-----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, TolwkMPGOaOWScHtdc2iXN1qXfXfubCloRK0boYNifWo0wLuD8P5Dt2ymWj75zeF WG5KiqxBMxr/af00v8UVeA== 0000950148-01-000486.txt : 20010402 0000950148-01-000486.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950148-01-000486 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 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: 1588070 BUSINESS ADDRESS: STREET 1: 216 HADDON AVE STREET 2: SUITE 607 CITY: WESTMONT STATE: NJ ZIP: 08108 BUSINESS PHONE: 7025677000 MAIL ADDRESS: STREET 1: 216 HADDON AVE STREET 2: SUITE 607 CITY: WESTMONT STATE: NJ ZIP: 08108 10-K 1 v70464e10-k.txt FORM 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, 2000 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 No.) Incorporation or Organization) 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. [ ] As of March 15, 2001, 20,518,282 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, 2001 was approximately $18,142,690, 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 8, 2001 Annual Meeting of Stockholders (which has not been filed as of the date of this filing) are incorporated by reference into Part III. 1 2 Unless the context indicates otherwise, all references in this Annual Report on Form 10-K to "Ameristar" refer to Ameristar Casinos, Inc. and all references to the "Company," "we," "our," "ours" and "us" refer to Ameristar and its consolidated subsidiaries. This Report contains certain forward-looking statements, including management's plans and objectives for our business, operations and economic performance. These forward-looking statements generally can be identified by the context of the statement or the use of words such as our management or we "believe," "anticipate," "intend," "expect," "plan," or words of similar meaning. Similarly, statements that describe our 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 our control. 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 We are a leading multi-jurisdictional gaming company that owns and operates casinos and related hotel and entertainment facilities with six properties in operation in Missouri, Iowa, Mississippi and Nevada. All of our principal operations are conducted through wholly owned subsidiaries of Ameristar. Our properties are: Ameristar Kansas City: Ameristar Kansas City is a casino and related hotel and other facilities located seven miles from downtown Kansas City. The casino opened in 1997 and is the newest and largest gaming facility in the Kansas City market. It features an historic Missouri riverboat theme, including a 184-room hotel, approximately 140,000 square feet of gaming space, 3,294 slot machines and 161 table games. Ameristar Kansas City offers a fully-integrated gaming, dining, lodging and entertainment experience in a spacious, land-based atmosphere specifically designed to attract customers from the greater Kansas City area, as well as strong visitor and overnight markets. Ameristar Kansas City was recently named the top tourist attraction in Missouri by a local Kansas City magazine. Ameristar Council Bluffs: Ameristar Council Bluffs is a riverboat casino and related land-based hotel and other facilities located in Council Bluffs, Iowa across the Missouri River from Omaha, Nebraska. We designed and operate Ameristar Council Bluffs as a destination resort to serve as the entertainment centerpiece for the region. The property currently features 444 hotel rooms, approximately 38,500 square feet of gaming space, 1,480 slot machines and 46 table games. In 1999, Ameristar Council Bluffs was awarded the prestigious Four-Diamond 2 3 designation from the AAA and is the only riverboat property in the nation to carry such designation. Ameristar St. Charles: Ameristar St. Charles is a casino and entertainment facility situated immediately north of the Interstate 70 bridge in the St. Louis metropolitan area. The casino complex is strategically located to attract customers from the St. Charles and greater St. Louis area. The casino opened in 1994 and features approximately 45,000 square feet of gaming space, 1,875 slot machines and 40 table games. We intend to continue with a partially-completed expansion of the property that will result in a casino and entertainment facility with at least 70,000 square feet of gaming space, 2,400 slot machines and 60 table games, as well as expanded entertainment facilities. This expansion is expected to be completed in mid-2002. Ameristar Vicksburg: Ameristar Vicksburg is a riverboat-themed dockside casino and related hotel and other land-based facilities located in Vicksburg, Mississippi. The casino is located one-quarter mile north of Interstate 20, the main east-west thoroughfare connecting Atlanta and Dallas, approximately 45 miles west of Jackson, Mississippi. We opened Ameristar Vicksburg in 1994 and recently completed a renovation and enhancement of the casino facilities in which we added approximately 1,000 new generation multi-coin slot machines, while also refurbishing much of the non-casino facilities. The property features a 150-room hotel, approximately 39,000 square feet of gaming space, 1,200 slot machines and 50 table games. The Jackpot Properties: Cactus Petes Resort Casino and The Horseshu Hotel & Casino are two casino-hotels located in Jackpot, Nevada at the Idaho border. The Jackpot Properties have been operated since 1956 and serve customers primarily from Idaho, Oregon, Washington, Montana, northern California and southwestern Canadian provinces. Together, the Jackpot Properties feature 420 hotel rooms, approximately 28,500 square feet of gaming space, 1,028 slot machines and 29 table games. We market the Jackpot Properties to three separate markets: budget, quality and luxury and the properties offer hotel rooms, food and other amenities at levels that are affordable for each of these customer bases. Cactus Petes is rated a Four-Diamond property by the AAA and has been named "Best Hotel/Resort" in rural Nevada by Nevada Magazine for the last two years. The Reserve: In addition to the six properties that we currently own, until January 29, 2001, we owned The Reserve Hotel Casino in Henderson, Nevada, a suburb of Las Vegas. The Reserve features an African safari and big game reserve theme that includes statues of elephants, giraffes and other animals. On January 29, 2001, we sold The Reserve to Station Casinos, Inc. for $71.8 million in cash. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." BUSINESS AND MARKETING STRATEGIES Our business strategy is to: (1) emphasize quality dining, lodging, entertainment and other non-gaming amenities at affordable prices to complement and enhance our gaming operations, (2) promote our properties as entertainment destinations, (3) construct and expand facilities appropriate to individual markets, (4) emphasize courteous and responsive service to develop customer loyalty and (5) utilize marketing programs to promote customer retention. In 3 4 selecting markets, we seek strong demographics and a favorable competitive environment. We believe this strategy will continue to distinguish us from our competitors, many of whom outside of Las Vegas have not emphasized non-gaming amenities in their operations to the same extent as us. Within markets, we look for sites with attractive, prominent locations and ease of access that will support the size and scope of our development plans. Our properties emphasize slot machine play, and we invest on an ongoing basis in new slot equipment to promote customer satisfaction and loyalty. To this end, we added more than 1,000 new generation multi-coin slot machines to our properties in 2000. All of our properties include table games such as blackjack, craps and roulette. In addition, Cactus Petes, Ameristar Vicksburg and the two Missouri properties offer poker and the Jackpot Properties offer keno and sports book wagering. We generally emphasize competitive minimum and maximum betting limits based on each market. Our gaming revenues are derived and are expected to continue to be derived from a broad base of customers, and we do not depend upon high-stakes players. We extend credit to our 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 and Missouri gaming statutes prohibit the issuance of casino credit. Our marketing strategy is to develop a loyal customer base by promoting the quality of our gaming, leisure and entertainment amenities that emphasize high standards of service and customer satisfaction. We use 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. Our marketing programs also include a number of promotions, designed primarily to increase the frequency of customer visits within local markets, as well as tour and travel promotional packages in certain markets. We use direct mail promotions and a variety of advertising media to market our properties, including print, television, radio, outdoor and internet advertising. EXPANSION PLANS St. Charles Expansion We intend to complete an expansion of Ameristar St. Charles that includes a man-made protective basin containing two new gaming vessels, a new retail and entertainment complex featuring an approximately 550-seat buffet, a well-appointed steakhouse and an entertainment lounge. Our current plans provide that upon completion of the expansion, the casino will have approximately 2,400 slot machines and 60 table games in a total of approximately 70,000 square feet of gaming space located on two floors of the gaming vessel and will be similar in design to Ameristar Kansas City. We are considering an alternative design that would further expand the casino among other enhancements. The expansion project will result in the opening of an entirely new gaming and entertainment facility at our St. Charles location and allow us to sell the existing barge facilities or utilize them for alternative purposes. 4 5 Prior to our acquisition of Ameristar St. Charles, the former owner invested approximately $169 million in the expansion project and completed building the protective basin, the porte cochere and the external physical structure of the new gaming vessels and a majority of the structure of the new restaurant and entertainment complex. In June 1997, the former owner of Ameristar St. Charles halted construction on the St. Charles expansion project. We estimate the remaining cost to complete the construction of the expansion project, as currently planned, to be approximately $110 million, including furniture, fixture and equipment costs that we estimate to be approximately $20 million. A substantial portion of the construction materials, equipment and fixtures for the St. Charles expansion were previously purchased by the former owner. Following the completion of the St. Charles expansion, the property will have available for future expansion up to an additional 70,000 square feet of gaming space and approximately 65,000 square feet of additional space in the land-based pavilion, each of which will require only interior build-out for completion. A substantial portion of this future expansion space has already been constructed by the former owner of the property. In addition, a substantial portion of the construction materials, equipment and fixtures for the future casino expansion space has been purchased. The construction is not expected to disrupt current operations of the casino gaming facilities because the currently operating gaming facilities are separate from the expansion project. We intend to complete the St. Charles expansion through a guaranteed maximum price construction contract. We plan to finance the construction of the St. Charles expansion with cash flow from operations and borrowings under our senior credit facilities. In connection with the acquisition of the St. Charles property, we assumed the contract with the general contractor for the St. Charles expansion and are negotiating to modify this contract to reflect our design changes. Furthermore, substantially all of the subcontracts for the expansion project remain in effect. We believe the St. Charles expansion project fulfills a strategic need in the St. Louis market and that, upon completion of the expansion, Ameristar St. Charles will be the premier gaming facility in the St. Louis market. We anticipate the expansion project will be completed in mid-2002. General Expansion Strategy We seek to expand our 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 at our existing properties, and selectively pursuing expansion projects through Native American reservations in North America. Although our preference is to own and operate each of our gaming properties, we also consider expansion opportunities involving management contracts or joint ventures. Consistent with our expansion strategy, we recently acquired two properties in Kansas City and St. Charles, Missouri, 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. We consider enhancement projects for each property on an ongoing basis. In doing so, we evaluate the operating performance of each property, the anticipated relative costs 5 6 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. We believe that our long-term success in our current markets and expanding into new markets will depend in part on our ability to distinguish our operations from those of our competitors. Our strategy of including quality non-gaming amenities in our 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 our participation in a particular project. In addition, we believe the selection of attractive expansion markets and quality locations within those markets will continue to be important to our growth. In selecting expansion opportunities, we seek 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 our development plans. 6 7 PROPERTY PROFILES The following table presents selected statistical and other information concerning our properties as of March 15, 2001.
