Incorporated by reference (f) June 1, 1997, made by ACI to Exhibit 10.8(k) to the payable to the order of Form S-4. Magliarditi in the original principal amount of $417,854. 10.9 Non-Negotiable Promissory Filed electronically (g) Note, dated as of November herewith. 11, 1999, made by ACI payable to Magliarditi in the original principal amount of $179,080. 10.9 Non-Negotiable Promissory Filed electronically (h) Note, dated as of November herewith. 11, 1999, made by ACI payable to Magliarditi in the original principal amount of $280,100. 10.9 Non-Negotiable Promissory Filed electronically (i) Note, dated as of November herewith. 11, 1999, made by ACI payable to Rebeil in the original principal amount of $5,670,920. 10.9 Non-Negotiable Promissory Filed electronically (j) Note, dated as of November herewith. 11, 1999, made by ACI payable to Rebeil in the original principal amount of $8,869,900. 10.10 Lease, dated December 11, Incorporated by reference (a) 1992, between Martha Ker to Exhibit 10.4 to the Brady Lum et. al. and ACVI as Form S-4. the assignee of Craig H. Neilsen. 10.10 First Amendment to Lease Incorporated by reference (b) Agreement, dated June 1, to Exhibit 10.4(b) to the 1995, between Lawrence O. 1995 10-K. Branyan, Jr., as trustee of the Brady-Lum Family Trust dated May 15, 1993 and ACVI. 10.11 Settlement, Use and Incorporated by reference Management Agreement and DNR to Exhibits 10.12 and 99.1 Permit, dated May 15, 1995, to ACI's Annual Report on between the State of Iowa Form 10-K for the year acting through the Iowa ended December 31, 1996. Department of Natural Resources and ACCBI as the assignee of Koch Fuels, Inc. 10.12**Asset Purchase and Sale Filed electronically Agreement, dated as of herewith. February 15, 2000, between Futuresouth, Inc., Southboat Lemay, Inc., Southboat Limited Partnership and Ameristar Casino St. Louis, Inc. 21.1 Subsidiaries of ACI. Filed electronically herewith. 23.1 Consent of Arthur Andersen Filed electronically LLP. herewith. 27.1 Financial Data Schedule Filed electronically herewith. 99.1 Agreement to furnish the Filed electronically Securities and Exchange herewith. Commission certain instruments defining the rights of holders of certain long-term debt. _________________________________ * Denotes a management contract or compensatory plan or arrangement. ** Portions of this Exhibit have been deleted pursuant to the Company's request for confidential treatment pursuant to Rule 24b- 2 promulgated under the Securities Exchange Act. EX-10 2 EXHIBIT 10.9(G) NON-NEGOTIABLE PROMISSORY NOTE 1. Promise to Pay. For good and valuable consideration, AMERISTAR CASINOS, INC., a Nevada corporation ("Borrower"), promises to pay to DOMINIC J. MAGLIARDITI, an individual ("Lender"), $179,080 with interest on the unpaid principal balance at eight percent (8%) per annum simple interest (subject to Paragraph 2) (the "Interest Rate") from June 1, 1997 until paid in accordance with the terms contained herein. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Should any accrued interest not be paid on any Interest Payment Date, it shall thereafter accrue interest as principal. All payments shall be made by wire to Lender's account at Wells Fargo Bank, N.A., ABA Routing No.: 122402049, Account No.: 0834-944134, or at such other place as the holder of this Note may from time to time designate. All payments shall be applied first to accrued interest and then to the principal balance. 2. Payment Schedule. This Note may be prepaid in whole or in part at any time without penalty. Borrower shall pay interest accruing under this Note as follows: (a) interest accruing from the date hereof through July 20, 1997 shall be paid (to the extent not previously paid) on July 20, 1997; (b) interest accruing from and after July 21, 1997 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each October, January, April and July thereafter until October 20, 1998; and (c) interest accruing from and after October 21, 1998 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each calendar month thereafter until the date (the "Payment Termination Date") that is the earlier of the Maturity Date or the date when the principal amount of, and all accrued interest on, this Note has been paid in full. Each date upon which a payment is required to be made pursuant to the foregoing provisions of this Section 2 shall be referred to herein as a "Payment Date." In addition, Borrower shall pay installments of principal as follows: (1) On January 20, 2004, Borrower shall pay $10,147.80 to Lender as an installment of principal; and (2) On July 20, 2004, Borrower shall pay $17,908.02 to Lender as an installment of principal. If on any Payment Date before the Payment Termination Date, Borrower fails to make any payment of interest or principal to Lender, as required above, and Borrower fails to cure such failure within ten (10) days after receiving written notice of such failure from Lender, then, commencing as of the next Payment Date, the Interest Rate hereunder shall be increased as follows: (i) With respect to the first such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eleven and four tenths percent (11.4%) per annum simple interest; (ii) With respect to the second such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal fourteen and seven-tenths percent (14.7%) per annum simple interest; and (iii) With respect to the third such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eighteen percent (18%) per annum simple interest. The Interest Rate shall not be increased to a level greater than eighteen percent (18%) per annum simple interest. 3. Maturity. All unpaid principal and accrued, but unpaid, interest shall be due and payable on December 31, 2004 (the "Maturity Date"). 4. Subordination. 4.1 Note Subordinated to Senior Indebtedness. Anything herein to the contrary notwithstanding, each of Borrower and Lender agrees that the payment of the Obligations with respect to this Note is subordinated, to the extent and in the manner provided in this Paragraph 4, to the prior payment in full in cash of all Senior Indebtedness. The provisions of this Paragraph 4 are made for the benefit of the holders of Senior Indebtedness and holders of Senior Indebtedness may enforce the provisions of this Paragraph 4 without any need to demonstrate any reliance hereon. 4.2 No Payment on Note in Certain Circumstances. Unless Subparagraph 4.3 shall be applicable, upon (i) (A) the occurrence of any default in the payment of all or any portion then due of principal of, premium, if any, or interest on any Senior Indebtedness, (B) the occurrence of any event which entitles one or more persons to act to accelerate the maturity of any Senior Indebtedness or (C) the existence of any facts or circumstances which would result in the occurrence of any event described in clause (A) or clause (B) if Borrower were to make any payment hereunder (any event described in clause (A) or clause (B) or facts or circumstances described in clause (C), a "Senior Indebtedness Default") and (ii) receipt by the Lender from the indenture trustee or other trustee, agent or representative for any Senior Indebtedness (the "Representative") of written notice of such Senior Indebtedness Default, then no direct or indirect payments or distribution of any assets of Borrower of any kind or character shall be made by or on behalf of Borrower on account of the Obligations on this Note or on account of the purchase or redemption or other acquisition of this Note whether pursuant to the terms of this Note or upon acceleration or otherwise unless and until such Senior Indebtedness Default shall have been cured or waived or shall have ceased to exist, or such Senior Indebtedness as to which such Senior Indebtedness Default relates shall have been discharged or paid in full in cash, after which Borrower shall resume making any and all required payments in respect of this Note, including any missed payments. In the event that, notwithstanding the foregoing, the Lender or any holder of this Note shall have received any payment or distribution prohibited by the foregoing provisions of this Subparagraph 4.2, then such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over and delivered forthwith to the Representatives or as a court of competent jurisdiction shall direct. 4.3 Note Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Borrower. Upon any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, upon any dissolution, winding-up, total or partial liquidation or total or partial reorganization of Borrower (including, without limitation, in bankruptcy, insolvency or receivership proceedings or upon any assignment for the benefit of creditors or any other marshaling of assets and liabilities of Borrower and whether voluntary or involuntary): (a) the holders of all Senior Indebtedness shall first be entitled to receive payments in full in cash of all amounts payable under Senior Indebtedness before Lender is entitled to receive any payment with respect to this Note and until all Obligations with respect to the Senior Indebtedness are paid in full in cash, any distribution to which Lender or any other holder of this Note would be entitled shall be made to the holders of Senior Indebtedness; (b) any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, to which Lender shall be paid by the liquidating trustee or agent or other person making such a payment or distribution, directly to the holders of Senior Indebtedness or their Representative until all Senior Indebtedness remaining unpaid shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing, any payment or distribution of assets or securities of Borrower of any kind or character, whether in cash, property or securities, shall be received by Lender or any other holder of this Note on account of principal of, premium, if any, or interest on this Note before all Senior Indebtedness is paid in full in cash, such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over to, the holders of Senior Indebtedness or their Representative, ratably according to the respective amounts of Senior Indebtedness held or represented by each, until all Senior Indebtedness remaining unpaid shall have been paid in full in cash after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. 4.4 Lender to Be Subrogated to Rights of Holders of Senior Indebtedness. Subject to the payment in full in cash of all Senior Indebtedness, Lender shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of Borrower applicable to the Senior Indebtedness until all amounts owing on this Note shall be paid in full in cash. 4.5 Defined Terms. When used in this Note, the following capitalized terms shall have the meanings set forth below: "Existing Senior Indebtedness" means any and all Indebtedness and other Obligations of Borrower under or evidenced by (i) that certain Credit Agreement dated as of June 1, 1995 by and among Borrower, as borrower, First Interstate Bank of Nevada, N.A., as agent, and the Financial Institutions named therein, as Lenders, as the same may be amended from time to time, or (ii) any other document or instrument evidencing or securing such Indebtedness, including, without limitation, that certain Promissory Note due December 31, 2001, dated as of July 5, 1995 and made by Ameristar Casinos, Inc. to First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time, and that certain Pledge Security Agreement dated as of June 1, 1995 by and between Borrower, as Pledgor, and First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time. "Hedging Obligations" means, with respect to the Senior Indebtedness of any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements relating to the Obligations under the Senior Indebtedness and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates on such Senior Indebtedness. "Indebtedness" means with respect to any person, corporation, trust, partnership, or other entity (a "Person"), without duplication, (i) all liabilities, contingent or otherwise, of such Person for borrowed money, evidenced by bonds, notes, debentures, drafts accepted or similar instruments or letters of credit, or for the payment of money relating to an obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with U.S. generally accepted accounting principals; (ii) reimbursement obligations of such person with respect to letters of credit; (iii) all liabilities of others of the kind described in the preceding clause (i) or clause (ii) that such Person has guaranteed or that is otherwise its legal liability; and (iii) all obligations of others secured by any mortgage, pledge, lien, encumbrances, charge or a security interest of any kind to which any of the properties or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such Person are subject, whether or not the obligations secured thereby shall have been assumed by such Person or shall otherwise be such Person's legal liability. "Obligations" means all obligations of every nature whether for principal, reimbursements, interest, fees, expenses, indemnities or otherwise, and whether primary, secondary, direct, indirect, contingent, fixed or otherwise (including obligations of performance) under the documentation governing any Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and interest on, and all other Obligations with respect to, (A) the Existing Senior Indebtedness and/or (B) any other Indebtedness of Borrower whether outstanding on June 1, 1997 or thereafter created, incurred, assumed or guaranteed or in effect guaranteed by Borrower, but with respect to the Indebtedness described in (B) above, only if the instrument or document evidencing such Indebtedness expressly provides that such Indebtedness shall be senior in right of payment to this Note; provided, however, Borrower shall not enter into any Senior Indebtedness if entering into such Senior Indebtedness would cause the aggregate outstanding principal balance of all Senior Indebtedness, immediately following execution and delivery of such Senior Indebtedness, to exceed $250,000,000 (excluding, for purposes of said maximum, Hedging Obligations with respect to Senior Indebtedness already counted for purposes of the calculation). "Senior Indebtedness" shall be deemed to include for all purposes of this Note interest accruing after the filing of a petition initiating any proceeding pursuant to any federal, state or foreign bankruptcy law in accordance with and at the rate (including any rate applicable upon any Senior Indebtedness Default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness of Borrower to any subsidiary of Borrower, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of Borrower or of any subsidiary of Borrower (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) any liability for federal, state, local or other taxes owed or owing by Borrower, and (v) any Indebtedness evidenced by that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Steven W. Rebeil (in his individual capacity and as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended) in an original principal amount of $14,540,820, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Lender in an original principal amount of $417,854, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Steven W. Rebeil (in his individual capacity and as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended) in an original principal amount of $13,232,146, or any novation(s) thereof, or the other Magliarditi Note (as defined in Paragraph 7), or any novation(s) thereof. 5. Set-Off. Borrower shall be entitled to set off (a) any obligations payable by Lender to Borrower (without regard to whether such obligations of Lender arises under the transaction that gave rise to this Note or any other transaction or facts) against (b) amounts due and payable hereunder by Borrower to Lender or any other holder of this Note. Any such set offs shall be subject to the provisions of the Settlement Agreement dated as of May 3, 1997 by and among Borrower, Ameristar Casino Las Vegas, Inc., Steven W. Rebeil, as an individual and in his capacity as Trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended, Lender, Gem Air, Inc. and Nevada AG Air, Ltd. 6. Miscellaneous Provisions. No provision of this Note may be amended, modified, supplemented, changed, waived, discharged or terminated unless Lender consents thereto in writing. In case any one or more of the provisions contained in this Note should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. In the event of a failure by Borrower prior to the Maturity Date to pay any amounts due hereunder as and when due, Lender's sole remedy shall be adjustment of the Interest Rate as set forth in Paragraph 2; Lender specifically acknowledges and agrees that it shall not have the right prior to the Maturity Date to accelerate the indebtedness hereunder, or take any other actions other than those set forth in Paragraph 2 hereof, as a consequence of any such non-payment. This Note shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Nevada. By accepting this Note, each holder of this Note agrees (a) to be bound by and to perform all of the obligations of Lender hereunder and (b) that its rights hereunder are subject to the provisions hereof. This Note is not negotiable. 7. Novation and Pari Passu Provisions. This Note, together with another Non-Negotiable Promissory Note of even date herewith of Borrower in favor of Lender in the original principal amount of $280,100 (collectively, the "Magliarditi Notes"), constitute a novation of that certain Non-Negotiable Promissory Note dated as of June 1, 1997 in the original principal amount $459,180 made by Borrower in favor of Lender (the "Original Note"). The Magliarditi Notes are and shall be subordinate to Senior Indebtedness to the same extent as the Original Note, and any and all statements in any Senior Indebtedness providing for the subordination of the Original Note to such Senior Indebtedness shall remain effective for, and applicable to, the subordination of the Magliarditi Notes. Without limiting the foregoing, (i) each of the Magliarditi Notes is and constitutes a "Gem Settlement Note" as defined in and for purposes of that certain Credit Agreement dated as of July 8, 1997, as amended, among Borrower and various of its subsidiaries as borrowers, the lenders named therein and Wells Fargo Bank, National Association, as Arranger, Agent Bank and Swingline Lender, and (ii) each of the Magliarditi Notes is and constitutes "Refinancing Indebtedness" of the "Gem Notes" as such terms are defined in and for purposes of that certain Indenture dated as of July 15, 1997, as amended, among First Trust National Association, as Trustee, Borrower and various subsidiaries of Borrower as guarantors. The novation of the Original Note is not intended to affect the limitation on the amount of Senior Indebtedness provided for in Subparagraph 4.5 of this Note. In the event that Borrower is unable to make full payment of principal of and/or interest on both the Magliarditi Notes when due, the total amount paid at such time by Borrower in respect of the Magliarditi Notes shall be applied ratably to the payment of the amounts then due and unpaid on the Magliarditi Notes, without preference or priority of any kind, according to the amounts due and payable on the Magliarditi Notes. By the acceptance of this Note, Lender hereby agrees and consents to such ratable application on behalf of itself and all subsequent holders of this Note; however, any acceptance by the holder of this Note of any partial payment of any amount due under this Note shall not be considered a forgiveness of indebtedness or a waiver of timely payment. The respective original holders of the Magliarditi Notes are, and subsequent holders of the Magliarditi Notes may be, entitled to certain rights or subject to certain obligations pursuant to the terms of a Settlement Agreement entered into in September 1999 among Bryan and Dawn Hafen, Steven W. Rebeil, individually and as Trustee of the Karizma Trust, Dominic Magliarditi, Gem Mesquite, Ltd., Gem Development Co., Ameristar Casino Las Vegas, Inc. and Ameristar Casinos, Inc. IN WITNESS WHEREOF, the parties hereto have executed this Note as of November 11, 1999. BORROWER: LENDER: AMERISTAR CASINOS, INC., a Nevada corporation /s/ Dominic J. Magliarditi DOMINIC J. MAGLIARDITI, an By: /s/ Thomas M. Steinbauer individual Name: Thomas M. Steinbauer Title: Senior Vice President of Finance Pay to the order of Bryan and Dawn Hafen /s/ Dominic J. Magliarditi DOMINIC J. MAGLIARDITI DATE: 11/18/99 EX-10 3 EXHIBIT 10.9(H) NON-NEGOTIABLE PROMISSORY NOTE 1. Promise to Pay. For good and valuable consideration, AMERISTAR CASINOS, INC., a Nevada corporation ("Borrower"), promises to pay to DOMINIC J. MAGLIARDITI, an individual ("Lender"), $280,100 with interest on the unpaid principal balance at eight percent (8%) per annum simple interest (subject to Paragraph 2) (the "Interest Rate") from June 1, 1997 until paid in accordance with the terms contained herein. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Should any accrued interest not be paid on any Interest Payment Date, it shall thereafter accrue interest as principal. All payments shall be made by wire to Lender's account at Wells Fargo Bank, N.A., ABA Routing No.: 122402049, Account No.: 0834-944134, or at such other place as the holder of this Note may from time to time designate. All payments shall be applied first to accrued interest and then to the principal balance. 2. Payment Schedule. This Note may be prepaid in whole or in part at any time without penalty. Borrower shall pay interest accruing under this Note as follows: (a) interest accruing from the date hereof through July 20, 1997 shall be paid (to the extent not previously paid) on July 20, 1997; (b) interest accruing from and after July 21, 1997 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each October, January, April and July thereafter until October 20, 1998; and (c) interest accruing from and after October 21, 1998 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each calendar month thereafter until the date (the "Payment Termination Date") that is the earlier of the Maturity Date or the date when the principal amount of, and all accrued interest on, this Note has been paid in full. Each date upon which a payment is required to be made pursuant to the foregoing provisions of this Section 2 shall be referred to herein as a "Payment Date." In addition, Borrower shall pay installments of principal as follows: (1) On January 20, 2004, Borrower shall pay $15,872.20 to Lender as an installment of principal; and (2) On July 20, 2004, Borrower shall pay $28,009.98 to Lender as an installment of principal. If on any Payment Date before the Payment Termination Date, Borrower fails to make any payment of interest or principal to Lender, as required above, and Borrower fails to cure such failure within ten (10) days after receiving written notice of such failure from Lender, then, commencing as of the next Payment Date, the Interest Rate hereunder shall be increased as follows: (i) With respect to the first such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eleven and four tenths percent (11.4%) per annum simple interest; (ii) With respect to the second such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal fourteen and seven-tenths percent (14.7%) per annum simple interest; and (iii) With respect to the third such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eighteen percent (18%) per annum simple interest. The Interest Rate shall not be increased to a level greater than eighteen percent (18%) per annum simple interest. 3. Maturity. All unpaid principal and accrued, but unpaid, interest shall be due and payable on December 31, 2004 (the "Maturity Date"). 4. Subordination. 4.1 Note Subordinated to Senior Indebtedness. Anything herein to the contrary notwithstanding, each of Borrower and Lender agrees that the payment of the Obligations with respect to this Note is subordinated, to the extent and in the manner provided in this Paragraph 4, to the prior payment in full in cash of all Senior Indebtedness. The provisions of this Paragraph 4 are made for the benefit of the holders of Senior Indebtedness and holders of Senior Indebtedness may enforce the provisions of this Paragraph 4 without any need to demonstrate any reliance hereon. 4.2 No Payment on Note in Certain Circumstances. Unless Subparagraph 4.3 shall be applicable, upon (i) (A) the occurrence of any default in the payment of all or any portion then due of principal of, premium, if any, or interest on any Senior Indebtedness, (B) the occurrence of any event which entitles one or more persons to act to accelerate the maturity of any Senior Indebtedness or (C) the existence of any facts or circumstances which would result in the occurrence of any event described in clause (A) or clause (B) if Borrower were to make any payment hereunder (any event described in clause (A) or clause (B) or facts or circumstances described in clause (C), a "Senior Indebtedness Default") and (ii) receipt by the Lender from the indenture trustee or other trustee, agent or representative for any Senior Indebtedness (the "Representative") of written notice of such Senior Indebtedness Default, then no direct or indirect payments or distribution of any assets of Borrower of any kind or character shall be made by or on behalf of Borrower on account of the Obligations on this Note or on account of the purchase or redemption or other acquisition of this Note whether pursuant to the terms of this Note or upon acceleration or otherwise unless and until such Senior Indebtedness Default shall have been cured or waived or shall have ceased to exist, or such Senior Indebtedness as to which such Senior Indebtedness Default relates shall have been discharged or paid in full in cash, after which Borrower shall resume making any and all required payments in respect of this Note, including any missed payments. In the event that, notwithstanding the foregoing, the Lender or any holder of this Note shall have received any payment or distribution prohibited by the foregoing provisions of this Subparagraph 4.2, then such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over and delivered forthwith to the Representatives or as a court of competent jurisdiction shall direct. 4.3 Note Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Borrower. Upon any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, upon any dissolution, winding-up, total or partial liquidation or total or partial reorganization of Borrower (including, without limitation, in bankruptcy, insolvency or receivership proceedings or upon any assignment for the benefit of creditors or any other marshaling of assets and liabilities of Borrower and whether voluntary or involuntary): (a) the holders of all Senior Indebtedness shall first be entitled to receive payments in full in cash of all amounts payable under Senior Indebtedness before Lender is entitled to receive any payment with respect to this Note and until all Obligations with respect to the Senior Indebtedness are paid in full in cash, any distribution to which Lender or any other holder of this Note would be entitled shall be made to the holders of Senior Indebtedness; (b) any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, to which Lender shall be paid by the liquidating trustee or agent or other person making such a payment or distribution, directly to the holders of Senior Indebtedness or their Representative until all Senior Indebtedness remaining unpaid shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing, any payment or distribution of assets or securities of Borrower of any kind or character, whether in cash, property or securities, shall be received by Lender or any other holder of this Note on account of principal of, premium, if any, or interest on this Note before all Senior Indebtedness is paid in full in cash, such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over to, the holders of Senior Indebtedness or their Representative, ratably according to the respective amounts of Senior Indebtedness held or represented by each, until all Senior Indebtedness remaining unpaid shall have been paid in full in cash after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. 4.4 Lender to Be Subrogated to Rights of Holders of Senior Indebtedness. Subject to the payment in full in cash of all Senior Indebtedness, Lender shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of Borrower applicable to the Senior Indebtedness until all amounts owing on this Note shall be paid in full in cash. 4.5 Defined Terms. When used in this Note, the following capitalized terms shall have the meanings set forth below: "Existing Senior Indebtedness" means any and all Indebtedness and other Obligations of Borrower under or evidenced by (i) that certain Credit Agreement dated as of June 1, 1995 by and among Borrower, as borrower, First Interstate Bank of Nevada, N.A., as agent, and the Financial Institutions named therein, as Lenders, as the same may be amended from time to time, or (ii) any other document or instrument evidencing or securing such Indebtedness, including, without limitation, that certain Promissory Note due December 31, 2001, dated as of July 5, 1995 and made by Ameristar Casinos, Inc. to First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time, and that certain Pledge Security Agreement dated as of June 1, 1995 by and between Borrower, as Pledgor, and First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time. "Hedging Obligations" means, with respect to the Senior Indebtedness of any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements relating to the Obligations under the Senior Indebtedness and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates on such Senior Indebtedness. "Indebtedness" means with respect to any person, corporation, trust, partnership, or other entity (a "Person"), without duplication, (i) all liabilities, contingent or otherwise, of such Person for borrowed money, evidenced by bonds, notes, debentures, drafts accepted or similar instruments or letters of credit, or for the payment of money relating to an obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with U.S. generally accepted accounting principals; (ii) reimbursement obligations of such person with respect to letters of credit; (iii) all liabilities of others of the kind described in the preceding clause (i) or clause (ii) that such Person has guaranteed or that is otherwise its legal liability; and (iii) all obligations of others secured by any mortgage, pledge, lien, encumbrances, charge or a security interest of any kind to which any of the properties or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such Person are subject, whether or not the obligations secured thereby shall have been assumed by such Person or shall otherwise be such Person's legal liability. "Obligations" means all obligations of every nature whether for principal, reimbursements, interest, fees, expenses, indemnities or otherwise, and whether primary, secondary, direct, indirect, contingent, fixed or otherwise (including obligations of performance) under the documentation governing any Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and interest on, and all other Obligations with respect to, (A) the Existing Senior Indebtedness and/or (B) any other Indebtedness of Borrower whether outstanding on June 1, 1997 or thereafter created, incurred, assumed or guaranteed or in effect guaranteed by Borrower, but with respect to the Indebtedness described in (B) above, only if the instrument or document evidencing such Indebtedness expressly provides that such Indebtedness shall be senior in right of payment to this Note; provided, however, Borrower shall not enter into any Senior Indebtedness if entering into such Senior Indebtedness would cause the aggregate outstanding principal balance of all Senior Indebtedness, immediately following execution and delivery of such Senior Indebtedness, to exceed $250,000,000 (excluding, for purposes of said maximum, Hedging Obligations with respect to Senior Indebtedness already counted for purposes of the calculation). "Senior Indebtedness" shall be deemed to include for all purposes of this Note interest accruing after the filing of a petition initiating any proceeding pursuant to any federal, state or foreign bankruptcy law in accordance with and at the rate (including any rate applicable upon any Senior Indebtedness Default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness of Borrower to any subsidiary of Borrower, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of Borrower or of any subsidiary of Borrower (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) any liability for federal, state, local or other taxes owed or owing by Borrower, and (v) any Indebtedness evidenced by that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Steven W. Rebeil (in his individual capacity and as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended) in an original principal amount of $14,540,820, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Lender in an original principal amount of $417,854, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Steven W. Rebeil (in his individual capacity and as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended) in an original principal amount of $13,232,146, or any novation(s) thereof, or the other Magliarditi Note (as defined in Paragraph 7), or any novation(s) thereof. 5. Set-Off. Borrower shall be entitled to set off (a) any obligations payable by Lender to Borrower (without regard to whether such obligations of Lender arises under the transaction that gave rise to this Note or any other transaction or facts) against (b) amounts due and payable hereunder by Borrower to Lender or any other holder of this Note. Any such set offs shall be subject to the provisions of the Settlement Agreement dated as of May 3, 1997 by and among Borrower, Ameristar Casino Las Vegas, Inc., Steven W. Rebeil, as an individual and in his capacity as Trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended, Lender, Gem Air, Inc. and Nevada AG Air, Ltd. 6. Miscellaneous Provisions. No provision of this Note may be amended, modified, supplemented, changed, waived, discharged or terminated unless Lender consents thereto in writing. In case any one or more of the provisions contained in this Note should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. In the event of a failure by Borrower prior to the Maturity Date to pay any amounts due hereunder as and when due, Lender's sole remedy shall be adjustment of the Interest Rate as set forth in Paragraph 2; Lender specifically acknowledges and agrees that it shall not have the right prior to the Maturity Date to accelerate the indebtedness hereunder, or take any other actions other than those set forth in Paragraph 2 hereof, as a consequence of any such non-payment. This Note shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Nevada. By accepting this Note, each holder of this Note agrees (a) to be bound by and to perform all of the obligations of Lender hereunder and (b) that its rights hereunder are subject to the provisions hereof. This Note is not negotiable. 7. Novation and Pari Passu Provisions. This Note, together with another Non-Negotiable Promissory Note of even date herewith of Borrower in favor of Lender in the original principal amount of $179,080 (collectively, the "Magliarditi Notes"), constitute a novation of that certain Non-Negotiable Promissory Note dated as of June 1, 1997 in the original principal amount $459,180 made by Borrower in favor of Lender (the "Original Note"). The Magliarditi Notes are and shall be subordinate to Senior Indebtedness to the same extent as the Original Note, and any and all statements in any Senior Indebtedness providing for the subordination of the Original Note to such Senior Indebtedness shall remain effective for, and applicable to, the subordination of the Magliarditi Notes. Without limiting the foregoing, (i) each of the Magliarditi Notes is and constitutes a "Gem Settlement Note" as defined in and for purposes of that certain Credit Agreement dated as of July 8, 1997, as amended, among Borrower and various of its subsidiaries as borrowers, the lenders named therein and Wells Fargo Bank, National Association, as Arranger, Agent Bank and Swingline Lender, and (ii) each of the Magliarditi Notes is and constitutes "Refinancing Indebtedness" of the "Gem Notes" as such terms are defined in and for purposes of that certain Indenture dated as of July 15, 1997, as amended, among First Trust National Association, as Trustee, Borrower and various subsidiaries of Borrower as guarantors. The novation of the Original Note is not intended to affect the limitation on the amount of Senior Indebtedness provided for in Subparagraph 4.5 of this Note. In the event that Borrower is unable to make full payment of principal of and/or interest on both the Magliarditi Notes when due, the total amount paid at such time by Borrower in respect of the Magliarditi Notes shall be applied ratably to the payment of the amounts then due and unpaid on the Magliarditi Notes, without preference or priority of any kind, according to the amounts due and payable on the Magliarditi Notes. By the acceptance of this Note, Lender hereby agrees and consents to such ratable application on behalf of itself and all subsequent holders of this Note; however, any acceptance by the holder of this Note of any partial payment of any amount due under this Note shall not be considered a forgiveness of indebtedness or a waiver of timely payment. The respective original holders of the Magliarditi Notes are, and subsequent holders of the Magliarditi Notes may be, entitled to certain rights or subject to certain obligations pursuant to the terms of a Settlement Agreement entered into in September 1999 among Bryan and Dawn Hafen, Steven W. Rebeil, individually and as Trustee of the Karizma Trust, Dominic Magliarditi, Gem Mesquite, Ltd., Gem Development Co., Ameristar Casino Las Vegas, Inc. and Ameristar Casinos, Inc. IN WITNESS WHEREOF, the parties hereto have executed this Note as of November 11, 1999. BORROWER: LENDER: AMERISTAR CASINOS, INC., a Nevada corporation /s/ Dominic J. Magliarditi DOMINIC J. MAGLIARDITI, an individual By: /s/ Thomas M. Steinbauer Name: Thomas M. Steinbauer Title: Senior Vice President of Finance EX-10 4 EXHIBIT 10.9(I) NON-NEGOTIABLE PROMISSORY NOTE 1. Promise to Pay. For good and valuable consideration, AMERISTAR CASINOS, INC., a Nevada corporation ("Borrower"), promises to pay to STEVEN W. REBEIL, as an individual and in his capacity as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended ("Lender"), $5,670,920 with interest on the unpaid principal balance at eight percent (8%) per annum simple interest (subject to Paragraph 2) (the "Interest Rate") from June 1, 1997 until paid in accordance with the terms contained herein. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Should any accrued interest not be paid on any Interest Payment Date, it shall thereafter accrue interest as principal. All payments shall be made by wire to Lender's account at Bank of America, NT &SA, ABA Routing No.: 121000358, Account No.: 0202702714, or at such other place as the holder of this Note may from time to time designate. All payments shall be applied first to accrued interest and then to the principal balance. 2. Payment Schedule. This Note may be prepaid in whole or in part at any time without penalty. Borrower shall pay interest accruing under this Note as follows: (a) interest accruing from the date hereof through July 20, 1997 shall be paid (to the extent not previously paid) on July 20, 1997; (b) interest accruing from and after July 21, 1997 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each October, January, April and July thereafter until October 20, 1998; and (c) interest accruing from and after October 21, 1998 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each calendar month thereafter until the date (the "Payment Termination Date") that is the earlier of the Maturity Date or the date when the principal amount of, and all accrued interest on, this Note has been paid in full. Each date upon which a payment is required to be made pursuant to the foregoing provisions of this Section 2 shall be referred to herein as a "Payment Date." In addition, Borrower shall pay installments of principal as follows: (1) On January 20, 2004, Borrower shall pay $321,351.81 to Lender as an installment of principal; and (2) On July 20, 2004, Borrower shall pay $567,091.98 to Lender as an installment of principal. If on any Payment Date before the Payment Termination Date, Borrower fails to make any payment of interest or principal to Lender, as required above, and Borrower fails to cure such failure within ten (10) days after receiving written notice of such failure from Lender, then, commencing as of the next Payment Date, the Interest Rate hereunder shall be increased as follows: (i) With respect to the first such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eleven and four tenths percent (11.4%) per annum simple interest; (ii) With respect to the second such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal fourteen and seven-tenths percent (14.7%) per annum simple interest; and (iii) With respect to the third such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eighteen percent (18%) per annum simple interest. The Interest Rate shall not be increased to a level greater than eighteen percent (18%) per annum simple interest. 3. Maturity. All unpaid principal and accrued, but unpaid, interest shall be due and payable on December 31, 2004 (the "Maturity Date"). 4. Subordination. 4.1 Note Subordinated to Senior Indebtedness. Anything herein to the contrary notwithstanding, each of Borrower and Lender agrees that the payment of the Obligations with respect to this Note is subordinated, to the extent and in the manner provided in this Paragraph 4, to the prior payment in full in cash of all Senior Indebtedness. The provisions of this Paragraph 4 are made for the benefit of the holders of Senior Indebtedness and holders of Senior Indebtedness may enforce the provisions of this Paragraph 4 without any need to demonstrate any reliance hereon. 4.2 No Payment on Note in Certain Circumstances. Unless Subparagraph 4.3 shall be applicable, upon (i) (A) the occurrence of any default in the payment of all or any portion then due of principal of, premium, if any, or interest on any Senior Indebtedness, (B) the occurrence of any event which entitles one or more persons to act to accelerate the maturity of any Senior Indebtedness or (C) the existence of any facts or circumstances which would result in the occurrence of any event described in clause (A) or clause (B) if Borrower were to make any payment hereunder (any event described in clause (A) or clause (B) or facts or circumstances described in clause (C), a "Senior Indebtedness Default") and (ii) receipt by the Lender from the indenture trustee or other trustee, agent or representative for any Senior Indebtedness (the "Representative") of written notice of such Senior Indebtedness Default, then no direct or indirect payments or distribution of any assets of Borrower of any kind or character shall be made by or on behalf of Borrower on account of the Obligations on this Note or on account of the purchase or redemption or other acquisition of this Note whether pursuant to the terms of this Note or upon acceleration or otherwise unless and until such Senior Indebtedness Default shall have been cured or waived or shall have ceased to exist, or such Senior Indebtedness as to which such Senior Indebtedness Default relates shall have been discharged or paid in full in cash, after which Borrower shall resume making any and all required payments in respect of this Note, including any missed payments. In the event that, notwithstanding the foregoing, the Lender or any holder of this Note shall have received any payment or distribution prohibited by the foregoing provisions of this Subparagraph 4.2, then such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over and delivered forthwith to the Representatives or as a court of competent jurisdiction shall direct. 4.3 Note Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Borrower. Upon any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, upon any dissolution, winding-up, total or partial liquidation or total or partial reorganization of Borrower (including, without limitation, in bankruptcy, insolvency or receivership proceedings or upon any assignment for the benefit of creditors or any other marshaling of assets and liabilities of Borrower and whether voluntary or involuntary): (a) the holders of all Senior Indebtedness shall first be entitled to receive payments in full in cash of all amounts payable under Senior Indebtedness before Lender is entitled to receive any payment with respect to this Note and until all Obligations with respect to the Senior Indebtedness are paid in full in cash, any distribution to which Lender or any other holder of this Note would be entitled shall be made to the holders of Senior Indebtedness; (b) any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, to which Lender shall be paid by the liquidating trustee or agent or other person making such a payment or distribution, directly to the holders of Senior Indebtedness or their Representative until all Senior Indebtedness remaining unpaid shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing, any payment or distribution of assets or securities of Borrower of any kind or character, whether in cash, property or securities, shall be received by Lender or any other holder of this Note on account of principal of, premium, if any, or interest on this Note before all Senior Indebtedness is paid in full in cash, such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over to, the holders of Senior Indebtedness or their Representative, ratably according to the respective amounts of Senior Indebtedness held or represented by each, until all Senior Indebtedness remaining unpaid shall have been paid in full in cash after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. 