AMERISTAR AMERISTAR AMERISTAR AMERISTAR THE JACKPOT KANSAS CITY COUNCIL BLUFFS ST. CHARLES VICKSBURG PROPERTIES ----------- -------------- ----------- --------- ---------- Opening Date January 1997 January 1996 May 1994 February 1994 1956 Casino Square Footage (approx.) 140,000 38,500 45,000 39,000 28,500 Slot Machines 3,294 1,480 1,875 1,200 1028 Table Games 161 46 40 50 29 Hotel Rooms 184 444(1) -- 150 420 Restaurants/Bars 15/11 5/6 3/3 3/4 5/4 Restaurant/Bar Seating Capacity 2,513/379 1,093/191 400/40 564/46 584/120 Guest Parking Spaces 5,000 3,000 4,000 1,700 1,030 Other Amenities Kids Quest Kids Quest Entertainment Entertainment 356-seat Showroom; Children's Children's Activity lounge; Gift Shop lounge; Gift Shop Sports Book; Keno; Activity Center Center (2); Meeting Meeting Space; (2); 1,400-seat Space; Indoor Swimming Pool; Gift Entertainment Swimming Pool & Shop; General Store; Facility; Spa; Exercise Service Station; 18-screen Movie Facility; Gift Amusement Arcade Theater (2); Shop; Amusement Video Arcade (2); Arcade Gift Shop Operating Subsidiary Ameristar.Casino Ameristar Casino Ameristar Casino Ameristar Casino Cactus Pete's, Inc. Kansas City, Inc. Council Bluffs, St. Charles, Inc. Vicksburg, Inc. ("CPI") ("ACKCI") Inc. ("ACCBI") ("ACSCI") ("ACVI")
- ------------------- (1) Includes 284 rooms currently operated by affiliates of Kinseth Hospitality Corporation located on land owned by us and leased to affiliates of Kinseth. (2) Operated by a third party. AMERISTAR KANSAS CITY Ameristar Kansas City originally opened in January 1997 and we acquired the property in December 2000. The property is a master-planned gaming and entertainment destination facility featuring an historic Missouri riverboat theme and is strategically located to attract customers from the greater Kansas City area, as well as tourists from outside the region. The property is located on approximately 183 acres immediately east of the heavily traveled Interstate 435 bridge, seven miles east of downtown Kansas City. Ameristar Kansas City's marketing programs are specifically designed to effectively target and capture repeat customer demand from the local customer base and also capture the strong visitor and overnight 7 8 markets. We believe that Ameristar Kansas City has specific advantages relative to other gaming facilities in the region and that it is the premier gaming facility in the Kansas City market. The site is adjacent to the Interstate 435 bridge, which supports an average traffic flow of approximately 88,000 cars per day. Interstate 435 is a six-lane, north-south expressway offering quick and easy accessibility and direct visibility of the site. We believe the Ameristar Kansas City facility offers a full Las Vegas-style gaming experience in the Midwest. The Ameristar Kansas City facility features: o two permanently docked gaming vessels situated in a man-made protective basin with an historic Missouri riverboat theme, o an approximately 140,000 square-foot gaming space with approximately 3,294 slot and video poker machines and 161 table games, including a poker room, o a land-based 184-room hotel and 5,000 parking spaces, and o a land-based entertainment center with seven full-service restaurants, several fast-food outlets, eleven bars and lounges, a 1,400-seat Grand Pavilion, a Kid's Quest child-care facility, an 18-screen movie theater complex, a 5,700-square foot non-gaming video arcade and a gift shop. Ameristar Kansas City's restaurants offer a variety of high-quality food at reasonable prices. Restaurants include an all-you-can-eat live action buffet featuring Italian, Mexican, Chinese, barbecue, and traditional American fare, a restaurant featuring fine Italian cuisine and a wine bar with an extensive selection, a restaurant featuring southwestern foods, a restaurant featuring fresh Louisiana style seafood, and a restaurant featuring a wide selection of micro-brewed lagers and an assortment of American and Bavarian cuisine. In addition, Ameristar Kansas City leases space to a well-known Kansas City favorite, Arthur Bryant's Barbeque. Furthermore, among other awards and distinctions, the property's restaurants were voted "Best of Kansas City" in five different categories in Kansas City Magazine's 2000 Annual Readers Survey. Market. The Kansas City gaming market is the twelfth largest in the United States with gaming revenues for the year ended December 31, 2000 of $559 million. The Kansas City market consists of four casinos located in Kansas City, including Ameristar Kansas City, and a fifth located approximately 50 miles north in St. Joseph, Missouri. The Kansas City market has over 1.4 million adults residing within a 50 mile radius and is insulated from other gaming markets, with no significant competition within 100 miles. In September 1999, Missouri began allowing continuous boarding on riverboats in the St. Louis market and in November 1999, Missouri began allowing continuous boarding on riverboats in the Kansas City market. Prior to this policy change, casino patrons were permitted to board gaming facilities only during the first 45 minutes of each two-hour period. In August 2000, Missouri legislation became effective authorizing the use of slot machines that exchange paper currency into electronic credit instead of tokens, so that patrons are not required to manually deposit tokens into gaming machines. This change allows for faster, more 8 9 convenient play, especially on new generation, multi-coin slot machines that have proven popular in other gaming jurisdictions without such regulations. Competition. Ameristar Kansas City competes primarily with three other gaming operations located in and around Kansas City, Missouri. Gaming has been approved by local voters in jurisdictions near Kansas City, including St. Joseph, Missouri, which is located approximately 50 miles north of Kansas City and currently has one riverboat gaming operation. Since the opening of Ameristar Kansas City in 1997, Sam's Town, the closest casino to Ameristar Kansas City, closed, and Boyd Gaming, the owner of Sam's Town, sold most of Sam's Town's assets to Harrah's Entertainment Inc. Sam's Town has remained closed since its acquisition by Harrah's, which has announced its intention to sell the property with a covenant restricting its use to non-gaming purposes. In June 2000, Isle of Capri purchased the Flamingo Hilton and commenced a substantial renovation of the property, which was partially completed in the first quarter of 2001 and is expected to be completed in the second quarter of 2001. We believe that during this construction period, Isle facility patrons were displaced by the construction and many frequented Harrah's North Kansas City. In May 2000, Harrah's North Kansas City, located approximately five miles from Ameristar Kansas City and currently the closest operating casino to Ameristar Kansas City, announced plans for facilities enhancements including consolidation of gaming space onto one expanded vessel. We cannot be sure what effect, if any, this will have on our operations or our ability to compete in the Kansas City market. In April 2000, the Boonville City Council approved the Isle of Capri riverboat gaming operation on a site that has received preliminary site and development approval from the Missouri Gaming Commission and which is located approximately 105 miles from Ameristar Kansas City. Boonville is located in an area that is not currently served by Missouri gaming facilities. AMERISTAR COUNCIL BLUFFS We opened Ameristar Council Bluffs in January 1996 under one of three gaming licenses currently issued for the Council Bluffs gaming market. Ameristar Council Bluffs is located on the bank of the Missouri River across from Omaha, Nebraska and is adjacent to the Nebraska Avenue exit on Interstate 29 immediately north of the junction of Interstate 29 and Interstate 80. We 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 property 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 AAA and the property is the only riverboat property in the nation to carry this designation. 9 10 The Council Bluffs Casino is an approximately 52,000 square foot three-level, cruising riverboat measuring 272 feet long by 98 feet wide with a casino of approximately 38,500 square feet. The third level addition to the riverboat was completed in November 1999, increasing 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, we believe that the Iowa Racing and Gaming Commission would grant a waiver 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 coffee shop, a steak house and a sports bar cabaret, all of which are operated by us. 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 completed in Spring 2000. In September 2000, Ameristar Council Bluffs completed the new 100-seat Atrium restaurant adjacent to the casino entrance as well as an expanded and enhanced VIP Lounge. In addition, as part of an approximately $7.4 million capital improvement program, we are currently renovating and enhancing the first two levels of the casino at Ameristar Council Bluffs, as well as refurbishing the sports bar and converting the 24-hour coffee shop to a 24-hour bakery and restaurant. We have leased a portion of the Ameristar Council Bluffs site to an affiliate of Iowa-based Kinseth Hospitality Corporation for a 188-room, limited-service Holiday Inn Suites hotel that opened on March 31, 1997 and was expanded during 1999. Kinseth 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. We have leased another portion of the Ameristar Council Bluffs site to another affiliate of Kinseth for a 96-room Hampton Inn hotel. Kinseth developed and operates this hotel, which is connected to the Holiday Inn Suites Hotel and the Main Street Pavilion by climate-controlled walkways. The Hampton Inn hotel opened on March 2, 2001. 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 10 11 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 the Council Bluffs gaming market for the year ended December 31, 2000 were $347 million, an increase of $20 million over 1999. Competition. Three gaming licenses have been issued for the Council Bluffs gaming market to Iowa West Racing Association. We operate our casino at Ameristar Council Bluffs pursuant to an operating agreement with Iowa West Racing Association. The other casinos operating under these licenses are Harveys Casino Hotel, which operates a riverboat casino in close proximity to Ameristar Council Bluffs, and Bluffs Run Casino, 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 1,500 slot machines, a restaurant, a buffet, and lounge entertainment. We believe that Bluffs Run will continue to provide significant competition due to its advantage of being the only land-based facility in the market. Harveys, which opened in 1996, also provides serious competition for Ameristar Council Bluffs. Harveys added a third level to its riverboat in early 1998, adding approximately 200 slot machines, and built a 1,600-space parking garage in 1999. AMERISTAR ST. CHARLES Ameristar St. Charles originally opened in May 1994 and we acquired the property in December 2000. The property is a master-planned gaming and entertainment destination facility featuring an historic Missouri riverboat theme and is located on approximately 52 acres immediately north of the Interstate 70 bridge in the St. Louis metropolitan area. The casino complex is strategically located to attract customers from the St. Charles and greater St. Louis area, as well as tourists from outside the region. Interstate 70 is a 10-lane, east-west freeway offering quick and easy accessibility to and direct visibility of the Ameristar St. Charles site for the 188,000 vehicles, on average, that use the highway per day. In April 2000, a reconfiguration of the two gaming vessels at Ameristar St. Charles was completed. In response to the new continuous boarding rules that went into effect in the St. Louis market in September 1999, all of the gaming operations of Ameristar St. Charles were moved to a barge which contains 45,000 square feet of gaming and entertainment space. Ameristar St. Charles features approximately 1,875 slot and video poker machines and 40 table games, and non-casino amenities including a 250-seat buffet, a distinctive steak house, a deli, three bars, an entertainment lounge and a gift shop. As described above in "--Expansion Plans," we intend to invest approximately $110 million to complete an expansion at the property in mid-2002. In May 1996, construction of an elevated roadway and a 4,000-space five-story parking structure was completed. The parking facility is constructed above the existing flood plain. The elevated roadway and parking structure provide improved access to the gaming facilities and significantly diminish Ameristar St. Charles' susceptibility to closure during the spring flooding season. 11 12 Market. The St. Louis gaming market is the ninth largest in the United States with gaming revenues for year ended December 31, 2000 of $684 million. The St. Louis market, which overlaps two jurisdictions, Missouri and Illinois, consists of five casinos, including Ameristar St. Charles. There are approximately 1.8 million adults living within 50 miles and 2.7 million adults living within 100 miles of St. Louis, making it the third largest gaming market in the United States in terms of local population, and the St. Louis market is insulated from other gaming markets. Competition. Ameristar St. Charles competes primarily with four other gaming operations located in and around St. Louis, Missouri. Two of these competitors are located in Illinois, which does not impose the $500 loss limit that is imposed by Missouri. One of the competitors is a facility located in Maryland Heights that opened in April 1997 and is located five miles from Ameristar St. Charles. Ameristar St. Charles experienced a decline in revenues following the opening of the Maryland Heights facility. Prior to Harrah's acquisition of Players International, Inc. on May 22, 2000, Harrah's and Players operated separate but adjacent facilities at Maryland Heights. Since Harrah's acquisition of Players, Harrah's has been in the process of consolidating both facilities into one operation. In addition, gaming has been approved by local voters in jurisdictions and other cities and counties along the Mississippi and Missouri Rivers near St. Louis, including two casinos in the outlying market area which were approved but have not been opened. This increasing competition could have a material adverse effect on Ameristar St. Charles' business. AMERISTAR VICKSBURG Ameristar Vicksburg, which opened in February 1994, represents our first expansion project outside of Jackpot. Ameristar Vicksburg is a riverboat-themed dockside casino and related land-based hotel and other facilities located in Vicksburg, Mississippi. We believe 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 casino is approximately 315 feet long and approximately 120 feet wide. Due to the width of the Ameristar Vicksburg, the casino and restaurants have the spacious feel of a land-based facility. Ameristar Vicksburg has three levels, which are connected by escalators and elevators. The casino is on the lower 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 more than 250 new gaming positions being added, including the installation of new generation multi-coin slots and the replacement of 232 older slot machines. A $10.0 million renovation and enhancement project is currently in progress that will refurbish the first two levels of the casino, including new cages, lounges, players club and promotions booths, and add a VIP slot area. This project also will replace the showroom with a blues club featuring a saloon, entertainment and gaming. Ameristar Vicksburg is open 24 hours a day, seven days a week. 12 13 Ameristar Vicksburg offers a variety of food and beverage options including three restaurants and four bars. The restaurants include a new upscale steakhouse, which opened in December 1999, a buffet and a 24-hour casual dining restaurant which was remodeled during 1999. One of the bars offers live cabaret-style entertainment. In addition, approximately 600 new parking spaces were added during 1999, bringing the total number of guest parking spaces to over 1,700. We believe 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, Ameristar Vicksburg is significantly wider than typical riverboat casinos. As part of a long-term plan to enhance Ameristar Vicksburg, we acquired 18 acres of raw land across from the main entrance to the property for the future development of additional improvements. We constructed a 150-room hotel, which opened in June 1998, on a portion of this parcel. In addition, we believe 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 1.0 million 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 December 31, 2000, Vicksburg had approximately 1,900 lodging rooms. Gaming revenues in the Vicksburg gaming market for the 52 weeks ended December 31, 2000 were approximately $230.2 million. Competition. Ameristar Vicksburg is subject to competition from three local competitors and from casinos in Shreveport and Bossier City, Louisiana. Ameristar Vicksburg is also subject to competition from a Native American casino in Philadelphia, Mississippi, which recently announced plans to construct an additional gaming and hotel facility near the existing property. Ameristar Vicksburg has approximately 1,600 gaming positions. 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 including a current proposal to develop a Native American casino in Louisiana near Vicksburg. We are currently involved in legal proceedings in which it is alleged that we 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 3. Legal Proceedings." 13 14 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. We set prices for hotel rooms, food and other non-gaming amenities at levels that are affordable to its separate customer bases. Our objective is to be perceived by our customers as providing good value and high quality for the price charged. We promote 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, we substantially completed a remodeling of the casino at The Horseshu in late 1997. Cactus Petes has received a Four-Diamond rating from the AAA annually since 1993 and The Horseshu Hotel has a Three-Diamond rating from the AAA. The food and beverage operations at the Jackpot Properties include a buffet, a fine dining restaurant, a 24-hour casual dining restaurant, a coffee shop and a snack bar, a showroom that features nationally known entertainment, and cocktail lounges with entertainment. Market. We believe 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. We have 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 December 31, 2000, the Jackpot Properties accounted for approximately 55% of the lodging rooms, 62% of the slot machines and 73% of the table games in Jackpot. We believe Cactus Petes offers a more attractive environment and a broader and higher quality range of gaming and leisure activities than those of its competitors. We are not aware of any expansion plans by existing or potential competitors in Jackpot. Casinos with video lottery terminals ("VLT") similar to slot machines are operated on Native American land in Idaho, including one near Pocatello with approximately 200 VLT machines that has been operated by the Shoshone-Bannock Tribes (the "S-B Tribes"). The S-B Tribes recently entered into a compact with the State of Idaho allowing gaming on the S-B Tribes' lands to the extent permitted under Idaho law as to be determined by a federal court pursuant to currently pending proceedings. The State is contending in this litigation that VLT terminals are not permitted under Idaho law. A recent proposal to amend Idaho law and compacts between the State of Idaho and three tribes with reservations in Northern Idaho would permit these tribes to operate VLT terminals but place limits on the expansion of gaming by these tribes. The S-B Tribes are not covered by this proposal, but the outcome of the litigation under the compact with the S-B tribes could be affected if Idaho law is amended as has been proposed. The Idaho legislature did not approve the bills to amend Idaho law or ratify the amended compacts with the other tribes during the 2001 legislative session, but similar legislation may be introduced in the future. 14 15 In addition, casino gaming on Native American lands in both western Washington and northeast Oregon has been in operation for several years, and casinos also operate in Alberta, Canada. See "Risk Factors -- Risks Related to Our Business." EMPLOYEES As of March 15, 2001, we employed approximately 6,400 employees. None of our current employees is employed pursuant to collective bargaining or other union arrangements. We believe our employee relations are good. RISK FACTORS IF WE CANNOT COMPETE SUCCESSFULLY WITH OTHER CASINO HOTEL OPERATORS, OUR FUTURE OPERATIONS MAY BE MATERIALLY ADVERSELY AFFECTED. 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, particularly if a competitor were to obtain a license to operate a gaming facility in a superior location. In addition, our operating properties are located in jurisdictions that restrict gaming to certain areas and/or are adjacent to states that prohibit or restrict gaming operations. While 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. 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: o 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; o Impaired ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes; o Limited flexibility in planning for or reacting to changes in market conditions; and o Increased vulnerability to any downturn in the general market or in our operations specifically. 15 16 Our principal long-term debt instruments contain restrictive covenants. These include limitations on our ability to: o incur additional indebtedness; o create liens and other encumbrances; o make certain payments and investments; o enter into transactions with affiliates; and o 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. THE DEVELOPMENT AND CONSTRUCTION OF THE ST. CHARLES EXPANSION INVOLVES MANY UNCERTAINTIES THAT COULD AFFECT THE FINAL COST AND TIME REQUIRED TO COMPLETE THE PROJECT. We have begun pre-construction work and mobilization for the St. Charles expansion and expect to commence construction in the second quarter of 2001. Construction involves significant risks that could affect the final cost and time of completion of the project, including the following: o greater than expected deterioration of the expansion site, exterior structure or electrical systems; o shortages of materials or skilled labor; o delays in obtaining necessary permits from federal, state and local governmental authorities; o work stoppages, weather interference, fire, floods or other natural disasters; and o unanticipated cost increases. Our anticipated costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared by us in consultation with architects and a general contractor and assume that we will be able to use most of the 16 17 construction materials that were purchased in 1996 and 1997 by the former owner. We cannot be sure that the construction materials that we acquired as part of the acquisitions of the Missouri properties will be available for use in the expansion project. If we are not able to use a significant portion of the construction materials that we acquired the costs of the expansion could increase materially. Our estimated cost of completing the St. Charles expansion is based primarily on the estimates provided in 1996 by the general contractor and subcontractors to the former owner of the St. Charles property, adjusted to reflect inflation experienced on construction costs in the St. Louis market from 1996 to 2000. We cannot be sure that our construction costs will not be higher than the adjusted estimates and we have not received updated firm estimates for the project. Furthermore, the existing plans for the St. Charles expansion project may change, and the scope of the project may vary significantly from what is currently anticipated. We also cannot be sure that we will not exceed the budgeted costs of the expansion project or that the project will commence operations within the contemplated time frame, if at all. Budget overruns and delays with respect to the project could have a material adverse impact on our results of operations, particularly in light of the requirement of the Missouri Gaming Commission that we complete construction of the St. Charles expansion prior to January 1, 2004 or face potential loss of our licenses to operate Ameristar St. Charles. Our senior credit facilities provide $100 million of borrowing capacity specifically for the St. Charles expansion. We anticipate that the costs of completing the expansion project as currently contemplated will be approximately $110 million. Accordingly, we will be required to finance a portion of the expansion project with cash from operations. We cannot be sure that our financial performance will be sufficient to fund the expansion project. This risk will become more significant if we have substantial cost overruns because of greater than expected deterioration, budget overruns or changes in the project. Under the terms of the documents governing our long term debt, it is not likely that we will be able to incur additional debt to fund the expansion project if cash from operations and available borrowings under our senior credit facilities are not sufficient to fund the construction. 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 for our properties entail significant risks. These risks include: o shortages of materials (including slot machines or other gaming equipment); o shortages of skilled labor or work stoppages; o unforeseen construction scheduling, engineering, environmental or geological problems; o weather interference, floods, fires or other casualty losses; and o 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 17 18 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 cash flows from operations. The availability of funds under our senior credit facilities at any time will be dependent upon, among other factors, the amount of our consolidated EBITDA (as defined in the credit agreement) 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 MAJORITY STOCKHOLDER'S OWNERSHIP RESULTS IN LIMITED LIQUIDITY IN THE MARKET FOR OUR COMMON STOCK. Craig H. Neilsen, our president, chief executive officer and chairman, 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. WE MAY EXPERIENCE DIFFICULTIES INTEGRATING THE MISSOURI PROPERTIES INTO OUR OPERATIONS. 