4.4 Lender to Be Subrogated to Rights of Holders of Senior Indebtedness. Subject to the payment in full in cash of all Senior Indebtedness, Lender shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of Borrower applicable to the Senior Indebtedness until all amounts owing on this Note shall be paid in full in cash. 4.5 Defined Terms. When used in this Note, the following capitalized terms shall have the meanings set forth below: "Existing Senior Indebtedness" means any and all Indebtedness and other Obligations of Borrower under or evidenced by (i) that certain Credit Agreement dated as of June 1, 1995 by and among Borrower, as borrower, First Interstate Bank of Nevada, N.A., as agent, and the Financial Institutions named therein, as Lenders, as the same may be amended from time to time, or (ii) any other document or instrument evidencing or securing such Indebtedness, including, without limitation, that certain Promissory Note due December 31, 2001, dated as of July 5, 1995 and made by Ameristar Casinos, Inc. to First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time, and that certain Pledge Security Agreement dated as of June 1, 1995 by and between Borrower, as Pledgor, and First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time. 'Hedging Obligations" means, with respect to the Senior Indebtedness of any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements relating to the Obligations under the Senior Indebtedness and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates on such Senior Indebtedness. "Indebtedness" means with respect to any person, corporation, trust, partnership, or other entity (a "Person"), without duplication, (i) all liabilities, contingent or otherwise, of such Person for borrowed money, evidenced by bonds, notes, debentures, drafts accepted or similar instruments or letters of credit, or for the payment of money relating to an obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with U.S. generally accepted accounting principals; (ii) reimbursement obligations of such person with respect to letters of credit; (iii) all liabilities of others of the kind described in the preceding clause (i) or clause (ii) that such Person has guaranteed or that is otherwise its legal liability; and (iii) all obligations of others secured by any mortgage, pledge, lien, encumbrances, charge or a security interest of any kind to which any of the properties or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such Person are subject, whether or not the obligations secured thereby shall have been assumed by such Person or shall otherwise be such Person's legal liability. "Obligations" means all obligations of every nature whether for principal, reimbursements, interest, fees, expenses, indemnities or otherwise, and whether primary, secondary, direct, indirect, contingent, fixed or otherwise (including obligations of performance) under the documentation governing any Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and interest on, and all other Obligations with respect to, (A) the Existing Senior Indebtedness and/or (B) any other Indebtedness of Borrower whether outstanding on June 1, 1997 or thereafter created, incurred, assumed or guaranteed or in effect guaranteed by Borrower, but with respect to the Indebtedness described in (B) above, only if the instrument or document evidencing such Indebtedness expressly provides that such Indebtedness shall be senior in right of payment to this Note; provided, however, Borrower shall not enter into any Senior Indebtedness if entering into such Senior Indebtedness would cause the aggregate outstanding principal balance of all Senior Indebtedness, immediately following execution and delivery of such Senior Indebtedness, to exceed $250,000,000 (excluding, for purposes of said maximum, Hedging Obligations with respect to Senior Indebtedness already counted for purposes of the calculation). "Senior Indebtedness" shall be deemed to include for all purposes of this Note interest accruing after the filing of a petition initiating any proceeding pursuant to any federal, state or foreign bankruptcy law in accordance with and at the rate (including any rate applicable upon any Senior Indebtedness Default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness of Borrower to any subsidiary of Borrower, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of Borrower or of any subsidiary of Borrower (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) any liability for federal, state, local or other taxes owed or owing by Borrower, and (v) any Indebtedness evidenced by that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Dominic J. Magliarditi in an original principal amount of $417,854, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Lender in an original principal amount of $13,232,146, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Dominic J. Magliarditi in an original principal amount of $459,180, or any novation(s) thereof, or the other Rebeil Note (as defined in Paragraph 7), or any novation(s) thereof. 5. Set-Off. Borrower shall be entitled to set off (a) any obligations payable by Lender to Borrower (without regard to whether such obligations of Lender arises under the transaction that gave rise to this Note or any other transaction or facts) against (b) amounts due and payable hereunder by Borrower to Lender or any other holder of this Note. Any such set offs shall be subject to the provisions of the Settlement Agreement dated as of May 3, 1997 by and among Borrower, Ameristar Casino Las Vegas, Inc., Lender, Dominic J. Magliarditi, Gem Air, Inc. and Nevada AG Air, Ltd. 6. Miscellaneous Provisions. No provision of this Note may be amended, modified, supplemented, changed, waived, discharged or terminated unless Lender consents thereto in writing. In case any one or more of the provisions contained in this Note should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. In the event of a failure by Borrower prior to the Maturity Date to pay any amounts due hereunder as and when due, Lender's sole remedy shall be adjustment of the Interest Rate as set forth in Paragraph 2; Lender specifically acknowledges and agrees that it shall not have the right prior to the Maturity Date to accelerate the indebtedness hereunder, or take any other actions other than those set forth in Paragraph 2 hereof, as a consequence of any such non-payment. This Note shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Nevada. By accepting this Note, each holder of this Note agrees (a) to be bound by and to perform all of the obligations of Lender hereunder and (b) that its rights hereunder are subject to the provisions hereof. This Note is not negotiable. 7. Novation and Pari Passu Provisions. This Note, together with another Non-Negotiable Promissory Note of even date herewith of Borrower in favor of Lender in the original principal amount of $8,869,900 (collectively, the "Rebeil Notes"), constitute a novation of that certain Non-Negotiable Promissory Note dated as of June 1, 1997 in the original principal amount $14,540,820 made by Borrower in favor of Lender (the "Original Note"). The Rebeil Notes are and shall be subordinate to Senior Indebtedness to the same extent as the Original Note, and any and all statements in any Senior Indebtedness providing for the subordination of the Original Note to such Senior Indebtedness shall remain effective for, and applicable to, the subordination of the Rebeil Notes. Without limiting the foregoing, (i) each of the Rebeil Notes is and constitutes a "Gem Settlement Note" as defined in and for purposes of that certain Credit Agreement dated as of July 8, 1997, as amended, among Borrower and various of its subsidiaries as borrowers, the lenders named therein and Wells Fargo Bank, National Association, as Arranger, Agent Bank and Swingline Lender, and (ii) each of the Rebeil Notes is and constitutes "Refinancing Indebtedness" of the "Gem Notes" as such terms are defined in and for purposes of that certain Indenture dated as of July 15, 1997, as amended, among First Trust National Association, as Trustee, Borrower and various subsidiaries of Borrower as guarantors. The novation of the Original Note is not intended to affect the limitation on the amount of Senior Indebtedness provided for in Subparagraph 4.5 of this Note. In the event that Borrower is unable to make full payment of principal of and/or interest on both the Rebeil Notes when due, the total amount paid at such time by Borrower in respect of the Rebeil Notes shall be applied ratably to the payment of the amounts then due and unpaid on the Rebeil Notes, without preference or priority of any kind, according to the amounts due and payable on the Rebeil Notes. By the acceptance of this Note, Lender hereby agrees and consents to such ratable application on behalf of itself and all subsequent holders of this Note; however, any acceptance by the holder of this Note of any partial payment of any amount due under this Note shall not be considered a forgiveness of indebtedness or a waiver of timely payment. The respective original holders of the Rebeil Notes are, and subsequent holders of the Rebeil Notes may be, entitled to certain rights or subject to certain obligations pursuant to the terms of a Settlement Agreement, entered into in September 1999 among Bryan and Dawn Hafen, Steven W. Rebeil, individually and as Trustee of the Karizma Trust, Dominic Magliarditi, Gem Mesquite, Ltd., Gem Development Co., Ameristar Casino Las Vegas, Inc. and Ameristar Casinos, Inc. IN WITNESS WHEREOF, the parties hereto have executed this Note as of November 11, 1999. BORROWER: LENDER: AMERISTAR CASINOS, INC., a Nevada corporation /s/ Steven W. Rebeil By: /s/ Thomas M. Steinbauer STEVEN W. REBEIL, as an Name: Thomas M. Steinbauer individual and in his capacity Title: Senior Vice as trustee of the Karizma Trust President of Finance created under that certain Trust Agreement dated July 2, 1991, as amended Pay to the order of Bryan and Dawn Hafen /s/ Steven W. Rebeil STEVEN W. REBEIL, as an individual and in his capacity as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended DATE: 11/16/99 EX-10 5 EXHIBIT 10.9(J) NON-NEGOTIABLE PROMISSORY NOTE 1. Promise to Pay. For good and valuable consideration, AMERISTAR CASINOS, INC., a Nevada corporation ("Borrower"), promises to pay to STEVEN W. REBEIL, as an individual and in his capacity as trustee of the Karizma Trust created under that certain Trust Agreement dated July 2, 1991, as amended ("Lender"), $8,869,900 with interest on the unpaid principal balance at eight percent (8%) per annum simple interest (subject to Paragraph 2) (the "Interest Rate") from June 1, 1997 until paid in accordance with the terms contained herein. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Should any accrued interest not be paid on any Interest Payment Date, it shall thereafter accrue interest as principal. All payments shall be made by wire to Lender's account at Bank of America, NT &SA, ABA Routing No.: 121000358, Account No.: 0202702714, or at such other place as the holder of this Note may from time to time designate. All payments shall be applied first to accrued interest and then to the principal balance. 2. Payment Schedule. This Note may be prepaid in whole or in part at any time without penalty. Borrower shall pay interest accruing under this Note as follows: (a) interest accruing from the date hereof through July 20, 1997 shall be paid (to the extent not previously paid) on July 20, 1997; (b) interest accruing from and after July 21, 1997 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each October, January, April and July thereafter until October 20, 1998; and (c) interest accruing from and after October 21, 1998 shall be paid (to the extent not previously paid) on the twentieth (20th) day of each calendar month thereafter until the date (the "Payment Termination Date") that is the earlier of the Maturity Date or the date when the principal amount of, and all accrued interest on, this Note has been paid in full. Each date upon which a payment is required to be made pursuant to the foregoing provisions of this Section 2 shall be referred to herein as a "Payment Date." In addition, Borrower shall pay installments of principal as follows: (1) On January 20, 2004, Borrower shall pay $502,627.19 to Lender as an installment of principal; and (2) On July 20, 2004, Borrower shall pay $886,990.02 to Lender as an installment of principal. If on any Payment Date before the Payment Termination Date, Borrower fails to make any payment of interest or principal to Lender, as required above, and Borrower fails to cure such failure within ten (10) days after receiving written notice of such failure from Lender, then, commencing as of the next Payment Date, the Interest Rate hereunder shall be increased as follows: (i) With respect to the first such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eleven and four tenths percent (11.4%) per annum simple interest; (ii) With respect to the second such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal fourteen and seven-tenths percent (14.7%) per annum simple interest; and (iii) With respect to the third such increase, the Interest Rate shall be increased so that the Interest Rate shall thereafter equal eighteen percent (18%) per annum simple interest. The Interest Rate shall not be increased to a level greater than eighteen percent (18%) per annum simple interest. 3. Maturity. All unpaid principal and accrued, but unpaid, interest shall be due and payable on December 31, 2004 (the "Maturity Date"). 4. Subordination. 4.1 Note Subordinated to Senior Indebtedness. Anything herein to the contrary notwithstanding, each of Borrower and Lender agrees that the payment of the Obligations with respect to this Note is subordinated, to the extent and in the manner provided in this Paragraph 4, to the prior payment in full in cash of all Senior Indebtedness. The provisions of this Paragraph 4 are made for the benefit of the holders of Senior Indebtedness and holders of Senior Indebtedness may enforce the provisions of this Paragraph 4 without any need to demonstrate any reliance hereon. 4.2 No Payment on Note in Certain Circumstances. Unless Subparagraph 4.3 shall be applicable, upon (i) (A) the occurrence of any default in the payment of all or any portion then due of principal of, premium, if any, or interest on any Senior Indebtedness, (B) the occurrence of any event which entitles one or more persons to act to accelerate the maturity of any Senior Indebtedness or (C) the existence of any facts or circumstances which would result in the occurrence of any event described in clause (A) or clause (B) if Borrower were to make any payment hereunder (any event described in clause (A) or clause (B) or facts or circumstances described in clause (C), a "Senior Indebtedness Default") and (ii) receipt by the Lender from the indenture trustee or other trustee, agent or representative for any Senior Indebtedness (the "Representative") of written notice of such Senior Indebtedness Default, then no direct or indirect payments or distribution of any assets of Borrower of any kind or character shall be made by or on behalf of Borrower on account of the Obligations on this Note or on account of the purchase or redemption or other acquisition of this Note whether pursuant to the terms of this Note or upon acceleration or otherwise unless and until such Senior Indebtedness Default shall have been cured or waived or shall have ceased to exist, or such Senior Indebtedness as to which such Senior Indebtedness Default relates shall have been discharged or paid in full in cash, after which Borrower shall resume making any and all required payments in respect of this Note, including any missed payments. In the event that, notwithstanding the foregoing, the Lender or any holder of this Note shall have received any payment or distribution prohibited by the foregoing provisions of this Subparagraph 4.2, then such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over and delivered forthwith to the Representatives or as a court of competent jurisdiction shall direct. 4.3 Note Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Borrower. Upon any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, upon any dissolution, winding-up, total or partial liquidation or total or partial reorganization of Borrower (including, without limitation, in bankruptcy, insolvency or receivership proceedings or upon any assignment for the benefit of creditors or any other marshaling of assets and liabilities of Borrower and whether voluntary or involuntary): (a) the holders of all Senior Indebtedness shall first be entitled to receive payments in full in cash of all amounts payable under Senior Indebtedness before Lender is entitled to receive any payment with respect to this Note and until all Obligations with respect to the Senior Indebtedness are paid in full in cash, any distribution to which Lender or any other holder of this Note would be entitled shall be made to the holders of Senior Indebtedness; (b) any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, to which Lender shall be paid by the liquidating trustee or agent or other person making such a payment or distribution, directly to the holders of Senior Indebtedness or their Representative until all Senior Indebtedness remaining unpaid shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing, any payment or distribution of assets or securities of Borrower of any kind or character, whether in cash, property or securities, shall be received by Lender or any other holder of this Note on account of principal of, premium, if any, or interest on this Note before all Senior Indebtedness is paid in full in cash, such payment or distribution shall be received, segregated from other funds, and held in trust by Lender or such other holder of this Note, as the case may be, for the benefit of, and shall immediately be paid over to, the holders of Senior Indebtedness or their Representative, ratably according to the respective amounts of Senior Indebtedness held or represented by each, until all Senior Indebtedness remaining unpaid shall have been paid in full in cash after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. 4.4 Lender to Be Subrogated to Rights of Holders of Senior Indebtedness. Subject to the payment in full in cash of all Senior Indebtedness, Lender shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of Borrower applicable to the Senior Indebtedness until all amounts owing on this Note shall be paid in full in cash. 4.5 Defined Terms. When used in this Note, the following capitalized terms shall have the meanings set forth below: "Existing Senior Indebtedness" means any and all Indebtedness and other Obligations of Borrower under or evidenced by (i) that certain Credit Agreement dated as of June 1, 1995 by and among Borrower, as borrower, First Interstate Bank of Nevada, N.A., as agent, and the Financial Institutions named therein, as Lenders, as the same may be amended from time to time, or (ii) any other document or instrument evidencing or securing such Indebtedness, including, without limitation, that certain Promissory Note due December 31, 2001, dated as of July 5, 1995 and made by Ameristar Casinos, Inc. to First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time, and that certain Pledge Security Agreement dated as of June 1, 1995 by and between Borrower, as Pledgor, and First Interstate Bank of Nevada, N.A., as Agent for the Lenders under the Credit Agreement referred to above, as the same may be amended from time to time. "Hedging Obligations" means, with respect to the Senior Indebtedness of any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements relating to the Obligations under the Senior Indebtedness and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates on such Senior Indebtedness. "Indebtedness" means with respect to any person, corporation, trust, partnership, or other entity (a "Person"), without duplication, (i) all liabilities, contingent or otherwise, of such Person for borrowed money, evidenced by bonds, notes, debentures, drafts accepted or similar instruments or letters of credit, or for the payment of money relating to an obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with U.S. generally accepted accounting principals; (ii) reimbursement obligations of such person with respect to letters of credit; (iii) all liabilities of others of the kind described in the preceding clause (i) or clause (ii) that such Person has guaranteed or that is otherwise its legal liability; and (iii) all obligations of others secured by any mortgage, pledge, lien, encumbrances, charge or a security interest of any kind to which any of the properties or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such Person are subject, whether or not the obligations secured thereby shall have been assumed by such Person or shall otherwise be such Person's legal liability. "Obligations" means all obligations of every nature whether for principal, reimbursements, interest, fees, expenses, indemnities or otherwise, and whether primary, secondary, direct, indirect, contingent, fixed or otherwise (including obligations of performance) under the documentation governing any Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and interest on, and all other Obligations with respect to, (A) the Existing Senior Indebtedness and/or (B) any other Indebtedness of Borrower whether outstanding on June 1, 1997 or thereafter created, incurred, assumed or guaranteed or in effect guaranteed by Borrower, but with respect to the Indebtedness described in (B) above, only if the instrument or document evidencing such Indebtedness expressly provides that such Indebtedness shall be senior in right of payment to this Note; provided, however, Borrower shall not enter into any Senior Indebtedness if entering into such Senior Indebtedness would cause the aggregate outstanding principal balance of all Senior Indebtedness, immediately following execution and delivery of such Senior Indebtedness, to exceed $250,000,000 (excluding, for purposes of said maximum, Hedging Obligations with respect to Senior Indebtedness already counted for purposes of the calculation). "Senior Indebtedness" shall be deemed to include for all purposes of this Note interest accruing after the filing of a petition initiating any proceeding pursuant to any federal, state or foreign bankruptcy law in accordance with and at the rate (including any rate applicable upon any Senior Indebtedness Default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness of Borrower to any subsidiary of Borrower, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of Borrower or of any subsidiary of Borrower (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) any liability for federal, state, local or other taxes owed or owing by Borrower, and (v) any Indebtedness evidenced by that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Dominic J. Magliarditi in an original principal amount of $417,854, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Lender in an original principal amount of $13,232,146, or any novation(s) thereof, that certain Promissory Note dated as of June 1, 1997 made by Borrower in favor of Dominic J. Magliarditi in an original principal amount of $459,180, or any novation(s) thereof, or the other Rebeil Note (as defined in Paragraph 7), or any novation(s) thereof. 5. Set-Off. Borrower shall be entitled to set off (a) any obligations payable by Lender to Borrower (without regard to whether such obligations of Lender arises under the transaction that gave rise to this Note or any other transaction or facts) against (b) amounts due and payable hereunder by Borrower to Lender or any other holder of this Note. Any such set offs shall be subject to the provisions of the Settlement Agreement dated as of May 3, 1997 by and among Borrower, Ameristar Casino Las Vegas, Inc., Lender, Dominic J. Magliarditi, Gem Air, Inc. and Nevada AG Air, Ltd. 6. Miscellaneous Provisions. No provision of this Note may be amended, modified, supplemented, changed, waived, discharged or terminated unless Lender consents thereto in writing. In case any one or more of the provisions contained in this Note should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. In the event of a failure by Borrower prior to the Maturity Date to pay any amounts due hereunder as and when due, Lender's sole remedy shall be adjustment of the Interest Rate as set forth in Paragraph 2; Lender specifically acknowledges and agrees that it shall not have the right prior to the Maturity Date to accelerate the indebtedness hereunder, or take any other actions other than those set forth in Paragraph 2 hereof, as a consequence of any such non-payment. This Note shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Nevada. By accepting this Note, each holder of this Note agrees (a) to be bound by and to perform all of the obligations of Lender hereunder and (b) that its rights hereunder are subject to the provisions hereof. This Note is not negotiable. 7. Novation and Pari Passu Provisions. This Note, together with another Non-Negotiable Promissory Note of even date herewith of Borrower in favor of Lender in the original principal amount of $5,670,920 (collectively, the "Rebeil Notes"), constitute a novation of that certain Non-Negotiable Promissory Note dated as of June 1, 1997 in the original principal amount $14,540,820 made by Borrower in favor of Lender (the "Original Note'). The Rebeil Notes are and shall be subordinate to Senior Indebtedness to the same extent as the Original Note, and any and all statements in any Senior Indebtedness providing for the subordination of the Original Note to such Senior Indebtedness shall remain effective for, and applicable to, the subordination of the Rebeil Notes. Without limiting the foregoing, (i) each of the Rebeil Notes is and constitutes a "Gem Settlement Note" as defined in and for purposes of that certain Credit Agreement dated as of July 8, 1997, as amended, among Borrower and various of its subsidiaries as borrowers, the lenders named therein and Wells Fargo Bank, National Association, as Arranger, Agent Bank and Swingline Lender, and (ii) each of the Rebeil Notes is and constitutes "Refinancing Indebtedness" of the "Gem Notes" as such terms are defined in and for purposes of that certain Indenture dated as of July 15, 1997, as amended, among First Trust National Association, as Trustee, Borrower and various subsidiaries of Borrower as guarantors. The novation of the Original Note is not intended to affect the limitation on the amount of Senior Indebtedness provided for in Subparagraph 4.5 of this Note. In the event that Borrower is unable to make full payment of principal of and/or interest on both the Rebeil Notes when due, the total amount paid at such time by Borrower in respect of the Rebeil Notes shall be applied ratably to the payment of the amounts then due and unpaid on the Rebeil Notes, without preference or priority of any kind, according to the amounts due and payable on the Rebeil Notes. By the acceptance of this Note, Lender hereby agrees and consents to such ratable application on behalf of itself and all subsequent holders of this Note; however, any acceptance by the holder of this Note of any partial payment of any amount due under this Note shall not be considered a forgiveness of indebtedness or a waiver of timely payment. The respective original holders of the Rebeil Notes are, and subsequent holders of the Rebeil Notes may be, entitled to certain rights or subject to certain obligations pursuant to the terms of a Settlement Agreement, entered into in September 1999 among Bryan and Dawn Hafen, Steven W. Rebeil, individually and as Trustee of the Karizma Trust, Dominic Magliarditi, Gem Mesquite, Ltd., Gem Development Co., Ameristar Casino Las Vegas, Inc. and Ameristar Casinos, Inc. IN WITNESS WHEREOF, the parties hereto have executed this Note as of November 11, 1999. BORROWER: LENDER: AMERISTAR CASINOS, INC., a Nevada corporation /s/ Steven W. Rebeil STEVEN W. REBEIL, as an By: /s/ Thomas M. Steinbauer individual and in his capacity Name: Thomas M. Steinbauer as trustee of the Karizma Trust Title: Senior Vice President created under that certain of Finance Trust Agreement dated July 2, 1991, as amended EX-10 6 EXHIBIT 10.12 CERTAIN PORTIONS OF THIS DOCUMENT FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED HAVE BEEN REDACTED. REDACTIONS ARE INDICATED BY A DOUBLE PAIR OF EMPTY BRACKETS ("[[ ]]"). ASSET PURCHASE AND SALE AGREEMENT By and Between FUTURESOUTH, INC., SOUTHBOAT LEMAY, INC. and SOUTHBOAT LIMITED PARTNERSHIP, Seller, and AMERISTAR CASINO ST. LOUIS, INC. Buyer. Dated as of February 15, 2000 1. Definitions; Construction. 1 1.1 Definitions 1 1.2 Construction 10 2. Assets, Assumed Contracts and Assumed Liabilities. 10 2.1 Assets 10 2.1.1 Lease 10 2.1.2 Project Documents 10 2.2 Assumed Contracts and Liabilities 10 2.3 Assumption of Liabilities 11 3. Purchase Price. 11 3.1 Purchase Price for the Assets. 11 3.1.1 Purchase Price 11 3.1.2 Royalty Payment 11 3.1.3 Sale of Project/Foreclosure 12 3.1.4 No Interest in Project 12 3.1.5 Delivery of Financial Statements 13 4. Closing; Conditions to Closing. 13 4.1 Closing 13 4.2 Seller's Conditions 13 4.3 Buyer's Conditions 14 5. Representations and Warranties of Seller 17 5.1 General Representations and Warranties. 17 5.1.1 Organization 17 5.1.2 Ownership 18 5.1.3 Authorization 18 5.1.4 Subsidiaries and Partnerships 18 5.1.5 No Conflict or Violation 18 5.1.6 No Burdensome Restrictions 19 5.1.7 Litigation and Proceedings 19 5.1.8 Consents and Approvals 19 5.1.9 Disclosures 19 5.2 Representations and Warranties With Respect to the Assets. 19 5.2.1 Title to Assets 20 5.2.2 Leased Site 20 5.2.3 Project Documents 20 5.2.4 Other Assets 20 5.3 Representations and Warranties With Respect to the Liabilities of Seller. 20 5.3.1 Debts 20 5.3.2 Environmental Matters 20 5.3.3 Insurance 20 5.4 Representations and Warranties With Respect to the Operations of Seller. 20 5.4.1 Compliance with Laws 21 5.4.2 Condemnation, Eminent Domain, Rezoning and Leasing 21 5.4.3 Improper Payments 21 5.5 Representations and Warranties With Respect to Seller's Disclosures. 21 5.5.1 Material Omissions 21 5.5.2 Brokers 21 5.5.3 Project Documents 21 6. Representations and Warranties of Buyer 22 6.1 Organization 22 6.2 Authorization 22 6.3 No Conflict or Violation 22 6.4 Litigation and Proceedings 22 6.5 Consents and Approvals 23 6.6 Brokers 23 6.7 No Licensing Problems 23 6.8 Ownership 23 6.9 Financial Statements of ACI 23 7. Affirmative Covenants 23 7.1 Permits 23 7.2 Governmental Investigation 24 7.3 Notices 25 7.4 Contracts 25 7.5 Other Prohibited Transactions 25 7.6 Inspection 25 7.7 Contacts 26 7.8 Condemnation 26 7.9 Project Documents 26 7.10 Improper Payments 26 7.11 Exclusivity 26 7.12 Right of Setoff 27 7.13 Showboat Development Company 27 7.14 Lease Obligations 27 7.15 Information 27 7.16 VIP Privileges 28 7.17 Transfers of Stock of Seller 28 8. Abandonment of Project 29 9. Alternate Site 30 10. Termination; Default. 31 10.1 Termination and Abandonment 31 10.2 Effect of Termination 31 10.3 Default by Seller 31 10.4 Default by Buyer 31 10.5 Notice and Cure Rights 31 11. Indemnification. 31 11.1 Seller 31 11.2 Buyer 32 11.3 Third Person Claims 32 11.4 Indemnification Payments 33 11.5 Limitations 33 11.5.1 On Buyer 33 11.5.2 On Seller 33 12. No Assurances 33 13. General Provisions. 34 13.1 Accounting Terms 34 13.2 Amendment and Modification 34 13.3 Approvals and Consents 34 13.4 Assignments 34 13.5 Business Day 34 13.6 Captions 34 13.7 Confidentiality 34 13.8 Counterpart Facsimile Execution 35 13.9 Counterparts 35 13.10 Entire Agreement 35 13.11 Exhibits 35 13.12 Failure or Delay 35 13.13 Further Assurances 35 13.14 Governing Law 36 13.15 Legal Fees, Costs 36 13.16 Notices 36 13.17 Publicity 37 13.18 Schedules 37 13.19 Severability 37 13.20 Specific Performance and Injunctive Relief 37 13.21 Submission to Jurisdiction 38 13.22 Successors and Assigns 38 13.23 Third-Party Beneficiary 38 13.24 Signature Warranty 38 13.25 Survival 38 14. Arbitration. 39 14.1 Arbitration Proceedings 39 14.2 Limitation on Consolidation or Joinder 39 INDEX OF EXHIBITS EXHIBIT DESCRIPTION EXHIBIT A Legal Description of the Leased Site EXHIBIT B Assignment and Assumption Agreement EXHIBIT C Bill of Sale EXHIBIT D Lease EXHIBIT E Management Agreement EXHIBIT F Project Documents EXHIBIT G Promissory Note EXHIBIT H Collateral Assignment of Lease EXHIBIT I Security Agreement EXHIBIT J Opinion of Buyer's Legal Counsel EXHIBIT K Opinion of Seller's Legal Counsel EXHIBIT L Certificate of Futuresouth Shareholders INDEX OF DISCLOSURE SCHEDULES SCHEDULE DESCRIPTION 5.1.1. Names 5.1.2. Stock Ownership 5.1.4. Seller's Subsidiaries and Partnerships 5.1.7. Litigation and Proceedings 5.1.8. Consents and Approvals Required of Seller 5.3.1. Seller's Debt 5.4.1. Compliance with Laws 5.4.3. Improper Payments 6.5. Consents and Approvals Required of Buyer ASSET PURCHASE AND SALE AGREEMENT This Asset Purchase and Sale Agreement is made and entered into as of the 15th day of February, 2000 among Ameristar Casino St. Louis, Inc., a Missouri corporation ("Buyer"), Futuresouth, Inc., a Missouri corporation (herein "Futuresouth"), Southboat Lemay, Inc., a Nevada corporation (herein "Southboat") and Southboat Limited Partnership, a Missouri limited partnership (herein "SLP") (Futuresouth, Southboat and SLP are herein collectively referred to as "Seller"). RECITALS A. Futuresouth is the sole shareholder of Southboat. Southboat is the sole general partner and Futuresouth is the sole limited partner of SLP. B. SLP holds a leasehold interest in an undeveloped site in St. Louis County, Missouri pursuant to that certain Amended and Restated Lease and Development Agreement by and between SLP, as tenant, and St. Louis County Port Authority, as landlord, dated as of February 15, 2000. A legal description of the leased site is set forth in Exhibit A and by this reference made a part hereof . C. Buyer wishes to purchase, and Seller wishes to sell, the Lease and the Project Documents (as hereinafter defined) upon the terms set forth herein. AGREEMENT In consideration of the foregoing, the mutual covenants herein contained and other good and valuable consideration (the receipt, adequacy and sufficiency of which are hereby acknowledged by the Parties by their execution hereof), the Parties agree as follows: 1. Definitions; Construction. 1.1 Definitions. For purposes of this Agreement, unless the context clearly indicates otherwise, the following capitalized terms have the following meanings: "ACI" means Ameristar Casinos, Inc., a Nevada corporation; the parent company of Buyer. "Affiliate" of any specified Person means: (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person; (ii) any other Person who is a director or officer (a) of such specified Person, (b) of any subsidiary of such specified Person or (c) of any Person described in clause (i) above; or (iii) any partner (general or limited), trustee, beneficiary, spouse, child (including an adult child) or sibling of, or member in a limited liability company with, any Person described in clause (i) above. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and it shall be conclusively presumed that the beneficial ownership of 25% or more of the securities having ordinary voting power for the election of directors (or comparable positions) of such Person constitutes control; and the term "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" means this Asset Purchase and Sale Agreement, including all Exhibits and Schedules hereto. "Applicable Law" means any law, rule, regulation, order, decree or other requirement having the force of law and, where applicable, any interpretation thereof by any authority having jurisdiction with respect thereto or charged with the administration thereof. "Assets" means the Lease and the Project Documents. "Assignment and Assumption Agreement" means that assignment and assumption agreement to be entered into between Buyer and Seller on the Closing Date, in the form of Exhibit B, whereby Seller assigns all of its rights under the Lease to Buyer and Buyer assumes Seller's obligations under the Lease on the terms set forth therein. "Basket Amount" means $25,000.00. "Bill of Sale" means that bill of sale to be executed and delivered by Seller to Buyer on the Closing Date, in the form of Exhibit C, whereby Seller conveys the Project Documents to Buyer. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks are authorized or required to close under the laws of the United States of America or the State of Missouri. "Buyer" has the meaning set forth in the opening paragraph of this Agreement. "Capital Expenditure" means all expenditures (excluding interest capitalized during construction) which must be capitalized under GAAP. "Capitalized Lease Obligation" means the obligations of a lessee under any lease of property which must be capitalized under GAAP. "Closing" has the meaning set forth in Section 4.1. "Closing Date" has the meaning set forth in Section 4.1. "Code" means the Internal Revenue Code of 1986, as amended. "Commencement of Construction" means the first turning of the ground in connection with the actual construction of the Project, excluding any ceremonial ground-breaking. "Confidential Information" means: (i) information not available to the general public or not in the public domain concerning Buyer's business and financial affairs delivered by or on behalf of Buyer to Seller; (ii) information not available to the general public concerning Seller's business and financial affairs (including, but not limited to, the information respecting the shareholders and partners of Seller) delivered by or on behalf of Seller to Buyer; and (iii) analyses, compilations, forecasts, studies and other documents prepared on the basis of such information prepared by the Parties or their respective agents, representatives, Affiliates, employees or consultants. "Contingent Obligation" means, as to any Person: (i) any direct or indirect liability, contingent or otherwise, of such Person with respect to any Debt or Contractual Obligation of another Person if the purpose or intent of such Person in incurring the Contingent Obligation is to provide assurance to the obligees of such Debt or Contractual Obligation that such Debt or Contractual Obligation will be paid or discharged, that any agreement relating thereto will be complied with or that any holder of such Debt or Contractual Obligation will be protected (in whole or in part) against loss in respect thereof, and (ii) any contingent liability as determined in accordance with GAAP (without regard to materiality). "Contractual Obligation" means any obligation, agreement or undertaking, whether oral or written and includes, without limitation, the Lease. "CPI" means the Consumer Price Index for All Urban Consumers for the U.S. City Average for All Items 1982-84=100, as determined by the United States Department of Labor, Bureau of Labor Statistics. "Debt" of a Person means (i) all obligations of such Person for borrowed money; (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person to pay the deferred purchase price of property or services; (iv) all Capitalized Lease Obligations of such Person; (v) all obligations or liabilities of others secured by an Encumbrance on any asset owned by such Person, whether or not such obligation or liability is assumed by such Person; (vi) all Contingent Obligations of such Person; and (vii) all other obligations or liabilities of such Person which are required by GAAP (without regard to materiality) to be shown as a liability or otherwise disclosed in financial statements. "Development Costs" means all Capital Expenditures of the Project, as made from time to time, excluding Maintenance Capital Expenditures to the extent funded or deemed to be funded out of the Maintenance Capital Expenditures Reserve. "Disclosing Party" has the meaning set forth in Section 13.7. "Disclosure Schedule" means those schedule(s) which sets forth all exceptions to Seller's representations and warranties contained in Section 5. "$" means United States of America dollars. "Encumbrance" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, restriction (including any easement, right-of-way or similar restriction), condition, lease, lien (statutory or otherwise), security interest, any conditional sale or option contract or other title retention agreement. "Environmental Damages" means all losses, penalties, fines, liabilities (including strict liability), costs and expenses, including reasonable attorneys' fees and consultants' fees, any of which are incurred at any time as a result of the existence of Hazardous Material at, upon, about or beneath the Leased Site, adjoining or nearby property or a Hazardous Waste Site or migrating or threatening to migrate to or from the Leased Site or a Hazardous Waste Site, or the existence of a violation of Environmental Laws pertaining to the Leased Site or a Hazardous Waste Site, including: (i) damages for personal injury, or injury to property or natural resource occurring upon or off the Leased Site or a Hazardous Waste Site, foreseeable or unforeseeable, including lost profits, consequential damages, interest and penalties, and (ii) damages for the loss of the use or any adverse impact on the marketing or marketability of rentable space on the Leased Site. "Environmental Laws" means all Applicable Laws relating to the environment, including: (i) all requirements pertaining to reporting, licensing, permitting, investigation and remediation of emissions, discharges, releases or threatened releases of Hazardous Material, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, (ii) all requirements relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Material, whether solid, liquid or gaseous in nature; and (iii) all requirements pertaining to the protection of the health and safety of employees or the public. "Excess Unexpended Maintenance Capital Expenditures Reserves" means that amount of the Maintenance Capital Expenditures Reserve funded or deemed to be funded in respect of any Fiscal Year that is not expended or deemed to be expended within two (2) years after the end of such Fiscal Year in respect of which such amount was reserved. For purposes of this definition, all disbursements funded or deemed to be funded out of the Maintenance Capital Expenditures Reserve shall be deemed to be made on a first-in, first-out (FIFO) basis of accounting. "Excursion Gambling Boat" means a casino gambling facility licensed in accordance with Applicable Law. "Financial Statements" means the financial statements of Buyer and, if Buyer engages in activities other than the Project or activities incidental thereto, of the Project for the applicable period, audited by a national accounting firm, containing a balance sheet, statements of income and expense and of cash flow, prepared in accordance with GAAP on a consistent basis, and includes all notes thereto. "Fiscal Year" means the 12-month period designated by the Buyer as its fiscal year for tax purposes. "GAAP" means generally accepted accounting principles from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board. "Governmental Authority" means any government of any nation, state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Hazardous Materials" means any substance: (i) the presence of which requires investigation or remediation under any Environmental Law; (ii) which is or becomes defined as a "hazardous waste" or "hazardous substance" under any Environmental Law; (iii) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any Governmental Authority; (iv) the presence of which causes or threatens to cause a nuisance or poses or threatens to pose a hazard to property or to the health or safety of Persons; (v) which contains gasoline, diesel fuel or other petroleum hydrocarbons; or (vi) which contains polychlorinated biphenyls or asbestos. "Hazardous Waste Site" means any site or location, wherever located (including any well, pit, pond, lagoon, tailings pile, spoil pile, impoundment, ditch, trench, drain, landfill, warehouse or waste storage container) where Hazardous Material has been deposited, stored, treated, reclaimed, disposed of, placed or otherwise come to be located. "Indemnified Party" means any Person claiming a right to indemnification pursuant to any indemnification provision in this Agreement. "Indemnifying Party" means any Person obligated to indemnify another Person pursuant to any indemnification provision in this Agreement. "Landlord" means St. Louis County Port Authority, a public body corporate and politic of the State of Missouri. "Lease" means that certain Amended and Restated Lease and Development Agreement by and between SLP and the St. Louis County Port Authority dated as of February 15, 2000, a copy of which is attached hereto as Exhibit D, any and all future amendments thereto permitted hereunder prior to the Closing Date and the leasehold estate created thereunder. "Leased Site" means that real property and any appurtenances thereto located in St. Louis County, Missouri containing approximately twenty-nine (29) acres all as set forth and legally described in Exhibit A. "Lender" means a Person who lends money to Buyer and/or ACI in connection with the Project in an arms' length transaction. "Maintenance Capital Expenditures" means those Capital Expenditures of Buyer made for the purpose of replacing or renovating then existing assets and/or components of the Project, including but not limited to slot machine and other gaming equipment replacements, restaurant renovations, casino signage renovation or replacement, hotel room renovations and replacements and other furniture, fixture and equipment renovations and replacements. "Maintenance Capital Expenditures Reserve" means an unsegregated reserve account for Maintenance Capital Expenditures to be funded or deemed funded annually from and after the Opening Date. The initial annual funding rate shall be equal to 3.5% of the total Development Costs on a weighted average during the Fiscal Year in question. If the Opening Date occurs on a date other than the first day of a Fiscal Year, the amount to be funded or deemed funded shall be prorated for such Fiscal Year. Commencing with the second full Fiscal Year following the Opening Date, the annual funding rate shall be increased annually, in the sole discretion of Buyer, to a percentage not to exceed the prior year annual rate multiplied by the increase, if any, in the CPI during the immediately preceding Fiscal Year. The annual funding percentage shall not be subject to decrease in the event of any decrease in the CPI. For example, after Fiscal Year 1, assuming the year to year increase in the CPI is 2%, then the maximum annual funding percentage increase is 3.5% times 2.0%, or .07%, thus making the revised annual percentage a maximum of 3.5% plus .07%, or 3.57%. Buyer, in its sole discretion, may either fund the Maintenance Capital Expenditure Reserve or deem the Maintenance Capital Expenditure Reserve funded for each applicable Fiscal Year. In the event the Maintenance Capital Expenditure Reserve is not actually funded in any given Fiscal Year, it shall be deemed funded. The Maintenance Capital Expenditures Reserve shall be reduced from time to time, but not below zero, by the amount of Maintenance Capital Expenditures incurred by Buyer (in the manner set forth under the definition of "Excess Unexpended Maintenance Capital Expenditure Reserves") and by the amount, if any, of Excess Unexpended Maintenance Capital Expenditure Reserves. "Management Agreement" means that certain Management and Administrative Services Agreement in form and substance as set out in Exhibit E by and between Buyer and ACI relating to the Project. The Management Fee, as defined in the Management Agreement (not to exceed 4% of the gross revenues of the Project), shall be considered as an operating expense of the Project, but any and all interest payable thereon pursuant to the Management Agreement shall be excluded as an operating expense of the Project. "Material Adverse Change" means a material adverse change in any of: (i) the condition of the business, performance, prospects, operation or assets of Seller (financial or otherwise), including without limitation the suitability of the Leased Site for the development of the Project; (ii) the value of the Leased Site as a location for the Project; (iii) the legality, validity or enforceability of this Agreement; (iv) the rights and remedies of Buyer under this Agreement; or (v) Applicable Law. "Material Adverse Effect" means one or more effects that, individually or in the aggregate, could result from a Material Adverse Change. "Net Free Cash Flow" means a sum determined and calculated at the end of each Fiscal Year upon the issuance of the Financial Statements for such Fiscal Year as follows: The operating income (loss) for the Project for an applicable Fiscal Year as determined in accordance with GAAP and other accounting principles employed by ACI in the preparation and issuance of its consolidated financial statements, each applied on a consistent basis, adjusted to add or subtract (as indicated) the following items for such Fiscal Year: 1. Additions to operating income (loss): (a) depreciation and amortization of assets; (b) Excess Unexpended Maintenance Capital Expenditures Reserves; (c) Project-Related Interest Income. 