18 19 We cannot assure you that we will be able to integrate the recently-acquired Missouri properties into our existing operations without encountering difficulties. These difficulties could include integrating personnel with disparate business backgrounds and business strategies, integrating different technology systems and managing relationships with other business customers. Furthermore, the integration of the Missouri properties may temporarily distract management from our day-to-day business. We may also lose key personnel from the Missouri properties because of their sale to us. For these reasons, we cannot assure you that we will be able to successfully integrate the Missouri properties and our inability to do so could have a material and adverse effect on our operations. IF OUR KEY PERSONNEL LEAVES US, OUR BUSINESS WILL BE SIGNIFICANTLY ADVERSELY AFFECTED. We depend on the continued performance of Craig H. Neilsen, Ameristar's President and Chief Executive Officer, 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. In addition, our ability to retain management members hired in connection with the acquisition of the Missouri properties will significantly impact our ability to successfully operate those properties. THE MARKET FOR QUALIFIED PROPERTY 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 property and corporate management personnel. Recruiting and retaining qualified management personnel is particularly difficult at Ameristar Vicksburg and the Jackpot Properties 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, Missouri, 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 Missouri 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 our Iowa, Missouri, Mississippi or Nevada subsidiaries, respectively, for any cause deemed reasonable by such licensing authority. Our gaming license in Mississippi must be renewed or continued every three years and our gaming license in Iowa must be renewed every year. Our gaming licenses in Missouri must be renewed in December 2001, December 2002 and every two years thereafter. 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 19 20 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, Missouri, 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. FAILURE OF LOCAL REAUTHORIZATION OF GAMING ACTIVITIES IN IOWA COULD HAVE A MATERIAL ADVERSE EFFECT ON US. 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 at Ameristar Council Bluffs, a reauthorization referendum must be submitted to the county 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. 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 original issue unless otherwise terminated by the Iowa Racing and Gaming Commission. The original issue date for our Iowa gaming license was January 27, 1995. We cannot assure you that gaming operations of the type we conduct at Ameristar Council Bluffs will continue to be authorized in Pottawattamie County. Any failure of Pottawattamie County to reauthorize gaming operations of the type we conduct at Ameristar Council Bluffs would have a material adverse effect on our business, financial condition and results of operations. THE NATIONAL GAMBLING IMPACT STUDY COMMISSION'S RECOMMENDATIONS MAY ADVERSELY AFFECT THE GAMING INDUSTRY AND OUR OPERATIONS. A National Gambling Impact Study Commission was established by the U.S. Congress to conduct a comprehensive study of the social and economic impact of gaming in the U.S. On April 28, 1999, the National Commission voted to recommend that the expansion of gaming be curtailed. In June 1999, the National Commission issued a final report of its findings and conclusions, together with recommendations for legislative and administrative actions. Below are highlights of some of those recommendations: o Legal gaming should be restricted to those at least 21 years of age. o Betting on college and amateur sports should be banned. o The introduction of casino-style gaming at pari-mutuel racing facilities for the primary purpose of saving the pari-mutuel facility financially should be prohibited. o Internet gaming should be banned in the U.S. 20 21 o The types of gaming activities allowed by Native American tribes within a given state should be consistent with the gaming activities allowed to other persons in that state. o 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 (e.g., in convenience stores), internet gaming and lotteries which the National Commission stated do not provide the same economic development. Any regulation of the gaming industry which may result from the National Commission's report may have an adverse effect on the gaming industry and on our financial condition or results of operations. ANY LOSS FROM SERVICE OF OUR RIVERBOAT AND DOCKSIDE FACILITIES FOR ANY REASON COULD MATERIALLY ADVERSELY AFFECT US. Our riverboat and dockside facilities in Missouri, 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 U.S. 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 those at Ameristar Kansas City, Ameristar Vicksburg and Ameristar St. Charles. The Ameristar Council Bluffs riverboat was due for its dry-dock inspection in November 2000, but we have been accepted into a United States Coast Guard program that has allowed us to extend the dry-dock requirement by undergoing a thorough underwater inspection. This underwater inspection has been completed and the Ameristar Council Bluffs riverboat has received a U.S. Coast Guard Certificate of Inspection valid through October 19, 2001. The underwater inspection program allows for an extension of the dry-dock requirement for up to 30 months. Based on the results of this inspection, Ameristar Council Bluffs has applied to the U.S. Coast Guard for such an extension and the regional office of the U.S. Coast Guard in St. Louis has recommended to the U.S. Coast Guard's office in Washington, D.C. that the extension be granted. However, if we do not obtain this further 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 any further 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 reinforced the cofferdam basin in which the vessel floats, further reinforcements may be necessary. We are also monitoring the 21 22 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. OUR PROPERTIES ARE SUBJECT TO THE RISK OF THEFT WHICH COULD ADVERSELY AFFECT OUR OPERATIONS. Given the nature of our operations, we entrust employees in various positions to handle large amounts of cash and casino chips and tokens. Although our internal controls and security and surveillance policies and procedures are designed to limit our exposure to theft and the associated risk of loss, we cannot assure you that such theft does not occur or that we will discover any such theft promptly, if at all. In addition, we cannot assure you that we will have adequate insurance coverage, if any, in the event of any such theft. Any theft by our employees or otherwise could have an adverse affect on our results of operations. 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. GOVERNMENT REGULATIONS The ownership and operation of casino gaming facilities are subject to extensive state and local regulations. We are required to obtain and maintain gaming licenses in each of the jurisdictions in which we conduct 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 our operations in that jurisdiction. In addition, changes in law that restrict or prohibit our gaming operations in any jurisdiction could have a material adverse effect on us. 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. Our operations are subject to 22 23 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 Nevada Commission, the Nevada Board 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 our gaming operations. Cactus Pete's, Inc. ("CPI"), which operates the Jackpot Properties, is required to be licensed by the Nevada Gaming Authorities. The gaming licenses require the periodic payment of fees and taxes and are not transferable. Ameristar is registered by the Nevada Commission as a publicly traded corporation (a "Registered Corporation") and has been found suitable to own the stock of CPI, which is a corporate licensee (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. Ameristar and CPI have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses currently required in order to engage in gaming activities in Nevada. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, CPI 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 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 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. 23 24 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 or Ameristar, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require CPI or Ameristar to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. CPI and Ameristar are required 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 and CPI must be reported to, or approved by, the Nevada Commission. If it were determined that the Nevada Act was violated by CPI, 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, 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 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 our 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 24 25 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 or CPI, 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 has 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 25 26 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. We have 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 26 27 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. MISSOURI. The ownership and operation of riverboat and dockside gaming facilities in Missouri are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Missouri Gaming Commission. The Missouri Riverboat Gaming Act (the "Missouri Act") provides for the licensing and regulation of riverboat and dockside gaming operations on the Mississippi and Missouri Rivers in the State of Missouri and the licensing and regulation of persons who distribute gaming equipment and supplies to gaming licensees. The Missouri Gaming Commission has discretion to approve gaming license applications for both permanently moored ("dockside") riverboat casinos and powered ("excursion") riverboat casinos and determine the number, location and type of excursion gambling boat allowed each licensee. Due to safety concerns, all gaming vessels on the Missouri River are permitted to be moored in moats set back from the river. Gaming licenses are initially issued for two one-year periods and must be renewed every two years thereafter. No gaming licensee may pledge or transfer in any way any license, or any interest in a license, issued by the Missouri Gaming Commission. As a result, the gaming licenses of Ameristar Casino Kansas City, Inc. and Ameristar Casino St. Charles, Inc. were not pledged to secure our senior credit facilities. The issuance, transfer and pledge of ownership interests in a gaming licensee are also subject to strict notice and approval requirements. Missouri Gaming Commission regulations prohibit a licensee from doing any of the following without at least 60 days prior notice to the Missouri Gaming Commission, and during such period, the Missouri Gaming Commission 27 28 may disapprove the transaction or require the transaction be delayed pending further investigation: o any transfer or issuance of an ownership interest in a gaming licensee that is not a publicly held entity or a holding company that is not a publicly held entity, and o any pledge or grant of a security interest in an ownership interest in a gaming licensee that is not a publicly held entity or a holding company that is not a publicly held entity; provided that no ownership interest may be transferred in any way pursuant to any pledge or security interest without separate notice to the Missouri Gaming Commission at least 30 days prior to such transfer, which restriction must be specifically included in the grant of a security interest. Under the Missouri Act, certain members of our management and certain of our employees associated with our gaming business are required to obtain and maintain occupational licenses. Currently, all of our management required to obtain occupational licenses have obtained them. The Missouri Gaming Commission may deny an application for a license for any cause that it deems reasonable. Substantially all loans, leases, sales of securities and similar financing transactions by a gaming licensee must be reported to and approved by the Missouri Gaming Commission. Missouri Gaming Commission regulations require a licensee to notify the Missouri Gaming Commission of its intention to consummate any of the following transactions at least 15 days prior to such consummation, and the Missouri Gaming Commission may reopen the licensing hearing prior to or following the consummation date to consider the effect of the transaction on the licensee's suitability: o any issuance of ownership interest in a publicly held gaming licensee or a publicly held holding company, if such issuance would involve, directly or indirectly, an o amount of ownership interest equaling 5% or greater of the ownership interest in the gaming licensee or holding company after the issuance is complete, o any private incurrence of debt equal to or exceeding one million dollars by a gaming licensee or holding company that is affiliated with the holder of a license, o any public issuance of debt by a gaming licensee or holding company that is affiliated with the holder of a license, and o any significant related party transaction as defined in the regulations. The Missouri Gaming Commission may waive or reduce the 15-day notice requirement. The Missouri Act imposes operational requirements on riverboat operators, including a charge of two dollars per gaming customer that licensees must pay to the Missouri Gaming Commission, certain minimum payout requirements, a 20% tax on adjusted gross receipts, prohibitions against providing credit to gaming customers (except for the use of credit cards 28 29 and cashing checks) and a requirement that each licensee reimburse the Missouri Gaming Commission for all costs of any Missouri Gaming Commission staff necessary to protect the public on the licensee's riverboat. Licensees must also submit audited quarterly financial reports to the Missouri Gaming Commission and pay the associated