2. Deductions from operating income (loss): (a) interest expense on any and all Project- Related Debt; (b) required principal payments on Project-Related Debt; (c) all sums required to be paid into any and all sinking funds or reserves for the purpose of retirement of all or a portion of the principal amount of any or all Project- Related Debt at scheduled maturity, if such sinking fund or reserve is required by the holder of such Debt and such holder is not an Affiliate of Buyer; (d) the actual or deemed funding of the Maintenance Capital Expenditures Reserve; (e) an amount necessary to provide ACI a non-cumulative preferred rate of return of [[ ]] percent per annum on its Unreturned Project Equity for such Fiscal Year; provided that such deduction shall be limited to the extent necessary to prevent the Net Free Cash Flow of Buyer for such Fiscal Year being reduced to below zero; (f) deductions shall not be double counted if the same payment fits under more than one category. "Opening Date" means the date on which the Excursion Gambling Boat included in the Project opens for business. "Party" means a Person named as entering into this Agreement. "Permit" means all approvals, authorizations, consents, licenses, franchises, orders and other permits of any Governmental Authority. "Permitted Encumbrances" means: (i) taxes and assessments, general and specific, not due and payable on or before the Closing Date; and (ii) those title exceptions listed in the commitment for title insurance to be obtained by Buyer which do not or will not, in the sole discretion of Buyer, impair the leasehold interest in, or the intended development, use, operation or occupancy of, the Leased Site. "Person" means any natural person, corporation, joint venture, association, company, trust, joint stock company, bank, trust company, land trust, vehicle trust, business trust, real estate investment trust, limited liability company, limited liability partnership, limited liability trust, partnership or other organization irrespective of whether it is a legal entity, and any Governmental Authority. "Prime Rate" means the prime rate as published from time to time by Wells Fargo Bank, N.A. or if such rate ceases to be published, then the prime rate as published daily in The Wall Street Journal. "Prime Territory" has the meaning set forth in Section 4.3.14. "Project" means Buyer's proposed development of the Leased Site, including a casino with approximately 2,000 slot machines and 60 table games, or approximately 2,360 gaming positions, and related improvements such as restaurants and parking. It is currently contemplated that there will be multiple restaurant offerings with total seating for approximately 700 to 750 guests. The term "Project" includes such additional improvements, renovations and/or expansions of existing improvements as Buyer may, at its sole discretion, elect to develop. Buyer may, at its sole discretion, elect from time to time to change the scope of the Project, but not the Purchase Price or the Royalty payable to Seller. "Project Costs" means all costs and obligations incurred by Buyer in developing, constructing, financing and operating the Project. "Project Documents" means all engineering studies, architectural and engineering drawings or plans, elevations, site studies, Coast Guard permit applications (if any), U.S. Army Corps Of Engineers' permit application(s), if any, the Seller's and its predecessor's Missouri Gaming Commission license application(s), title insurance commitment(s) and policies, if any (including all copies of recorded or unrecorded documents listed as exceptions to the title of the Leased Site), surveys, environmental reports, market studies, applications for zoning or rezoning of all or a portion of the Leased Site, all correspondence, documents and/or agreements pertaining to the Lease and/or all or any portion of the Leased Site; all correspondence, documents and/or agreements relating to nearby or adjoining property to the Leased Site, information, presentations and other material used or useful in connection with any attempts by Seller to develop the Project. A list of such documents is attached hereto as Exhibit F. "Project Equity" means the equity investment of ACI in Buyer for the Project plus the retained earnings accumulated within the Buyer to the extent that any such undistributed retained earnings are used for capital expansion, additions and improvements, excluding Maintenance Capital Expenditures funded out of the Maintenance Capital Expenditures Reserve. "Project-Related Debt" means all bona fide indebtedness incurred by or allocated to Buyer in connection with the development, construction, maintenance, operation, expansion or improvement of the Project and all refinancing indebtedness in respect thereof, including any and all loans to Buyer from one (1) or more Affiliates of Buyer on which the rate of interest shall be the Prime Rate plus five and one-half (5.5) percentage points. Notwithstanding any provision hereof to the contrary: (x) any indebtedness incurred or guaranteed by Buyer for the purposes set forth in the immediately preceding sentence which is also incurred by any Affiliate(s) of Buyer as co-borrower(s) and/or guaranteed by any Affiliate(s) of Buyer shall be deemed to be indebtedness incurred by such Affiliate(s) of Buyer and loaned to Buyer, such that Buyer shall be obligated to pay to such Affiliate(s) any difference between the actual rate of interest payable to the third party lender(s) and the lesser of (i) such actual rate of interest plus five (5) percentage points, or (ii) the Prime Rate plus five and one-half (5.5) percentage points; and (y) Project-Related Debt does not include the Promissory Note nor indebtedness otherwise incurred by or allocated to Buyer in order to make loans to one (1) or more Affiliates or as part of a consolidated borrowing group with one (1) or more Affiliates. "Project-Related Interest Income" means the interest income earned by Buyer as reported on the Buyer's Financial Statements, excluding interest income earned on loans or advances to Affiliates of the Buyer or on loans or advances to third parties not in the ordinary course of Buyer's business. "Promissory Note" means that negotiable promissory note in the original principal amount of [[ ]] to be executed by Buyer, payable to the order of Seller and which is to be in the form of Exhibit G. "Purchase Price" has the meaning set forth in Section 3. 1. 1. "Responsible Officer" means: (i) in the case of a corporation, the president, the chief executive officer, the chief financial officer, a vice president or a treasurer of such corporation; (ii) in the case of a partnership, a general partner therein; or (iii) in the case of a limited liability company, a manager of such entity. "Royalty" means that portion of the Purchase Price set forth in Section 3.1.2. "Seller" has the meaning set forth in the opening paragraph of this Agreement. Unless otherwise indicated by the context of usage (e.g., "any entity comprising Seller"), references to Seller herein shall be deemed to refer to each of Futuresouth, Southboat and SLP individually and all such entities collectively, and their respective successors and permitted assigns, if any. The Persons comprising Seller shall be jointly and severally liable for all obligations of Seller pursuant to this Agreement and the Transfer Documents. "Seller Collateral" means the collateral which secures the Promissory Note and the Royalty, namely a collateral assignment of the Lease in the form attached hereto as Exhibit H and a security interest in the Project Documents pursuant to a security agreement in the form attached hereto as Exhibit I, which collateral liens shall be subordinated to any lien on the same collateral held from time to time by a holder of Project- Related Debt that is not an Affiliate of Buyer, whether such holder is the original holder of such lien or an assignee. "Showboat" means Showboat Development Company, a Nevada corporation. "Stock" means shares of capital stock (including common and preferred stock) or other equity interests (regardless of how designated) of or in a corporation or comparable entity (including, without limitation, a partnership, joint venture, limited liability company or liquidating trust), whether voting or nonvoting, general or limited. "Stock Equivalents" means all securities convertible into or exchangeable for Stock and all warrants, options and other rights to purchase or subscribe for any Stock, or other Stock Equivalents, whether or not presently convertible, exchangeable or exercisable. "Subsidiary" with respect to Seller means any corporation of which Seller and its other Subsidiaries own not less than 50% of the outstanding Stock of such corporation having ordinary voting power for the election of directors of such corporation. "Tax" means any tax, charge, fee, levy, duty, withholding or other assessment, together with any interest and penalties, additions to tax and additional amounts imposed by any Governmental Authority. "Third Person" means a Person other than a Party or an Affiliate of a Party. "Transfer Documents" means the Assignment and Assumption Agreement, the Bill of Sale and all other assignments, certificates of title and other documents referred to in Section 4.3. "Unreturned Project Equity" for any Fiscal Year means: (i) the Project Equity as of the first day of such Fiscal Year plus (ii) the weighted average of all additions to the Project Equity during such Fiscal Year, reduced by (x) (but not below zero) ninety percent (90%) of the aggregate amount of Net Free Cash Flow of Buyer for the immediately preceding Fiscal Year, and further reduced by (y) the aggregate amount of all reductions pursuant to the preceding clause (x) for all Fiscal Years preceding the immediately preceding Fiscal Year. 1.2 Construction. Unless the context of this Agreement clearly requires otherwise; (i) references to the plural include the singular and vice versa; (ii) references to any Person include such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement; (iii) references to one gender include all genders; (iv) "including" is not limiting; (v) "or" has the inclusive meaning represented by the phrase "and/or"; (vi) the words "hereof", "herein", "hereby", "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (vii) section, clause, Exhibit and Schedule references are to this Agreement unless otherwise specified; (viii) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, and general or specific references to any Applicable Law means such Applicable Law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. 2. Assets, Assumed Contracts and Assumed Liabilities. 2.1 Assets. Subject to the terms and conditions hereof, on the Closing Date, Seller agrees to sell, assign, transfer, grant, bargain, deliver and convey to Buyer, and Buyer agrees to purchase from Seller, the Assets. The conveyances of the Assets are to be made as follows: 2.1.1 Lease. Seller agrees to execute and deliver to Buyer, or cause to be executed and delivered to Buyer, at the Closing, the Assignment and Assumption Agreement respecting the Leased Site. 2.1.2 Project Documents. Seller agrees to execute and deliver to Buyer at the Closing, the Bill of Sale conveying to Buyer all the Project Documents. 2.2 Assumed Contracts and Liabilities. Subject to the terms and conditions hereof, Buyer agrees to execute and deliver to Seller, and Seller agrees to execute and deliver to Buyer, at the Closing the Assignment and Assumption Agreement whereby Buyer assumes, upon the terms set forth therein, the Lease. 2.3 Assumption of Liabilities. Except for the Lease, Buyer and Seller agree that Buyer is not assuming any liability of Seller or of any Affiliate of Seller (including, but not limited to, obligations, if any, to Showboat) and hereby disclaims responsibility for any Debts, Contractual Obligations, or other obligations of Seller or of any Affiliate of Seller not so specifically assumed. Except for obligations accruing or arising under the Lease from and after the Closing Date, the Parties intend that Buyer is not, nor is it to be deemed, a successor of Seller or of any Affiliate of Seller with respect to any of Seller's or of any such Affiliate's Debts, Contractual Obligations or other obligations to Third Persons arising or accruing before, on or after the Closing Date. 3. Purchase Price. 3.1 Purchase Price for the Assets. 3.1.1 Purchase Price. The purchase price payable by Buyer to Seller for all the Assets is the sum of [[ ]] (the "Base Purchase Price") plus the Royalty as set forth in Section 3.1.2 (the Base Purchase Price and the Royalty are collectively called the "Purchase Price"), all to be paid by wire transfer or such other means as Seller may reasonably direct. The Base Purchase Price is payable as follows: (i) [[ ]] upon the execution and delivery of a letter of intent relating to this Agreement, which amount Buyer has previously paid to Seller. (ii) [[ ]] upon the selection for investigation by the Missouri Gaming Commission of Buyer's gaming license application to own and operate an Excursion Gambling Boat as part of the Project. (iii) [[ ]] evidenced by the Promissory Note payable in twelve (12) equal quarterly installments of [[ ]] each, with the first installment due and payable upon the Commencement of Construction of the Project by Buyer, and subsequent installments due every three (3) months thereafter, together with interest on the unpaid principal balance accrued at the rate of [[ ]] percent per annum from the date of the Commencement of Construction. The outstanding principal may be prepaid at any time, at the option of Buyer, without penalty. 3.1.2 Royalty Payment. Buyer shall, from and after the Opening Date and for so long as an Excursion Gambling Boat is operated as part of the Project during the term of the Lease, pay to Seller an annual payment (the "Royalty") as follows: (i) The annual payment shall be equal to the lesser of (a) [[ ]] percent of the Net Free Cash Flow for each Fiscal Year beginning with the Fiscal Year in which the Opening Date occurs, as certified by Buyer's or ACI's chief financial officer, or (b) [[ ]], prorated for any partial Fiscal Year. Such certification shall contain a detailed calculation of the Royalty showing all components of such calculation. Buyer's independent auditors will verify the determination of the Royalty, and Buyer shall deliver such verification together with Buyer's certification of the Royalty. The foregoing notwithstanding, beginning with the first full Fiscal Year after the Opening Date, the amount of annual Royalty payment for each full Fiscal Year shall not be less than [[ ]]. (ii) The Royalty payment shall be due and payable on or before the later of: (a) Ninety (90) days following the close of Buyer's Fiscal Year, or (b) Upon the delivery to Seller of Buyer's annual Financial Statements as required pursuant to Section 3.1.5. (iii) If Buyer shall fail to pay any Royalty payment when due and shall not cure such failure within the later of (x) five (5) days after delivery of written notice of such failure by Seller to Buyer, or (y) fifteen (15) days after the due date, then Buyer shall pay interest thereon at the rate of twelve percent (12%) per annum from the date due until paid. 3.1.3 Sale of Project/Foreclosure. In the event of the sale by Buyer of the Project or the Buyer's leasehold interest pursuant to the Lease, except as provided below, Buyer shall require the purchaser (hereinafter sometimes called "Buyer's Successor") to assume all obligations of Buyer under this Agreement thereafter arising, including the obligations pursuant to Section 3.1.2 to pay the Royalty and pursuant to Section 3.1.5 to provide Financial Statements. The Buyer shall remain jointly and severally liable with Buyer's Successor for performance of all such obligations; provided that Buyer shall be deemed to be released from any and all further obligations hereunder (i) if Buyer's Successor has a tangible net worth at the time of the closing of such sale greater than $25,000,000.00, (ii) five (5) years following the date of closing of such sale, or (iii) upon the subsequent sale of the Project or the leasehold interest pursuant to the Lease to any Person that is not an Affiliate of Buyer or of Buyer's Successor. Notwithstanding the foregoing, the obligations to pay the Royalty and provide the Financial Statements and Buyer's obligations under Section 7.16 shall not apply and shall be released forever (a) in the event of a foreclosure sale by a Lender which is not an Affiliate of Buyer, or (b) the sale of the Project or the Buyer's leasehold interest pursuant to the Lease by Buyer, or the direct or indirect sale of the stock of Buyer by ACI to a Third Person, in either case described in this clause (b) following any period of three consecutive full Fiscal Years following the Opening Date in each of which Buyer has a negative Net Free Cash Flow; provided that in the event of a sale of the type referenced in clause (b) above, Buyer shall pay to Seller [[ ]] percent of the net proceeds, if any, of any such sale in excess of the sum of the then outstanding Project-Related Debt and Unreturned Project Equity as and when such net proceeds are received by Buyer. 3.1.4 No Interest in Project. Seller's right to receive the Royalty shall not entitle Seller to, nor constitute any legal or equitable interest in, the Project nor in the ownership of Buyer. The relationship between Buyer and Seller with respect to the Royalty is solely that of debtor and creditor and none other, and it is expressly acknowledged and agreed that Buyer is not a fiduciary for or in respect of Seller. 3.1.5 Delivery of Financial Statements. Following the Commencement of Construction, Buyer will deliver a copy of its Financial Statements to Seller within 120 days after the end of each Fiscal Year or when publicly released, whichever is earlier. Seller may engage its own auditors, at its expense, to review any such Financial Statements and the underlying financial records, during the normal business hours of Buyer's finance department, upon reasonable advance notice. Such right of review may be exercised not more than once with respect to the Financial Statements for each Fiscal Year. Buyer will also provide to Seller copies of unaudited quarterly financial statements within sixty (60) days after the end of each fiscal quarter. 4. Closing; Conditions to Closing. 4.1 Closing. The closing of the purchase and sale contemplated herein (the "Closing") is to occur at the offices of Stinson, Mag & Fizzell, P.C., 100 South Fourth Street, Suite 700, St. Louis, Missouri 63102, on September 28, 2001 or a mutually convenient date and time within thirty (30) days following the satisfaction of or written waiver of the conditions set forth in Sections 4.2 and 4.3 of this Agreement, whichever first occurs (the "Closing Date"). Buyer, at its option, has the right to extend the Closing Date for up to two (2) additional twelve (12)-month periods, by delivering to Seller written notice thereof within thirty (30) days prior to any such date. The foregoing notwithstanding, the Closing Date shall occur on or before the Commencement Date (as defined in the Lease) so that the Commencement Date Fee and the Annual Rent (as defined in the Lease) shall be payable by Buyer, not Seller. On the Closing Date, Seller shall convey all of its right, title, and interest in, and shall surrender possession of, all the Assets to Buyer. 4.2 Seller's Conditions. All of the obligations of Seller hereunder to be performed at the Closing are subject to the satisfaction of every one of the following conditions precedent unless waived in writing by Seller: 4.2.1 the representations and warranties of Buyer herein are true and correct in all material respects as of the Closing Date; 4.2.2 Buyer is in compliance with all covenants, agreements and undertakings of Buyer herein, 4.2.3 all consents, approvals or other authorizations of third parties, including any Governmental Authorities, required for the consummation of the transactions contemplated hereby have been received by Seller, 4.2.4 no proceeding, investigation or inquiry is pending or threatened by or before any arbitrator or Governmental Authority to enjoin, restrain or prohibit, or to obtain material damages in respect of, or which is related to or arises out of this Agreement or the consummation of the transactions contemplated hereby. 4.2.5 at the Closing, Buyer tenders to Seller the following documents, executed in a manner and otherwise in form and substance reasonably satisfactory to Seller: 4.2.5.1 a copy of resolutions duly adopted by the board of directors of Buyer authorizing the execution and delivery of this Agreement by Buyer and the consummation of the transactions herein contemplated to be consummated by Buyer, including the Promissory Note, and the Assignment and Assumption Agreement, duly certified, as of the Closing Date, by the secretary or any assistant secretary of Buyer; 4.2.5.2 a certificate, dated as of the Closing Date, of a Responsible Officer of Buyer to the effect that all of the conditions precedent to Buyer's obligations in Section 4.3 that have not been waived by Buyer have been satisfied, and that the representations and warranties of Buyer herein are true and correct in all material respects as of the Closing Date; 4.2.5.3 a certificate of the secretary or assistant secretary of Buyer certifying the names and signatures of the officers of Buyer who have been authorized to execute and deliver this Agreement and any other agreement executed and delivered on behalf of Buyer in connection herewith; 4.2.5.4 a copy of the articles or certificate of incorporation of Buyer certified as correct and complete as of a recent date by the Secretary of State or comparable official of the jurisdiction of incorporation of Buyer, together with a certificate containing the attestation of such official as to the good standing of Buyer in such jurisdiction, and a copy of the bylaws of Buyer, certified as correct and complete as of the Closing Date by the secretary or assistant secretary of Buyer; 4.2.5.5 the Promissory Note; 4.2.5.6 the Assignment and Assumption Agreement; 4.2.5.7 the collateral assignment of the Lease, security agreement and UCC-1 financing statements constituting and evidencing the Seller Collateral; 4.2.5.8 the legal opinion of counsel for Buyer in form and substance as set out in Exhibit J; and 4.2.5.9 all conditions under the Lease to the assignment of the Lease to Buyer have been satisfied or waived by Landlord. 4.3 Buyer's Conditions. All of the obligations of Buyer hereunder to be performed at the Closing are subject to the satisfaction of every one of the following conditions precedent unless, waived in writing by Buyer; 4.3.1 the representations and warranties of Seller herein are true and correct in all material respects as of the Closing Date, 4.3.2 Seller is in compliance with all covenants, agreements and undertakings of Seller herein; 4.3.3 no Material Adverse Change has occurred; 4.3.4 all consents, approvals or other authorizations of third parties, including any Governmental Authorities, required for the consummation of the transactions contemplated hereunder have been received by Buyer and/or ACI (including the approval of St. Louis County if and to the extent required by Buyer); 4.3.5 No proceeding, investigation or inquiry is pending or threatened by or before any arbitrator or Governmental Authority to enjoin, restrain or prohibit, or to obtain material damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which could reasonably be expected to result in a Material Adverse Effect; 4.3.6 Buyer has obtained current judgment, tax and other lien and Uniform Commercial Code financing statement search reports showing no liens against the Leased Site or any of the Assets, other than taxes not yet due and payable; 4.3.7 on or before the Closing, Seller shall have tendered to Buyer the following documents, executed in a manner and otherwise in form and substance reasonably satisfactory to Buyer: 4.3.7.1 a copy of resolutions duly adopted by the shareholders and directors of Futuresouth and Southboat authorizing the execution and delivery of this Agreement by Seller and the Transfer Documents and the consummation of the transactions herein and therein contemplated to be consummated by Seller, duly certified, as of the Closing Date, by the respective secretary or any assistant secretary of Futuresouth and Southboat; 4.3.7.2 certificates, dated as of the Closing Date, of Responsible Officers of Futuresouth, Southboat and SLP to the effect that all of the conditions precedent to Seller's obligations in Section 4.2 that have not been waived by Seller have been satisfied, and that the representations and warranties of Seller herein are true and correct in all material respects as of the Closing Date; 4.3.7.3 a copy of resolutions duly adopted by the shareholders and directors of the corporate general partner of SLP authorizing the execution and delivery of this Agreement by SLP and the Transfer Documents and the consummation of the transactions herein and therein contemplated to be consummated by Seller, duly certified, as of the Closing Date, by the respective secretary or any assistant secretary of such corporate general partner. 4.3.7.4 a copy of resolutions duly adopted by the limited partner of SLP authorizing the transactions contemplated herein and in the Transfer Documents to be consummated by Seller, duly certified, as of the Closing Date, by the secretary or any assistant secretary of the corporate general partner. 4.3.7.5 releases and Uniform Commercial Code termination statements, executed by the appropriate secured parties and in a form appropriate for recording and filing that are sufficient to release any and all Encumbrances against the Assets other than Permitted Encumbrances; 4.3.7.6 copies of the respective articles or certificates of incorporation of Futuresouth, Southboat and the corporate general partner of SLP, certified as correct and complete as of a recent date by the Secretary of State or comparable official of thejurisdictions of incorporation of Futuresouth, Southboat and the corporate general partner of SLP together with a certificate containing the attestation of such official as to the good standing of Futuresouth, Southboat or the corporate general partner of SLP as the case may be, in such jurisdiction, and a copy of the respective bylaws of Futuresouth, Southboat and the corporate general partner of SLP, certified as correct and complete as of the Closing Date by the respective secretaries or assistant secretaries of Futuresouth, Southboat and the corporate general partner of SLP; 4.3.7.7 a copy of the Amended and Restated Agreement of Limited Partnership of SLP, certified as correct and complete as of a recent date by the corporate general partner of SLP, together with a certificate of the Missouri Secretary of State attesting to the good standing of SLP and a copy of the certificate of limited partnership, certified as correct and complete as of a recent date by the Missouri Secretary of State. 4.3.7.8 a legal opinion of Seller's legal counsel directed to the Buyer in form and substance as set out in Exhibit K. 4.3.7.9 an estoppel certificate from Landlord, in form and substance satisfactory to Buyer, certifying that (i) the Lease is in full force and effect, (ii) there exists no default(s) under the Lease, (iii) to the Landlord's knowledge, there exists no event or circumstance that with notice and/or the passage of time will cause a default to occur under the Lease, and (iv) all representations and warranties of Landlord set forth in Section 8 of the Lease shall be deemed to have been remade without qualification or exception by Landlord to Buyer as of the Closing Date. 4.3.7.10 a certificate from each shareholder of Futuresouth in form and substance as set out in Exhibit L, delivered to Buyer prior to the execution and delivery of this Agreement by Buyer and to be reaffirmed as of the Closing Date; and any disclosures set forth on any disclosure schedules to such certificates shall be acceptable to Buyer in its sole discretion; provided that Buyer shall act in good faith with respect thereto. 4.3.8 The completion to Buyer's satisfaction of background investigations of all the Seller's entities and their respective management, personnel and owners pursuant to ACI's Gaming Compliance Program, as required by the Nevada Gaming Control Board. 4.3.9 The satisfactory completion, in Buyer's sole discretion, of its due diligence investigation concerning the Leased Site and Project, including environmental matters, title matters, survey, utilities, traffic, highway, soil structure, zoning, access, the "offsite work conditions" as provided in the Lease, and the feasibility of developing and operating the Project on the Leased Site. 4.3.10 The consent of Landlord and any requisite Governmental Authority to the assignment and assumption of the Lease. 4.3.11 Approval by Landlord, the Missouri Gaming Commission, the U.S. Army Corps of Engineers, the U.S. Coast Guard, local land use planning and zoning authorities and all Governmental Authorities having jurisdiction over the Project, in such a manner as to not materially decrease the size and scope of the Project, except as otherwise acceptable to Buyer in its sole discretion. 4.3.12 Buyer must be reasonably satisfied that the ingress and egress to the Leased Site shall be improved (and at a cost, if any, to Buyer, acceptable to Buyer in its sole discretion) in a manner sufficient to handle the projected traffic flow to and from the Leased Site. Buyer must be reasonably satisfied that improvements shall be permitted on the Leased Site and surrounding properties to enhance the visibility and prominence of the Leased Site, including the development of an off-site lighted monument sign and directional signage in the surrounding area. Buyer shall be satisfied in its sole discretion, that the hardscape and landscape along the major access roads leading to the Leased Site shall be satisfactorily improved. 4.3.13 No additional Excursion Gambling Boat or other casino shall be licensed or approved for development in Missouri that is within a radius of fifteen (15) miles of the Leased Site and that is south of Interstate 64 (the "Prime Territory"). 4.3.14 Receipt by Buyer, in form and substance acceptable to Buyer, of a commitment for an ALTA leasehold title insurance policy from a title insurer selected by Buyer, insuring Buyer's leasehold interest in the Leased Site, subject only to the Permitted Encumbrances. 4.3.15 On or before the Closing, Seller shall have tendered to Landlord the duly executed Assignment Release (as defined in the Lease). 5. Representations and Warranties of Seller. Notwithstanding any provision in this Agreement to the contrary, all representations in this Agreement by Seller, including everything in this Section 5, are limited by the qualification in this paragraph. Since Southboat and SLP were controlled and operated by Showboat prior to December 11, 1997, all representations herein by Southboat and SLP are limited to the period from and after December 11, 1997, and do not apply to any periods before that date. In order to induce Buyer to enter into this Agreement and to close the transactions contemplated hereunder, Seller makes the following representations and warranties to Buyer as of the date hereof and as of the Closing Date: 5.1 General Representations and Warranties. 5.1.1 Organization. Futuresouth and Southboat are duly organized and validly existing corporations in good standing under the laws of the jurisdiction of their respective incorporations, and each has the power and authority to own, lease and operate its assets and properties and to conduct its business as now being conducted. Southboat is licensed and qualified to do business as a foreign corporation and is in good standing in the State of Missouri. Futuresouth and Southboat have not conducted business under any name other than their respective corporate names except as set forth in Disclosure Schedule 5.1.1. SLP is a duly organized and validly existing limited partnership in good standing under the laws of the jurisdiction of its organization, and has the power and authority to own, lease and operate its assets and properties and to conduct its business as now being conducted. 5.1.2 Ownership. Futuresouth owns beneficially and of record all outstanding shares of the capital stock of Southboat. Disclosure Schedule 5.1.2 is a listing of all beneficial and record holders of Stock in Futuresouth and the number of shares of Stock held beneficially and/or of record by each of them. Except as provided on Disclosure Schedule 5.1.2, no entity comprising Seller has issued any Stock Equivalents. The only partners of SLP are Futuresouth and Southboat, and neither such partner has assigned or agreed to assign any of its interest in SLP. 5.1.3 Authorization. There is no provision in the articles of incorporation, certificates of incorporation, bylaws or agreement of limited partnership or other governing documents of any entity comprising Seller which prohibits or limits Seller's ability to consummate the transactions contemplated herein. Seller has the full right, power and authority to enter into this Agreement, to consummate all of the transactions contemplated and to fulfill all of the obligations to be fulfilled by Seller hereunder. The execution and delivery of the Lease by SLP and the execution and delivery of this Agreement by Seller and the due consummation by Seller of the transactions contemplated hereby will be duly authorized by all necessary action of the directors and shareholders of Futuresouth and Southboat, the directors and shareholders of the corporate general partner of SLP and the limited partner of SLP and Seller has delivered copies thereof to Buyer prior to the execution and delivery of this Agreement by Buyer. This Agreement constitutes a legal, valid and binding agreement of each entity comprising Seller enforceable against each such entity in accordance with its terms. 5.1.4 Subsidiaries and Partnerships. No entity comprising Seller has any Subsidiary, nor owns stock or any other interest in any corporation or other entity, except for the interests that Futuresouth owns in Southboat and SLP. 5.1.5 No Conflict or Violation. Assuming all consents necessary to transfer the Assets to Buyer are obtained in a timely fashion, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated to be consummated by Seller hereby nor compliance by Seller with any of the provisions hereof will result in: (i) a violation of or a conflict with any provision of the articles or certificates of incorporation, limited partnership agreements or comparable organizational documents or bylaws of any entity comprising Seller; (ii) to the best of Seller's knowledge, after due investigation, a breach of, or right of termination, forfeiture or default under any term, condition or provision of any Contractual Obligation or Permit to which any entity comprising Seller is a party or by which any of its assets is bound or affected, or an event which, with the giving of notice, lapse of time, or both, would result in any such breach, right of termination, forfeiture or default; (iii) to the best of Seller's knowledge, after due investigation, a violation of any Applicable Law, or order, judgment, writ, injunction, decree or award, or an event which with the giving of notice, lapse of time, or both, would result in any such violation; (iv) to the best of Seller's knowledge, after due investigation, an imposition of any Encumbrance on any Asset, or an event which, with the giving of notice, lapse of time, or both, would result in any such imposition; or (v) to the best of Seller's knowledge, after due investigation, any Person having the right to enjoin, rescind or otherwise prevent or impede the transactions contemplated hereby or to obtain damages from Buyer or to obtain any other judicial or administrative relief as a result of any transaction carried out in accordance with the provisions of this Agreement. 5.1.6 No Burdensome Restrictions. No entity constituting Seller is a party to any Contractual Obligation the performance of which will result in the creation of an Encumbrance on any Asset. To the best of Seller's knowledge, after due investigation, no entity comprising Seller is in breach or violation of, or in default under or with respect to any Contractual Obligation which breach, violation or default has any reasonable likelihood of having a Material Adverse Effect, nor has any event occurred which constitutes or, with the giving of notice, lapse of time, or both, would constitute such a breach, violation or default. No entity comprising Seller is subject to any Applicable Law, compliance with which has any reasonable likelihood of having a Material Adverse Effect. 5.1.7 Litigation and Proceedings. Except as set forth in Disclosure Schedule 5.1.7, there are no actions, suits, proceedings or investigations pending (other than any investigation relating to Buyer's application for a license to operate an Excursion Gambling Boat at the Leased Site) or, to the best of Seller's knowledge after due investigation, threatened against or directly affecting any entity comprising Seller or any of their respective properties or their respective directors, officers or employees (in their capacities as such) before any Governmental Authority relating to the Leased Site or the Assets, nor is there any valid basis for any such action, suit, proceeding or investigation. No entity constituting Seller has been charged with, nor, to the best of Seller's knowledge after due investigation, is under investigation with respect to, any charge which has not been resolved concerning any violation of any Applicable Law with respect to any entity comprising Seller or the Assets nor is there a valid basis for any such charge or investigation. No judgment, order, writ, injunction, decree or assessment or other command of any Governmental Authority affecting any entity comprising Seller or the Assets is entered or in effect. There is no action, suit, proceeding or investigation pending or, to the best of Seller's knowledge, after due investigation, threatened which challenges the validity of this Agreement or the transactions contemplated hereunder, or otherwise seeks to prevent, directly or indirectly, the consummation of such transactions, nor is there any valid basis for any such action, suit, proceeding or investigation. 5.1.8 Consents and Approvals. No consent, approval or authorization of any Person, nor any declaration, filing or registration with any Governmental Authority or other Person, is required to be made or obtained by any entity constituting Seller in connection with the execution, delivery and performance by Seller of the transactions contemplated hereunder, except as set forth in Disclosure Schedule 5.1.8. 5.1.9 Disclosures. All disclosures made by or on behalf of any and all entities comprising Seller in connection with the background investigation under ACI's Gaming Compliance Program are and will be true, complete and correct. 5.2 Representations and Warranties With Respect to the Assets. 5.2.1 Title to Assets. Since the acquisition of the Assets by Seller on or about December 11, 1997, there have been no acquisitions or dispositions of the Assets. Seller has not, directly or indirectly, by operation of law or otherwise, transferred or assigned all or part of its right, title or interest in and to any of the Assets to any other Person. 5.2.2 Leased Site. Seller has no knowledge of any federal, state, county or municipal pending proceedings to change any highways or road systems adjoining the Leased Site or to restrict or change access from any such highway or road to the Leased Site or of any pending proceedings for improvements which might result in a special assessment against the Leased Site. 5.2.3 Project Documents. To the best of Seller's knowledge, Exhibit F is a true, accurate and complete list of all Project Documents that are possessed by Seller and which were delivered to Seller by Showboat, and all such Project Documents have previously been delivered to Buyer by Seller for review and photocopying. 5.2.4 Other Assets. Neither Seller nor any Affiliate of Seller owns or possesses any assets, other than the Assets, respecting the Leased Site or the development thereof. In the event that any such assets are discovered, Seller shall promptly deliver written notice thereof to Buyer and shall promptly convey such assets to Buyer upon Buyer's request. 5.3 Representations and Warranties With Respect to the Liabilities of Seller. 5.3.1 Debts. Seller has no Debt (whether accrued, fixed, absolute, contingent or otherwise and whether direct or indirect, primary or secondary, due or to become due) relating to the Assets, except liabilities which are set forth in the Disclosure Schedule 5.3.1. To the best of Seller's knowledge after due investigation, there is no basis for the assertion against Seller with respect to the Assets of any liability, obligation, commitment or Encumbrance which could adversely affect the value of any of the Assets or the Project or become an Encumbrance on any of the Assets, except as set forth on such Schedule. 5.3.2 Environmental Matters. Seller has never been in physical possession of the Leased Site and has never conducted any environmental site assessments relating to the Leased Site. Buyer and Seller understand that the Project Documents contain environmental site assessment materials generated for Showboat; however, Seller makes no representations or warranties concerning the correctness or completeness of such materials, except as set forth in Section 5.5.1. It is agreed that Seller shall not have any liability for any environmental remediation that may be necessary on the Leased Site, except in connection with a breach of the representations, warranties or covenants contained herein. 5.3.3 Insurance. Since January 15, 2000, Seller has maintained, and as of the Closing will have consistently maintained general liability insurance coverage with respect to the Leased Site in an amount of not less than $2,000,000.00 per occurrence, subject to no deductible. 5.4 Representations and Warranties With Respect to the Operations of Seller. 5.4.1 Compliance with Laws. Except as set forth in Schedule 5.4.1, each entity constituting Seller is, to the best of Seller's knowledge after due investigation, in compliance with all Applicable Laws. Seller has not received any notice alleging (or any notice of any investigation related to) any violation by Seller or any entity constituting Seller of any Applicable Law, which notice has not been fully and completely resolved as of the date of this Agreement. 5.4.2 Condemnation, Eminent Domain, Rezoning and Leasing. No part of the Leased Site is, to the best of Seller's knowledge, the subject of any pending condemnation, eminent domain, rezoning or similar proceeding. Seller has not listed the Leased Site (or any portion thereof) for lease or sub-lease with any real estate broker, listing agent or similar Person. To the best of Seller's knowledge, none of the Leased Site is subject to a lease or similar Contractual Obligation, other than the Lease. 5.4.3 Improper Payments. Except as set forth in Schedule 5.4.3, neither Seller nor any agent acting on behalf of Seller has at any time (i) made any contributions to any candidate for political office in violation of Applicable Law, or failed to disclose fully any contributions to any candidate for political office in accordance with any Applicable Law requiring such disclosure or (ii) made any payment to any local, state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by Applicable Law. 5.5 Representations and Warranties With Respect to Seller's Disclosures. 5.5.1 Material Omissions. To the best of Seller's knowledge, in addition to the foregoing representations and warranties contained in this Section 5, neither this Agreement nor any statement, list, certificate or other information furnished or to be furnished by or on behalf of Seller in connection with this Agreement or any of the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading, or which if disclosed would reasonably affect the decision of a Person considering a purchase of the Assets for the Project. 5.5.2 Brokers. No agent, broker or other Person acting pursuant to express or implied authority of Seller is entitled to a commission or finder's fee in connection with the transactions contemplated by this Agreement or, pursuant to express or implied authority of Seller, will be entitled to make any claim (including the assertion of an Encumbrance) against Buyer or all or any portion of the Assets for a commission or finder's fee. 5.5.3 Project Documents. Seller will, at Closing, quitclaim all of Seller's right, title and interest in and to the Project Documents to Buyer; however, Seller makes no express or implied warranties of any kind concerning the Project Documents, except as otherwise expressly provided herein. Seller shall have no liability of any kind to Buyer if Buyer cannot legally use the Project Documents, or if they are not assignable, or for defects in such documents, or for any other matter related to such documents, except in connection with a breach of the representations, warranties or covenants contained herein. 6. Representations and Warranties of Buyer. Buyer makes the following representations and warranties to Seller: 6.1 Organization. Buyer is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, and has the power and authority to own, lease and operate its assets and properties and to conduct its business as now being conducted. 6.2 Authorization. There is no provision in Buyer's articles or certificate of incorporation or comparable organizational documents or in its bylaws which prohibits or limits Buyer's ability to consummate the transactions contemplated hereunder. Subject to the provisions of Sections 4.3.8 and 4.3.9 and to the other terms and conditions of this Agreement, Buyer has the full right, power and authority to enter into this Agreement and to consummate or cause to be consummated all of the transactions and to fulfill all of the obligations contemplated hereunder excepting those matters contemplated herein that are subject to approval by Governmental Authority. The execution and delivery of this Agreement by Buyer and the due consummation by Buyer of the transactions contemplated hereby have been duly authorized by all necessary action of the board of directors and shareholders of Buyer. This Agreement constitutes a legal, valid and binding agreement of Buyer enforceable against Buyer in accordance with its terms 6.3 No Conflict or Violation. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby will result in a material: (i) violation of or a conflict with any provision of the articles or certificate of incorporation or comparable organizational documents or bylaws of Buyer; (ii) breach of, accrual of a right of termination with respect to, or forfeiture or default under any term, condition or provision of any Contractual Obligation or Permit to which Buyer is a party or by which any of its assets is bound or affected, or an event which, with the giving of notice, lapse of time, or both, would result in any such breach, right of termination, forfeiture or default; (iii) violation of any Applicable Law, or order, judgment, writ, injunction, decree or award, or an event which, with the giving of notice, lapse of time, or both, would result in any such violation; or (iv) any Person having the right to enjoin, rescind or otherwise prevent or impede the transactions contemplated hereby or to obtain damages from Seller or to obtain any other judicial or administrative relief as a result of any transaction carried out in accordance with the provisions of this Agreement. 6.4 Litigation and Proceedings. There are no actions, suits, proceedings or investigations pending (other than any investigation relating to Buyer's application for a license to operate an Excursion Gambling Boat at the Leased Site) or, to the best of Buyer's knowledge after due investigation, threatened against or directly affecting Buyer or any of its properties or its directors, officers or employees (in their capacities as such) before any Governmental Authority, nor is there any valid basis for any such action, suit, proceeding or investigation. Buyer has not been charged with, nor, to the best of Buyer's knowledge after due investigation, is under investigation with respect to, any charge which has not been resolved concerning any violation of any Applicable Law with respect to Buyer nor is there a valid basis for any such charge or investigation. No judgment, order, writ, injunction, decree or assessment or other command of any Governmental Authority affecting Buyer or any Affiliate of Buyer is entered or in effect. There is no action, suit, proceeding or investigation pending or, to the best of Buyer's knowledge after due investigation, threatened which challenges the validity of this Agreement or the transactions contemplated hereunder, or otherwise seeks to prevent, directly or indirectly, the consummation of such transactions, nor is there any valid basis for any such action, suit, proceeding or investigation. 6.5 Consents and Approvals. No consent, approval or authorization of any Person, nor any declaration, filing or registration with any Governmental Authority or other Person, is required to be made or obtained by Buyer in connection with the execution, delivery and performance by Buyer of the transactions contemplated to be consummated by Buyer hereunder, except for the consents and approvals which are contemplated hereunder and such other consents and approvals as are set out on Disclosure Schedule 6.5. 6.6 Brokers. No agent, broker or other Person acting pursuant to express or implied authority of Buyer is entitled to a commission or finder's fee in connection with the transactions contemplated by this Agreement or, pursuant to express or implied authority of Buyer, will be entitled to make any claim (including the assertion of an Encumbrance) against Seller or the Leased Site for a commission or finder's fee, 6.7 No Licensing Problems. Buyer is not aware of any circumstances, whether or not they have been disclosed to the Missouri Gaming Commission, that would adversely affect Buyer's ability to obtain a gaming license from the State of Missouri, or which would adversely affect the ability of Buyer or its Affiliates to obtain any consents to the Project that they may need from the gaming authorities of any other state where any of them do business. 6.8 Ownership. Buyer is wholly owned subsidiary of ACI, and no other Person has any equity interest in or option to acquire an equity interest in Buyer. 6.9 Financial Statements of ACI. The audited financial statements of ACI for its Fiscal Year ended December 31, 1998, and the unaudited statements of ACI for the nine months ended September 30, 1999, copies of which have been delivered to Seller, fairly present the financial condition of ACI as of the date of said statements and there has been no material adverse change in the financial condition of ACI since the date of said statements. 7. Affirmative Covenants. From and after the date hereof, the Parties covenant and agree as follows: 7.1 Permits. Seller understands and acknowledges that Buyer has amended and restated the Missouri Riverboat Gaming Applications previously submitted by Seller or its predecessor, and Seller hereby reaffirms its consent thereto. On or before the later of February 11, 2000 and ten (10) days following the execution and delivery of this Agreement by the Parties, Buyer shall pay to Seller the sum of $25,000.00 to partially reimburse Seller for the application fees previously paid by Seller to the Missouri Gaming Commission. Seller agrees to cooperate with Buyer and to take all actions reasonably requested by Buyer to assist and support Buyer in its efforts to obtain all Permits necessary for the development and operation of the Project. Buyer shall promptly reimburse Seller for all reasonable out-of-pocket costs and expenses incurred by Seller in rendering such assistance, provided that such costs and expenses have been submitted to and pre-approved by Buyer. Buyer shall bear the costs associated with all applications for Permits, including the fees of legal counsel and supporting experts. Seller, if it elects to retain legal counsel to review such applications, shall bear the cost of such counsel. In the event any Governmental Authority shall seek to impose a fee or fees for the investigation of the background of any entity comprising Seller or any shareholder, officer, director, partner (limited or general), employee or Affiliate thereof, such fee and any expenses associated with such investigation, including legal and accounting fees, shall be paid by Seller. 7.2 Governmental Investigation. Seller (a) acknowledges that Buyer's ability to obtain and maintain all Permits necessary to develop and operate the Project depends in part upon the completion from time to time to the satisfaction of all relevant Governmental Authorities, including without limitation the Missouri Gaming Commission, of a thorough background investigation and evaluation of Seller, all shareholders, partners and other Persons with any financial interest or management role in Seller, and all employees of Seller, which investigation and evaluation may concern the character, reputation and criminal records of such Persons; (b) agrees to cooperate with Buyer to furnish or cause to be furnished all information and to take or cause to be taken all actions necessary or expedient to the achievement from time to time of such satisfactory completion; (c) agrees to promptly notify Buyer in writing of the occurrence of any changes in the record or beneficial ownership of any Stock of any of the entities comprising Seller, which notice shall specify the name of the entity, the nature of the change or transaction causing the change, the quantity of Stock involved, and the names and addresses of all parties to the change or transaction causing the change; and (d) agrees that, if Buyer is informed, orally or in writing, through formal notification or otherwise, that any such Person's interest in or involvement with Seller may or could delay or jeopardize the ability of Buyer or any Affiliate of Buyer to obtain or maintain any Permit related to the Project or otherwise, Buyer shall notify Seller thereof, and, to the extent permitted by the Missouri Gaming Commission and/or other Governmental Authority, Seller shall have thirty (30) days after receipt of such notice in which to try to convince the Missouri Gaming Commission and/or other Governmental Authority that such Person's interest does not need to be terminated and should not delay or jeopardize the ability of Buyer or any Affiliate of Buyer to obtain or maintain any Permit related to the Project or otherwise. Buyer agrees to provide Seller with such information as is made available to Buyer concerning the reasons why the Missouri Gaming Commission and/or other Governmental Authority wants such Person's interest terminated or why such Person's interest in or involvement with Seller may or could delay or jeopardize the ability of Buyer or any Affiliate of Buyer to obtain or maintain any Permit related to the Project or otherwise; provided that Buyer shall have no obligation to obtain such information or to support or assist Seller in supporting such Person's continued interest in or involvement with Seller. The foregoing notwithstanding, Buyer shall, upon receipt of a written request from Seller, request by letter addressed to the Missouri Gaming Commission and/or other Governmental Authority (as the case may be) the disclosure to Seller of such information; provided that Buyer shall not be obligated to request such information more than once with respect to any such Person. If Seller is not successful in said thirty (30) day period in convincing the Missouri Gaming Commission and/or other Governmental Authority that such Person's interest does not need to be terminated, then Seller shall cause such interest or involvement to be terminated by the sale of such interest to a suitable Person, the termination of such involvement or otherwise. Until such termination is effected to the satisfaction of Buyer or its Affiliate (as the case may be) and all relevant Governmental Authorities, all rights to any Royalty payment, payments under the Promissory Note and any other payment due from Buyer coming due prior to the date on which such satisfactory termination is effected shall be suspended; provided that if such satisfactory termination is not effected within forty-five (45) days following the delivery of the aforesaid notice to Seller, Seller shall permanently forfeit all rights to the foregoing payments. Seller agrees that at all times prior to the termination of such involvement to the satisfaction of Buyer or its Affiliate (as the case may be) and all relevant Governmental Authorities, neither Seller nor any Affiliate of Seller shall have any legal or financial interest or participation, direct, indirect, attributed or otherwise, in or to the Project, including any income or revenues therefrom. 7.3 Notices. Seller shall deliver or cause to be delivered to Buyer, promptly after receipt or delivery (if applicable) of the same, copies of all notices from any Governmental Authority or any Person respecting the Leased Site, the Business or the Project. 7.4 Contracts. Seller will not, except with Buyer's prior written consent, amend or terminate the Lease, exercise or waive any rights under the Lease or enter into any material Contractual Obligation respecting the Leased Site. In the event that Buyer requests or requires any further extension of the Investigation Date (as defined in the Lease), Seller shall not be obligated to obtain any such extension or to pay any consideration to the Landlord or any Third Person in connection therewith. 7.5 Other Prohibited Transactions. No Party will, without the prior written consent of the other, take any action or omit to take any action, suffer any act or omission, which may result in any of the representations and warranties of such first mentioned Party being untrue or in the nonfulfillment of any of the covenants set forth herein. Seller may not (and will not permit any of its Affiliates to), without the prior written consent of Buyer (which consent with respect to subsections (i), (iv) and (v) shall not be unreasonably withheld, but may be given or withheld in Buyer's sole discretion with respect to all other subsections below), directly or indirectly, by operation of law or otherwise; (i) pay any dividends or otherwise make any distributions to Seller's shareholders in violation of Applicable Law; (ii) issue any Stock or Stock Equivalent in Seller; (iii) borrow money using the Lease or Leased Site as collateral; (iv) fail to pay any of Seller's Debts, to the extent of Seller's assets, as the same become due; provided that Seller shall have the right to diligently contest any claimed Debt; (v) dissolve Seller and form a liquidating trust, the certificated Stock of which is issued to the then shareholders of Futuresouth, (vi) merge or consolidate Seller with any other Person; (vii) engage in any discussions, or solicit or encourage any discussions, regarding the Leased Site or the Lease, except as provided for herein; or (viii) agree to do any of the foregoing. Seller will promptly notify Buyer in writing upon the occurrence of any Material Adverse Change or event which could have a Material Adverse Effect. 7.6 Inspection. Buyer and its employees, officers, shareholders, directors, attorneys, agents, independent auditors and representatives have the right to make a full due diligence investigation of the Assets and the books and records of Seller pertaining thereto. Buyer may conduct engineering or other inspections necessary or desirable to enable Buyer to evaluate the Leased Site, and may apply for any Permits which may be required of Buyer. Seller will cooperate with Buyer in carrying out the provisions of this Section and will provide Buyer promptly with such documents and information pertaining to the Assets as Buyer may reasonably request, if such documents are under the control of Seller or any Affiliate of Seller. Buyer agrees to indemnify, hold harmless and defend Seller against any loss, damages, claim or liability (including mechanic or materialmen's liens) suffered by Seller and resulting from the acts or omissions of Buyer or its employees, officers, shareholders, directors, attorneys, agents, independent auditors and representatives in inspecting or investigating the Leased Site pursuant to this Section. Notwithstanding the preceding sentence, Buyer has no obligation to indemnify, hold harmless or defend Seller with respect to any matter arising out of Seller's own negligence or willful misconduct. Sections 11.3 and 11.4 shall apply with respect to Buyer's indemnification obligations under this Section 7.6. In no event may Buyer commence any construction on the Leased Site until it has closed on the purchase of the Assets. 7.7 Contacts. Seller hereby grants Buyer permission to contact any parties to the Lease or Project Documents for the purpose of investigating and ascertaining the status thereof. 7.8 Condemnation. If, after the date hereof but prior to the Closing, condemnation or eminent domain proceedings are proposed, threatened or commenced against any portion of the Leased Site which could have a Material Adverse Effect on the prospects or operation of the Project, Seller will immediately notify Buyer of such event. Buyer may elect to terminate its obligations under this Agreement by notice to Seller within ten (10) Business Days after Buyer receives such notice from Seller, or elect to close the purchase and sale contemplated herein and receive any and all condemnation proceeds or awards (collectively the "Proceeds") payable as the result of such proceeding (including, any such Proceeds paid to or for the account of Seller or any Affiliate of Seller prior to the Closing Date, whether or not such Proceeds then constitute Assets). If Buyer elects to terminate such obligations, no Party shall have any further obligation under this Agreement, except for such obligations as expressly survive termination. If Buyer elects to close, Seller agrees to execute such assignment documents as Buyer may reasonably require to effect the assignment to Buyer of all Proceeds to which Seller has a right. 7.9 Project Documents. Seller shall, if requested in writing by Buyer's legal counsel, deliver to Buyer or such legal counsel letters addressed to each of the professional service companies which prepared or issued any of the Project Documents, authorizing such companies to communicate freely and otherwise cooperate with Buyer. The letters shall be in a form and substance reasonably acceptable to Buyer and Seller. 7.10 Improper Payments. Neither Seller nor any Affiliate of Seller nor any agent acting on behalf of any of them will (i) make any contributions to any candidate for political office in violation of Applicable Law, or fail to disclose fully any contributions to any candidate for political office in accordance with any Applicable Law requiring such disclosure or (ii) make any payment to any local, state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by Applicable Law. The provisions of this Section 7.10 will survive the Closing and the delivery of the Transfer Documents. 7.11 Exclusivity. So long as this Agreement is in effect, neither Seller nor any Affiliate of Seller shall participate in any negotiations or discussions or enter into any understanding or agreement with any third party concerning the Project or the Leased Site that would conflict with, preclude or serve as an alternative or "back-up" to this Agreement or the transactions contemplated hereunder. If Seller or any Affiliate of Seller receives any written or oral offers or proposals from third parties for any such negotiations, discussions, understandings or agreements respecting the Project or the Leased Site, Seller shall immediately notify Buyer in writing of the identity of the Person making such offer or proposal and the substance thereof. 7.12 Right of Setoff. Seller agrees, on its behalf and on behalf of all subsequent holders of the Promissory Note and any assignees of the Royalty, that Buyer may (at its election) from time to time set off any and all amounts due Buyer from Seller (as and when the same become due) against any and all amounts then due and owing (or to become due and owing) under the Promissory Note and the Royalty following the delivery by Buyer to Seller of not less than twenty-five (25) days prior written notice thereof, which notice shall state the grounds for any such setoff and shall include copies of any and all appropriate supporting documentation. In the event that Seller objects to any such proposed setoff, Seller shall have the right to cause the matter to be decided by arbitration in accordance with the provisions of Section 14 hereof. In order to exercise such right, Seller shall file a notice of a demand for arbitration with Buyer and the American Arbitration Association within the aforesaid twenty-five (25) day period. In the event that such right is timely exercised by Seller, Buyer shall within twenty- five (25) days following the receipt of the notice of a demand for arbitration deposit in escrow with U.S. Title Guaranty Company, Inc. (or such other party upon whom Buyer and Seller may agree) the amount set off that is in dispute. If the amount deposited is greater than $25,000.00, such amount shall be held by the escrow agent in an interest-bearing account, and the interest earned thereon shall be paid ratably to the party or parties to whom the amount deposited is disbursed upon the resolution of the dispute. The escrow agreement shall provide that the amount escrowed shall be disbursed by the escrow agent (i) upon receipt of a joint direction from Buyer and Seller, (ii) in accordance with the arbitration award, or (iii) in accordance with an order from a court of competent jurisdiction. 7.13 Showboat Development Company. Seller expressly acknowledges that it shall satisfy any and all of its responsibilities, liabilities and obligations owed to Showboat under that certain Stock Purchase Agreement dated the 11th day of December, 1997 by and between Showboat and Futuresouth, including any amendments thereto. Seller further agrees to indemnify, defend and save Buyer harmless from and against any and all claims, demands, judgments and expenses, including but not limited to attorneys' fees and expenses of litigation incurred by Buyer in connection with any claims made by Showboat, its successors and assigns against Buyer. Sections 11.1, 11.3 and 11.4 shall apply to such indemnification obligations of Seller. 7.14 Lease Obligations. Prior to the Closing Date, Buyer shall not be responsible for the performance of any of the obligations of SLP under the Lease, except that Buyer agrees, subject to the limitations and conditions set forth in this Agreement, to cooperate with Seller in connection with the performance of those obligations specifically applicable to Assignee (as defined in the Lease), pursuant to Sections 2(c), 3(b) and (c), 4(a) and 13 of the Lease. 7.15 Information. Buyer agrees to provide reasonable reports to Seller from time to time concerning the status of the Project and any material changes therein, to meet with representatives of Seller not less frequently than quarterly for such purposes, and to respond to reasonable requests from Buyer for information concerning the status of the Project. 7.16 VIP Privileges. Subject to the provisions of Section 3.1.3 hereof and compliance with Applicable Law, commencing on the Opening Date and continuing for as long as the Excursion Gambling Boat included in the Project remains open for business, (i) each of the shareholders of Futuresouth, so long as they remain shareholders of Futuresouth, shall be entitled to use, along with their guests, on a non-exclusive basis, all of the facilities of the Project that are available for use from time to time by the customers of the Project, including any club or other facilities that are available for use by only a portion of such customers, and (ii) Buyer shall, subject to Applicable Law, provide to Seller a credit allowance in the amount of $10,000.00 per calendar year, which may be utilized by Seller (or such shareholders, as permitted by Seller) to purchase goods and services available from time to time for purchase by customers of the Project at then prevailing prices. Buyer may establish and modify, from time to time, reasonable policies and procedures for the exercise of Buyer's rights under this Section 7.16. Such credit allowance shall be prorated for any calendar year in which the Project is not open for business during part of such year. If and to the extent that any portion of the credit allowance for any calendar year is not used in such calendar year, such unused portion shall be forfeited. 7.17 Transfers of Stock of Seller. Seller will not permit any direct or indirect sale, assignment, pledge, hypothecation, transfer or other disposition of any record or beneficial interest in any Stock of any entity constituting Seller (a "Transfer") except in compliance with the following provisions: (a) Transfers Upon Death. Any Transfer occurring directly as a result of and upon the occurrence of the death of a natural person may be made so long as the Transfer is in compliance with all Applicable Laws and the following additional requirements: (i) Seller will promptly notify Buyer of the Transfer as required by Section 7.2; (ii) the transferee will cooperate with any background investigation with respect to the transferee pursuant to ACI's Gaming Compliance Program; (iii) the Transfer will be subject to any investigation and/or approval required by one or more Governmental Authorities as contemplated by Section 7.2; and (iv) such Transfer shall not in any way limit or restrict Buyer's rights under Section 7.2 with respect to the suspension and/or forfeiture of payments by Buyer to Seller. Transfers permitted pursuant to this clause do not extend to or include Transfers by the estate of the deceased natural person to heirs or devisees or by a testamentary trust of the deceased natural person to beneficiaries of such trust, which Transfers are subject to clause (c) of this Section 7.17. (b) Dissolution or Merger of Entities. Any Transfer of Stock in Southboat or SLP to Futuresouth deemed to result from the dissolution and liquidation of Southboat or SLP, or deemed to result from the merger or consolidation of Southboat or SLP with and into Futuresouth as the surviving entity, may be made so long as such Transfer complies with Section 7.5 and all Applicable Laws and Seller promptly notifies Buyer in writing of the transaction. (c) Other Transfers. Any other Transfer may be made only with the prior written consent of Buyer, which consent will not be unreasonably delayed or withheld. In connection with any such proposed Transfer, Seller will provide to Buyer in writing the details of the proposed Transfer and will cause the proposed transferee to submit to any background investigation conducted under ACI's Gaming Compliance Program and to cooperate with any investigations by one or more Governmental Authorities as contemplated by Section 7.2. Without limiting the foregoing, Seller acknowledges and agrees that it will not be unreasonable for Buyer to withhold its consent if (i) Buyer's background investigation, if any, concerning the transferee under ACI's Gaming Compliance Program is not satisfactory; (ii) if Buyer is informed, orally or in writing, through formal notification or otherwise, that the proposed transferee's interest in or involvement with Seller may or could delay or jeopardize the ability of Buyer or any Affiliate of Buyer to obtain or maintain any Permit related to the Project or otherwise; or (iii) if any Permit of any Governmental Authority or other requirement of Applicable Law for the consummation of such Transfer has not been obtained or satisfied, as the case may be. If Buyer withholds its consent pursuant to clause (ii) above, Seller will have the rights set forth in Section 7.2 to seek to convince the applicable Governmental Authority that the transferee should be allowed to acquire an interest in Seller and to cause Buyer to request information from the applicable Governmental Authority. (d) Legend. Upon the execution of this Agreement and thereafter, Seller agrees to cause all outstanding and all newly issued Stock certificates or other indicia of ownership of any entity constituting Seller to bear the following legend: THE SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF ANY RECORD OR BENEFICIAL INTEREST IN THE SECURITIES OR OTHER EQUITY INTERESTS REPRESENTED BY THIS CERTIFICATE, AGREEMENT OR INSTRUMENT (A "TRANSFER") IS SUBJECT TO CERTAIN RESTRICTIONS AND REQUIREMENTS SET FORTH IN AN ASSET PURCHASE AND SALE AGREEMENT AMONG FUTURESOUTH, INC., SOUTHBOAT LEMAY, INC., SOUTHBOAT LIMITED PARTNERSHIP (AS SELLER ON A COLLECTIVE BASIS) AND AMERISTAR CASINO ST. LOUIS, INC. (AS BUYER) DATED AS OF FEBRUARY ___, 2000 (THE "AGREEMENT"). ANY SUCH TRANSFER MADE IN VIOLATION OF THE AGREEMENT SHALL BE NULL AND VOID AB INITIO. A COPY OF THE AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. (e) Effect of Consent. The consent of Buyer to any proposed Transfer shall not limit or restrict the exercise of Buyer's rights under Section 7.2 as and when appropriate. 8. Abandonment of Project. In the event Buyer, in its sole discretion, determines for any reason and at any time prior to the Commencement of Construction not to proceed with the Project, Buyer shall deliver written notice thereof to Seller. Upon delivery of such notice, this Agreement shall terminate and all parties shall thereafter be released from all further obligations hereunder, except as expressly stated in this Section or as otherwise provided herein. Following the delivery of such notice, Buyer shall reasonably cooperate with Seller for a reasonable period of time (not to exceed ninety (90) days) in Seller's efforts, if any, to substitute another company in the place of Buyer to pursue the Project. In the event of such termination, Seller shall have the right, but not the obligation, to require Buyer to assign to Seller its assignable rights, assets and entitlements to the Project, including the Lease, the Project Documents, and all other plans and designs, studies, inspections, reports and permits for the Project in exchange for an agreement by Seller, in form and substance satisfactory to Buyer and Seller, to: (i) assume any and all liabilities and obligations in respect of such assigned rights, assets and entitlements, (ii) indemnify, protect, defend and hold harmless Buyer and ACI against and from such liabilities in accordance with Sections 11.3 and 11.4 of this Agreement, and (iii) pay One Hundred Dollars ($100.00) to Buyer and ACI; provided, however, that Seller will not be required to assume, or to indemnify, protect, defend or hold harmless Buyer and ACI against or from any liabilities in respect of any intentional torts or frauds for which Buyer or ACI is responsible. 9. Alternate Site. Alternate Site. Notwithstanding any provision to the contrary contained herein, in the event that Buyer, ACI or any other Affiliate of ACI (herein called an "ACI Entity") shall, during the term of this Agreement (whether prior to or after the Closing Date) or within thirty (30) months following the termination of this Agreement by Buyer (other than a termination pursuant to Section 10.3 hereof), shall have a gaming license application accepted for investigation by the Missouri Gaming Commission for a site, other than the Leased Site, that is within the Prime Territory (the "Alternate Site"), and such ACI Entity thereafter receives a gaming license and commences gaming operations on an Excursion Gambling Boat at the Alternate Site, then Buyer and ACI shall cause such ACI Entity to pay to Seller the balance of the Purchase Price with respect to the operation by the ACI Entity of such Excursion Gambling Boat and any related facilities in accordance with the provisions of Section 3 hereof, and all other provisions of this Agreement respecting the Purchase Price shall likewise be applicable thereto; provided that the foregoing obligation to pay the balance of the Purchase Price to Seller shall be conditioned upon Seller taking all actions reasonably requested by any ACI Entity to assist, support and cooperate with such ACI Entity in its efforts to obtain all Permits necessary for the development and operation of such Excursion Gambling Boat and related facilities. The foregoing notwithstanding, if this Agreement has been terminated by Buyer due to a failure to satisfy one (1) or more of the conditions set forth in Section 4.3 hereof, then the foregoing obligation to pay the balance of the Purchase Price shall also be conditioned upon the exclusive endorsement by St. Louis County of the Alternate Site (to the exclusion of all other sites within the Prime Territory) for the development and operation by the ACI Entity of an Excursion Gambling Boat. In addition, in the event that any ACI Entity shall within eighteen (18) months following the termination of this Agreement (other than an termination pursuant to Section 10.3 hereof) have a gaming license application accepted for investigation by the Missouri Gaming Commission for a site that is outside the Prime Territory, but within a radius of fifty (50) miles of the Leased Site, then Buyer and ACI shall cause such ACI Entity to pay to Seller the sum of [[ ]] dollars upon the issuance to the ACI Entity by the Missouri Gaming Commission of a gaming license for the operation of an Excursion Gambling Boat at such site. Buyer agrees to keep Seller reasonably informed of the efforts of Buyer or any other ACI Entity related to the pursuit of a license from the Missouri Gaming Commission for an Excursion Gambling Boat within a 50-mile radius of the Leased Site. 10. Termination; Default. 10.1 Termination and Abandonment. This Agreement may be terminated and abandoned at any time prior to the Closing Date as follows: 10.1.1 By mutual written consent of the Parties. 10.1.2 By written notice to Seller delivered by Buyer, if any of the conditions set forth in Section 4.3 hereof have not been satisfied or waived by the Closing Date, or 10.1.3 By written notice to Buyer delivered by Seller, if any of the conditions set forth in Section 4.2 hereof have not been satisfied or waived by the Closing Date. 10.2 Effect of Termination. In the event of the termination or abandonment of this Agreement pursuant to the provisions of Section 10.1.1, 10.1.2, 10.1.3 or 10.3, this Agreement shall be void and of no further effect, except to the extent expressly provided herein. 10.3 Default by Seller. Subject to Section 10.5, in the event of a default by Seller on any of its obligations hereunder, Buyer may elect to either: (i) sue for specific performance as set forth herein; or (ii) terminate this Agreement and sue for damages; or (iii) terminate this Agreement. 10.4 Default by Buyer. Subject to Section 10.5, in the event of a default by Buyer on any of its obligations hereunder, Seller's sole remedy is to terminate this Agreement and sue Buyer for any and all damages sustained by Seller as a result of such default, provided, that Seller shall not be entitled to claim as damages any consequential damages. 10.5 Notice and Cure Rights. Neither party may terminate thisb Agreement because of a default hereunder by the other party, unless the nondefaulting party has given the defaulting party written notice of such default and such default remains uncured for more than ten (10) calendar days after such notice is effective. 11. Indemnification. 11.1 Seller. Seller hereby unconditionally, irrevocably and absolutely agrees to protect, defend, indemnify and hold harmless Buyer, and Buyer's past, present and future officers, directors, shareholders, employees, agents, attorneys, representatives, trustees and beneficiaries, and each of the foregoing's heirs, personal representatives, successors and assigns, from any and all manner of actions, suits, debts, sums of money, interest owed, accounts, controversies, agreements, guaranties, promises, undertakings, charges, damages, judgments, executions, obligations and costs, expenses and fees (including reasonable attorneys' fees and court costs), counterclaims, claims, demands, causes of action, liabilities, losses and amounts paid in settlement incurred, paid or sustained by any of the foregoing, in each case in connection with, arising out of, based upon, relating to or otherwise involving: (i) any misrepresentation, breach of warranty or nonfulfillment of any provision of this Agreement by Seller; (ii) any material error or omission in any statement, report, exhibit, schedule or other information delivered to Buyer by or on behalf of Seller; (iii) any claim or obligation or Debt of Seller to any party not being assumed by Buyer hereunder which is asserted against Buyer; or (iv) any act or omission of Seller, its agents, servants or employees occurring prior to the close of business on the Closing Date. 11.2 Buyer. Buyer hereby unconditionally, irrevocably and absolutely agrees to protect, defend, indemnify and hold harmless Seller, and Seller's past, present and future officers, directors, shareholders, partners, employees, agents, attorneys, representatives, trustees and beneficiaries, and each of the foregoing's heirs, personal representatives, successors and assigns, from any and all manner of actions, suits, debts, sums of money, interest owed, accounts, controversies, agreements, guaranties, promises, undertakings, charges, damages, judgments, executions, obligations and costs, expenses and fees (including reasonable attorneys' fees and court costs), counterclaims, claims, demands, causes of action, liabilities, losses and amounts paid in settlement incurred, paid or sustained by any of the foregoing, in each case in connection with, arising out of, based upon, relating to or otherwise involving: (i) any misrepresentation, breach of warranty or nonfulfillment of any provision of this Agreement by Buyer; or (ii) any claim, obligation or Debt of Seller which is expressly assumed by Buyer hereunder which is asserted against Seller. 11.3 Third Person Claims. Promptly after any Indemnified Party has received notice of or has knowledge of any claim by a Third Person, or of the commencement of any action or proceeding by a Third Person, the Indemnified Party must, as a condition precedent to a claim with respect thereto being made against an Indemnifying Party, give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice must state the nature and basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party has the right to defend and settle any such matter, at its own expense and by its own counsel, which counsel shall be reasonably acceptable to the Indemnified Party, so long as the Indemnifying Party diligently pursues the same in good faith. If the Indemnifying Party undertakes so to defend or settle, it must promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party must cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation includes furnishing the Indemnifying Party with any books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party's possession or control. All Indemnified Parties must use the same counsel, which is the counsel selected by the Indemnifying Party, provided that, if counsel to the Indemnifying Party has a conflict of interest that prevents such counsel for the Indemnifying Party from representing the Indemnified Party, the Indemnified Party has the right to participate in such matter through counsel of its own choosing and the Indemnifying Party must reimburse the Indemnified Party for the reasonable fees and expenses of its counsel. After the Indemnifying Party has notified the Indemnified Party of the Indemnifying Party's intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense in good faith, the Indemnifying Party is not liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability, except to the extent set forth in the "provided that" clause in the immediately preceding sentence and except to the extent such participation is requested by the Indemnifying Party, in which event the Indemnified Party is to be reimbursed by the Indemnifying Party for reasonable additional legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under the applicable indemnity provision of this Agreement with respect to such Third Person claim is limited to the amount so offered in settlement by such Third Person and the Indemnified Party must reimburse the Indemnifying Party for any additional costs of defense which it subsequently incurs with respect to such claim and all additional costs of settlement or judgment. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense in good faith, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, such costs and expenses to be paid or reimbursed by the Indemnifying Party on an as-incurred basis, and the Indemnified Party may settle such matter on a basis which is commercially reasonable under the circumstances, and the Indemnifying Party must reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith. All settlements effected hereunder must effect a complete release of the Indemnified Party with respect to the Third Person claim unless the Indemnified Party otherwise agrees in writing. 11.4 Indemnification Payments. The parties hereto will make appropriate adjustments in the amount of indemnification payable to an Indemnified Party for any Tax benefits or Tax detriments in determining the amount of any indemnification obligation under this Agreement. 11.5 Limitations. Notwithstanding any other provisions of this Agreement to the contrary, no action for indemnification, breach of contract, misrepresentation or any other claim for damages may be brought by any party more than thirty-six (36) months after the Closing Date. 11.5.1 On Buyer. Notwithstanding any provision to the contrary contained herein, no claim for indemnification for breach of this Agreement or any representation or warranty hereunder may be made by Buyer against Seller unless or until the aggregate amount for all such claims by Buyer against Seller exceeds the Basket Amount. 11.5.2 On Seller. Notwithstanding any provision to the contrary contained herein, no claim for indemnification for breach of this Agreement or any representation or warranty hereunder may be made by Seller against Buyer unless or until the aggregate amount for all such claims by Seller against Buyer exceeds the Basket Amount. 