auditing fees. Other areas of operation which are subject to regulation under Missouri rules are the size, denomination and handling of chips and tokens, the surveillance methods and computer monitoring of electronic games, accounting and audit methods and procedures, and approval of an extensive internal control system. The Missouri rules also require that all of an operator's purchases of chips, tokens, dice, playing cards and electronic gaming devices must be acquired from suppliers licensed by the Missouri Gaming Commission, or another person or entity approved by the Missouri Gaming Commission. The Missouri Act provides for a loss limit of $500 per person per two-hour "cruise". Although the Missouri Act provides no limit on the amount of riverboat space that may be used for gaming, the Missouri Gaming Commission can impose space limitations through the adoption of rules and regulations. Additionally, United States Coast Guard safety regulations could affect the amount of riverboat space that may be devoted to gaming. The Missouri Act also includes requirements as to the form of riverboats, which must resemble Missouri's riverboat history to the extent practicable and include certain non-gaming amenities. All nine licensees currently operating riverboat gaming operations in Missouri are authorized to conduct all or a portion of their operations on a dockside basis. Missouri gaming regulations have been modified in recent years to benefit gaming operations. In September 1999 the Missouri Gaming Commission began allowing open and continuous boarding on the riverboats in the St. Louis market and in November 1999 the Missouri Gaming Commission began allowing open and continuous boarding on area riverboats in the Kansas City market. This change eliminated the prior mandated two-hour simulated cruise times, which had limited boarding at any gaming vessel to only 45 minutes at the beginning of each two-hour period. The Missouri Act now authorizes the exchange of currency into electronic credits so that patrons are no longer forced to manually feed tokens into gaming machines at the start of play. This allows faster, more convenient play, especially in multi-coin games which have proven popular in other gaming jurisdictions. The Missouri Act requires each licensee to post a bond or other surety to guarantee that the licensee complies with its statutory obligations. In addition, the Missouri Act gives the Missouri Gaming Commission the authority to require gaming licensees to post a bond or other form of security to the State of Missouri to, among other things, guarantee the completion of an expansion of a gaming facility within the later of a time period determined by the Missouri Gaming Commission or August 28, 2003. The failure to complete an approved expansion project within the prescribed time period may, pursuant to the Missouri Act, constitute sufficient grounds for not renewing the gaming license for the gaming facility. To promote safety, the Missouri Gaming Commission has required that gaming entertainment barges obtain annual certification from the American Bureau of Shipping. On January 8, 1999, the American Bureau of Shipping decertified the gaming barges and other ancillary barges now operated by Ameristar St. Charles, as a result of low water levels on the Missouri River and the build up of silt and debris under these barges. At that time, the Missouri Gaming Commission expressed concern regarding the effect of the low water level on the barges. However, the Missouri Gaming Commission allowed the former owner to keep the 29 30 St. Charles property open because of steps taken to remedy the problem. The American Bureau of Shipping subsequently recertified the St. Charles facility in November 1999. While the former owner previously took steps to reduce the possibility that this will happen again, including additional dredging of materials from under the barges, we cannot assure you that this condition will not recur and, if so, require the closure of a property for a significant amount of time. If the Missouri Gaming Commission decides that a gaming subsidiary violated a gaming law or regulation, the Missouri Gaming Commission could limit, condition, suspend or revoke the license of the gaming subsidiary. In addition, a gaming subsidiary, its parent company and the persons involved could be subject to substantial fines for each separate violation. Limitation, conditioning or suspension of any gaming license could (and revocation of any gaming license would) materially adversely affect Ameristar and our gaming subsidiaries' gaming operations. The Missouri Gaming Commission regulates the issuance of excursion liquor licenses, which authorize the licensee to serve, offer for sale, or sell intoxicating liquor aboard any excursion gambling boat or facility immediately adjacent to and contiguous with the excursion gambling boat, which is owned and operated, by the licensee. An excursion liquor license is granted for a one year term by the Missouri Gaming Commission and is renewable annually. The Commission can discipline an excursion liquor licensee for any violation of Missouri law or the Missouri Gaming Commission's rules. Licensees are responsible for the conduct of their business and for any act or conduct of any employee on the premises that is in violation of the Missouri Act or the rules of the Missouri Gaming Commission. Missouri Gaming Commission liquor control regulations also include prohibitions on certain intoxicating liquor promotions and a ban on fees accepted for advertising products. Only Class A licensees can obtain a liquor license from the Missouri Gaming Commission. Class A licenses are licenses granted by the commission to allow the holder to conduct gambling games on an excursion gambling boat and to operate an excursion gambling boat. 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"). 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 that are also similar in many respects to the Nevada gaming regulations. The laws, regulations and supervisory procedures of Mississippi and the Mississippi Commission are based upon declarations of public policy that are concerned with, among other things, (1) the prevention of unsavory or unsuitable persons from having direct or indirect involvement with gaming at any time or in any capacity; (2) the establishment and maintenance of responsible accounting practices and procedures; (3) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Mississippi Commission; (4) the 30 31 prevention of cheating and fraudulent practices; (5) providing a source of state and local revenues through taxation and licensing fees; and (6) ensuring that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the Mississippi Commission. We believe that our compliance with the licensing procedures and regulatory requirements of the Mississippi Commission will not affect the marketability of our securities. Changes in Mississippi laws or regulations may limit or otherwise materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse effect on us and our Mississippi gaming operations. The Mississippi Act provides for legalized dockside gaming at the discretion of the fourteen counties that border the Gulf Coast or the Mississippi River, but only if the voters in such counties have not voted to prohibit gaming in that county. In recent years, certain anti-gaming groups proposed for adoption through the initiative and referendum process certain amendments to the Mississippi Constitution, which would prohibit gaming in the state. The proposals were declared illegal by the Mississippi courts on constitutional and procedural grounds. The latest ruling was appealed to the Mississippi Supreme Court, which affirmed the decision of the lower court. If another such proposal were to be offered and if a sufficient number of signatures were to be gathered to place a legal initiative on the ballot, it is possible for the voters of Mississippi to consider such a proposal in November 2002. As of March 15, 2001, dockside gaming was permissible in nine of the fourteen 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 lying south of the 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 decision 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 oral argument was heard by the Supreme Court on March 6, 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 that appealed the initial siting decision. In addition, Ameristar is involved in legal proceedings in which it is alleged that Ameristar 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 that may be utilized for gaming. There are no limitations on the number of gaming licenses that may be issued in Mississippi. We and any subsidiary of ours that operates a casino in Mississippi (a "Mississippi Gaming Subsidiary") are subject to the licensing and regulatory control of the Mississippi Commission. Ameristar Casinos, Inc. is registered as a publicly traded holding company (a 31 32 "Registered Corporation") of Ameristar Casino Vicksburg, Inc. ("ACVI") under the Mississippi Act. A Registered Corporation 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 we are unable to continue to satisfy the registration requirements of the Mississippi Act, we and our Mississippi Gaming Subsidiaries cannot own or operate gaming facilities in Mississippi. Each Mississippi Gaming Subsidiary must maintain a gaming license from the Mississippi Commission to operate a casino in Mississippi. Such licenses are issued by the Mississippi Commission subject to certain conditions, including continued compliance with all applicable state laws and regulations. Gaming licenses are not transferable, are issued for a three-year period (and may be 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 Mississippi Gaming Subsidiary of a Registered Corporation without first obtaining licenses and approvals from the Mississippi Commission. We have obtained such approvals in connection with the licensing of our Mississippi Gaming Subsidiary. Certain of Ameristar's officers and employees and the officers, directors and certain key employees of our Mississippi Gaming Subsidiary must be found suitable or be licensed by the Mississippi Commission. We believe that we have obtained or applied for all necessary findings of suitability with respect to such persons associated with Ameristar or our Mississippi Gaming Subsidiary, although the Mississippi Commission, in its discretion, may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with Ameristar 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 finding of suitability, the Mississippi Commission has jurisdiction to disapprove a change in a person's corporate position or title and such changes must be reported to the Mississippi Commission. The Mississippi Commission has the power to require any Mississippi Gaming Subsidiary or Ameristar to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. At any time, the Mississippi Commission has the power to investigate and require the finding of suitability of any record or beneficial stockholder of Ameristar. The Mississippi Act requires any person who acquires more than 5% of any class of voting securities of a Registered Corporation 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 a class of voting securities of a Registered Corporation, 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 class of a Registered Corporation's voting securities. However, the Mississippi Commission has 32 33 adopted a policy that permits certain institutional investors to own beneficially up to 15% of a class of a Registered Corporation's voting securities 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. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of such securities beyond such time as the Mississippi Commission prescribes, may be guilty of a misdemeanor. We may be subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with us or our Mississippi Gaming Subsidiary, the company involved: (1) pays the unsuitable person any dividend or other distribution upon such person's voting securities; (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. We may be required to disclose to the Mississippi Commission, upon request, the identities of the holders of any of our debt or other securities. In addition, under the Mississippi Act, the Mississippi Commission may, in 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 if it has reason to believe that the ownership would be inconsistent with the declared policies of the State of Mississippi. If the Mississippi Commission determines that a person is unsuitable to own a debt security, then the Registered Corporation 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 the unsuitable person in connection with those 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. Each Mississippi Gaming Subsidiary must maintain in Mississippi a current ledger with respect to ownership of its equity securities and each Registered Corporation must maintain in Mississippi a current list of its stockholders, which must reflect the record ownership of each outstanding share of any class of equity security issued by such corporation. The ledger and stockholder lists must be available for inspection by the Mississippi Commission at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required 33 34 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 Registered Corporation bear a legend indicating that the securities are subject to the Mississippi Act and the regulations of the Mississippi Commission. Ameristar has received from the Mississippi Commission a waiver from this legend requirement. The Mississippi Commission has the power to impose additional restrictions on the holders of securities at any time. Substantially all material loans, leases, sales of securities and similar financing transactions by a Registered Corporation or a Mississippi Gaming Subsidiary must be reported to or approved by the Mississippi Commission. A Mississippi Gaming Subsidiary may not make a public offering of its securities, but may pledge or mortgage casino facilities. We may not make an issuance or a public offering of our 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 those purposes. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering. We have received a waiver of the prior approval requirement for our securities offerings, subject to certain conditions. Under the regulations of the Mississippi Commission, a Mississippi 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 Mississippi Gaming Subsidiary and the foreclosure of such a pledge are ineffective without the prior approval of the Mississippi Commission. Moreover, restrictions on the transfer of an equity security issued by a Mississippi Gaming Subsidiary and agreements not to encumber such securities are ineffective without the prior approval of the Mississippi Commission. We have obtained approvals from the Mississippi Commission for such guarantees, pledges and restrictions in connection with offerings of securities, subject to certain restrictions. Changes in control of Ameristar or our Mississippi Gaming Subsidiary through merger, consolidation, acquisition of assets, management or consulting agreements, or any act or conduct by a person by which such person obtains control, may not 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 the 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 Registered Corporations may be injurious to 34 35 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 a Registered Corporation may make exceptional repurchases of voting securities in excess of the current market price and before a corporate acquisition opposed by management can be consummated. Mississippi's gaming regulations also require prior approval by the Mississippi Commission of a plan of recapitalization proposed by a Registered Corporation's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purpose of acquiring control of the Registered Corporation. Neither Ameristar nor any Mississippi Gaming Subsidiary may engage in gaming activities in Mississippi while also conducting gaming operations outside of Mississippi without approval of the Mississippi Commission. The Mississippi Commission may require determinations that, among other things, there are means for the Mississippi Commission to have access to information concerning the out- of-state gaming operations of Ameristar and our affiliates. We have 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 determined that we violated a gaming law or regulation, the Mississippi Commission could limit, condition, suspend or revoke our approvals and the license of the Mississippi Gaming Subsidiary, subject to compliance with certain statutory and regulatory procedures. In addition, we, the Mississippi Gaming Subsidiary 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 our Mississippi casino facilities. Limitation, conditioning or suspension of any gaming license or approval or the appointment of a supervisor could (and revocation of any gaming license or approval would) materially adversely affect us, our gaming operations and our results from operations. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Mississippi and to the counties and cities in which a Mississippi 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 gaming devices 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 not in excess of $134,000 per month, and 8% of gaming receipts in excess of $134,000 per month. The foregoing license fees are allowed as a credit against the 35 36 Mississippi Gaming Subsidiary'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. Ameristar believes that ACVI is in compliance with this requirement with the opening of a 150-room hotel in June 1998. The Mississippi Commission adopted amendments to the regulation that increase the infrastructure development requirement from 25% to 100% for new casinos (or upon acquisition of a closed casino), but grandfathered existing licensees. IOWA. Ameristar's Council Bluffs operations are conducted by Ameristar Casino Council Bluffs, Inc. ("ACCBI") and are subject to Chapter 99F of the Iowa Code and the regulations promulgated thereunder. Ameristar'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 for the years of 1997 through 2000. 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, 2002. 36 37 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 weekly and 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. 37 38 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 us 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. All persons participating in any capacity at a gaming facility, with the exception of certified law enforcement officers while they are working for the facility as uniformed officers, are required to obtain occupational licenses from the Iowa Gaming Commission. All such licenses require annual renewal. The Iowa Gaming Commission had broad discretion to deny or revoke any occupational license. 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. ACCBI is subject to licensure by the Alcoholic Beverages Division ("ABD") of the Iowa Department of Commerce which administers and enforces the laws of the State of Iowa concerning alcoholic beverages. Additionally, ACCBI is subject to the liquor ordinances adopted by local authorities. A local authority may adopt ordinances governing establishments which are located within their jurisdiction. Local ordinances may be more restrictive than the state law, but they may not conflict with the state law. The ABD and the local authorities have full power to suspend or revoke any license for the serving of alcoholic beverages. OTHER JURISDICTIONS. We expect to be subject to similar rigorous regulatory standards in each jurisdiction in which we seek to conduct gaming operations. There can be no assurance that regulations adopted or taxes imposed by other jurisdictions will permit profitable operations by us. FEDERAL REGULATION OF SLOT MACHINES. We are 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. NON-GAMING REGULATIONS. The sale of alcoholic beverages by us is subject to the licensing, control and regulation in Jackpot by the Liquor Board of Elko County, 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. The sale of alcoholic beverages by us at our Missouri properties is subject to the licensing, control and regulation by the Missouri Gaming Commission as described above and in Kansas City by Clay County. In Mississippi, Ameristar Vicksburg has 38 39 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 described above (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 our business. Certain officers and managers of ACVI must be investigated by the applicable Liquor License Authorities in connection with its liquor permit. The applicable Liquor License Authorities must approve any changes in licensed positions. All cruising vessels operated by us 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 was due for its dry-dock inspection in November 2000, but we have been accepted into a United States Coast Guard program that has allowed us to extend the dry-dock requirement by undergoing a thorough underwater inspection. This underwater inspection has been completed and the Ameristar Council Bluffs riverboat has received a U.S. Coast Guard Certificate of Inspection valid through October 19, 2001. The underwater inspection program allows for an extension of the dry-dock requirement for up to 30 months. Based on the results of this inspection, Ameristar Council Bluffs has applied to the U.S. Coast Guard for such an extension. Currently, Ameristar Council Bluffs is the only one of our properties 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, Ameristar'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 Ameristar's outstanding common stock. All of our shipboard employees 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. ITEM 2. PROPERTIES Ameristar Kansas City. Ameristar Kansas City is located on approximately 150 acres of property, approximately 33 acres of which we lease and the balance of which we own. The site is east of and adjacent to Interstate 435 along the north bank of the Missouri River. The site, 39 40 which is approximately seven miles east of downtown Kansas City, may be accessed via the Missouri Highway 210 exit on Interstate 435. The leased property is under lease with the Birmingham Drainage District for a 10-year initial term that commenced in 1995; the lease grants us eight 10-year renewal options. Approximately 2.9 acres of the Ameristar Kansas City site is ground leased by us for the use of a child care facility. Ameristar Council Bluffs. Ameristar Council Bluffs is located 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. We own approximately 27 acres of this site and have rights to use the remaining portion of the site that is owned by the State of Iowa for a 50-year term. We have leased 0.623 acres of the Ameristar Council Bluffs site to an affiliate of Kinseth Hospitality Corporation for the development and operation of a 188-room limited service Holiday Inn Suites Hotel that opened on March 31, 1997 and was expanded during 1999. We have also leased 0.426 acres of the Ameristar Council Bluffs site to another affiliate of Kinseth for the development and operation of a 96-room Hampton Inn hotel, which is expected to open in March 2001. All of our interests in Ameristar Council Bluffs serve as collateral for our obligations under the senior credit facilities. Ameristar St. Charles. Ameristar St. Charles is located on approximately 52 acres which we own along the west bank of the Missouri River immediately north of Interstate 70. Access to the property may be obtained via the Fifth Street exit on Interstate 70. Ameristar Vicksburg. In connection with the development of Ameristar Vicksburg, we acquired eight parcels in Vicksburg along Washington Street near Interstate 20. These parcels comprise approximately 48 acres, approximately 34 of which are developable. Substantially all of Ameristar Vicksburg's assets are pledged to secure our obligations under the senior credit facilities. In addition, we have 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. The Jackpot Properties. Cactus Petes is located on a 35-acre site and The Horseshu is located on a 30-acre site, both of which we own. The Cactus Petes and The Horseshu sites are across from each other on U.S. Highway 93. We also own 239 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 our obligations under the senior credit facilities, and the USDA housing projects are subject to mortgage loans in favor of the USDA. We own a gas station adjacent to Highway 93 in Jackpot, which we operate under a franchise from Chevron. We believe that this facility is in material compliance with applicable environmental and other regulatory requirements. We have 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, we have not conducted tests for the presence of 40 41 any environmental contamination from this gas station. We believe that the likelihood of a material unfavorable outcome with respect to potential environmental liabilities relating to this former gas station is remote. Other Properties. We lease approximately 29,400 square feet of office space in various locations, including for our executive offices in Las Vegas, Nevada. ITEM 3. LEGAL PROCEEDINGS E.L. Pennebaker, Jr., et. al. v. Ameristar Casinos, Inc., et. al. On February 23, 1998, E.L. Pennebaker, Jr. filed a complaint in the Circuit Court of Pike County, Mississippi against Ameristar, 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 Ameristar, HVC and DGNB on the conspiracy count and against Ameristar and HVC on the restraint of trade and tortiously 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 Ameristar'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 we and the other defendants have appealed the case to the Mississippi Supreme Court, and we otherwise intend 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. Subsequent to the appeal being taken, DGNB settled with the plaintiffs, and the judgment has been reduced accordingly. Mr. Pennebaker has also filed a petition with the Mississippi Gaming Commission requesting that the Mississippi Gaming Commission order Ameristar, 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. 41 42 We have 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. Ameristar Casinos, Inc. et al. On November 22, 1999, Mr. Gibbes and Ms. Dozier filed a complaint in the Circuit Court of Pike County, Mississippi against Ameristar, HVC, Isle of Capri Casinos, Inc. (the parent company of RCMV; "ICC") and DGNB. The matter is pending as case no. 99-0157-B. We believe 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 case no. 3:99cv911WS. The plaintiffs filed a motion to remand the case back to the Pike County circuit court. Subsequent to the filing of this motion, ICC settled with the plaintiffs, but the federal district court was not advised of the settlement. Subsequently, the federal district court granted the plaintiffs' motion to remand the case to state court on the grounds that ICC's citizenship was not diverse. The other defendants have filed a motion seeking the federal court to vacate its prior ruling, which motion is still pending. We intend to continue to vigorously defend against this cause of action. Other Legal Proceedings and Claims. From time to time, we are a party to litigation which arises in the ordinary course of business. Except for the matters described or referred to above, we are not currently a party to any litigation that management believes would be likely to have a material adverse effect on us. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 42 43 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 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 ---- --- 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 2000 ---- First Quarter $ 4.19 $ 3.63 Second Quarter 4.34 3.00 Third Quarter 6.00 4.19 Fourth Quarter 6.63 4.59