12. No Assurances. Buyer neither represents nor provides any assurances to Seller that Buyer will develop the Project at all, and if the Project is developed, Buyer does not represent that the size of the Project, including the scope, Development Costs, the operating costs or the Net Free Cash Flow will be as projected or anticipated. Buyer may at any time elect to abandon the Project, in its sole discretion, regardless of the effect of such abandonment on Seller. Seller expressly acknowledges that there are risks associated with the Project, that the Project may not be developed and that if it is developed it may not provide a positive Net Free Cash Flow. In no event shall this Agreement be construed to confer on Seller any vested right to require that the Project be developed or, if developed, that it be developed, financed or operated in any particular way or be operated for any particular length of time. 13. General Provisions. 13.1 Accounting Terms. All accounting terms not specifically defined herein are to be construed in accordance with GAAP (consistently applied) as in effect from time to time. 13.2 Amendment and Modification. No amendment, modification, supplement, termination, consent or waiver of any provision of this Agreement, nor consent to any departure therefrom, will in any event be effective unless the same is in writing and is signed by the Party against whom enforcement of the same is sought. Any waiver of any provision of this Agreement and any consent to any departure from the terms of any provision of this Agreement is to be effective only in the specific instance and for the specific purpose for which given. 13.3 Approvals and Consents. If any provision hereof requires the approval or consent of any Party to any act or omission, such approval or consent is not to be unreasonably withheld or delayed except as set forth herein. 13.4 Assignments. Except as provided in Section 3.1.3 and except for assignments, deeds of trust, security interests and other transfers made to secure or collateralize Project-Related Debt, no Party may assign or transfer any of its rights or obligations under this Agreement to any other Person without the prior written consent of the other Parties. Notwithstanding the foregoing, Buyer may assign its rights and obligations under this Agreement to any Affiliate of Buyer without the consent of Seller; provided that such assignee executes and delivers to Seller an assumption agreement in form and substance reasonably satisfactory to Seller assuming all of Buyer's obligations hereunder; and provided further that such assignment does not release Buyer from its obligations hereunder for which such assignee and Buyer shall be jointly and severally liable. 13.5 Business Day. If any day on which any payment is required to be made hereunder, or on which any notice must be sent, or on which any time period described herein commences or ends is not a Business Day, then such day will be deemed for all purposes of this Agreement to fall on the next succeeding day which is a Business Day. 13.6 Captions. Captions contained in this Agreement and the table of contents preceding this Agreement have been inserted herein only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. 13.7 Confidentiality. Each Party agrees to maintain as confidential any Confidential Information that it may receive from any other Party and may not disclose such information to any Person without the prior written consent of the Party originally providing such Confidential Information. However, a Party (the "Disclosing Party") may disclose such Confidential Information: (i) to legal counsel and other professional advisors of the Disclosing Party (but only if they have been informed of the confidential nature of such Confidential Information and agree in writing to be bound by the terms of this Section); (ii) to regulatory officials having jurisdiction over the Disclosing Party or over any Permit (or application therefor) contemplated herein; (iii) to Affiliates of Buyer and Seller; and (iv) as required by law or legal process or in connection with any legal proceeding to which the Disclosing Party is a party or is otherwise subject, including, but not limited to, the application process contemplated herein, but, in each such event, the Disclosing Party, prior to such disclosure, is to inform the Party originally furnishing such Confidential Information. 13.8 Counterpart Facsimile Execution. For purposes of this Agreement, a document (or signature page thereto) signed and transmitted by facsimile machine or telecopier is to be treated as an original document. The signature of any Party thereon, for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same binding effect as an original signature on an original document. At the request of any Party, any facsimile or telecopy document is to be re-executed in original form by the Parties who executed the facsimile or telecopy document. No Party may raise the use of a facsimile machine or telecopier or the fact that any signature was transmitted through the use of a facsimile or telecopier machine as a defense to the enforcement of this Agreement or any amendment or other document executed in compliance with this Section. 13.9 Counterparts. This Agreement may be executed by the Parties on any number of separate counterparts, and all such counterparts so executed constitute one agreement binding on all the Parties, notwithstanding that all the Parties are not signatories to the same counterparts. 13.10 Entire Agreement. This Agreement constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements, letters of intent, understandings, negotiations and discussions of the Parties, whether oral or written, including, but not limited to, any financial projections or estimates of the Tax treatment of the proceeds to be received by Seller from the transactions contemplated under this Agreement that may have been prepared by Buyer. 13.11 Exhibits. All of the Exhibits and Schedules attached from time to time to this Agreement are deemed incorporated herein by reference. Any Exhibits or Schedules not attached to this Agreement at the time of its execution shall be negotiated, agreed upon and attached to this Agreement not later than February 7, 2000. Each party shall act in good faith with respect to the completion and approval of such Exhibits and Schedules. 13.12 Failure or Delay. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or privilege hereunder operates as a waiver thereof, nor does any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. No notice to or demand on any Party in any case entitles such Party to any other or further notice or demand in similar or other circumstances. 13.13 Further Assurances. The Parties will execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purpose of this Agreement. 13.14 Governing Law. This Agreement and the rights and obligations of the Parties hereunder are to be governed by and construed and interpreted in accordance with the laws of the State of Missouri applicable to contracts made and to be performed wholly within Missouri, without regard to choice or conflict of laws rules. 13.15 Legal Fees, Costs. Except as otherwise provided herein, all legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby are to be paid by the Party incurring such costs and expenses, In the event any Party brings suit or institutes arbitration proceedings to construe or enforce the terms hereof, or raises this Agreement as a defense in a suit or arbitration proceeding brought by another Party, the prevailing Party in such suit or arbitration proceeding is entitled to recover its attorneys' fees and expenses. 13.16 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, return receipt requested, or delivered in person or by commercial courier against receipt or by facsimile copy with confirmed receipt, as follows: if to Buyer: AMERISTAR CASINO ST. LOUIS, INC. ATTENTION: Craig H. Neilsen, President 3773 Howard Hughes Parkway, Suite 490 South Las Vegas, Nevada 89109 Fax: (702) 369-8860 Telephone: (702) 567-7000 and with copies to: GORDON R. KANOFSKY Senior Vice President of Legal Affairs Ameristar Casinos, Inc. 16633 Ventura Boulevard Suite 1050 Encino, California 91436-1864 Fax: (818) 995-7099 Telephone: (818) 995-7040 and STEVEN E. KUSHNER Stinson, Mag & Fizzell, P.C. 100 South Fourth Street Suite 700 St. Louis, Missouri 63102 FAX: (314) 259-4599 Telephone: (314) 259-4544 If to Seller: FUTURESOUTH, INC. ATTN: DENNIS LONG 10205 Gravois Road St. Louis, MO 63123 Fax: (314) 849-0423 Telephone: (314) 842-5666 with a copy to: FREDERICK J. BERGER Riezman & Berger PC 7700 Bonhomme St. Louis, MO 63105 Fax: (314) 727-6458 Telephone: (314) 727-0101 or to such other address as any Party may designate by notice to the other Parties in accordance to the terms of this Section. Any notice or other communication mailed by registered or certified mail shall be deemed given at the earlier of the time of its receipt by the addressee or three days after the time of mailing thereof. Any notice or other communication given by any other means shall be deemed given at the time of its receipt by the addressee. 13.17 Publicity. Any publicity release, advertisement, filing, public statement or announcement made by or at the request of any Party regarding this Agreement or any of the transactions contemplated hereby is to be first reviewed by and must be reasonably satisfactory to the Buyer provided, however, that Buyer may make disclosures in filings with the Securities and Exchange Commission, The Nasdaq Stock Market, Inc. and gaming regulatory authorities in Missouri, Nevada, Iowa and Mississippi without prior notice to or the consent of Seller. 13.18 Schedules. To the extent necessary to correct, modify or supplement the information contained herein, the Schedules hereto may be replaced by mutually agreed upon replacement Schedules. 13.19 Severability. If all or any portion of any provision of this Agreement shall be held to be invalid, illegal or unenforceable in any respect or in any jurisdiction, then such invalidity, illegality or unenforceability shall not affect any other provision hereof or thereof, and such provision shall be limited and construed in such jurisdiction as if such invalid, illegal or unenforceable provision or portion thereof were not contained herein or therein. 13.20 Specific Performance and Injunctive Relief. Seller recognizes that, if it fails to perform, observe or discharge any of its obligations under this Agreement, Buyer will suffer irreparable damages and no remedy at law will provide adequate relief to Buyer. Therefore, Buyer is hereby authorized to demand and obtain specific performance of this Agreement, and is entitled to temporary and permanent injunctive relief, in a court of competent jurisdiction at any time when Seller fails to comply with any of the provisions of this Agreement applicable to it. To the extent permitted by Applicable Law, Seller hereby irrevocably waives any defense that it might have based on the adequacy of a remedy at law which might be asserted as a bar to such remedy of specific performance or injunctive relief and further waives any requirement that Buyer post any bond in connection with any request for injunctive relief. 13.21 Submission to Jurisdiction. EXCEPT FOR MATTERS SUBMITTED TO ARBITRATION IN ACCORDANCE WITH SECTION 14 HEREOF, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY DOCUMENT RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF MISSOURI OR ANY COURT OF THE UNITED STATES OF AMERICA FOR THE EASTERN DISTRICT OF MISSOURI, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF SUCH COURTS. THE PARTIES IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. NOTWITHSTANDING THE FOREGOING, IN THE EVENT A LAWSUIT IS FILED, EACH PARTY RESERVES THE RIGHT TO REMOVE THE LAWSUIT TO FEDERAL COURT. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO EACH OF THE OTHER PARTIES AT ITS ADDRESS PROVIDED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 20 DAYS AFTER SUCH MAILING. 13.22 Successors and Assigns. All provisions of this Agreement are binding upon, inure to the benefit of and are enforceable by or against the Parties and their respective heirs, executors, administrators or other legal representatives and permitted successors and assigns. 13.23 Third-Party Beneficiary. This Agreement is soley for the benefit of the Parties and their respective successors and permitted assigns, and no other Person has any right, benefit, priority or interest under, or because of the existence of, this Agreement. Following the Closing, Seller shall not be deemed to be a third party beneficiary of any covenant or provision of the Lease. 13.24 Signature Warranty. Each Person executing this Agreement warrants that he is authorized to do so on behalf of the Party for whom he signs this Agreement. 13.25 Survival. All representations, warranties, agreements and obligations of the Parties contained herein shall, notwithstanding any investigation made by any Party hereto, survive Closing and not be merged into any document delivered at Closing. Notwithstanding any provision to the contrary contained herein, the provisions of Sections 8, 11, 13.7, 13.10, 13.14, 13.15, 13.6, 13.17, 13.21 and 14 shall survive any termination of this Agreement. 14. Arbitration. 14.1 Arbitration Proceedings. The parties desire to avoid and settle without litigation disputes that may arise between them relative to the Royalty provided in Section 3.1.2 and/or any setoff pursuant to Section 7.12 herein. In the event the parties are unable to resolve a dispute related to the Royalty or Seller disputes any setoff by Buyer and timely files a notice of a demand for arbitration as set forth in Section 7.12, then such dispute shall be submitted to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("Rules"). The hearing location shall be either the City of St. Louis or St. Louis County, Missouri. The award rendered by the arbitrator shall be final and binding as between the parties and judgment on such award may be entered in any court having jurisdiction thereof. A single neutral arbitrator shall be appointed by the American Arbitration Association under the Rules who shall be a certified public accountant. Notice of a demand for arbitration of any dispute relating to the Royalty shall be filed in writing with the other party(ies) and with the American Arbitration Association. The parties agree that after any such notice has been filed, they shall, before the hearing thereof, make discovery and disclosure of all materials relative to such dispute to the extent and in the manner provided by the Rules and disclosure shall be completed no later than 30 days after filing of such notice of arbitration unless extended by such single arbitrator upon a showing of good cause by either party to the arbitration or by consent of the parties to the arbitration. The arbitrator may consider any material which is relevant to the subject matter of such dispute even if the material might also be relevant to an issue or issues not subject to arbitration hereunder; provided, however, that the arbitrator shall not have the power to modify the terms of this Agreement. A stenographic record shall be made of the arbitration hearing, which shall be held within ninety (90) days following the delivery of the aforesaid notice of a demand for arbitration. Each party shall pay its own costs of the arbitration and the parties share equally the costs of the American Arbitration Association and the arbitrator. 14.2 Limitation on Consolidation or Joinder. No arbitration hereunder may include, by consolidation, joinder or any other manner, any Person other than Buyer, Seller and other Persons substantially involved in a common question of fact or law whose presence is required if complete relief is to be accorded in arbitration. Consent to arbitration involving an additional Person does not constitute consent to arbitration of a dispute not described therein or with a Person not named or described therein. This Section 14 is enforceable by specific performance under Applicable Law in a court of competent jurisdiction. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set out above. SELLER: FUTURESOUTH, INC., a Missouri Corporation By: /s/ Dennis P. Long Title: President SOUTHBOAT LEMAY, INC., a Nevada Corporation By: /s/ Dennis P. Long Title: President SOUTHBOAT LIMITED PARTNERSHIP., a Missouri Limited Partnership By: Southboat Lemay, Inc., its General Partner By: /s/ Dennis P. Long Title: President BUYER: AMERISTAR CASINO ST. LOUIS, INC., a Missouri Corporation By: /s/ Gordon R. Kanofsky Title: Authorized Agent EXHIBIT D AMENDED AND RESTATED LEASE AND DEVELOPMENT AGREEMENT THIS AMENDED AND RESTATED LEASE AND DEVELOPMENT AGREEMENT (the "Lease") is made and entered into as of this 15th day of February, 2000 (the "Effective Date"), by and between the ST. LOUIS COUNTY PORT AUTHORITY, a public body corporate and politic of the State of Missouri ("Landlord"), and SOUTHBOAT LIMITED PARTNERSHIP, a Missouri limited partnership ("Tenant"); R E C I T A L S A. Landlord is the owner, subject to the Exceptions (defined below), of a certain approximately 80 acre parcel of real estate, together with the structures thereon, located in the Lemay area of St. Louis County, Missouri (the "County"), as described on Attachment A (the "Property"), consisting of a certain approximately 29 acre site depicted diagrammatically on Attachment B (the "Premises") and an approximately 51 acre site depicted diagrammatically on Attachment C (the "Adjacent Parcel"). B. Landlord is a public body corporate and politic duly organized and existing pursuant to Chapter 68 of the Revised Statutes of Missouri and is charged with the responsibility of developing the riverfront area of the unincorporated portion of St. Louis County. In connection with such duties and responsibilities, to promote the general welfare, to encourage capital investment, and to increase the volume of commerce within the Lemay area and of the County generally, Landlord has determined that the Premises should be developed and operated as a Casino (as hereinafter defined) with related uses (the "Project"). C. Tenant submitted to Landlord and the St. Louis County Council (the "Council") a certain Project proposal, which Project proposal was modified and supplemented by subsequent correspondence to Landlord and the Council (together, the "Original Project Proposal"). D. In order to induce acceptance of the Original Project Proposal by Landlord and the Council, Tenant agreed to apply to the Missouri Gaming Commission (the "Commission") for one or more licenses, as necessary, to operate the Project (including the Casino) at and from the Premises ("Gaming Licensure"), to pay certain rentals to Landlord in consideration of the opportunity to develop and operate the Project, and to designate the County as the "home dock" for the Project, all as hereinafter set forth. E. In order to further induce Landlord and the Council to approve the Original Project Proposal, Showboat, Inc., a Nevada corporation ("Original Guarantor") and parent company of Showboat Lemay, Inc., a Missouri corporation and Tenant's general partner (the "General Partner"), agreed to issue its unconditional guarantees (together, the "Original Guarantees") of (i) payment of the hereinafter specified minimum rent for 15 years (the "Original Rent Guarantee") and (ii) timely completion of construction of and payment for all Project improvements and installations (the "Original Completion Guarantee"). F. In order to promote the economic development of the Lemay area and the County, and in consideration of the Original Project Proposal, the financial incentives to Landlord, the Original Guarantees, the special and unique qualifications of the Original Guarantor in the development and operation elsewhere of gaming projects, and the covenants and promises of the Tenant and the Original Guarantor under this Lease and the Original Guarantees, respectively, Landlord approved the Original Project Proposal, and the Council enacted Ordinance Number 17,593, as amended by Ordinance Number 17,739, in support of the Original Project Proposal and the execution, delivery and performance of this Lease. G. Pursuant to the foregoing, Landlord and Tenant entered into that certain Lease and Development Agreement, dated as of October 13, 1995 (the "Original Effective Date"), as amended by a First Amendment to Lease and Development Agreement, dated as of May 21, 1996, a Second Amendment to Lease and Development Agreement, dated as of December 12, 1996, a Third Amendment to Lease and Development Agreement, dated as of December 12, 1997, a Fourth Amendment to Lease and Development Agreement, dated as of December 8, 1998, and a Fifth Amendment to Lease and Development Agreement, dated as of September 20, 1999 (collectively, the "Original Lease"). H. The Investigation Date (as defined in the Original Lease) did not occur prior to the Investigation Deadline (as defined in the Original Lease), and pursuant to the aforementioned Third Amendment to Lease and Development Agreement, the Original Guarantor was released from its obligations and liabilities to Landlord under the Original Guarantees and the Original Guarantees were canceled. I. In conjunction with the release and discharge of the Original Guarantor and the cancellation of the Original Guarantee, Landlord consented to the transfer of all of the stock of the General Partner to Futuresouth, Inc., subject, however, to the commitment of Tenant to secure the affiliation and support of another entity meeting the Stated Criteria (as defined in the Original Lease). J. Subject to the terms and conditions set forth herein, Tenant desires to assign and transfer to Ameristar Casino St. Louis, Inc., a Missouri corporation ("Assignee"), all of Tenant's right, title and interest in this Lease (the "Assignment"). K. Assignee has filed its application for Gaming Licensure with the Commission and has developed a revised Project Proposal comprised of the preliminary construction documents included in Attachment D-1 and the employment and contracting policies included in Attachment D-2 (together, the "New Project Proposal"), which Landlord has determined will, if implemented, yield to Landlord, the County and the Lemay area the benefits anticipated from the implementation of the Original Project Proposal. L. The parent corporation of Assignee, Ameristar Casinos, Inc., a Nevada corporation ("New Guarantor"), will be required, in connection with the Assignment, to provide to Landlord, on or before the Commencement Date, a Guarantee of Minimum Rent in the form of Attachment E (the "New Rent Guarantee") and, in conjunction with the Assignment, a Guarantee of Completion in the form of Attachment F (the "New Completion Guarantee") (together, the "New Guarantees"). M. In consideration of and as a material inducement to Landlord granting its consent to the Assignment, Tenant has acknowledged and agreed that such consent shall be conditioned on the execution and delivery to Landlord of a Lease Assignment and Assumption Agreement between Tenant and Assignee in the form of Attachment G (the "Assignment and Assumption Agreement") and, from Southboat Limited Partnership, a Release of Landlord and St. Louis County in the form of Attachment H (the "Assignment Release"). N. In furtherance of the Assignment, Tenant has requested that Assignee and New Guarantor, at their sole risk, cost and expense, have access to the Premises from and after the Effective Date for the purpose of conducting due diligence in respect of the Premises and performing certain work incidental to the proper conduct of due diligence and site preparation, and Landlord has agreed to grant such right to Assignee and New Guarantor, subject to the execution and delivery, by Landlord, Assignee and New Guarantor of a License and Indemnity for Early Entry onto the Premises in the form of Attachment I (the "Early Entry License"). O. Landlord and Tenant desire to amend and restate the Original Lease as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, Landlord and Tenant agree as follows: 1. Effectiveness of Lease and Assignment. (a) Demise of Premises. Landlord and Tenant acknowledge and agree that Landlord demised and leased the Premises to Tenant, and that Tenant leased and took the Premises from Landlord for the Term (as hereinafter defined), as of the Original Effective Date, and that said demise and letting is subject to all the terms and conditions of this Lease. (b) Restatement and Amendment of Original Lease. Upon the execution of this Lease by Landlord and Tenant, the Original Lease shall be deemed fully restated and amended pursuant to the terms hereof, as of the Effective Date. (c) Landlord's Ownership. Landlord represents and warrants to Tenant that Landlord is the owner of the Premises subject to the following matters (collectively, the "Exceptions"): (i) covenants, restrictions, easements, liens, encumbrances and any other matters of record affecting the Premises; (ii) present and future federal, state and local zoning and land use laws, ordinances and restrictions affecting the Premises, or the use thereof; (iii) any state of facts which an accurate survey or an inspection of the Premises and the Mississippi River would show; (iv) special assessments now or hereafter becoming a lien against the Premises; and (v) general property taxes and assessments for the current and subsequent tax fiscal years affecting the Premises. (d) The Assignment. Landlord hereby consents to the Assignment, subject, however, to the full and timely satisfaction of each of the following conditions: (1) On or before the Investigation Deadline (as defined herein), the Investigation (as defined herein) shall have commenced and Landlord shall have received (a) from Tenant and Assignee a fully executed Assignment and Assumption Agreement, (b) from Southboat Limited Partnership a fully executed Assignment Release, (c) from New Guarantor, the New Completion Guarantee, and (d) from counsel to Assignee and New Guarantor, an opinion confirming the corporate existence and good standing of Assignee and New Guarantor, and the due authorization, execution and delivery by Assignee and/or New Guarantor, as the case may be, of their respective deliveries to Landlord, including without limitation the certificate described in subparagraph (5) below. (2) No default on the part of Tenant shall have occurred and be continuing under any provision of this Lease. (3) Assignee or New Guarantor, as the case may be, shall have delivered true, accurate and complete copies to Landlord of each and every environmental report, study, test, investigation, evaluation or work performed or obtained by either of them, or their respective employees, agents, contractors or consultants, on or about the Premises. (4) No failure on the part of Assignee or New Guarantor, as the case may be, to comply with the following requirements shall have occurred and be continuing as of the effective date of the Assignment: (a) Assignee or New Guarantor, as the case may be, shall have obtained any required consent of Landlord in connection with any partnership or corporate transaction involving Assignee or the New Guarantor which results in a change of control of the Assignee or the New Guarantor, unless the transaction involves the assignment of Assignee's rights under the Assignment and Assumption Agreement to the New Guarantor or to any corporation, partnership or limited liability company controlling or controlled by the New Guarantor or under common control with Assignee and meeting the Stated Criteria (as defined in Section 12(b)) or unless any such transaction involving the New Guarantor meets the Stated Criteria. The procedures for approval of any proposed assignment requiring Landlord's consent shall be the same as those set forth in respect of any such transaction involving Tenant under this Lease. (b) Assignee shall have filed its application for Gaming Licensure and shall not have withdrawn or effectively abandoned such application prior to the Investigation Deadline, and in no event later than 30 days after the Effective Date, Assignee shall have delivered to Landlord a copy of the transmittal correspondence for such application to the Commission, and, promptly thereafter, a copy of each and every material notice delivered to or received from the Commission by Assignee. As used in this subsection (b), a "material notice" shall be any notice substantively bearing upon the availability of Gaming Licensure or the Site Permits (as hereinafter defined) or affecting the occurrence of the Commencement Date or Project Opening. (c) Neither Assignee nor New Guarantor (nor any permitted successor or assign) shall have filed a voluntary petition in bankruptcy or shall have been adjudicated bankrupt or insolvent or shall have filed any petition or answer seeking any reorganization, readjustment, liquidation, dissolution or similar relief under any bankruptcy or insolvency statute or law of the United States or any State, or shall have sought or consented to or acquiesced in the appointment of any bankruptcy or insolvency trustee, receiver or liquidator of Assignee or New Guarantor of all or any substantial part of either of their respective properties; nor within 60 days after the commencement of any involuntary proceeding against Assignee or New Guarantor seeking reorganization, readjustment, liquidation, dissolution or similar relief under any bankruptcy or insolvency statute or law, Assignee or New Guarantor, as the case may be, shall have failed to secure a dismissal and discharge thereof. (5) On the Assignment Date, Assignee and New Guarantor shall each deliver to Landlord a certificate setting forth, as to Assignee and New Guarantor, respectively, without qualification, the same representations and warranties made by the Tenant to Landlord in Section 8(a) (except that the representation and warranty set forth in Section 8(a)(i) shall be revised to reflect the correct type of entity and state of organization of such entity). Landlord agrees, upon the request of Tenant or Assignee, to deliver a certificate to Tenant and Assignee, addressed to Tenant, Assignee and New Guarantor, containing the same representations and warranties made by the Landlord to Tenant in Section 8(b); provided, however, that Landlord shall have no liability to any party whatsoever in the event that, as a result of any event first occurring subsequent to the Effective Date, the representation and warranty contained in Section 8(b)(iii) cannot be made without qualification. (e) Upon satisfaction of each and every condition set forth in Section (d)(1) through (5), the effective date of the Assignment (the "Assignment Date") shall be deemed to have occurred, Assignee shall have succeeded to all right, title and interest of Southboat Limited Partnership under this Lease and for all purposes herein shall be deemed the "Tenant" under this Lease, the New Guarantor shall be bound under the New Guarantees, and Southboat Limited Partnership, having delivered the Assignment Release, shall be released from any obligation or liability to Landlord accruing under this Lease subsequent to the Assignment Date. (f) In the event that prior to the Investigation Deadline either Tenant or Assignee shall notify Landlord in writing that the Assignment will not occur in accordance with the requirements of this Agreement, or in the event, for any reason, the Assignment shall fail to occur on or before the Investigation Deadline, this Lease shall be of no further force or effect and Landlord shall have no obligation or liability to Tenant or Assignee in respect of the proposed Assignment; provided, however, that in such event, the Original Lease shall be deemed automatically reinstated, ratified and reconfirmed by the parties. Nothing contained in this Lease shall be construed as creating any privity of estate between Landlord, on the one hand, and Assignee or New Guarantor, on the other hand, or any liability or obligation on the part of Landlord to New Guarantor or to Assignee prior to the Assignment Date except as expressly set forth in the Early Entry License, and except for enforcement of the rights granted New Guarantor and Assignee under the Early Entry License, neither New Guarantor nor, prior to the Assignment Date, Assignee, shall have any right, standing or privilege to enforce any obligation of Landlord under this Lease, whether directly or by assignment from Tenant, or in the name, place or stead of Tenant, or, except as to the obligations of Landlord under Section 1(d), as a putative third-party beneficiary of the rights or privileges of Tenant under this Lease. Nothing contained in this Section 1(f), however, shall be deemed to limit Tenant's rights under this Lease. 2. Tenant's Due Diligence and Pre-development Work. (a) As-Is Delivery of Premises. Except as expressly provided in this Lease, Landlord makes no representation and provides no warranty to Tenant or Assignee of any kind whatsoever regarding (i) the existence or nature of any Exceptions, (ii) the condition of the Premises or the Mississippi River (including, without limitation, any environmental matters), (iii) the suitability of the Premises for any aspect of the Project, or (iv) the feasibility of Tenant's development and operation of the Project on, at or from the Premises. Tenant acknowledges receipt from Landlord of the following: (i) an owner's policy of title insurance dated October 9, 1987 relating to the Property and issued by Ticor Title Insurance Company; (ii) a survey dated July 7, 1987 relating to the Property and prepared by Pitzman's & Co. Surveyors and Engineers, and (iii) certain environmental reports and studies conducted in respect of the Property dated January 30, 1981, March 12, 1981, January 1986 and June 1986, respectively, and prepared by Envirodyne Engineers, Inc. Tenant acknowledges that such materials have been provided solely for informational purposes to assist Tenant in Tenant's due diligence, that the same do not constitute representations or warranties by Landlord or the County, and that Tenant shall rely on Tenant's own evaluations, inspections and testing of the Premises in determining the suitability of the Premises and the feasibility of the Project. The foregoing provisions of this Section 2(a) shall be binding on Assignee as of the Assignment Date. (b) Tenant's Access to Premises. Tenant shall continue to have access to the Premises at any and all times after the Effective Date and prior to the Assignment Date. The access of Assignee and New Guarantor to the Premises prior to the Assignment Date shall be subject to the terms and conditions of the Early Entry License. (c) Zoning Condition. At the written request of Assignee, which request shall be delivered by Tenant to Landlord not later than 60 days after the Effective Date, Landlord shall apply to the County Planning Commission for an amendment to the existing "C-8" classification of the Premises so as to enable Assignee to construct and operate the Project at and from the Premises in accordance with the New Project Proposal; provided, however that Landlord shall not be obligated to incur any out-of- pocket or third-party costs and expenses in connection with such application. Tenant shall provide to Landlord or shall cause Assignee to provide to Landlord such information and documentation as may be necessary and appropriate to enable Landlord to apply for the rezoning. In the event the Premises is not so rezoned (or, if so rezoned, in the event the conditions of such rezoning are not acceptable to Tenant or Assignee in its discretion) pursuant to County ordinance prior to the later to occur of that date which is 180 days after the Effective Date or that date which is 120 days after the filing of the application by Landlord (the "Rezoning Deadline"), Tenant shall have the option, if exercised by delivery of written notice to Landlord delivered prior to the Rezoning Deadline, to cancel this Lease without further obligation or liability on the part of either party to the other; provided, however, that if the aforementioned rezoning has not occurred on or prior to the Rezoning Deadline notwithstanding the reasonably diligent efforts of the parties to secure the rezoning, either party shall have the right to extend the Rezoning Deadline for an additional period of 60 days. Tenant shall be responsible for providing or for causing Assignee to provide to the County Planning Commission all information required of Tenant or Assignee, as the case may be, by the County Planning Commission. (d) Acceptance of Premises. Tenant hereby accepts the Premises "AS IS", subject only, if applicable, to (i) the occurrence of the Commencement Date, as defined in Section 3(a), and (ii) any termination of this Lease occurring pursuant to the provisions hereof. From and after the Original Effective Date, Landlord shall not subject, and shall not have subjected, the Premises to any liens or encumbrances not expressly permitted by this Lease without the prior written consent of Tenant. The foregoing provisions of this Section 2(d) shall be binding on Assignee as of the Assignment Date. 3. Term of Lease. (a) Commencement Date. The term of this Lease (the "Term") shall commence (the "Commencement Date") if at all, at such time as the following have occurred: (i) the Assignment; (ii) the Missouri Gaming Commission (the "Commission") commences the investigation of Assignee (the "Investigation") incident to Assignee's application for Gaming Licensure to operate the Project in accordance with the New Project Proposal (the "Investigation Date"); (iii) Assignee has obtained all Site Permits (as defined in Section 3(b)) (the "Site Permit Date"); and (iv) the New Guarantor shall have executed and delivered to Landlord the New Rent Guarantee, together with an opinion of counsel confirming the corporate existence and good standing of New Guarantor, and the due authorization, execution and delivery by New Guarantor of the New Rent Guarantee. The Term shall expire on the 99th anniversary of the day prior to the Commencement Date. Each successive 12 month annual period occurring subsequent to the Commencement Date shall be deemed a "Lease Year" for all purposes under the Lease. Landlord and Tenant shall each execute a memorandum prepared by Landlord and reasonably acceptable to Tenant confirming the Commencement Date of this Lease, such memorandum to become an attachment to this Lease. (b) Site Permits and Gaming Licensure. As used in this Lease, the term "Site Permits" shall mean all permits or licenses issuable by the U.S. Army Corps of Engineers (the "Corps") or by other governmental bodies to enable Tenant to commence dredging of the Mississippi River, and for site development, grading and excavation work on the Premises, including, without limitation, the Corps' Section 10 and 404 Permits, a flood plain development permit, a metro sewers and highway permit and a site plan approval permit, but excluding any building or construction permits required to enable Tenant to commence or complete the construction of Tenant's Project improvements or to occupy and operate the Project. Tenant shall make application for all Site Permits at the earliest practical opportunity consistent with the status from time to time of the Investigation. Tenant and Assignee shall use all reasonable efforts under the circumstances to obtain the Site Permits and Gaming Licensure, and Landlord shall fully and actively support, endorse and diligently assist Tenant and Assignee in such efforts, provided Landlord shall not be obligated to incur any out-of-pocket or third party expenses for Tenant's or Assignee's benefit or pay any monies to Tenant or Assignee. From and after the Assignment Date, Tenant shall deliver to Landlord a copy of each and every material notice delivered to or received from the Commission by Tenant. As used in this subsection (b), a "material notice" shall be any notice substantively bearing upon the availability of Gaming Licensure or the Site Permits or affecting the occurrence of the Commencement Date or Project Opening. Without the prior written consent of Landlord, such consent not to be unreasonably withheld or delayed, Tenant shall not withdraw Tenant's application for any of the Site Permits or for Gaming Licensure prior to any termination of this Lease. (c) Early Defeasance of Lease. Landlord or Tenant shall have the right to terminate this Lease pursuant to subsection (d) if, for any reason other than an Unavoidable Delay (as defined in Section 30) or a delay caused by Landlord or the County, any of the following conditions occur: (i) notwithstanding Tenant's or Assignee's diligent pursuit of Gaming Licensure, if the Investigation Date has not occurred on or before August 15, 2001 (the "Investigation Deadline") or Tenant or Assignee reasonably determines, based on communications with or information received from the Commission staff, that the Commission will not commence the Investigation before the Investigation Deadline; or (ii) the Site Permit Date has not occurred on or before the expiration of the 9 month period commencing on the Investigation Date (the "Site Permit Deadline") or the Corps officially notifies Tenant or Assignee that it will not permit the construction or operation of the Project as contemplated in this Lease; provided, however, in the event (i) the Investigation Date has timely occurred, (ii) Tenant or Assignee has obtained all Site Permits other than the Site Permits to be issued by the Corps (or issuance of the remaining Site Permits is contingent solely on issuance of the Corps' Site Permits), and (iii) the Corps has not officially notified Tenant or Assignee that it will not permit the operation of the Project at the Premises, Tenant or Assignee shall have the option to extend the Site Permit Deadline for 3 successive periods of 60 days each by delivery of written notice of such election to Landlord not sooner than 30 days prior to, and not later than, the Site Permit Deadline; provided, however, Tenant or Assignee has made diligent efforts to secure the Site Permits to be issued by the Corps and has cooperated with the Corps by responding in a reasonably timely fashion to requests for information or proposed plan changes from the Corps. (d) Termination Notice. Termination of this Lease pursuant to Section 3(c) shall be accomplished by delivery of written notice to the non-terminating party of such election on or before the Investigation Deadline or the Site Permit Deadline, as the case may be (a "Termination Notice"); provided, however, that no such Termination Notice shall be effective unless the terminating party shall have sent an initial notice advising the non-terminating party of its intent to terminate this Lease at least 30 days prior to the date of the Termination Notice and the cause or grounds for such termination have not been cured during such 30-day period. (e) Post-Commencement Date Defeasance. From and after the Commencement Date, this Lease may be terminated by Tenant solely upon the discovery of any hazardous waste, pollutant, toxic pollutant, hazardous substance, toxic substance, infectious waste, solid waste or similar material or substance requiring abatement, removal, remediation or other special treatment in order to comply with applicable law (collectively, "Hazardous Substances") beneath the surface of the Premises not detected by or otherwise made known in writing to Assignee or New Guarantor prior to the Assignment Date, and costing more than $3,000,000 to remediate, or upon the repeal, invalidation or material adverse amendment of the law or regulations permitting and/or regulating gaming in the State of Missouri and consequent cessation of Tenant's business at the Premises, or upon the occurrence of a casualty or condemnation, all in accordance with the applicable provisions of Sections 4(g), 11(c), 15 or 16, respectively. 