On March 15, 2001, there were 262 holders of record of Ameristar's Common Stock. No dividends on Ameristar's Common Stock have been declared during the last three 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 senior credit facilities 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." 43 44 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, STATEMENT OF OPERATIONS DATA: 1996 1997 1998 1999 2000 --------- --------- --------- --------- --------- (Amounts in Thousands, Except Per Share Data) REVENUES: Casino $ 161,338 $ 173,077 $ 216,319 $ 247,416 $ 286,438 Food and beverage 24,250 30,672 45,853 49,142 53,653 Rooms 7,641 9,685 14,201 17,257 18,121 Other 7,760 8,275 10,401 11,089 12,018 --------- --------- --------- --------- --------- 200,989 221,709 286,774 324,904 370,230 Less: Promotional allowances 12,524 15,530 22,092 24,618 28,224 --------- --------- --------- --------- --------- Net revenues 188,465 206,179 264,682 300,286 342,006 --------- --------- --------- --------- --------- COSTS AND EXPENSES: Casino 75,685 78,733 103,387 114,357 134,948 Food and beverage 16,773 19,784 31,698 33,207 35,134 Rooms 2,368 3,130 5,809 6,372 6,945 Other 7,054 7,546 10,044 10,203 12,257 Selling, general and administrative 47,758 51,958 75,604 86,142 90,416 Depreciation and amortization 14,135 16,358 24,191 24,460 27,784 Preopening costs 7,379 -- 10,611 -- -- Impairment loss on assets held for -- 646 -- -- 57,153 sale --------- --------- --------- --------- --------- Total costs and expenses 171,152 178,155 261,344 274,741 364,637 --------- --------- --------- --------- --------- INCOME (LOSS) FROM OPERATIONS 17,313 28,024 3,338 25,545 (22,631) OTHER INCOME (EXPENSE): Interest income 354 445 296 300 161 Interest expense (8,303) (12,107) (22,699) (24,449) (28,316) Other (77) (35) (13) (851) (942) --------- --------- --------- --------- --------- Income (loss) before income tax provision (benefit) 9,287 16,327 (19,078) 545 (51,728) Income tax provision (benefit) 3,390 5,959 (6,363) 340 (17,981) --------- --------- --------- --------- --------- Income (loss) before extraordinary loss 5,897 10,368 (12,715) 205 (33,747) Extraordinary loss on early retirement of debt, net of income taxes -- (673) -- -- (6,560) --------- --------- --------- --------- --------- NET INCOME (LOSS) $ 5,897 $ 9,695 $ (12,715) $ 205 $ (40,307) ========= ========= ========= ========= =========
44 45 AMERISTAR CASINOS, INC. CONSOLIDATED SELECTED FINANCIAL DATA (CONTINUED)
For the year ended December 31, STATEMENT OF OPERATIONS DATA: 1996 1997 1998 1999 2000 ---------- ---------- ---------- ---------- ---------- (Amounts in Thousands, Except Per Share Data) EARNINGS PER SHARE: Income (loss) before extraordinary item Basic and diluted $ 0.29 $ 0.51 $ (0.62) $ 0.01 $ (1.65) ========== ========== ========== ========== ========== Net income (loss) Basic and diluted $ 0.29 $ 0.48 $ (0.62) $ 0.01 $ (1.98) ========== ========== ========== ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,360 20,360 20,362 20,401 ========== ========== ========== ========== ========== December 31, BALANCE SHEET AND OTHER DATA: 1996 1997 1998 1999 2000 -------- -------- -------- -------- -------- Cash and cash equivalents $ 10,724 $ 13,031 $ 18,209 $ 15,531 $ 36,245 Total assets 270,052 336,186 351,773 378,645 890,921 Total notes payable, long-term debt and capital lease obligations, net of current maturities 143,893 193,113 230,399 242,890 780,475 Stockholders' equity 70,944 80,639 67,924 68,169 28,044 Capital expenditures 43,087 72,932 32,312 57,590 33,357
- ---------------------- Certain revenues and expenses were reclassified beginning in 1998 to be consistent with classifications used in 1999 and 2000. 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 casino at Ameristar Council Bluffs opened in January 1996, portions of the land-based facilities opened in June 1996 and the 160-room hotel opened in November 1996. The remaining land-based facilities opened in February and March 1997. The expanded casino opened in November 1999. The Reserve Hotel and Casino opened in February 1998 and was sold on January 29, 2001 pursuant to an agreement entered into in October 2000. The Ameristar Vicksburg hotel opened in June 1998. The expanded casino opened in December 1999. Ameristar Kansas City and Ameristar St. Charles properties were purchased on December 20, 2000. No dividends were paid in 1996, 1997, 1998, 1999 and 2000. 45 46 AMERISTAR CASINOS, INC. CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA
For the fiscal quarter ended March 31, June 30, September 30, December 31, 2000 2000 2000 2000 Total --------- -------- ------------- ------------ ----- (Amounts in Thousands, Except Per Share Data) Revenue $ 81,692 84,121 86,626 89,567 342,006 Income (loss) from operations 11,334 6,003 (49,599)(A) 9,631 (22,631) Income (loss) before income tax and extraordinary item 4,315 (679) (56,648) 1,284 (51,728) Income (loss) before extraordinary item 2,784 (483) (36,864) 816 (33,747) Net income (loss) 2,784 (483) (36,864) (5,744)(B) (40,307) Basic earnings (loss) per share(C) $ 0.14 $ (0.02) $ (1.81) $ (0.28) $ (1.98) Diluted earnings (loss) per share(C) 0.13 (0.02) (1.81) (0.27) (1.98) For the fiscal quarter ended March 31, June 30, September 30, December 31, 1999 1999 1999 1999 Total --------- -------- ------------- ------------ ----- (Amounts in Thousands, Except Per Share Data) Revenue $ 70,037 76,228 77,628 76,393 300,286 Income from operations 6,232 7,369 6,642 5,302 25,545 Income (loss) before income tax (173) 1,297 505 (1,084) 545 Net income (loss) (113) 779 287 (748) 205 Basic earnings (loss) per share(C) $ (0.01) $ 0.04 $ 0.01 $ (0.04) $ 0.01 Diluted earnings (loss) per share(C) (0.01) 0.04 0.01 (0.04) 0.01
- ------------------- (A) Includes impairment loss on assets held for sale of $57,153. (B) Extraordinary loss on early extinguishment of debt was $6,560, net of tax. (C) Because earnings (loss) per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total earnings (loss) per share amounts for the year. 46 47 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 We are a leading multi-jurisdictional gaming company that owns and operates casinos and related hotel, food and beverage, entertainment and other facilities. On December 20, 2000, we acquired substantially all the assets of two gaming and entertainment facilities located in Kansas City, Missouri and St. Charles, Missouri from subsidiaries of Station Casinos, Inc. On January 29, 2001, in a separate transaction, we sold substantially all the assets of The Reserve Hotel and Casino, located in Henderson, Nevada, to a subsidiary of Station Casinos. As a result of these transactions, we currently own and operate six casino properties in five distinct markets through our wholly owned subsidiaries. Our properties currently consist of the following: Ameristar Kansas City, a casino and related hotel and other facilities located seven miles from downtown Kansas City; 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; Ameristar St. Charles, a casino and related facilities located on the Missouri River, situated immediately north of the Interstate 70 bridge in the St. Louis metropolitan area; Ameristar Vicksburg, a riverboat-themed dockside casino and related land-based facilities, located in Vicksburg, Mississippi; and Cactus Petes Resort Casino and The Horseshu Hotel & Casino, two casino-hotels located in Jackpot, Nevada at the Idaho border. See "Item 1. Business" for additional information regarding our operating properties. 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 Iowa and Missouri 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. 47 48 Our 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, charges associated with debt refinancing and/or property acquisition and disposition transactions, construction at existing facilities and general weather conditions. Consequently, our operating results for any quarter or year are not necessarily comparable and may not be indicative of results to be expected for future periods. RESULTS OF OPERATIONS 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, 1998 1999 2000 ---------- ----------- ----------- Consolidated cash flow information: Cash flows provided by operations $ 23,123 $ 34,287 $ 38,836 Cash flows used in investing (53,863) (50,048) (521,206) Cash flows provided by financing 35,918 13,083 503,084 Net revenues: Jackpot Properties $ 54,671 $ 58,294 $ 60,314 Ameristar Vicksburg 68,538 76,930 82,555 Ameristar Council Bluffs 97,672 112,047 124,631 The Reserve 43,578 52,832 62,044 Ameristar Kansas City -- -- 7,986 Ameristar St. Charles -- -- 4,364 Corporate and other 223 183 112 --------- --------- --------- Consolidated net revenues $ 264,682 $ 300,286 $ 342,006 ========= ========= ========= Adjusted operating income (loss) (1): Jackpot Properties $ 9,638 $ 10,619 $ 10,595 Ameristar Vicksburg 13,562 15,392 16,041 Ameristar Council Bluffs 17,230 20,714 22,060 The Reserve (16,092) (7,089) (168) Ameristar Kansas City -- -- 1,168 Ameristar St. Charles -- -- 597 Corporate and other (10,389) (14,091) (15,771) --------- --------- --------- Consolidated operating income $ 13,949 $ 25,545 $ 34,522 ========= ========= ========= Adjusted operating income (loss) margins (1): Jackpot Properties 17.6% 18.2% 17.6% Ameristar Vicksburg 19.8% 20.0% 19.4% Ameristar Council Bluffs 17.6% 18.5% 17.7% The Reserve (36.9%) (13.4%) (.3%) Ameristar Kansas City -- -- 14.6% Ameristar St. Charles -- -- 13.7% Consolidated operating income margin 5.3% 8.5% 10.1%
48 49
Year Ended December 31, 1998 1999 2000 -------- -------- -------- EBITDA (2) Jackpot Properties $ 13,163 $ 13,743 $ 14,215 Ameristar Vicksburg 20,231 21,092 22,945 Ameristar Council Bluffs 24,322 28,430 32,053 The Reserve (9,519) 426 6,146 Ameristar Kansas City -- -- 1,459 Ameristar St. Charles -- -- 715 Corporate and other (10,057) (13,686) (15,227) -------- -------- -------- Consolidated EBITDA $ 38,140 $ 50,005 $ 62,306 ======== ======== ======== EBITDA Margins (2): Jackpot Properties 24.1% 23.6% 23.6% Ameristar Vicksburg 29.5% 27.4% 27.8% Ameristar Council Bluffs 24.9% 25.4% 25.7% The Reserve (21.8%) 0.8% 9.9% Ameristar Kansas City -- -- 18.3% Ameristar St. Charles -- -- 16.4% Consolidated EBITDA margin 14.4% 16.7% 18.2%
- ---------------------------- (1) Adjusted operating income is income from operations (as reported) before The Reserve's preopening costs in 1998 and before the impairment loss on assets held for sale in 2000. (2) EBITDA consists of income from operations plus depreciation and amortization and impairment loss on assets held for sale. 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. 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. Year Ended December 31, 2000 Versus Year Ended December 31, 1999 Ameristar experienced an overall growth in net revenues and operating cash flow for the twelve months ended December 31, 2000 compared to 1999. The results of operations for the year ended December 31, 2000 have been significantly impacted by the following events: o The Company completed acquisitions of the Kansas City and St. Charles properties in late December of 2000. The inclusion of 11 days of operations at the two new Missouri properties resulted in an increase to net revenues of $12.4 million for the year-ended December 31, 2000. o The Company also completed significant casino and parking expansions at the Iowa and Mississippi properties in late 1999 and early 2000. In addition, a number of new generation multi-coin slot machines have been installed throughout 49 50 the Company's properties and the strategic implementation of enhanced marketing programs has been introduced, aimed at increasing revenues and profitability. The Company's philosophy of reinvesting in its properties is continuing with ongoing renovation and enhancement projects at Ameristar Council Bluffs and Ameristar Vicksburg. o The Company agreed on October 17, 2000 to sell substantially all of the assets of The Reserve Hotel and Casino for approximately $71.8 million. The sale of The Reserve closed in late January 2001. The sale resulted in an impairment loss of $57.2 million, which reduced operating income for the year-ended December 31, 2000. As a result, the Company reported a $22.6 million loss from operations for the year-ended December 31, 2000 as compared to a $25.5 million income from operations for 1999, despite increases in revenue and cash flows from operations. Net revenues for the year ended December 31, 2000 were $342.0 million compared to $300.3 million for 1999, an increase of $41.7 million or 13.9 percent. This growth results from casino and parking expansions at the Company's Iowa and Mississippi properties, the introduction of new generation multi-coin slot machines throughout the Company's properties, the strategic implementation of enhanced marketing programs and the additional revenues provided by the two new Missouri properties. A significant amount of the increase in net revenues was due to the previously mentioned acquisition of the Kansas City and St. Charles properties on December 20, 2000, though each of our properties experiences an increase in revenues. Loss from operations (including the impairment loss) for the twelve months ended December 31, 2000 was $22.6 million compared to income from operations of $25.5 million for 1999. Excluding the impairment loss, operations produced an increase in operating income of $9.0 million or 35.3 percent for the twelve months ended December 31, 2000, as compared to the prior year. These increases in operating income prior to the impairment loss resulted primarily from increased revenues at all the properties, partially offset by operating expense increases at the properties (particularly marketing costs) and development costs related to the Company's unsuccessful bid for a gaming license in South St. Louis County, Missouri. The Company incurred an extraordinary loss of $10.0 million ($6.6 million net of tax) for the retirement of our $100 million subordinated notes in December 2000. These notes were retired in connection with the refinancing for the purchase of the Missouri properties. The Company incurred a net loss of $40.3 million for the year-ended December 31, 2000, compared to net income of $0.2 million in 1999. The net loss was a result of the $57.2 million impairment of assets ($37.1 million net of tax) and the $10.0 million ($6.6 million net of tax) extraordinary loss on the retirement of debt. Net income in 2000, prior to these unusual and non-recurring transactions, was $3.4 million compared to net income of $0.2 million in 1999. Earnings per share, prior to these unusual and non-recurring transactions, was $0.17 for 2000 compared to $0.01 for 1999. 