4. Project Construction and Development. (a) Submission and Approval of Plans. Prior to commencement of the work for the construction and development of the Project on the Premises (the "Work"), Tenant shall submit or shall cause Assignee to submit to Landlord for Landlord's approval, a final site plan, footprints, utility plans, exterior renderings, elevations and offsite improvement plans (together, the "Plans") and a proposed schedule of the Work (the "Work Schedule"), including the barge-based gaming facility and related installations for dockside gaming at the Premises (together, the "Casino"). Landlord's approval of the Plans and Work Schedule shall not be unreasonably withheld or delayed. In all events, Landlord shall approve or disapprove any proposed Plans within 10 business days after Landlord's receipt of same, and any disapproval shall be specific as to the reasons. Tenant, or, prior to the Assignment Date, Assignee, shall be given adequate time and opportunity to correct such matters which Landlord has identified as the basis for such disapproval. If Landlord does not approve or disapprove such Plans within 10 business days after submission by Tenant or Assignee, as the case may be, then such Plans shall be deemed approved for all purposes under this Agreement. Landlord agrees that the Premises shall be subject to any utility easements referenced in the approved Plans and to execute such easement agreements for the benefit of the Project. Landlord's approval of the Plans shall not be deemed to constitute acceptance by Landlord of any liability in connection with the Plans or the Work, such liability and risk being expressly and exclusively borne by Tenant. The procedures set forth in this Section 4(a) shall apply with respect to any changes to the approved Plans or Work Schedule proposed by Tenant or Assignee, as the case may be. (b) Construction and Occupancy Permit Applications. Tenant, at Tenant's sole cost and expense, shall apply for all permits required to enable Tenant to commence and complete the construction of Project improvements (the "Construction Permits") and to occupy and operate the Project (the "Occupancy Permits"), and Tenant shall prepare all engineering and construction documents required to apply for or comply with the terms of any Construction Permit. Landlord shall endorse and support Tenant's Permit applications to the extent the same are materially consistent with the approved Plans; provided Landlord shall not be required to incur any out-of- pocket or third-party costs or expenses in connection therewith. (c) Delivery of Premises. The Premises shall be made available to Tenant for commencement of the Work from and after the Commencement Date, provided Tenant has first obtained such Permits (Site Permits or Construction Permits, as the case may be) as are necessary for commencement of the applicable Work, executed and delivered the necessary construction contracts, established the construction disbursing escrow and delivered to Landlord the insurance certificates, contract assignments, consents and bonds provided for in Section 4(e). Prior to commencing any Work on or at the Premises, Tenant, at Tenant's sole risk, cost and expense, shall cause a resubdivision plat and revised legal description of the Premises to be prepared by a licensed Missouri surveyor in accordance with Attachment B and submitted to Landlord for Landlord's review and approval, which approval shall not be unreasonably withheld. The legal description of the Premises shall become Attachment J to this Lease. The resubdivision plat shall be sufficient to enable Landlord to cause the Premises to be lawfully subdivided from the Adjacent Parcel and shall be consistent with Tenant's contemplated ingress and egress by the public to the Project and Tenant's access to service roads and work areas as shown on the Project design plans and renderings. Landlord agrees to cooperate fully with Tenant in connection with Tenant's preparation of the legal descriptions and resubdivision plat, but at no out-of-pocket or third-party cost or expense to Landlord, except that Landlord shall bear the cost of any surveying of the Adjacent Parcel required to effect the resubdivision and any other resubdivision costs allocable to the Adjacent Parcel, with any such allocation between Tenant and Landlord to be based on the relative size of the parcels unless the cost in question relates solely to one parcel. (d) Coordination and Inspection of Work. Landlord shall have the right to inspect and monitor the progress of the Work during regular business hours, on reasonable prior notice to Tenant and without material interference with the Work. Tenant shall advise Landlord as to any material claim pending or threatened by or against Tenant or otherwise involving the Project and of any anticipated delays in Project Opening. Within 30 days after the Commencement Date, Tenant and Landlord shall each designate one or more "Project Representatives" who shall provide liaison services between the Tenant and contractors and consultants working on the Project on one hand and Landlord and officials and departments of the County on the other. The Project Representatives shall confer by telephone and fax communication, and shall meet with each other regularly or otherwise on reasonable prior request for the purpose of conveying and obtaining information and approvals required in connection with the Work. Notices provided by Project Representatives shall be sent and received in accordance with the provisions of Section 29 regarding delivery of Notices. (e) The Work. After the Commencement Date, Tenant shall proceed with reasonable diligence to obtain all Construction Permits not theretofore obtained by Tenant, to commence and complete the Work in accordance with the Plans and, subject only to Unavoidable Delays and delays caused by Landlord or the County, the Work Schedule, and to obtain all Occupancy Permits and to open the Project (including the Casino) to the public ("Project Opening"). All Work shall be performed by Tenant at the sole risk, cost and expense of Tenant (i) in a first class, workmanlike manner, (ii) free of liens for labor and materials (subject to Tenant's right to contest liens as provided in this Lease), (iii) subject to commercial liability, builder's risk and worker's compensation insurance coverage required under this Lease, (iv) free of all other claims against Landlord or the Project (subject to Tenant's right to contest liens as provided in this Lease), (v) in compliance with the Permits and all applicable laws, regulations, ordinances and codes ("Governmental Requirements"), and (vi) as to the Work performed on the Premises only, subject to construction disbursing escrows with properly qualified and licensed contractors (collectively, the "Work Requirements"). Tenant shall be responsible for timely delivery to Landlord of all insurance certificates, construction contracts, construction disbursing escrows, collateral assignments of construction contracts and the contractors' consents thereto. Tenant shall deliver to Landlord a certificate of Substantial Completion of the Work issued by Tenant's architect, and Tenant shall provide evidence of payment of all construction costs. As used herein, "Substantial Completion" shall mean that only insubstantial details of finish construction and installation remain to be performed, and that the Project may nonetheless be opened to the public. Tenant agrees that all punch-list items shall be completed as soon as reasonably practical and in no event later than 180 days after Substantial Completion. Tenant shall deliver to Landlord a certificate of Final Completion issued by Tenant's architect and evidencing the completion of all punch-list items. (f) Control of Work. Landlord and Tenant agree, subject to the provisions of the New Project Proposal applicable to the employment or engagement of local persons or companies, minorities and women or companies owned by minorities and women, which provisions are hereby incorporated into this Lease by this reference, and subject further to applicable Governmental Requirements, that performance of the Work shall be subject to the following terms and conditions: (i) Tenant shall have the sole and exclusive right to select any architect, construction manager, general contractor and engineer in connection with the design and construction of the Project; (ii) Tenant shall have the sole and exclusive right to select any additional subcontractors, materialmen, suppliers or any other persons or companies in connection with the construction of the Project; and (iii) Tenant shall have the sole and exclusive right to manage, direct, control, coordinate and prosecute the completion of the Project, and Landlord shall cooperate fully in such regard, but at no cost or expense to Landlord. (g) Undetected Contamination. In the event Tenant, after commencement of the Work and not later than the date of Project Opening, discovers Hazardous Substances beneath the surface of the Premises which were not detected prior to the Effective Date or, if detected, the extent of which was not fully ascertained by any "Phase II" work or testing performed prior to the Effective Date (the results of which were made known in writing to Assignee or New Guarantor) or which were not otherwise disclosed to Assignee or New Guarantor in writing prior to the Assignment Date, and in the event the cost to remediate such Hazardous Substances shall equal or exceed $3,000,000, Tenant shall have the option, by delivery of written notice to Landlord within 90 days after Tenant's discovery of such Hazardous Substances, accompanied by a written bid of Tenant's contractor confirming such $3,000,000 or greater remediation cost, to terminate this Lease without further obligation or liability to Landlord, such termination to take effect no earlier than the date Tenant shall have (i) paid all costs incurred by Tenant in connection with the Work, (ii) installed warning signs and perimeter fencing to secure access to any area made dangerous by Tenant's excavations, and (iii) surrendered the Premises to Landlord, free and clear of Tenant's construction equipment and materials, but otherwise "AS IS." Landlord shall not be obligated to refund to Tenant the Commencement Date Fee (defined in Section 5(a)(i)) or any prepaid Annual Rent, and Landlord's agreement with respect to the cure of any objection raised by Tenant shall be void and of no further force or effect. Tenant shall provide Landlord with copies of all reports, test results and evaluations of Hazardous Substances discovered beneath the Premises. (h) Project Opening. Upon, and as a condition to, Project Opening, Tenant shall pay the Project Opening Fee described in Section 5(a)(ii). On or before the date of Project Opening, the parties shall execute a memorandum prepared by Landlord and reasonably acceptable to Tenant establishing the Project Opening date (and the date payments of Minimum Rent or Percentage Rent, as the case may be, shall be due under Section 5), which memorandum shall become an attachment to this Lease. (i) Relocation of Sewer Line. Landlord hereby agrees to the relocation of the sewer line running west to east across the Premises if requested by Tenant in accordance with plans approved by MSD and to grant MSD an easement as reasonably necessary to accommodate such relocation, and Tenant hereby agrees to provide for all costs related to the inspection and removal, relocation or replacement of such sewer line. (j) Provision for Additional Wetland Areas. Landlord hereby agrees to designate wetland areas to replace the wetland areas located on the Premises and Tenant hereby agrees to pay for any costs associated with the replacement of the wetland areas located on the Premises. (k) Right-of-Ways. Landlord will use its best efforts, not including litigation, to cause St. Louis County to vacate the right-of-way for the extension of Arlee Avenue upon the dedication to St. Louis County of the extension of Hoffmeister Avenue contemplated by Tenant; provided, however, that it is understood and agreed that Landlord shall be entitled to dedicate to St. Louis County a right-of-way up to 82 feet wide on the Premises for the future northward extension of the Hoffmeister Avenue Extension. Tenant agrees to take all action reasonably necessary to effectuate such dedication and to allow for the construction of such northward extension. 5. Rent. (a) Key Date Payments and Annual Rent. Tenant shall pay to Landlord, without setoff or deduction, by corporate or cashiers check or by wire transfer to such account as may be directed by Landlord in immediately available U.S. funds, the following rentals (collectively, "Rent"): (i) $2,500,000 on the Commencement Date (the "Commencement Date Fee"); (ii)$2,500,000 on the date of Project Opening (the "Project Opening Fee"); and (iii)as annual rent ("Annual Rent"), (A) commencing on the Commencement Date and continuing until the date of Project Opening, $2,000,000 per annum, payable in equal monthly installments, and (B) commencing on the date of Project Opening and continuing until the expiration of the Term or, subject to Section 25, termination of the Lease, the greater of (a) 4% of Adjusted Gross Receipts ("AGR") ("Percentage Rent") or (b) applicable Minimum Rent. (b) Minimum Rent. As used in this Lease, the term "Minimum Rent" shall mean $3,000,000 during the 1st 12 month period occurring after Project Opening, $2,800,000 during the 2nd 12 month period occurring after Project Opening, $2,600,000 during the 3rd 12 month period occurring after Project Opening, $2,400,000 during the 4th 12 month period occurring after Project Opening, $2,200,000 during the 5th 12 month period occurring after Project Opening, and $2,000,000 commencing on the 5th anniversary of the date of Project Opening and continuing through Lease Year 15. Minimum Rent shall be increased by 10% on the first day of each successive 10th Lease Year occurring during the Term, commencing with Lease Year 16. (c) Payment of Annual Rent. From the Commencement Date until the date of Project Opening, Annual Rent shall be paid in equal monthly installments, with each installment equal to 1/12th of the applicable Minimum Rent. From and after the date of Project Opening, Annual Rent shall be paid on a monthly basis as provided in Section 5(a)(iii)(B). In the event the Commencement Date, the date of Project Opening, or the date the Term expires occurs on a date which is not the first day of a month, the relevant monthly installment of Annual Rent shall be prorated per diem, based on the number of days of such month included within the applicable Rent period. Payments of Annual Rent shall be subject to quarterly adjustment as provided in this subsection (c) in the event and to the extent Minimum Rent accruing for such quarterly period is exceeded by Percentage Rent (4% x AGR) accruing for such quarterly period. As used in this Lease, the term "Adjusted Gross Receipts" or "AGR" shall mean the gross receipts from licensed gambling games and devices less winnings paid to wagerers and the 20% tax paid to the State of Missouri pursuant to Section 318.822 of the Revised Missouri Statutes. In the event Percentage Rent exceeds Minimum Rent during any quarter, Tenant shall pay such difference to Landlord, as an adjustment to Minimum Rent, not later than 45 days after the end of each quarter. At the end of each Lease Year, Tenant shall be entitled to a credit against Rent next due to the extent of any overpayments of Percentage Rent made by Tenant during such Lease Year. Tenant shall report AGR to Landlord on a quarterly basis in accordance with the provisions of Section 13. 6. Triple Net Obligation. The Lease shall be what is commonly known as a "Triple Net" Lease, and Tenant shall be responsible for the full and timely performance of all obligations and payment of all costs, charges, fees, expenses and other sums incurred by or for Tenant's benefit in connection with Tenant's ownership, leasing, construction, development, equipping, management, maintenance, repair, replacement, operation or use of the Project or any component thereof, including without limitation all salaries, fees, commissions, rentals, license or permit fees, loan or mortgage payments, utility charges, trash, sewage and waste water disposal charges, fuel charges, insurance premiums and deductibles, and all general real estate, ad valorem, sales, use and other taxes and assessments, special or general, allocable to the Premises, the Project or the leasehold estate of Tenant. All sums other than Rent payable by Tenant hereunder, including without limitation the amounts due Landlord pursuant to this Section 6 (whether directly or by reimbursement of any sum paid by Landlord to a third party in the cure of a default by Tenant as permitted under this Lease) shall be deemed "Additional Rent" as to which Landlord shall have the same rights and remedies for enforcement of payment and collection as Landlord has in respect of Rent. 7. INTENTIONALLY OMITTED. 8. Representations and Warranties. (a) In order to induce Landlord to enter into this Lease, Tenant makes the following representations and warranties to Landlord, as of the Effective Date: (i) Tenant is duly formed and validly existing as a Missouri limited partnership; (ii) the execution and delivery of this Lease and the performance by Tenant of Tenant's obligations hereunder have been duly authorized by all requisite corporate action; (iii)this Lease constitutes the legal, valid and binding obligation of Tenant and is enforceable against Tenant in accordance with its terms; (iv) no litigation is pending or, to the best of Tenant's knowledge, threatened against Tenant which, if adversely determined, would likely have a material adverse impact on Tenant or the Project; (v) Tenant is not a party to, and neither Tenant nor Tenant's properties, real or personal, are subject to, any agreement, order, proceeding, ruling or other matter in conflict with any provision of this Lease or which materially and adversely affects its ability to perform its obligations hereunder; (vi) Tenant is solvent and is not a party to any assignment for the benefit of creditors or bankruptcy proceeding; and (vii)Tenant is not in material default of any contract or agreement to which it is a party which materially and adversely affects Tenant's ability to perform its obligations under this Lease. (b) In order to induce Tenant to enter into this Lease, Landlord makes the following representations and warranties to Tenant as of the Effective Date: (i) Landlord is a corporate and political body lawfully existing and in good standing under the laws of the State of Missouri and has the power and authority to enter into this Lease, and the execution and delivery of this Lease and the performance by Landlord of Landlord's obligations hereunder have been duly authorized by all requisite governmental action; (ii) this Lease constitutes the legal, valid and binding obligation of Landlord and is enforceable against Landlord in accordance with its terms; (iii)no litigation is pending or, to the best of Landlord's knowledge, threatened against Landlord which, if adversely determined, would likely have a material adverse impact on the Project; (iv) Landlord is solvent and is not a party to any assignment for the benefit of creditors or bankruptcy proceeding; (v) Landlord is not a party to any agreement, order, proceeding, ruling or other matter in conflict with any provision of this Lease; and (vi) Landlord is not in default of any contract or agreement to which it is a party which materially and adversely affects its ability to perform its obligations under this Lease. (c) Each party agrees to promptly notify the other of any occurrence which shall make any representation or warranty provided by it as of the Effective Date no longer true, accurate or complete in any material respect. 9. Use of Premises and Quiet Enjoyment. (a) Designated Use. Tenant shall use the Premises for the operation of a Casino and for related, supporting infrastructure, including without limitation a parking lot, lighting, signage and such additional installations as are required by Tenant in connection therewith. In addition to the Casino, Tenant or its permitted subtenants may (but shall not be obligated to) develop and operate on the Premises such restaurants, bars, hotels, bowling alleys, movie theaters, stores and/or other facilities, as Tenant may in its discretion determine, provided, however, that in all events the Casino shall contain a minimum of 26,000 square feet of Las Vegas style gaming area. (b) Alterations and Improvements. Subject to the provisions of Section 9(a), Tenant may from time to time, at Tenant's sole risk, cost and expense, make alterations and improvements, (i) without Landlord's prior written consent, to the interior, non-structural components of the Premises which do not reduce the minimum square footage devoted to Casino gaming, and (ii) with Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed, to the exterior or structural components of the Project; provided, however, that Landlord shall not be required to consent to any reduction in the square footage of the Project devoted to Casino gaming. In the event of a dispute between the parties as to whether Landlord's consent is required or has been unreasonably withheld, the issue shall be submitted to binding arbitration in accordance with the procedures of Section 31. In order to rule in favor of Landlord, the arbitrators must determine that such proposed new construction would be detrimental to the Project and Landlord's realization of the benefits of this Lease. (c) Compliance With Governmental Requirements. During the Term, Tenant shall, at its sole cost and expense, promptly observe and comply with all Governmental Requirements and the requirements of all insurance companies writing policies covering the Casino or the parking areas, streets, sidewalks, vaults, curbs and gutters included within the Project, or the use and occupation or franchises and privileges connected therewith, whether or not such Governmental Requirements or insurance requirements shall necessitate structural changes, improvements, interference with the use and enjoyment of the Project, replacements or repairs, extraordinary as well as ordinary, foreseen or unforeseen. The Casino shall be located within the Project in such a manner so as not to violate any applicable Gaming Licensure requirements of the Commission or any Permits obtained by Tenant. Tenant shall pay all costs, expenses, claims, fines, penalties and damages that may in any manner arise out of or be imposed because of the failure of Tenant to comply with any of the foregoing requirements. (d) Permitted Contests. Tenant, after notice to Landlord, may, by appropriate legal proceedings conducted at Tenant's sole expense, contest in good faith the validity or enforcement of any Governmental Requirement and may defer compliance therewith, provided that (i) such noncompliance shall not constitute a crime, (ii) Tenant shall diligently prosecute such contest to final determination by a court, governmental authority, agency, department or other body having final jurisdiction, (iii) the contest conducted by Tenant will not operate to extend the Investigation Deadline or the Permit Deadline, and (iv) the contest conducted by Tenant will not result in the closing of the Project, any foreclosure or forfeiture of Tenant's leasehold estate or the imposition of any charge, fine, lien, penalty or claim against Landlord. Tenant, after notice to Landlord, may, by appropriate legal proceedings conducted at Tenant's sole expense, contest in good faith the validity of any lien for labor or materials imposed against Tenant or the Project, provided that Tenant first discharges such lien from the records of the County by posting of bond or other security reasonably adequate to secure Tenant's performance, and provided further that such contest will not result in the closing of the Project or any foreclosure or forfeiture of Tenant's leasehold estate. (e) Quiet Enjoyment. Landlord covenants and agrees that Tenant shall be entitled to lawfully and quietly hold, occupy and enjoy the Premises during the Term without hindrance or interference by Landlord or by any party claiming by, through or under Landlord, in accordance with and subject to the terms and conditions of this Lease. 10. Exclusivity and Restrictive Covenant. (a) Grant of Exclusivity. To the fullest extent permitted by law, and subject only to the provisions of Section 10(b), Landlord hereby grants to Tenant and its permitted successors and assigns, for a period commencing on the Original Effective Date and continuing through the 15th Lease Year (the "Exclusive Rights Period"), the exclusive right to operate any type of excursion gaming boat, land based or other type of gaming or gambling facility or facilities on any property which is at any time during the Exclusive Rights Period owned or controlled, directly or indirectly, by Landlord and located south of the River des Peres or, with respect to the development thereof or to uses which may be made thereof by the owner, tenant or occupant, under the direct or indirect administrative jurisdiction of Landlord. Such exclusive rights shall include an obligation on the part of Landlord to not authorize, endorse, support or otherwise assist, directly or indirectly, in connection with issuance by any governmental entity of any license or permit to or for the development or operation of any potentially competing gaming project south of the River des Peres for the duration of the Exclusive Rights Period. (b) Conditions of Grant. Landlord's grant to Tenant of exclusivity is subject to the following express conditions: (i) the Casino shall remain in operation after Project Opening; (ii) no Event of Default shall have occurred and be continuing under this Lease on the part of Tenant or on the part of the New Guarantor under the New Guarantees; (iii) Tenant and New Guarantor shall honor the restrictive covenant contained or referenced in Section 10(c); and (iv) Tenant shall not earn more than $200,000,000 in AGR during any Lease Year; provided that such amount shall be increased for the sixth (6th) Lease Year and each Lease Year thereafter by the same percentage as the percentage increase, if any, in the Consumer Price Index (as hereinafter defined) between the last month of the fifth (5th) Lease Year and the last month of the sixth (6th) and each succeeding Lease Year, as the case may be. For purposes hereof, the term "Consumer Price Index" means the Consumer Price Index for All Urban Consumers for the U.S. City Average for All Items 1982-84=100, as determined by the United States Department of Labor, Bureau of Labor Statistics. In the event that the publication of the Consumer Price Index is discontinued, such index as may be published by any United States government bureau or department to replace the present Consumer Price Index shall be substituted therefor. (c) Restrictive Covenant. Tenant covenants and agrees that during the Exclusive Rights Period, Tenant shall not participate in any manner in the ownership, sponsorship, control, management, operation or use of any riverboat gaming facility along either the Illinois or Missouri banks of the Mississippi River from the southern boundary of the City of St. Louis to the northern boundary of Jefferson County. Tenant acknowledges that the restrictive covenant contained in this Section 10(c) is reasonable under all of the circumstances. Notwithstanding the foregoing, the Exclusive Rights Period shall terminate upon any termination of this Lease other than pursuant to Section 25 hereof. (d) Right of First Refusal. In the event Landlord shall elect to support issuance of a second gaming license south of the River des Peres because Tenant has earned more than $200,000,000 in AGR, as adjusted pursuant to Section 10(b), during any Lease Year, and provided Tenant is in compliance with the conditions described in clauses (i), (ii) and (iii) of Section 10(b), Landlord shall grant Tenant a 180-day right of first refusal (subject to extension during the pendency of any arbitration proceeding as hereinafter defined) to commit in writing to construct and operate a second gaming project in unincorporated St. Louis County at a mutually acceptable location (and on terms and conditions mutually acceptable to the parties) which, if constructed and opened for operation by Tenant within 30 months after Tenant's election (which 30-month period shall be subject to extension on account of Unavoidable Delays and/or during the pendency of any arbitration proceeding as hereinafter provided), shall operate, so long as the Tenant is in compliance with respect to clauses (i), (ii) and (iii) above, as the same pertain to both projects, to divest Landlord of the right to implement or to authorize the implementation of any proposal from another prospective tenant, developer or operator of a second gaming facility, whether the proposal in question involves the sale, lease or licensing of property owned or leased by Landlord or Landlord's support before the Commission and the St. Louis County Council with respect to an operation proposed to be located on privately-owned land. Tenant's failure to elect to construct and operate a second gaming project by timely written notice to Landlord shall constitute a waiver of Tenant's right of first refusal, unless Landlord's proposal does not result in a sale or lease of the site in question, in which event Tenant's right of first refusal shall be deemed reinstated. Landlord agrees to lend all reasonable cooperation to Tenant in connection with any timely exercise by Tenant of Tenant's right of first refusal to construct and operate a second gaming project. In the event of a dispute between Landlord and Tenant regarding any aspect of Tenant's specific plans for the construction and operation of a second gaming project or the terms of a lease or other agreement with Landlord with respect to such second gaming project (other than rent, which shall be equal to the then- current Rent payable under this Lease), either party shall have the right to submit such dispute to binding arbitration in accordance with the procedures of Section 31. (e) Memorandum of Restrictive Covenant. The provisions of this Section 10 shall be incorporated into a memorandum prepared and recorded by Landlord against the Adjacent Parcel and any property now or hereafter owned by Landlord and located south of the River des Peres. 11. Covenant of Continuous Operation. (a) Maximization of Revenues. The Project (including the Casino and any barges utilized in connection with the Project, and all structures, parking lots, driveways, landscaping, fencing, lighting and signage), shall be maintained, managed, operated, staffed, serviced, equipped and repaired in accordance with all Governmental Requirements, insurance requirements and the highest standards of projects operating along and from the Mississippi and Missouri Rivers. The Casino shall remain in operation 24 hours a day, 7 days a week, 365 days a year, so as to maximize the opportunity of Landlord to earn Percentage Rent under Section 5(a)(iii), except to the extent limited by applicable Governmental Requirements, Unavoidable Delays, casualty or condemnation or by repairs, replacements or alterations made by Tenant in accordance with the provisions of Section 9. Tenant shall provide a reasonably adequate complement of properly trained and equipped security personnel for the Project at all times. (b) Particular Operations. The exterior of the Project and all Project signage shall be illuminated at all times during which the Project is open. Subject to applicable laws, Tenant shall have the right to erect or affix such signs and banners as Tenant may require in its discretion for directional, informational, promotional or advertising purposes upon windows, doors and walls (interior and exterior) of Project structures and otherwise on or about the Project. All signs and banners shall be in good taste and generally consistent with the themes and aesthetics of the Project. (c) Illegality of Gaming Operations. Notwithstanding the foregoing provisions of this Section 11, in the event casino gaming shall become illegal in the State of Missouri by virtue of legislative action taken by the Missouri General Assembly, popular referendum or otherwise, and in the further event that the Casino is closed for a period of 365 consecutive days due to such legal impediment, then either party shall have the right to cancel this Lease by delivery of written notice of such election to the other party at any time prior to the date casino gaming again becomes legal in the State of Missouri. For so long as the Project remains closed due to such legal impediment, Tenant's obligation to operate the Project and to pay Rent shall be suspended. Landlord or Tenant shall have the right but not the obligation to contest the validity of any legal impediment to the operation of the Project arising under this subsection (c), and in the event either party elects to contest such impediment, the other party shall lend all non- financial assistance reasonably required by the contesting party; provided, however, Tenant shall not be obligated to participate in or assist Landlord in connection with such contest if the Project is closed for 365 days due to such legal impediment and either party elects to cancel this Lease as provided in this subsection (c). 12. Assignment and Subletting. (a) Landlord's Consent Generally. No assignment or subletting (including licensing) shall be allowed without the prior written consent of Landlord, which consent shall not be unreasonably withheld. In no event shall any assignment or subletting operate by itself to release Tenant from any liability under this Lease, release New Guarantor from any liability under the New Guarantees or constitute permission for any further subletting or assignment. Consent to any one proposed assignment or sublease shall not be deemed consent to further proposed assignments or subleases. A partnership or corporate transaction involving Tenant or the General Partner, including without limitation a merger or sale or other transfer of the partnership interests in Tenant or the stock of or partnership interests in the General Partner, which results in a change of control of the Tenant or the General Partner, shall constitute an assignment requiring Landlord's prior written consent. Notwithstanding the foregoing provisions of this Section 12(a), if the transaction involves the assignment of this Lease to the New Guarantor or to any corporation, partnership or limited liability company controlling or controlled by the New Guarantor or under common control with Tenant, the consent of Landlord thereto shall not be required, but no such transaction, by itself, shall release Tenant from any liability under this Lease. Tenant shall deliver notice to Landlord of any assignment or sublease which Tenant believes does not require Landlord's consent under this Section 12(a), together with sufficient information to enable Landlord to verify that its consent is not required. The assignment or pledge of the assets of the Project as collateral for financing purposes shall not be considered an assignment pursuant to this Section 12 but shall be governed by the provisions of Section 19. Landlord's consent shall not be required in connection with the subletting or licensing of portions of the Premises for bar, restaurant, hotel, retail, recreational, entertainment or other purposes which are incidental to the operation of the Casino and which do not reduce the floor space dedicated to Casino gaming under Section 9; provided that no such subletting or licensing shall operate to relieve Tenant of any liability under this Lease. (b) Procedures for Assignment and Subletting. In the event Tenant desires to assign its interest in this Lease or to sublet the use of all or any portion of the Project, and provided Landlord's consent to such assignment or subletting is required under Section 12(a), Tenant shall deliver notice of the proposed transaction to Landlord, together with detailed information regarding the financial condition and operating history of the proposed assignee or subtenant (including any operator) and the terms of the proposed assignment or subletting. Within 30 days after receipt of the foregoing information, and subject to the provisions of subsection (a) of this Section 12, Landlord shall accept or reject Tenant's proposal. Landlord's rejection shall be based upon (i) the failure of the proposed assignee or subtenant to meet any of the "Stated Criteria" as hereinafter defined, or (ii) the occurrence of an Event of Default, and Landlord shall specifically state the grounds for Landlord's rejection. If Landlord shall fail to respond to Tenant within 30 days after receipt of Tenant's proposal, Landlord shall be deemed to have accepted such proposal. In the event Tenant shall object to Landlord's rejection of Tenant's proposal, Tenant's sole remedy shall be to commence arbitration proceedings in accordance with the provisions of Section 31. The arbitrators shall either approve or disapprove the proposed assignment or sublease based on their determination regarding compliance with the Stated Criteria or whether an Event of Default has occurred and shall make no other award or determination. Tenant agrees to indemnify and hold Landlord harmless from and against any loss, cost, damage, claim, demand or expense (including attorneys' fees and expenses) incurred by Landlord in connection with any action brought by or for the benefit of the proposed assignee or subtenant or seeking relief other than arbitration as provided herein. In the event an assignment is approved by Landlord or through arbitration, the assignee shall be subject to all of the provisions of this Lease. (c) Stated Criteria. With respect to any assignee or subtenant (or the general partner, if the assignee or subtenant is a partnership), the following shall constitute the Stated Criteria for approving any proposed assignee of Tenant's interest in this Lease or any proposed subtenant or operator of the Project: (i) the assignee, subtenant or parent corporation of such assignee or subtenant shall have a net worth of not less than $10,000,000.00, and if such parent corporation is relied upon to meet the net worth test, it shall deliver a guarantee of the Lease suitable to Landlord; (ii) the assignee, subtenant or parent corporation of such assignee or subtenant shall have a sufficient casino gaming operating history or reputation in the industry or community or a manager with such experience or reputation, in the reasonable judgment of Landlord; and (iii)the assignee, subtenant or parent corporation of such assignee or subtenant shall have a gaming license to operate the Project. Tenant agrees that Landlord shall not be deemed unreasonable in rejecting a proposed assignee or subtenant on any of the above-stated grounds. (d) Conveyance by Landlord. Landlord shall promptly notify Tenant in writing of any conveyance of the Premises, in whole or in part, or any interest therein, to any party. Landlord shall not convey the Premises, in whole or in part, or any interest therein to any party if such conveyance shall impair Tenant's rights under this Lease or jeopardize Gaming Licensure. Landlord's right to transfer title to the Premises or to assign rentals derived therefrom to any governmental body shall not be deemed to constitute any such impairment or jeopardy. 13. Reporting Covenants. Tenant shall report, or, prior to the Assignment Date, shall cause Assignee to report, each month in writing to Landlord the progress of the Gaming Licensure and Permit application process, the progress of construction, and, after Project Opening, on a quarterly basis, AGR realized by Tenant. Tenant also shall provide, or, prior to the Assignment Date, shall cause Assignee to provide, Landlord with such other information regarding the development and operation of the Project as Landlord may reasonably request, including the status of Tenant's obligations under the Lease. All reports of AGR shall be certified as to accuracy and completeness by an officer of Tenant. In addition, copies of annual audit statements shall be provided to Landlord by Tenant, and Landlord shall have the right, at Landlord's sole cost and expense, except as hereinafter provided, to conduct an audit of the books and records of Tenant, not more frequently than once during any Lease Year, in order to verify the accuracy of AGR reported by Tenant and Tenant's compliance with the various operating and reporting covenants contained in this Lease. Tenant shall maintain Tenant's books and records in support of Tenant's computations and reporting of AGR in accordance with generally accepted principles of accounting consistently applied. Tenant's books and records shall be retained or made available in the St. Louis metropolitan area, available for inspection and audit by Landlord during regular business hours on reasonable prior notice to Tenant and without material interruption of Tenant's business. In the event Landlord's audit or any audit conducted by the Commission discloses that AGR has been under- reported such that Landlord is entitled to receive an additional payment of Annual Rent, Tenant shall promptly make payment to Landlord of the entire sum due Landlord. In the event the amount due exceeds 5% of the amount paid by Tenant, Tenant also shall pay Landlord's reasonable expenses in conducting such audit. Upon Landlord's request, Tenant also shall provide Landlord with a copy of each financial statement, report and filing issued by or on its behalf and provided to any regulatory body, including, without limitation, the Missouri Gaming Commission, the Securities and Exchange Commission and other authorities, agencies and commissions having jurisdiction over Tenant's operations. Tenant shall promptly report to Landlord any notice received by it from any governmental authority or in respect of any proceedings at law or in equity to which Tenant is a party alleging violation of any Governmental Requirements by Tenant, and Tenant shall provide to Landlord such information as Landlord may request in connection therewith. Upon Landlord's request, Tenant shall present to Landlord on an annual basis the Coast Guard certificate of inspection obtained for the Casino. Tenant hereby irrevocably designates St. Louis County as the "home dock" for the Project during the Term for all purposes under Section 313.822 of the Revised Missouri Statutes, and Tenant agrees to confirm the status of the County as the "home dock" for the Project as and when requested to do so by Landlord or the Commission. 14. Insurance. (a) Types of Insurance. Throughout the Term, Tenant shall maintain in full force and effect the following insurance coverage: (i) commercial liability insurance on an "occurrence basis" against claims for "personal injury" including, without limitation, bodily injury, death or property damage occurring on, in or about the Project or in connection with any other operations of Tenant related to the Project (such as, by way of example, off-site bus or shuttle service), such insurance to afford immediate minimum protection of $5,000,000 combined single limit/per occurrence and $10,000,000 aggregate, and, (a) with respect to the Project exclusive of any boat hull, a deductible not greater than $75,000, and, (b) with respect to any boat hull, a deductible not greater than 1% of the value of the boat; (ii) property insurance against loss or damage to the Project (including the Casino) by fire and other risks covered by insurance of the type now known as "fire and extended coverage" in an amount equal to the replacement value of the Casino and remainder of the Project and with a deductible not greater than $75,000 from the loss payable for any casualty; (iii)protection and indemnity insurance including collision liability covering collisions with all fixed or floating objects with a minimum limit of $5,000,000 per occurrence and a deductible not greater than $75,000; (iv) worker's compensation insurance in full compliance with all applicable state and federal laws and regulations, including a specific endorsement covering liability for Federal Longshoremen's and Harbor Workers' Compensation Act; (v) employers liability insurance in the minimum amounts of $1,000,000 per individual claim, not to exceed $10,000,000 in the aggregate, with a deductible not greater than $350,000, covering injury or death to any employee which may be outside of or in addition to liability under any worker's compensation statutory coverage; (vi) excess or umbrella insurance providing a minimum of $10,000,000 in excess of underlying limits and coverage provided by commercial general liability, protection and indemnity and employer's liability policies; and (vii)personal property insurance covering Tenant's trade fixtures, equipment, goods and inventory in an amount not less than 95% replacement value. (b) Quality of Coverage. All such policies shall be issued by insurance companies licensed to do business in the State of Missouri and approved by Landlord as to form and as to surety and reserving the right of recovery by the Landlord in the event of damage to its property and issued in the name of Tenant and naming Landlord as additional insured, as its interest may appear. In addition, one or more of the policies shall include special dram shop and vehicular endorsements and a contractual liability endorsement covering the indemnification agreements of Tenant contained in this Lease. Policy certificates shall be delivered to Landlord on the Effective Date and shall state that the coverage afforded thereby shall not be modified or canceled without 30 days' prior written notice to Landlord, delivered by registered mail. Provided no Event of Default has occurred and is continuing, all loss proceeds shall be made available to Tenant to restore and repair the Project (including the Casino) as provided in Section 15. Permitted deductibles may be increased by an amount equal to any increased inflation in the value of U. S. currency. (c) Renewal of Coverage. Certificates of insurance with reasonably satisfactory evidence of payment of the premium thereof, shall be delivered to Landlord on or before the Commencement Date or date of Project Opening, as appropriate, and upon renewals of such policies, not less than 30 days after renewal. Not less than 30 days prior to the expiration of any such coverage, Tenant will provide evidence to Landlord of continuing insurability by means of letters from qualified carriers confirming intent to renew or provide the required coverage. If Tenant at any time fails or refuses to procure or maintain the required amount of insurance, then the Landlord may, and without notice to Tenant, obtain same for and on behalf of Tenant and charge the cost thereof to Tenant, such charge to be due and payable upon demand and to constitute Additional Rent hereunder. (d) Waiver of Subrogation and Right of Recovery. Tenant, and all parties claiming under or through Tenant, hereby expressly release and discharge Landlord and the County from any claim or liability, whether based on negligence or any reason whatsoever, for any personal injury or property damage. All insurance policies of Tenant shall contain an endorsement containing an express waiver of any right of subrogation by the insurance company against Landlord and the County. (e) Additional Insurance. Tenant shall obtain such other insurance in such amounts as may from time to time be reasonably required by the Landlord against other insurable hazards, and the Landlord may require the amount of any policy of insurance Tenant is required to maintain pursuant to the provisions of this Lease to be reasonably increased. Tenant shall not carry separate or additional insurance concurrent in form or contributing in the event of any loss or damage with any insurance required to be obtained by Tenant under this Lease, if the effect of such insurance would be to reduce the protection or payment to be made under insurance required hereunder. In the event Tenant objects to any increased or additional coverage required by Landlord on the grounds that such coverage is not required of, or is not commercially available to, other operators of facilities similar to the Project, and Landlord disagrees, the issue shall be submitted to binding arbitration in accordance with the provisions of Section 31 hereof. 15. Damage and Destruction. (a) Casualty Termination. If, at any time during the last 10 years of the Term, the Project is damaged by any cause or casualty in an amount exceeding 15% of the then replacement cost of the Project, Tenant shall have the right to terminate this Lease by written notice to Landlord within 60 days of the happening of the casualty causing such damage or destruction. In such event, Landlord (subject to the requirements of any Leasehold Mortgage (as defined in Section 19)) shall receive from the insurance proceeds the lesser of (a) the then present value of the Minimum Rent payable to Landlord for the remainder of the Term plus the amount equal to the cost of rebuilding all damaged or destroyed land-based facilities, or (b) 100% of the insurance proceeds. Any funds remaining following the distribution of the insurance proceeds paid to Landlord pursuant to the previous sentence shall be paid to Tenant. Upon any termination of the Lease under this provision, Tenant shall surrender possession of the Premises within 90 days after notice of termination, whereupon each of the parties shall be released thereby from any further obligations to the other except for items which have theretofore accrued and are then unpaid, and such termination shall be deemed to relate back to the date of damage or destruction; provided, however, that if the Project or any part thereof shall be kept open for business after the date of damage and prior to the surrender of possession of the Premises, the termination date shall be the date upon which Tenant shall discontinue the conduct of its business on the Premises. In the event of any termination pursuant to this Section 15(a), and upon surrender of the Premises to Landlord, Landlord shall refund to Tenant any unearned portion of Annual Rent prepaid by Tenant. In addition, in the event Landlord relets the Premises to another lessee, Landlord shall reimburse Tenant for the prepaid Minimum Rent paid by Tenant due to the termination of this Lease pursuant to this Section 15(a) from the rent paid by such lessee. (b) Casualty Reconstruction. In the event of damage or destruction occurring to the Project (including the Casino) other than as described in subsection (a) above, Tenant shall (subject to compliance with the requirements of any Leasehold Mortgage (as defined in Section 19)) repair and rebuild the Project (including the Casino), and restore the Project to full operation with reasonable diligence; Tenant shall direct, control, coordinate and approve all such repairs, reconstruction and restoration contemplated by this provision and shall have the right to select any architects, engineers and contractors for such repairs, reconstruction or restoration. All loss proceeds shall be made available to Tenant and shall be applied to effect such repair, reconstruction or restoration of the Project. No component of Annual Rent or Additional Rent shall abate as a result of any such damage or destruction, regardless of the availability or sufficiency of loss proceeds to repair or restore the Project, it being understood and agreed that Tenant shall maintain such business interruption insurance as Tenant may require in order to assure Tenant of the ability to continue to meet Tenant's financial obligations under this Lease. 16. Condemnation. (a) Definitions. Whenever used in this section, the following words shall have the following respective definitions and meanings: (i) "condemnation" or "condemnation proceedings" - any action or proceeding brought by competent authority for the purpose of the taking of the fee of the Premises, the Project or any part thereof, as a result of the exercise of the power of eminent domain, including a voluntary sale to such authority either under threat of or in lieu of condemnation or while such action or proceedings is pending; (ii) "taking" - the event of vesting of title to the fee of the Premises, or the Project or any part thereof, in the competent authority pursuant to condemnation; (iii) "vesting date" - the date of the taking. (b) Defense of Taking. Landlord, immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Premises or any part thereof, shall notify Tenant of the pendency of such proceedings. Landlord shall then, if requested by Tenant, file or defend its rights thereunder and prosecute the same with due diligence to its final disposition. Tenant may, but shall not be required to, participate in any such proceedings and Landlord from time to time will deliver to Tenant all instruments requested by it to permit such participation. In the event Tenant chooses to participate in any such proceedings, Landlord may be the nominal party in such proceedings, but Tenant shall be entitled to control and direct the same and to be represented therein by counsel of its choice, at Tenant's cost. Landlord covenants and agrees that it will use its best efforts and take all actions necessary and appropriate to cause the County not to exercise its powers of eminent domain with regard to the Premises, the Project or any part thereof, and otherwise to assure to the greatest extent possible that neither the Premises, the Project nor any part thereof, shall be condemned during the Term. (c) Total Taking. In the case of a taking of all of the Premises and the Project, this Lease shall terminate as of the vesting date and the Rent under this Lease shall be apportioned to the date of termination, and upon surrender of the Premises to Landlord, Landlord shall refund to Tenant any unearned portion of Annual Rent prepaid by Tenant. (d) Partial Taking - Termination or Arbitration. In the case of a taking of less than all of the Premises and Project (other than for a temporary use) Landlord and Tenant mutually shall determine within a reasonable time after the vesting date whether the remainder thereof can economically and feasibly be used by Tenant. If Landlord and Tenant cannot mutually agree upon such matter with 90 days after the vesting date, it shall be determined by binding arbitration pursuant to the provisions of Section 31. If it is determined by mutual agreement or by arbitration that the remaining Premises and Project cannot economically and feasibly be used by Tenant, Tenant may terminate this Lease on not less than 10 days nor more than 30 days notice to Landlord to such effect, provided that such notice is given within 30 days after such determination, and the Rent shall be apportioned to the date of termination. If Tenant does not elect to terminate this Lease within the period aforementioned, it shall continue in full force and effect with respect to the remaining portion of the Premises. If this Lease shall terminate pursuant to this provision, the award for the Project shall be apportioned and paid, to the extent available, in the following order of priority: (i) Landlord and Tenant first shall be entitled to their reasonable expenses and charges including, without limitation, reasonable attorneys' fees incurred in connection with the taking; (ii) Landlord shall be entitled to the value of the fee exclusive of the value of this Lease; and (iii) Tenant shall be entitled to the balance of the award. If the court in which the condemnation proceedings are brought fails or refuses to apportion its award between Landlord and Tenant, and if Landlord and Tenant cannot agree upon the allocation defined in the above order of priority, such values, allocation and apportionment shall be determined by binding arbitration under the provisions of this Lease. The provisions of this section regarding the apportionment of the award shall also apply in the case of a total taking and shall survive any termination of this Lease pursuant to this Section 16. (e) Partial Taking - Reconstruction. In the case of a partial taking where the Tenant does not elect to terminate this Lease pursuant to the provisions set forth above, Tenant shall commence and proceed with reasonable diligence to repair and reconstruct the remaining improvements to a complete, economically usable, architectural unit or units, including, without limitation, temporary repairs, changes and installations required to accommodate space subtenants and all other work and replacements and additions of furniture and furnishings incidental to and appropriate in connection with all of the foregoing (all such repair, reconstruction, replacements and additions and work being referred to in this section as "restoration"); and the total award of the condemnation proceedings, including the award for the Project shall be apportioned and paid to the extent available in the following order of priority: (i) Landlord and Tenant first shall be entitled to their reasonable expenses and charges including, without limitation, reasonable attorneys' fees incurred in connection with the taking; (ii) Tenant shall be entitled to an amount equal to the cost of restoration to the extent contemplated by this section, such sums shall be turned over to Tenant to be held in trust for the purpose of paying for the cost of restoration; (iii) Landlord shall be entitled to the value of the fee exclusive of the value of this Lease; (iv) Tenant next shall be entitled to the value of its leasehold estate under this Lease, the value of the Project, the value of the furniture, fixtures and equipment of the Project and the balance of the award. In the case of a partial taking where the Tenant does not elect to terminate this Lease pursuant to the provisions set forth above, the Rent payable for the balance of the Term of this Lease shall be equitably reduced effective as of the date of such partial taking to an amount fixed by agreement between Landlord and Tenant or, in the event of their failure to agree within thirty (30) days of such taking, by arbitration pursuant to the provisions of Section 31. (f) Temporary Taking. In the event of a taking of all or any portion of the Premises and the Project for temporary use, the foregoing provisions of this Section 16 shall be inapplicable thereto. This Lease shall remain in full force and effect and Tenant alone shall be entitled to make claim for, recover and retain any award recoverable in respect of such temporary use, so long as Rent is first paid from such award. If any portion of the award for such temporary use is intended to cover the cost of restoring the Premises and the Project to the condition they were in prior to such temporary use, such portion of the award shall be paid to Tenant to cover the cost of such restoration and repair. 17. Adjacent Parcel. (a) Development Parameters. Tenant and its affiliates shall be permitted to submit proposals to Landlord for the development of all or portions of the Adjacent Parcel. The Adjacent Parcel may be developed by Landlord and/or other parties for light industrial, commercial, retail, entertainment and/or recreational uses. Structures of any size or height, such as warehouses, distribution centers, manufacturing facilities, hotels, shopping centers, entertainment, sporting or recreational facilities, parking lots or garages, communications towers, and docking facilities, may be constructed and operated on the Adjacent Parcel. Landlord covenants that no use may be made of the Adjacent Parcel which shall constitute a nuisance or hindrance to the Project, detract materially from the aesthetic appeal of the Project, generate excessive industrial noise or noxious industrial or chemical odors, or materially impair access to the Project. Neither the volume nor type of traffic, including heavy truck traffic, on the Adjacent Parcel, including any resulting noise or omissions, nor any signage or illumination located on the Adjacent Parcel, shall be deemed to constitute a nuisance, impairment or detraction. That portion of the Adjacent Parcel which is within the 50' by 550' zone along the northern perimeter boundary of the Premises identified on Attachment K shall constitute a "Buffer Zone" between any development located on the Adjacent Parcel and the Premises. Only green space or landscaping shall be located within the Buffer Zone. Tenant shall have a non-exclusive, irrevocable license during the Term of this Lease, at Tenant's sole risk, cost and expense, at Tenant's option, but without obligation, to enter upon the Buffer Zone for the sole purpose of performing, maintaining, repairing and replacing landscaping on the Buffer Zone should Tenant so desire. Notwithstanding the foregoing provisions of this Section 17(a), the parties acknowledge and agree that a reconfiguration of the roadway providing access to the Premises and/or the Adjacent Parcel, if and as agreed to by the parties in connection with a resolution of pertinent access issues, may entail access to the Adjacent Parcel (i) via the bridge to be constructed by Tenant or via the roadway to be constructed on the Premises, or (ii) to provide alternate access to the Premises for emergency vehicles. (b) Enforcement. A restrictive covenant consistent with the requirements of Section 17(a) shall be recorded by Landlord against the Adjacent Parcel, and such restrictive covenant shall be prior and paramount to any mortgage, deed of trust or other encumbrance against the Adjacent Parcel. Landlord shall have the right but not the obligation to enforce compliance with such covenant to the extent the real estate in question has been sold or transferred to a third party, but Tenant, its successors and assigns, shall be designated in the covenant as intended beneficiaries thereof with full right to institute action, legal and equitable, for any violation thereof. To the extent Landlord retains ownership of the real estate in question and the violation complained of is committed by a tenant or occupant of the real estate, Landlord shall use its best efforts to enforce Landlord's rights under the covenant by appropriate legal action, including seeking appellate relief, if necessary. (c) Original Lease. In the event of a conflict between any provision of this Section 17 and any existing provision of that certain Lease between Landlord, as successor to NL Industries, Inc., and The Kiesel Company, as Tenant, dated as of April 1, 1997, including any amendments thereto and restatements thereof, the provisions of the latter such lease shall control. In the event the operations of the Kiesel Company, its successors, assigns or subtenants, on or from the Kiesel Company premises, are interfering with, or will likely interfere with, Tenant's development or operation of the Project, in the reasonable judgment of Tenant, after written notice to Landlord, and provided other measures taken by Landlord and the Kiesel Company to obviate the interference or potential interference are either unavailable or prove insufficient, Landlord agrees to cancel the Kiesel Company lease at the earliest permissible date. 18. Non-Disturbance and Attornment. Landlord shall have the right to obtain from any lender (a "Mortgagee") a mortgage secured by Landlord's interest in the Premises and/or this Lease; provided, however, that this Lease, including all of the rights of Tenant under or pursuant to this Lease, shall be paramount to, and shall not be subject or subordinate to, any mortgage, deed of trust or other security interest instrument ("Mortgage") that may now or hereafter affect Tenant's interest in the Premises. Any Mortgage shall contain, as required terms, the express acknowledgment that Tenant shall not be liable for the payment of the sum secured by such Mortgage, nor for any expenses in connection with the same. Neither such Mortgage nor any instrument collateral thereto shall contain any covenant or other obligation on Tenant's part to pay such debt, or any part thereof, or to take any affirmative action of any kind whatsoever; provided, however, that Tenant shall remain liable under this Lease notwithstanding any foreclosure of Landlord's interest in the Premises or any transfer of title to the Premises, and provided further that Tenant shall agree to attorn to such transferee. Such Mortgage shall expressly provide that the Mortgagee shall not seek any money judgment against Tenant related to any Mortgage obligation of Landlord. Each Mortgagee shall agree to a non-disturbance and attornment agreement which will require the Mortgagee to recognize that this Lease is superior to Mortgagee's Mortgage, (ii) that Tenant shall be entitled to use and occupy the Premises and the Project in accordance with the terms of this Lease, (iii) that Tenant shall be entitled to all of its rights under this Lease, (iv) that insurance and condemnation awards and proceeds shall be disbursed as provided in this Lease, and (v) Tenant's possession of the Premises and the Project shall not be disturbed by Mortgagee or by any person whose rights are acquired through foreclosure proceedings or through a deed in lieu of foreclosure except as may be expressly provided in this Lease, and any subsequent transferee of such rights shall be so bound provided no Event of Default occurs and is continuing under this Lease. The non- disturbance and attornment agreement may require (x) that as a condition to the making of any amendment or modification to this Lease Landlord receive the prior written consent of such Mortgagee, (y) that such Mortgagee shall receive notice of any default claimed by or through Tenant against Landlord, and (z) that such Mortgagee shall have the same right to cure such default as is provided the holder of any Leasehold Mortgage obtained by Tenant. Tenant shall within 10 days after receipt from Landlord execute and deliver to Landlord and Landlord's Mortgagee such estoppels and attornment agreements as may be reasonably required in connection with any proposed financing or refinancing involving the Premises and/or the Adjacent Parcel, provided the terms and conditions of such estoppels or attornment agreements are consistent with the provisions of this Section 18 and the same do not constitute a modification of this Lease. 19. Leasehold Mortgages. (a) Right to Leasehold Mortgage. Tenant shall have the right to mortgage and to refinance this Lease and Tenant's leasehold estate and any improvements thereon, including but not limited to the Project, ("Leasehold Mortgage") at any time, and from time to time, on any terms Tenant may deem desirable and to assign this Lease and any existing and future subleases, license agreements and concession agreements, and the rentals and fees payable to Tenant thereunder to the holder of such mortgage ("Leasehold Mortgagee"), as additional collateral security for the indebtedness secured by the Leasehold Mortgage. In connection therewith, Landlord agrees to timely execute and deliver an estoppel certificate, a non-disturbance agreement, and such other documents in reasonably satisfactory form as shall be requested by any Leasehold Mortgagee, so long as such certificates, agreements or other documents are not inconsistent with this Lease. Any Leasehold Mortgage shall be subject and subordinate to Landlord's rights under this Lease and its fee interest in the Premises, except as otherwise provided herein. (b) Terms of Leasehold Mortgage. If Tenant shall have executed and delivered a Leasehold Mortgage or Mortgages and the Leasehold Mortgagee shall have notified Landlord in writing to such effect giving its name and address: (i) Landlord concurrently shall serve upon such Leasehold Mortgagee a copy of each notice, consent, approval, request or demand given to Tenant under this Lease including, without limitation, any notice, consent, approval, request or demand under this Lease. No such notice to Tenant shall be deemed to have been given nor shall be effective unless copies thereof are thus served upon the Leasehold Mortgagee at such address and in the manner provided pursuant to the Notice provisions hereof. (ii) Subject to the provisions set forth below, such Leasehold Mortgagee shall have the right, for a period of 30 days more than is given to Tenant, to remedy or cause to be remedied any default which is the basis of a notice; and Landlord shall accept performance by such Leasehold Mortgagee as performance by Tenant. In the event that Tenant has contested an event of default, such Leasehold Mortgagee shall be given a 20 day period after the date of a final decision affirming the contested default within which to cure such default on behalf of Tenant. (iii)In the case of default by Tenant under this Lease which is susceptible of being cured only when such Leasehold Mortgagee has obtained possession of the Premises and the Project, other than a default in the payment of Rent or Additional Rent, Landlord shall take no action to effect a termination of this Lease by service of a notice or otherwise without first giving to such Leasehold Mortgagee a reasonable period of time (not to exceed 6 months) within which diligently to obtain possession of the Premises and the Project (including possession by a receiver) and to cure such default and/or diligently to institute and complete foreclosure proceedings or otherwise acquire Tenant's leasehold estate under this Lease and to cure such defaults. (iv) Upon acquisition of Tenant's interest in this Lease by the Leasehold Mortgagee, or by any purchaser of this Lease pursuant to any foreclosure proceeding instituted by the Leasehold Mortgagee, Landlord's right to serve a notice of election to end the Term based upon the occurrence of any default (other than non-payment of Rent or Additional Rent, or non-compliance with the provisions of Sections 9, 10, 12, 14, 15 or 20) which cannot with the exercise of due diligence be remedied by such Leasehold Mortgagee or purchaser shall be deemed waived. (v) If, prior to any foreclosure sale brought by a Leasehold Mortgagee, or if prior to the date upon which Tenant's interest in this Lease shall have been otherwise acquired by Leasehold Mortgagee or other purchaser, the default in respect of which Landlord shall have given the notice shall have been remedied and possession of the Premises and the Project restored to Tenant, the obligation of the Leasehold Mortgagee to assume this Lease shall be null and void and of no further effect. (vi) Notwithstanding anything contained in this Section 19 to the contrary, if for any reason this Lease shall terminate prior to the expiration of the Term, Landlord shall give written notice thereof to the Leasehold Mortgagee. Subject to the curing of any Event of Default and the payment of all Rent and Additional Rent owed Landlord by the Tenant, and provided such cure occurs not later than 60 days after Landlord's termination of this Lease, Landlord shall enter into a new lease for the Premises and the Project with the Leasehold Mortgagee or with any person, firm, corporation or entity designated by the Leasehold Mortgagee for the remainder of the Term, subject to approval by Landlord, which approval shall not be unreasonably withheld or delayed as provided in clause (vii) below, commencing as of the date of such termination, at the Rent and upon the same terms, covenants and conditions contained in this Lease (except those which by their terms are no longer applicable). Such new lease shall have priority equal to this Lease. Concurrently with the execution and delivery of such new lease, Landlord shall turn over and/or assign to the new tenant all of its right, title and interest in and to moneys (including insurance proceeds) if any, then held by or subsequently paid to Landlord, which Tenant would have been entitled to receive but for such termination. (vii)Landlord shall have no obligation (i) to waive Landlord's lien rights (it being understood and agreed that Landlord shall be required only to subordinate such lien rights to the security interests of the Leasehold Mortgagee) or (ii) to agree to any modification of any express term, covenant or provision of this Lease, including, without limitation, the disposition of the proceeds of a condemnation or casualty contrary to the provisions of this Lease. Landlord's refusal to accept any proffered successor tenant or operator of the Project shall be deemed reasonable to the extent such party fails to meet any of the Stated Criteria. Tenant shall require any Mortgagee to provide Landlord with notice of any default under the terms of any loan agreements, mortgages or promissory notes entered or provided to the Mortgagee. In no event shall Landlord be required to forbear in the exercise of any remedies available to Landlord against New Guarantor upon the occurrence of an Event of Default by Tenant. In the event Landlord shall refuse to approve a successor to Tenant proffered by the Leasehold Mortgagee, the sole remedy available to the Leasehold Mortgagee shall be to commence arbitration proceedings in accordance with the provisions of Section 31. The arbitrators shall either approve or disapprove the proposed successor based on compliance with the Stated Criteria and shall make no other award or determination. (c) Amendments Requested by Leasehold Mortgagee. Landlord agrees, without obligation, to review and consider any proposed amendments to this Lease requested by any Leasehold Mortgagee or prospective Leasehold Mortgagee. 20. Indemnification. (a) Indemnity Generally. Tenant shall defend, pay, indemnify and hold harmless Landlord and its agents, employees, servants and representatives (together, the "Indemnified Parties") from and against any and all claims, demands, injuries, damages, fines, penalties, lawsuits, actions, proceedings, orders, decrees, judgments or liability of any kind or nature by or in favor of anyone whomsoever and from and against any and all costs and expenses incurred by any of the Indemnified Parties, including reasonable attorneys' fees and expenses, resulting or arising from or in connection with (i) any accident, bodily injury, death, personal injury of any kind, or property damage arising during the term of this Lease directly or indirectly, out of or from or on account of any occurrence in, upon, at, or about the Project; (ii) any accident, bodily injury, death, personal injury or property damage arising, directly or indirectly, out of or in connection with Tenant's operation of gaming activities or the Casino; (iii) any use, occupancy, non-use, or condition of the Project; and (iv) any failure on the part of the Tenant to perform or comply with any of the terms, covenants and conditions of this Lease. (b) Defense. In case any action, suit or proceeding is brought against any of the Indemnified Parties by reason of any occurrence described in clauses (i) through (iv), Tenant or Tenant's insurer, upon the request of Landlord, will, at no expense to Landlord or the Indemnified Party, resist and defend such action, suit or proceeding or cause same to be resisted and defended by counsel reasonably acceptable to Landlord, subject to the right of any applicable insurer to direct and control such counsel. The Indemnified Party shall have the right, at its discretion, to retain its own counsel and be reimbursed by Tenant for all reasonable attorneys' fees and costs incurred in the defense of any action. The obligations of Tenant under this Section shall survive the termination of this Lease. (c) Environmental Indemnity and Release. In addition to the foregoing, Tenant agrees to indemnify and hold harmless the Indemnified Parties and to defend them against any lawsuits or claims for any liability, injuries, damages, penalties or fines (including reasonable attorneys' fees and expenses) arising from or relating to the disposal, discharge, release or spilling into or onto the air, water, soil, sewer system or similar media of any Hazardous Substance which disposal, discharge, release or spill, whether accidental or intentional, occurs on, within or from the Project (including the Casino, wherever located) during the Term. Tenant agrees that Landlord shall have no liability or obligation of any kind to Tenant on account of any Hazardous Substances released on or from the Premises and covenants not to bring any action, claim or demand against Landlord on account thereof; provided, however, that such covenant to not sue Landlord shall not apply to any release or migration of any Hazardous Substance onto the Premises from the Adjacent Parcel which is caused by Landlord or any tenant or occupant of the Adjacent Parcel, their respective employees, contractors or agents, and which first occurs during any period of Landlord's ownership after the Original Effective Date. (d) Survival of Indemnity. The provisions of this Section 20 shall survive any termination of this Lease. 21. Right of Entry. Landlord and its authorized agents and employees shall, upon reasonable notice and during all reasonable business hours, have the right to enter upon the Project to examine same; provided, however, that any such entry shall not interfere with Tenant's use or the operation of the Project, and provided further that Tenant shall have the right to have a representative or employee of Tenant accompany any such inspection by Landlord. Landlord shall have the right from time to time to inspect the Premises and to conduct tests and evaluations to confirm whether Hazardous Substances have been released on or from the Project in violation of applicable Governmental Requirements. Such tests shall be conducted at Landlord's sole risk, cost and expense, except that if it is determined that Tenant shall have violated the provisions of Section 20 relating to the release of Hazardous Substances, then Tenant shall, in addition to performing such remediation as may be required, pay to Landlord all costs incurred by Landlord in connection with such tests and evaluations, and such additional tests and evaluations as Landlord may conduct to confirm satisfactory completion of Tenant's remediation work. 22. Limitation of Claims. Landlord shall not be responsible for any damage or loss to the Casino or the Project, its furnishings, fixtures, equipment or other goods thereon due to any cause whatsoever, including, but not limited to, theft, vandalism, public disorder, fire, weather, collisions, floating or underwater hazards, electrolysis, tie-up or boat defects. Additionally, Landlord shall not be responsible for any damage or injury to Tenant's patrons, wherever located, arising from any source, and Tenant shall perform all acts necessary to provide for the safety of its patrons while on the Premises or in the Casino. Upon any sale of the Premises by Landlord, Landlord shall be released from all obligations and liabilities accruing under this Lease prior to the effective date of such sale, provided the transferee shall expressly assume and agree to perform for the benefit of Tenant all obligations of Landlord under this Lease accruing after the effective date of such transfer. 23. Attorneys' Fees and Expenses. Except as otherwise expressly provided in this Lease, each party shall pay its own attorneys' fees and expenses in connection with any matter arising under this Lease. 24. Late Payments. Late payments shall be subject to a 3% penalty and interest on late payments shall accrue from the date of delinquency until paid at the rate of 2% in excess of the from time to time publicly announced prime rate of interest of The Bank of America; provided that a payment shall not be deemed to be a late payment if such payment is made within any applicable grace or cure period provided hereunder. 25. Default and Remedies. (a) Tenant's Default. It shall be an Event of Default if any one or more of the events described in the following clauses (i) through (ix) shall occur and be continuing after expiration of the applicable notice and cure period provided for in such clause or otherwise provided for in subsection (b): (i) if default be made in the punctual payment of any Rent payable to Landlord hereunder, when and as the same shall become due and payable, and such default shall continue for a period of ten (10) days after written notice to Tenant (except that Landlord shall not be required to deliver notice of non-payment of Rent on more than two occasions during any Lease Year), or if default be made in the punctual payment of any Additional Rent payable hereunder, when and as the same shall become due and payable, and such default shall continue for a period of thirty (30) days after written notice to Tenant; (ii) if this Lease be mortgaged by Tenant except as provided in Section 19, or if this Lease be assigned or the Project (including the Casino) or any part thereof be sublet, except as provided in Section 12; (iii)if Tenant shall abandon the Work or the Project, or if Tenant shall fail to continuously or fully operate the Project after Project Opening as required under this Lease; (iv) if Tenant shall fail to timely file its application for Gaming Licensure, or if Tenant shall withdraw or effectively abandon such application prior to termination of this Lease in accordance with its terms or, after first obtaining Gaming Licensure, if Tenant for any reason ceases to be licensed to conduct a gaming operation at the Project pursuant to the laws of the State of Missouri; (v) if Tenant shall fail to observe, perform or comply with any of the terms, covenants and conditions in this Lease other than those specified in subsections (i) through (iv) above, within 30 days after notice from Landlord specifying the nature of such default; (vi) if Tenant or New Guarantor shall file a voluntary petition in bankruptcy or shall be adjudicated bankrupt or insolvent or shall file any petition or answer seeking any reorganization, readjustment, liquidation, dissolution or similar relief under any bankruptcy or insolvency statute or law of the United States or any State, or shall seek or consent to or acquiesce in the appointment of any bankruptcy or insolvency trustee, receiver or liquidator of Tenant or New Guarantor of all or any substantial part of either of their respective properties or of the Project; (vii)if within 60 days after the commencement of any involuntary proceeding against Tenant or New Guarantor seeking reorganization, readjustment, liquidation, dissolution or similar relief under any bankruptcy or insolvency statute or law, Tenant or New Guarantor, as the case may be, fails to secure a dismissal and discharge thereof; (viii)if Tenant or New Guarantor shall make a material misrepresentation in any representation or warranty provided to Landlord under this Lease or any of the New Guarantees, as the case may be, or in any report provided to Landlord pursuant to Section 13; or (ix) if New Guarantor shall be in default under any covenant of New Guarantor contained in any of the New Guarantees and such default shall remain uncured beyond the period provided therein for the cure thereof, if any. (b) Cure or Remedies. No Event of Default shall be deemed to have occurred under clauses (ii) through (ix) unless Tenant or New Guarantor, as the case may be, shall fail to cure such default within 30 days after delivery by Landlord of written notice of such default to Tenant, unless the same cannot be cured within 30 days, in which event an Event of Default shall not be deemed to have occurred if Tenant commences the cure of such default within 30 days and thereafter diligently pursues such cure to completion. Upon an Event of Default, Landlord, at its option, may at any time thereafter declare this Lease and all rights of Tenant under this Lease as expired and terminated and Tenant shall remain liable as hereinafter provided. (c) Surrender of Premises. Subject to the provisions of Section 27, upon any such expiration or termination of this Lease, Tenant shall quit and peacefully surrender the Project to Landlord, and Landlord, upon any such expiration or termination, may without further notice enter upon and re-enter the Project and possess and repossess itself thereof, by force, summary proceedings, ejectment or otherwise, and may dispossess Tenant and remove Tenant and all persons and property from the Project. (d) Reletting of Premises. If this Lease shall expire or be terminated, or if the Project or any part thereof shall be abandoned by Tenant, or shall become vacant during the Term, Landlord may in its own name, or as agent for Tenant if this Lease not be terminated, enter into possession of and relet the Project or any part thereof for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) and on such conditions as Landlord, in its discretion, may determine and may collect and receive the rents therefor. (e) Direct Damages. No event of expiration or termination of this Lease, abandonment or vacancy, shall relieve Tenant of its liability and obligations under this Lease, whether or not the Project shall be relet. In any such event Tenant shall pay Landlord the Rent and all Additional Rent required to be paid hereunder by Tenant up to the time of such event. Thereafter: (i) In the event of termination of the Lease, Tenant, until the date which is the first to occur of (a) the expiration of the Term or (b) the expiration of the 15th Lease Year subsequent to the date of termination, shall be liable to Landlord as damages for Tenant's default, the equivalent of the amount of the Rent and Additional Rent which would be payable under this Lease by Tenant if this Lease were still in effect, less the net proceeds of any reletting effected pursuant to the provisions hereof, after deducting all of Landlord's expenses in connection with such reletting, including without limitation, all repossession costs, brokerage and management commissions, operating expenses, legal expenses, reasonable attorneys' fees, alterations costs, and expenses of preparation of such reletting. The amount of Additional Rent due in the event of expiration or termination of this Lease shall be equal to the Additional Rent paid to Landlord in the year prior to the year of termination divided into twelve equal monthly installments. Tenant shall pay such damages (herein called "deficiency") to the Landlord on the days on which the net Rent would have been payable under this Lease if this Lease were still in effect, and the Landlord shall be entitled to recover from Tenant each deficiency as the same shall arise. (ii) At any time after the expiration or termination of this Lease, in lieu of collecting any further deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, on demand, an amount equal to the difference between the Rent which would have accrued to Landlord under this Lease from the date of termination to the date which is the first to occur of (a) the expiration of the Term or (b) the expiration of the 15th Lease Year subsequent to the date of termination, and the then fair and reasonable rental value of the Premises for the same period as provided in Section 25(f). Tenant shall remain liable for any deficiencies not previously recovered by Landlord. (f) Value of Premises. If the Premises or any part thereof be relet by Landlord for the unexpired Term, or any part thereof, the amount of rent reserved upon such reletting shall be deemed the fair and reasonable rental value for the part or the whole of the Premises so relet during the term of the reletting. Landlord agrees to make reasonable efforts to mitigate its damages by listing the Premises with a licensed real estate broker for reletting on terms and conditions acceptable to Landlord, but Landlord shall have no obligation to relet the Premises to any particular tenant or for any particular use, including, without limitation, casino gaming. (g) Additional Damages. If this Lease be terminated, or if the Project is abandoned or becomes vacant, and whether or not the Project be relet, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, in addition to any damages becoming due under this Section 25, the following: an amount equal to all expenses, if any, including reasonable attorneys' fees, incurred by Landlord in recovering possession of the Project (whether or not litigation be commenced in aid thereof), repairing any damage to the Project, and all reasonable costs and charges for the care of said Project while vacant, which damages shall be due and payable by Tenant to Landlord at such time or times as such expenses are incurred by Landlord. Tenant hereby expressly waives, as far as permitted by law, the service of any notice of intention to re-enter provided for in any statute, and except as is herein otherwise provided Tenant, for and on behalf of itself and all persons claiming through or under Tenant (including any leasehold mortgagee or other creditor), also waives any and all right of redemption or re-entry or repossession in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge or in case of re- entry or repossession by Landlord or in case of any expiration or termination of this Lease except as expressly provided in this Lease. The terms "enter," "re-enter," "entry" or "re-entry" as used in this Lease are not restricted to their technical legal meanings. (h) Waiver of Automatic Stay. In view of the public interest in the integrity of the gaming process and the involvement of the County and Landlord in the Project, in the event of any voluntary or involuntary petition in bankruptcy involving Tenant or New Guarantor, Tenant and New Guarantor hereby waive, to the fullest extent permitted by law, any right they may have to object to the waiver of vacation of the automatic stay in all respects as to the rights of Landlord under the Lease and the New Guarantees. (i) Waiver of Jury Trial. Tenant hereby waives all right to trial by jury in any action or proceeding hereafter instituted by Landlord against Tenant with respect to this Lease or the Project. (j) Additional Remedies. In the event of any breach by Tenant of any of the agreements, terms, covenants or conditions contained in this Lease, Landlord shall have the right to invoke any right and remedy allowed at law or in equity including the right to seek specific performance of Tenant's obligations under this Lease and to enjoin violations of this Lease by Tenant. (k) Landlord's Default. It shall be an event of default on the part of Landlord (a "Landlord Default") if any one or more of the events described in the following clauses (i) through (iii) shall occur and be continuing after expiration of the applicable notice and cure period provided for in such clause: (i) Landlord shall fail to make any payment which Landlord agrees to make to or for the benefit of Tenant pursuant to Section 2 or to otherwise cure on a timely basis any objection raised by Tenant under Section 2 which Landlord has theretofore agreed in writing to cure, after 30 days prior written notice to Landlord; (ii) Landlord shall make a material misrepresentation in any representation or warranty provided to Tenant under Section 8(b) or to Assignee in the certificate to be provided to Assignee pursuant to Section 1(d)(5), and such misrepresentation shall materially and adversely affect any right or benefit available to Tenant or Assignee under this Lease; or (iii)Landlord shall breach any express covenant of Landlord under this Lease and shall fail to cure such breach within 30 days after notice from Tenant specifying the nature of such breach, unless the same cannot be cured within 30 days, in which event Landlord shall not be deemed in default provided Tenant commences the cure of such default within 30 days and thereafter diligently pursues such cure to completion. If a Landlord Default shall occur, Tenant shall have the right to pursue any remedy available to Tenant at law or in equity on account of such Landlord Default; provided, however, in no event shall Tenant be entitled to (i) withhold, deduct or offset Rent or Additional Rent, (ii) vacate or abandon the Project or close the Casino (except pursuant to any express right of vacation or closure granted Tenant under this Lease), (iii) seek or recover consequential damages (such as for lost profits) from Landlord, (iv) seek or recover damages or equitable relief in violation of the provisions of Sections 20(c) or Section 22, or (v) terminate this Lease (except pursuant to any express right of termination granted Tenant under this Lease). Tenant hereby waives and releases each of the claims specified in clauses (i) through (v) hereof. In all events, any recovery of monetary damages (except in connection with a breach of Section 10) by Tenant shall be limited solely to the interest of Landlord in the Premises, which shall include the Rentals and avails thereof. 26. Remedies Cumulative. Each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Landlord or Tenant or any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord or Tenant of any or all other rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise. 27. Surrender of Premises. Upon the expiration or termination of this Lease, Tenant agrees to quit and surrender the Premises, clean and free of any and all Hazardous Substances released, spilled or discharged into or on the Project during the Tenant's tenancy and in the same condition and repair as on the date of execution hereof, and Tenant, at Landlord's option, shall remove the Casino and any fixtures or structures installed or located within the Premises or any public right of way at Tenant's sole cost and expense and without expense to Landlord. Tenant may, or, if directed by Landlord, shall remove all personal property of Tenant from the Premises, including gaming equipment and gaming machinery. If Tenant shall fail to remove any of Tenant's property within 90 days after the receipt of notice of termination or expiration of this Lease, Tenant's property shall be deemed abandoned. If the Premises is not surrendered as and when aforesaid, Tenant shall indemnify Tenant against all loss or liability resulting from the delay of Tenant in so surrendering the same including without limitation, any claims made by any succeeding occupant founded on such delay. Tenant's obligations under this Section shall survive the expiration or sooner termination of the Term. 28. Cure of Tenant's Default. If Tenant shall fail to make any payment or perform any act required hereunder to be made or performed by Tenant then Landlord may, but shall be not be obligated to, make such payment or perform such act with the same effect as if made or performed by Tenant. Entry by Landlord upon the Project for such purpose shall not waive or release Tenant from any default or obligation hereunder. Tenant shall reimburse Landlord for all sums paid and all costs incurred by Landlord in performing the obligations of Tenant hereunder, including attorneys' fees, upon Landlord's demand therefor which shall be Additional Rent hereunder. 29. Notices. Unless otherwise indicated differently, all notices, payments, requests, reports, information or demands which any party hereto may desire or may be required to give to any other party hereunder, shall be in writing and shall be personally delivered or sent by a nationally recognized courier service, telecopier or first-class certified or registered United States mail, postage prepaid, return receipt requested, and sent to the party at its address appearing below or such other address as such party shall hereafter inform the other party hereto by written notice given as aforesaid: If to Landlord: St. Louis County Port Authority Economic Council of St. Louis County 121 South Meramec, Suite 900 Clayton, Missouri 63105 Attention: Director of Real Estate FAX: (314) 615-7666 Copies to: Economic Council of St. Louis County 121 South Meramec, Suite 900 Clayton, Missouri 63105 Attention: General Counsel St. Louis County 41 South Central Clayton, Missouri 63105 Attention: County Counselor FAX: (314) 615-3732 If to Southboat Southboat Limited Partnership Ltd. Partnership: 10205 Gravois Road St. Louis, Missouri 63123 Attention: Mr. Dennis P. Long Copies to: Frederick J. Berger, Esq. Riezman & Berger, P.C. 7700 Bonhomme, 7th Floor St. Louis, Missouri 63105 If to Assignee: Ameristar Casino St. Louis, Inc. 3773 Howard Hughes Parkway Suite 490 South Las Vegas, Nevada 89109 Attention: President FAX: (702) 369-8860 Copies to: Gordon R. Kanofsky Senior Vice President of Legal Affairs Ameristar Casinos, Inc. 16633 Ventura Boulevard Suite 1050 Encino, California 91436 FAX: (818) 995-7099 Steven E. Kushner Stinson, Mag & Fizzell 100 South Fourth Street, Suite 700 St. Louis, Missouri 63102 FAX: (314)259-4599 All notices, payments, requests, reports, information or demands so given shall be deemed effective upon receipt, or if mailed, upon receipt or the expiration of the third day following the date of mailing, whichever occurs first, except that any notice of change in address shall be effective only upon receipt by the party to whom said notice is addressed. Any notices relating to maintenance shall be given to those parties locally responsible as hereinafter designated by the parties upon completion of the anticipated improvements. Prior to the Assignment Date, Tenant and Assignee shall receive a copy of each and every notice delivered by Landlord to Tenant or Assignee. 30. Unavoidable Delay. As used in this Lease, the term "Unavoidable Delay" shall mean any delay if and to the extent caused by a fire, flood, tornado, earthquake, severe inclement weather or other Act of God, strike, lockout or other labor dispute, material breach of a contractual obligation by a party not affiliated with Tenant, Assignee or New Guarantor (provided Tenant or Assignee uses its best efforts to enforce its contractual rights and to secure performance by another contractor if such right is available to Tenant or Assignee under such contract), unavailability of essential materials, war, insurrection, civil disorder or a change in law or regulation or an order by the Commission. In no event shall the Investigation Deadline be changed due to any Unavoidable Delay. In no event shall lack of funds, Tenant's failure to comply with Tenant's contractual obligations or changes in the economy or marketplace constitute a basis for asserting an Unavoidable Delay. 31. Arbitration of Certain Disputes. (a) Arbitration of Specific Disputes. In the event of a dispute between the parties pursuant to Sections 9, 10, 12, 14, 16 or 19, the issue requiring resolution may be submitted by either party to expedited arbitration in accordance with the following procedures: (b) Arbitration Procedures. Arbitration shall be commenced by written notice thereof from the party seeking arbitration to the other party. Not later than 10 days after delivery of such notice, each party shall select an independent arbitrator who shall be an attorney licensed to practice law in any state and practicing law for not less than 20 years. Not later than 20 days after their selection, the two arbitrators shall jointly select a third arbitrator having the same qualifications as themselves. The arbitration panel shall meet and determine the rules for submission and hearing of evidence and so advise Landlord and Tenant not later than 10 days after their selection. The panel shall convene and conduct a hearing according to the rules established by them and shall render a written decision which shall be binding on the parties not later than 60 days after the date the third arbitrator has been selected. The decision of the arbitration panel shall be final and binding on the parties. Each party shall bear the fees and expenses of its own arbitrator and shall share equally in the payment of the fees and expenses of the third arbitrator. 32. Estoppels. Each party acknowledges that from time to time the other party may request, for the benefit of third parties, information relating to the effectiveness of this Lease and the New Guarantees, whether this Lease or the New Guarantees have been modified or amended, the status of payments of Rent and Additional Rent due hereunder, whether an Event of Default or a Landlord Default has occurred and is continuing, and other information reasonably and customarily required by lenders, accountants and other parties having an interest in the Project, or in Landlord, Tenant or New Guarantor and their respective operations. Each party agrees to respond in writing to any request it may receive from the other party within 10 days after its receipt of such request, and to provide all such requested information. 33. Relationship of Parties. Nothing contained in this Lease shall be deemed to constitute or be construed or implied to create the relationship of principal and agent, partnership, joint venture or any other relationship between the parties hereto, other than the relationship of the landlord and tenant. The term "Landlord" as used in this Lease means only the owner of the current interest of Landlord in the Premises or, as the case may be, the successor thereto from time to time. 34. No Broker. Tenant covenants, warrants and represents to Landlord that there was no broker instrumental in consummating the Assignment and that no conversations or prior negotiations were had by Tenant with any broker in connection therewith. Tenant agrees to indemnify and hold the Landlord harmless against and from all liabilities, including reasonable attorneys' fees, arising from any claims for brokerage commissions or finders' fees resulting from or arising out of any conversations or negotiations had by Tenant directly with any broker. 35. Conflict of Interest. The parties agree to abide by all Governmental Requirements relating to conflict of interest. Additionally, but not in limitation of the foregoing, no member, officer, commissioner or employee of Landlord or any branch of County government who has any power of review or approval of any of the undertakings herein, shall participate in any decisions relating thereto which affect his/her personal interests or the interests of any corporation or partnership in which he or she is directly or indirectly interested. No member, official or employee of Landlord shall have any personal interest direct or indirect, in this Lease, nor participate in any decisions relating thereto which affect his or her personal interests or the interests of any corporation or partnership in which he or she is directly or indirectly interested. In the construction and/or operation of the Project, Tenant shall not knowingly, after due inquiry, employ or contract with any person if a member of his or her immediate family is a member, officer, commissioner or employee of Landlord or any branch of County government in an administrative capacity, by which is meant those who have selection, hiring, supervisory or operational responsibility for the work to be performed pursuant to this Lease. For the purposes of this section, "immediate family" includes: wife, husband, son, daughter, mother, father, brother, sister, brother-in-law, sister-in-law, father-in-law, mother-in- law, aunt, uncle, niece, nephew, step-parent and stepchild. 36. Entire Lease. This Lease sets forth the entire agreement between the parties. There are no understandings, agreements, statements, promises, or representations or warranties, express or implied, in respect of the Property, the Project or this Lease which are not specified herein. This Lease shall not be modified, amended or supplemented except by a writing subscribed to by the party to be charged, nor may this Lease be canceled by Tenant or the Project surrendered except in accordance with the express provisions of this Lease. 37. Survival of Covenants. All representations, warranties and indemnities set forth in this Lease shall survive the execution hereof. 38. Binding Effect. This Lease binds the parties hereto and inures to the benefit of their respective heirs, personal representatives, successors or assigns. 39. Time of the Essence. Time is of the essence with respect to the performance of this Lease and each and every provision contained herein. 40. Venue. If and in the event of a dispute arising hereunder, venue shall be vested in the Circuit Court of St. Louis County, State of Missouri. Tenant acknowledges that it has negotiated this Lease in the County, and has made numerous business contacts and entered into agreements relating to real estate and other matters sufficient to confer jurisdiction of the courts of St. Louis County, State of Missouri. 41. Authorization and Capacity. The parties hereto represent to each other that each has the full right, power and authority to enter into this Lease and to fully perform its obligations. The persons executing this Lease warrant and represent that each has the authority to execute in the capacity stated and to bind the parties hereto. 42. Third-Party Beneficiaries. Subject only to the provisions of Sections 1(d) and (f), Landlord and Tenant are the only parties to this Lease and the only parties capable of or entitled to the enforcement of its provisions. Each party confirms that no other parties are intended to be third party beneficiaries of any covenant or provision of this Lease. Notwithstanding the foregoing provisions of this Section 42, Tenant acknowledges and agrees that the County shall be an intended third party beneficiary of Tenant's designation of the County as the "home dock" for the Project under Section 13. 43. Severability. In the event any provision of this Lease is rendered void or unenforceable by a court of competent jurisdiction, the remaining provisions of this Lease shall be construed so as to constitute a complete agreement, and this Lease, as so reformed, shall remain in full force and effect. 44. Non-Waiver Provision. Failure by either party hereto, at any time, to require the performance by the other of any term of this Lease, shall not in any way effect the right of either party to enforce such terms, nor shall any waiver by either party of any term hereof be taken or held to be a waiver of any other provision of this Lease. No waiver of any term or provision of this Lease shall be effective unless the same is in writing, signed by the parties hereto. 45. Governing Law. This Lease is entered into in the State of Missouri and shall be construed, enforced and governed, as to both validity and performance, in accordance with the laws of the State of Missouri and all of the rights and obligations of the parties hereunder shall be determined in pursuant to the laws of the State of Missouri. 46. Recording of Lease. From and after the Commencement Date, either party may, at its own expense, cause a memorandum of this Lease, approved by the other party, to be recorded in the Office of the Recorder of Deeds for the County of St. Louis. 47. Attachments. All exhibits attached to this Lease are incorporated herein and made part hereof by reference. 48. Headings. The captions, headings and arrangements in this Lease are for convenience only and do not in any way define, limit or modify the terms or provisions hereof. 49. Number and Gender of Words. Whenever the singular number is used in this Lease, the same shall include the plural where appropriate and words of any gender shall include the other gender where appropriate. 50. Business Days. Except as provided in Section 11, whenever it is provided in this Lease that an event shall occur on a day which is a Saturday, Sunday or legal holiday in the State of Missouri, such event shall occur instead on the next business day. 51. Multiple Counterparts. This Lease may be executed in a number of identical counterparts and if so executed, each such counterpart is deemed an original for all purposes, and all such counterparts shall collectively constitute one Lease. IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as the date first above written. THIS LEASE CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES LANDLORD: ST. LOUIS COUNTY PORT AUTHORITY By: /s/ Charles Wiegers Name: Charles Wiegers Title: Chair APPROVED AS TO FORM /s/ Elaine B. Wright General Counsel, Economic Council of St. Louis County TENANT: SOUTHBOAT LIMITED PARTNERSHIP By: Southboat Lemay, Inc., its general partner By: /s/ Dennis P. Long Name: Dennis P. Long Title: President of Southboat Lemay, Inc., Its General Partner SCHEDULE OF ATTACHMENTS ATTACHMENT A Description of the Property ATTACHMENT B Site Plan of the Premises ATTACHMENT C Diagram of Adjacent Parcel Attachment D-1 New Project Proposal Preliminary Construction Documents Attachment D-2 New Project Proposal Employment and Contracting Policies Attachment E Guarantee of Minimum Rent Attachment F Guarantee of Completion Attachment G Assignment and Assumption Agreement Attachment H Release of Landlord and St. Louis County Attachment I License and Indemnity for Early Entry onto the Premises Attachment J Legal Description of Premises ATTACHMENT K Adjacent Parcel Buffer Zone ATTACHMENT E GUARANTEE OF MINIMUM RENT FOR VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged, and to induce the ST. LOUIS COUNTY PORT AUTHORITY, a public body corporate and politic of the State of Missouri ("Landlord") to approve the proposed assignment of the right, title and interest of Southboat Limited Partnership, a Missouri limited partnership ("Tenant") in that certain Amended and Restated Lease and Development Agreement, by and between Tenant and Landlord, dated as of February ___, 2000(the "Lease") to Ameristar Casino St. Louis, Inc., a Missouri corporation ("Assignee"), AMERISTAR CASINOS, INC., a Nevada corporation ("Guarantor"), having its principal place of business at 3773 Howard Hughes Parkway, Suite 490 South, Las Vegas, Nevada 89109, does hereby unconditionally covenant and agree with Landlord, its successors and assigns, as follows: 1. Terms defined in the Lease and used in this Guarantee of Minimum Rent (the "Rent Guarantee") shall have the same meaning herein as so defined. 2. If an Event of Default shall occur under Section 25(a)(i) of the Lease at any time during the Guarantee Period (as hereinafter defined) due to the failure of Tenant to pay, within ten (10) days after notice of nonpayment (unless notice shall no longer be required pursuant to such subsection), any component or installment of Minimum Rent due Landlord pursuant to the Lease, or if the Lease shall be terminated at any time during the Guarantee Period due to an Event of Default, then Guarantor will well and truly immediately pay Landlord on demand, in cash, the full sum of unpaid Minimum Rent due Landlord under the Lease for the remainder of the Guarantee Period (and said sum will not be reduced by application of any "present value" formula), not to exceed the total amount of all Minimum Rent allocable to the Guarantee Period (the "Guaranteed Amount"). As used in this Rent Guarantee, the term "Guarantee Period" shall mean that period commencing on the Commencement Date and ending on the earlier to occur of (a) the last day of the 15th Lease Year occurring after the Commencement Date and (b) the date on which the Lease is terminated in accordance with its terms (other than due to an Event of Default). Notwithstanding the first sentence of this Section 2, in lieu of paying to Landlord in one lump sum the entire Guaranteed Amount, Guarantor may elect to pay to Landlord the Minimum Rent as and when the same would have otherwise been due under the Lease through the remainder of the Guarantee Period had the Lease not been terminated or had an Event of Default under Section 25(a)(i) not occurred. Notwithstanding the foregoing, in the event of an Event of Default under this Rent Guarantee, Guarantor's option to make installment payments of Minimum Rent shall be null and void, and Guarantor shall immediately pay to Landlord, on demand, in cash, the full sum of the Guaranteed Amount due but unpaid. 3. This Rent Guarantee constitutes an absolute and unconditional guarantee of payment of Minimum Rent accruing during the Guarantee Period and is not a guarantee of collection. It shall be enforceable against Guarantor, its successors and assigns, without the necessity for any suit or proceedings by Landlord against Tenant, its successors and assigns, and without the necessity of any notice of acceptance of this Rent Guarantee. In addition, Guarantor further waives any right Guarantor may have to seek a reduction in, or a credit against payment of, the Guaranteed Amount, or any portion thereof, for any reason other than payment of the Guaranteed Amount; provided, however, that the Guaranteed Amount shall be reduced by an amount equal to any rent or license or operating fees actually received by Landlord during the Guarantee Period from any new tenant, licensee or operator of the Premises procured by or for Landlord, after deduction of (i) all Rent and Additional Rent accrued under the Lease but unpaid to Landlord, and (ii) Landlord's reasonable expenses incurred in the enforcement of Tenant's obligations under the Lease and Guarantor's obligations under this Rent Guarantee, and in reletting or licensing the use of the Premises, including, without limitation reasonable brokerage fees and commissions and reasonable attorneys' fees and expenses. 4. Guarantor agrees that the validity of this Rent Guarantee and the obligations of Guarantor shall in no way be terminated, affected or impaired by reason of the assertion or the failure or delay to assert by Landlord against Tenant, or Tenant's successors and assigns, any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease. The single or partial exercise of any right, power or privilege under this Rent Guarantee shall not preclude any other or the further exercise thereof or the exercise of any other right, power or privilege by Landlord. 5. Failure of Guarantor to honor any demand for payment under this Rent Guarantee within ten (10) days after notice thereof by Landlord (which notice shall not be required more than twice during any twelve month period) and to make payment of any sums due hereunder within 5 days after delivery of such notice, or the breach by Guarantor of any representation or warranty of Guarantor hereunder, shall constitute an Event of Default hereunder. 6. This Rent Guarantee shall not be affected and the liability of the Guarantor shall not be extinguished or diminished (a) by Landlord's receipt, application or release of security given for the performance and observation of the covenants and conditions in the Lease to be performed or observed by Tenant, its successors and assigns, including any sums paid by Guarantor under the Guarantee of Completion issued by Guarantor to Landlord on the Assignment Date (the "Completion Guarantee"), (b) by the discharge of Tenant's liabilities through bankruptcy, insolvency or any similar debt relief proceedings, (c) by reason of sums paid or payable to Landlord from the proceeds of any insurance policy or condemnation award (unless the Lease is terminated incident to condemnation), or (d) by any extensions, renewals, amendments, indulgences, modifications, transfers or assignments in whole or in part of the Lease, whether or not notice thereof is given to Guarantor. 7. Guarantor agrees that the liability of Guarantor is co-extensive with that of Tenant and also joint and several. 8. Landlord's acceptance of a note or collateral of Tenant or Guarantor shall not constitute the full cash payment required herein. This Rent Guarantee is given in addition to all other guarantees which may pertain to Tenant's indebtedness, and is not subordinate to any other guarantees. Landlord's rights under all guarantees, including this Rent Guarantee, shall be cumulative and independently enforceable. It shall not be a condition to the enforcement of this Rent Guarantee that any other guarantees or collateral be resorted to by Landlord. Any such collateral or guarantee, including the Completion Guarantee, may be applied by Landlord in satisfaction of any obligation or liability of Tenant under the Lease without thereby impairing, reducing, diminishing or otherwise modifying the obligations of Guarantor under this Rent Guarantee. 9. In order to induce Landlord to approve the proposed assignment of Tenant's right, title and interest in the Lease to Assignee, Guarantor makes the following representations and warranties to Landlord: (a) Guarantor is duly formed and validly existing as a Nevada corporation; (b) the execution and delivery of this Rent Guarantee and the performance by Guarantor of Guarantor's obligations hereunder have been duly authorized by all requisite corporate action; (c) this Rent Guarantee constitutes the legal, valid and binding obligation of Guarantor and is enforceable against Guarantor in accordance with its terms; (d) no litigation or regulatory proceedings are pending or, to the best of Guarantor's knowledge, threatened against Guarantor which, if adversely determined, would likely have a material adverse impact on Guarantor or on this Rent Guarantee; (e) Guarantor is not a party to, and neither Guarantor nor Guarantor's properties, real or personal, are subject to, any agreement, order, proceeding, ruling or other matter in conflict with any provision of this Rent Guarantee or which materially and adversely affects its ability to perform its obligations hereunder; (f) Guarantor is solvent and is not a party to any assignment for the benefit of creditors or bankruptcy proceeding; and (g) Guarantor is not in material default of any contract or agreement to which it is a party which materially and adversely affects Guarantor's ability to perform its obligations under this Rent Guarantee. 10. Guarantor agrees that it will, at any time and from time to time, within ten (10) business days following written request by Landlord, execute, acknowledge and deliver to Landlord a statement certifying that this Rent Guarantee is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating such modifications). Guarantor agrees that such certificate may be relied on by third parties. Should Landlord be obligated by any bankruptcy or other law in connection with any bankruptcy proceeding of Tenant or Guarantor to repay to Tenant or to Guarantor or to any trustee, receiver or other representative or any of them, any amounts previously paid to Landlord, its successors and assigns, this Rent Guarantee shall be reinstated in the amount of such repayments. 11. As a further inducement to Landlord to approve the proposed assignment of Tenant's right, title and interest in the Lease to Assignee and in consideration thereof, Landlord and Guarantor covenant and agree that in any action or proceeding brought on, under or by virtue of this Rent Guarantee, Landlord and Guarantor shall and do hereby waive trial by jury. Without regard to principles of conflicts of laws, the validity, interpretation, performance and enforcement of this Rent Guarantee shall be governed by and construed in accordance with the laws of the State of Missouri, and Guarantor hereby consents to jurisdiction and venue in the Circuit Court of St. Louis County, Missouri, or in the United States District Court for the Eastern District of Missouri, St. Louis, Missouri, wherein Landlord at its election may bring an action for the enforcement of this Rent Guarantee. If Landlord commences an action in such court, Guarantor hereby agrees that it will submit to the personal jurisdiction of such court and will not attempt to have such action dismissed, abated or transferred on the ground of forum non conveniens. 12. Guarantor covenants and agrees that for so long as the restrictive covenant described in Section 10(c) of the Lease shall remain in effect as against Tenant, Guarantor shall not participate in any manner in the ownership, sponsorship, control, management, operation or use of any riverboat gaming facility along either the Illinois or Missouri banks of the Mississippi River from the southern boundary of the City of St. Louis to the northern boundary of Jefferson County, Missouri. Guarantor acknowledges that the restrictive covenant contained in this Section 12 (and made by the Tenant under the Lease) is reasonable under all of the circumstances. The provisions of this Section 12 shall survive any termination of this Rent Guarantee. 13. Guarantor covenants and agrees to pay interest to Landlord on any and all sums due Landlord hereunder which remain unpaid for more than five (5) days after delivery of Landlord's demand for payment, commencing on the date such payment is due, at the rate of two percent (2%) in excess of the from time to time publicly announced prime rate of interest of The Bank of America. 14. If any provision or application of this Rent Guarantee is invalid, unenforceable or illegal for any reason, the parties agree that such invalid, unenforceable or illegal provision or application shall be deemed modified to the extent, but only to the extent, required to make such portion or application enforceable, and that no such modification shall be deemed to affect the remainder of this Rent Guarantee. 15. Unless otherwise indicated differently, all notices, payments, requests, reports, information or demands which any party hereto may desire or may be required to give to any other party hereunder, shall be in writing and shall be personally delivered or sent by a nationally recognized courier service, telecopier or first-class certified or registered United States mail, postage prepaid, return receipt requested, and sent to the party at its address appearing below or such other address as such party shall hereafter inform the other party hereto by written notice given as aforesaid: If to Guarantor: Ameristar Casinos, Inc. 3773 Howard Hughes Parkway Suite 490 South Las Vegas, Nevada 89109 Attention: President FAX: (702) 369-8860 With copies to: Gordon R. Kanofsky Senior Vice President of Legal Affairs Ameristar Casinos, Inc. 16633 Ventura Boulevard Suite 1050 Encino, California 91436 FAX: (818) 995-7099 Steven E. Kushner Stinson, Mag & Fizzell 100 South Fourth Street, Suite 700 St. Louis, Missouri 63102 Fax: (314) 259-4599 If to Landlord: St. Louis County Port Authority Economic Council of St. Louis County 121 South Meramec, Suite 900 Clayton, Missouri 63105 Attention: Director of Real Estate FAX: (314) 615-7666 With copies to: Economic Council of St. Louis County 121 South Meramec, Suite 900 Clayton, Missouri 63105 Attention: General Counsel FAX: (314) 615-7666 St. Louis County 41 South Central Clayton, Missouri 63105 Attention: County Counselor FAX: (314) 615-3732 All notices, payments, requests, reports, information or demands so given shall be deemed effective upon receipt, or if mailed, upon receipt or the expiration of the third day following the date of mailing, whichever occurs first, except that any notice of change in address shall be effective only upon receipt by the party to whom said notice is addressed. 16. Guarantor hereby indemnifies and holds Landlord harmless from and against any attorneys' fees and the expenses of such attorneys, costs of collection and court costs which may be incurred by Landlord in the enforcement of its rights hereunder, whether or not litigation is commenced, but only if Landlord is the prevailing party in any such enforcement action. IN WITNESS WHEREOF, Guarantor has executed this Rent Guarantee this ___ day of _____________. AMERISTAR CASINOS, INC. By: Name: Title: ATTEST: By: Name: Title: ATTACHMENT F GUARANTEE OF COMPLETION FOR VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged, and to induce the ST. LOUIS COUNTY PORT AUTHORITY, a public body corporate and politic of the State of Missouri ("Landlord") to approve the proposed assignment of the right, title and interest of Southboat Limited Partnership, a Missouri limited partnership ("Tenant") in that certain Amended and Restated Lease and Development Agreement, by and between Tenant and Landlord, dated as of February ___, 2000 (the "Lease") to Ameristar Casino St. Louis, Inc., a Missouri corporation ("Assignee"), AMERISTAR CASINOS, INC., a Nevada corporation ("Guarantor"), having its principal place of business at 3773 Howard Hughes Parkway, Suite 490 South, Las Vegas, Nevada 89109, does hereby unconditionally covenant and agree with Landlord, its successors and assigns, as follows: 1. Terms defined in the Lease and used in this Guarantee of Completion (the "Completion Guarantee") shall have the same meaning herein as so defined. 2. If Tenant shall abandon the Project after commencement of any Work, or, if for reasons other than an Unavoidable Delay or a delay caused by Landlord or St. Louis County, any lien for services, labor or materials shall be filed against the Property or the Project on account of the Work, and such lien shall not be timely discharged or, in the event Tenant or Guarantor shall elect to contest the lien in good faith and by appropriate proceedings without providing security to Landlord in accordance with Section 9(d) of the Lease, or in the event the Work shall be defective in any material respect or not in conformity with the Plans in any material respect and Tenant shall fail or refuse to correct the Work after 30 days' prior written notice, then Guarantor, at Guarantor's sole risk, cost and expense, and subject to all of the provisions of the Lease governing the Work, will well and truly immediately perform or correct the Work, or pay and discharge the lien claim, as the case may be. Guarantor shall pay all costs of the Work not paid by Tenant and reimburse Landlord for any costs reasonably incurred by Landlord in completing or correcting the Work or in paying the cost of any lien claim or the defense thereof, as the case may be. 3. This Completion Guarantee constitutes an absolute and unconditional guarantee of completion of the Work in accordance with the requirements of the Lease and payment of all costs incurred by Tenant and/or Guarantor for or in connection with the Work. This Completion Guarantee shall be enforceable against Guarantor, its successors and assigns, without the necessity for any suit or proceedings by Landlord against Tenant, its successors and assigns, and without the necessity of any notice of non-payment, non-performance or non-observance or any notice of acceptance of this Completion Guarantee or any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Nothing contained in this Section 3, however, shall impair the right of Guarantor to contest the validity of any claim for the cost of labor or materials or to pursue any claim against a contractor, subcontractor or supplier in connection with the Work; provided, however, that in any such event the right of Guarantor to contest or pursue any such claim shall be conditioned on delivery to Landlord of reasonably adequate cash security to cover the cost of the claim, together with reasonable attorneys fees and expenses, or the reasonable cost required to complete or correct the Work, as the case may be. 4. Guarantor agrees that the validity of this Completion Guarantee and the obligations of Guarantor shall in no way be terminated, affected or impaired by reason of the assertion or the failure or delay to assert by Landlord against Tenant, or Tenant's successors and assigns, any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease. The single or partial exercise of any right, power or privilege under this Completion Guarantee shall not preclude any other or the further exercise thereof or the exercise of any other right, power or privilege by Landlord. 5. Failure of Guarantor to honor any demand for performance or payment under this Completion Guarantee and to make immediate payment of any sums due hereunder, or the breach by Guarantor of any representation or warranty of Guarantor hereunder, shall constitute an Event of Default hereunder. 6. This Completion Guarantee shall not be affected and the liability of the Guarantor shall not be extinguished or diminished (a) by Landlord's receipt, application or release of security given for the performance and observation of the covenants and conditions in the Lease to be performed or observed by Tenant, its successors and assigns, including any sums paid by Guarantor under the Guarantee of Minimum Rent to be issued by Guarantor to Landlord on the Commencement Date (the "Rent Guarantee"), (b) by the discharge of Tenant's liabilities through bankruptcy, insolvency or any similar debt relief proceedings, (c) by reason of sums paid or payable to Landlord from the proceeds of any insurance policy or condemnation award (unless the Lease is terminated incident to condemnation), or (d) by any extensions, renewals, amendments, indulgences, modifications, transfers or assignments in whole or in part of the Lease, whether or not notice thereof is given to Guarantor. If the Lease is terminated in accordance with its terms (other than due to an Event of Default) prior to completion of the Work, the obligations of Guarantor under this Completion Guarantee shall thereafter be limited to securing the obligation of Tenant to pay all costs incurred by Tenant in connection with the Work and to remove all property of Tenant from the Premises in accordance with the terms of the Lease. 7. Guarantor agrees that it shall have no rights of indemnification or subrogation, and that Guarantor shall subordinate its rights of recourse, against Tenant by reason of any indebtedness or sums due to Guarantor, unless and until the obligations secured by this Completion Guarantee are fully performed. Guarantor agrees that it shall not assert any claim which it has or may have against Tenant, including any claims under this Completion Guarantee, until the obligations of Tenant under the Lease in respect of the Work are fully satisfied and discharged. The liability of Guarantor is co-extensive with that of Tenant and also joint and several. 8. Landlord's acceptance of a note or collateral of Tenant shall not constitute the full cash payment required herein. This Completion Guarantee is given in addition to all other guarantees which may pertain to Tenant's indebtedness or obligations, and is not subordinate to any other guarantees. Landlord's rights under all guarantees, including this Completion Guarantee, shall be cumulative and independently enforceable. It shall not be a condition to the enforcement of this Guarantee that any other guarantees or collateral be resorted to by Landlord. Any such collateral or guarantee, including the Rent Guarantee, may be applied by Landlord in satisfaction of any obligation or liability of Tenant under the Lease without thereby impairing, reducing, diminishing or otherwise modifying the obligations of Guarantor under this Completion Guarantee. 9. In order to induce Landlord to approve the proposed assignment of Tenant's right, title and interest in the Lease to Assignee, Guarantor makes the following representations and warranties to Landlord: (a) Guarantor is duly formed and validly existing as a Nevada corporation; (b) the execution and delivery of this Completion Guarantee and the performance by Guarantor of Guarantor's obligations hereunder have been duly authorized by all requisite corporate action; (c) this Completion Guarantee constitutes the legal, valid and binding obligation of Guarantor and is enforceable against Guarantor in accordance with its terms; (d) no litigation or regulatory proceedings are pending or, to the best of Guarantor's knowledge, threatened against Guarantor which, if adversely determined, would likely have a material adverse impact on Guarantor or on this Completion Guarantee; (e) Guarantor is not a party to, and neither Guarantor nor Guarantor's properties, real or personal, are subject to, any agreement, order, proceeding, ruling or other matter in conflict with any provision of this Completion Guarantee or which materially and adversely affects its ability to perform its obligations hereunder; (f) Guarantor is solvent and is not a party to any assignment for the benefit of creditors or bankruptcy proceeding; and (g) Guarantor is not in material default of any contract or agreement to which it is a party which materially and adversely affects Guarantor's ability to perform its obligations under this Completion Guarantee. 10. Guarantor agrees that it will, at any time and from time to time, within ten (10) business days following written request by Landlord, execute, acknowledge and deliver to Landlord a statement certifying that this Completion Guarantee is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating such modifications). Guarantor agrees that such certificate may be relied on by third parties. Should Landlord be obligated by any bankruptcy or other law to repay to Tenant or to Guarantor or to any trustee, receiver or other representative or any of them, any amounts previously paid to Landlord, its successors and assigns, this Completion Guarantee shall be reinstated in the amount of such repayments. 11. As a further inducement to Landlord to approve the proposed assignment of Tenant's right, title and interest in the Lease to Assignee and in consideration thereof, Landlord and Guarantor covenant and agree that in any action or proceeding brought on, under or by virtue of this Completion Guarantee, Landlord and Guarantor shall and do hereby waive trial by jury. Without regard to principles of conflicts of laws, the validity, interpretation, performance and enforcement of this Completion Guarantee shall be governed by and construed in accordance with the laws of the State of Missouri, and Guarantor hereby consents to jurisdiction and venue in the Circuit Court of St. Louis County, Missouri, or in the United States District Court for the Eastern District of Missouri, St. Louis, Missouri, wherein Landlord at its election may bring an action for the enforcement of this Completion Guarantee. 12. Guarantor hereby indemnifies and holds Landlord harmless from and against any attorneys' fees and the expenses of such attorneys, costs of collection and court costs which may be incurred by Landlord in the enforcement of its rights hereunder, whether or not litigation is commenced, but only if Landlord is the prevailing party in any such enforcement action. 13. Guarantor covenants and agrees to pay interest to Landlord on any and all sums due Landlord hereunder which remain unpaid for more than five (5) days after delivery of Landlord's demand for payment, commencing on the date such payment is due, at the rate of two percent (2%) in excess of the from time to time publicly announced prime rate of interest of The Bank of America. 14. If any provision or application of this Completion Guarantee is invalid, unenforceable or illegal for any reason, the parties agree that such invalid, unenforceable or illegal provision or application shall be deemed modified to the extent, but only to the extent, required to make such portion or application enforceable, and that no such modification shall be deemed to affect the remainder of this Completion Guarantee. 15. Unless otherwise indicated differently, all notices, payments, requests, reports, information or demands which any party hereto may desire or may be required to give to any other party hereunder, shall be in writing and shall be personally delivered or sent by a nationally recognized courier service, telecopier or first-class certified or registered United States mail, postage prepaid, return receipt requested, and sent to the party at its address appearing below or such other address as such party shall hereafter inform the other party hereto by written notice given as aforesaid: If to Guarantor: Ameristar Casinos, Inc. 3773 Howard Hughes Parkway Suite 490 South Las Vegas, Nevada 89109 Attention: President FAX: (702) 369-8860 With copies to: Gordon R. Kanofsky Senior Vice President of Legal Affairs Ameristar Casinos, Inc. 16633 Ventura Boulevard Suite 1050 Encino, California 91436 FAX: (818) 995-7099 Steven E. Kushner Stinson, Mag & Fizzell 100 South Fourth Street, Suite 700 St. Louis, Missouri 63102 Fax: (314) 259-4599 If to Landlord: St. Louis County Port Authority Economic Council of St. Louis County 121 South Meramec, Suite 900 Clayton, Missouri 63105 Attention: Director of Real Estate FAX: (314) 615-7666 With copies to: Economic Council of St. Louis County 121 South Meramec, Suite 900 Clayton, Missouri 63105 Attention: General Counsel FAX: (314) 615-7666 St. Louis County 41 South Central Clayton, Missouri 63105 Attention: County Counselor FAX: (314) 615-3732 All notices, payments, requests, reports, information or demands so given shall be deemed effective upon receipt, or if mailed, upon receipt or the expiration of the third day following the date of mailing, whichever occurs first, except that any notice of change in address shall be effective only upon receipt by the party to whom said notice is addressed. IN WITNESS WHEREOF, Guarantor has executed this Completion Guarantee this ___ day of _______________. AMERISTAR CASINOS, INC. By: Name: Title: ATTEST: By: Name: Title: EX-21 7 EXHIBIT 21.1 SUBSIDIARIES OF AMERISTAR CASINOS, INC. Cactus Pete's, Inc., a Nevada corporation Ameristar Casino Vicksburg, Inc., a Mississippi corporation, ("ACVI") Ameristar Casino Council Bluffs, Inc., an Iowa corporation Ameristar Casino Las Vegas, Inc., a Nevada corporation A.C. Food Services, Inc., a Nevada corporation AC Hotel Corp., a Mississippi corporation (which also is a subsidiary of ACVI) Ameristar Casino St. Louis, Inc., a Missouri corporation EX-27 8
5 This data should be reviewed in conjunction with the financial statements and notes included in this filing. 0000912145 AMERISTAR CASINOS, INC. 1,000 12-MOS DEC-31-1999 DEC-31-1999 15,531 0 2,080 0 3,268 31,150 412,963 108,949 378,645 58,112 100,000 0 0 204 68,169 378,645 300,286 300,286 0 274,741 0 0 24,449 545 340 0 0 0 0 205 0.01 0.01
EX-23 9 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this 1999 Annual Report on Form 10-K into the Company's previously filed Registration Statements on Form S-8 (File Nos. 33-83378, 333-34313). Arthur Andersen LLP Las Vegas, Nevada March 30, 2000 EX-99 10 EXHIBIT 99.1 SUPPLEMENTAL AGREEMENT OF AMERISTAR CASINOS, INC. Ameristar Casinos, Inc. ("ACI") hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of any of the following instruments defining the rights of holders of long-term debt issued by ACI or its subsidiaries: 1. Purchase Money Deed of Trust Note executed by Ameristar Casino Vicksburg, Inc., a Mississippi corporation ("ACVI"), in favor of Magnolia Hotel Company, a Mississippi corporation ("Magnolia"), in the principal amount of $250,000. 2. Purchase Money Deed of Trust Note executed by ACVI in favor of Magnolia in the principal amount of $4,329,725.85. In addition, ACI hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of all omitted exhibits and schedules to the Asset Purchase and Sale Agreement filed as Exhibit 10.12 to this Annual Report. -----END PRIVACY-ENHANCED MESSAGE-----