50 51 Ameristar Council Bluffs had total net revenues of $124.6 million for the year ended December 31, 2000 compared to $112 million in 1999, an increase of $12.6 million and 11.3 percent. The increase was primarily driven by increased slot revenues, offset slightly by lower table games revenues. The slot increase of $13.9 million is attributable to the addition of the third deck of the boat in late 1999 (which increased the number of gaming positions by approximately 349), having the largest number of new generation multi-coin slot machines in the market, having an aggressive new cash-back program and overall continued growth in the Iowa gaming market. The decrease in table win of $1.4 million from 1999 to 2000 was the result of a 1.6 percentage point decline in table games hold percentage, which more than offset the increase in table drop of $0.9 million. Net revenues at Ameristar Vicksburg for the year ended December 31, 2000 was $82.6 million compared to $76.9 million in 1999, an increase of $5.7 million or 7.4 percent. The property experienced an increase in slot revenue of $5.5 million or 9.8 percent. The increase in net revenues is largely due to the casino expansion in the fall of 1999, the implementation of new generation multi-coin slot machines, an increase in slot machine count and improved marketing strategies. The Jackpot properties produced net revenues of $60.3 million for the year ended December 31, 2000 compared to $58.3 million in 1999, an increase $2.0 million or 3.4 percent. The increased revenues are primarily attributable to slot machine upgrades and improved marketing programs. Increased slot revenues of $1.9 million over prior year were attributed to enhanced slot product, timely slot conversions and effective marketing programs. The Reserve had net revenues for the year ended December 31, 2000 of $62 million, an improvement of $9.2 million or 17.4 percent over the 1999 net revenues of $52.8 million. Slot revenue was the primary component of net revenues, comprising nearly 70 percent of the net revenues for the year. Slot revenue of $43.1 million exceeded the prior year by $7.2 million, or 20.0 percent. This improvement is primarily attributable to the implementation of various strategies to drive revenues and gain market share. The company-wide operating expense ratio for 2000 improved to 89.9 percent of net revenues (before the asset impairment loss of $57.2 million in connection with the sale of The Reserve) compared to 91.5 percent of net revenues in 1999. The improvement in this ratio is primarily the result of increased revenues, partially offset by operating expense increases at the properties and corporate office and $1.9 million in development costs related to the Company's unsuccessful bid for a gaming license in South St. Louis County, Missouri. Casino costs and expenses for the year ended December 31, 2000 increased $20.6 million or 18.0 percent, from $114.4 million in 1999 to $134.9 million in 2000. As a percentage of casino revenues, casino expenses increased to 47.1 percent in 2000 compared to 46.2 percent in 1999. The increase in casino expenses as a percentage of casino revenues was due to an increase in cash back to players and an aggressive marketing strategy implemented in the second quarter of 2000. This cost increase was partially offset by other efficiencies in casino operations. 51 52 The Company's food and beverage costs and expenses increased $1.9 million to $35.1 million in 2000 compared to $33.2 million in 1999. The Company's food and beverage expense-to-revenue ratio decreased to 65.5 percent in 2000 compared to 67.6 percent in 1999. This improvement is primarily related to improved operational efficiencies experienced during 2000. Rooms expenses increased by $0.5 million to $6.9 million in 2000 from $6.4 million in 1999. The Company's room expense-to-revenue ratio increased to 38.3 percent in 2000 compared to 37.0 percent in 1999. The increase is primarily related to increases in payroll and benefits and the addition of the Kansas City property with a 184 room hotel for part of December. Selling, general and administrative costs and expenses (including utilities and maintenance and business development costs) increased $4.3 million or 5.0 percent from prior year. The increase was due primarily to $1.9 million in development costs related to the Company's unsuccessful bid for a gaming license in South St. Louis County, Missouri, increases in marketing costs associated with the Company's implementation of an aggressive marketing strategy in the second quarter of 2000, increases in corporate overhead related to increased corporate staffing levels and increases in employee compensation at Ameristar Council Bluffs, Ameristar Vicksburg and the Jackpot Properties, partially offset by a decrease in such costs at The Reserve. Depreciation expenses of $27.8 million for 2000 represented an increase of $3.3 million over 1999. The increases are attributed to the addition of the Missouri properties along with the new third deck and parking garage at Council Bluffs and improvements at the Vicksburg facilities. Interest expense, net of capitalized interest of $1.4 million in 2000 and $0.6 million in 1999, was $28.3 million for the year ended December 31, 2000 compared to $24.4 million in 1999, an increase of $3.9 million or 15.8 percent. The increased interest expense relates primarily to increased debt incurred to finance construction of the third deck and parking garage at Council Bluffs and the casino expansion at Vicksburg and the purchase of Kansas City and St. Charles properties in December. In addition, the Company's average borrowing rate was 10.6 percent in 2000 compared to 9.8 percent in 1999, reflective of higher interest rates in the general economy throughout much of 2000. Interest was capitalized on borrowings for construction related to Ameristar Vicksburg, Ameristar Council Bluffs and Ameristar St. Charles after the December 20, 2000 acquisition. The Company's effective tax benefit on losses was 34.8% in 2000 and the effective tax rate on income was 62.4% in 1999 (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. Year Ended December 31, 1999 Versus Year Ended December 31, 1998 52 53 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 percent. 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 percent. 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 percent. 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 percent. 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. We are continuing to seek further operating improvement for additional revenue enhancement. The company-wide operating expense ratio for 1999 improved to 91.5 percent of net revenues compared to 98.7 percent of net revenues in 1998 (94.7 percent 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 percent to $114.4 million from $103.4 million in 1998. As a percentage of casino revenues, casino expenses decreased to 46.2 percent in 1999 compared to 47.8 percent 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. 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. Food and beverage 53 54 expense-to-revenue ratio decreased to 67.5 percent in 1999 compared to 69.1 percent 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 percent 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 percent from 1998 to 1999 as our 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 percent from 1998 to 1999. This increase primarily reflects the additional debt incurred to finance our 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. Our average borrowing rate was 9.8 percent in 1999 compared to 10.3 percent in 1998. The borrowing rate decreased due to the favorable effect of lower interest rates during the first half of 1999. Our 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 us that 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 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 percent. This represents growth in the market share of Ameristar Council Bluffs and in the Council Bluffs gaming market in general. 54 55 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 percent. 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 percent 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. The operating expense ratio for 1998 increased to 98.7 percent (94.7 percent before preopening) compared to 86.4 percent 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 percent of net revenue, which is comparable to 1997. Casino costs and expenses increased by $24.7 million or 31.3 percent from $78.7 million in 1997 to $103.4 million in 1998. As a percentage of casino revenues, casino expenses increased to 47.8 percent in 1998 compared to 45.5 percent 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. 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. Food and beverage expense-to-revenue ratio increased to 69.1 percent in 1998 compared to 64.5 percent 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 percent 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. 55 56 Depreciation expense increased $7.8 million or 47.9 percent from 1997 to 1998 as our 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 percent from 1997. This increase primarily reflects the additional debt outstanding to finance our 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. Our average borrowing rate was 10.3% in 1998 compared to 9.9% in 1997. The borrowing rate increased due to the issuance of $100 million in 10.5% senior subordinated notes in mid-1997 and an increase in LIBOR. Our 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 us that are not deductible for Federal income tax purposes. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operating activities were $38.8 million, $34.3 million and $23.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increases in 2000 and 1999 were due primarily to the increase in operating income from improved operations at all of our properties. Cash flows used in investing activities were $521.2 million, $50.0 million and $53.9 million for the years ended December 31, 2000, 1999 and 1998, respectively. The acquisitions of Ameristar Kansas City and Ameristar St. Charles in December 2000 utilized approximately $487 million in cash. During the year ended December 31, 2000, we made capital expenditures of $33.4 million, comprised of $13.1 million related to expansion and remodeling projects at Ameristar Council Bluffs (including the completion of the 1,000 space parking garage), $11.7 million in remodeling projects and equipment at Ameristar Vicksburg, and other capital expenditures for equipment and maintenance at each of the Company's properties. 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 to the casino and constructing the parking garage, $16.6 million at Ameristar Vicksburg including expanding the casino, remodeling restaurants and other site improvements, and other capital expenditures for remodeling and land purchases at The Reserve and maintenance projects at the Jackpot Properties. In 1998, we made capital expenditures of $32.3 million, primarily related to the completion of The Reserve and the hotel at Ameristar Vicksburg. 56 57 Cash flows provided by financing activities were $503.1 million, $13.1 million and $35.9 million for the years ended December 31, 2000, 1999 and 1998, respectively. In December 2000, the Company refinanced substantially all of its long-term debt and borrowed funds for the acquisitions of Ameristar Kansas City and Ameristar St. Charles, as described more fully below. Cash flows from financing activities decreased 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. Borrowings in 1998 related primarily to the completion of The Reserve and the hotel at Ameristar Vicksburg. On December 20, 2000, we refinanced substantially all our long-term debt through $575 million of new senior credit facilities with a group of lenders led by affiliates of Deutsche Bank AG and a $300 million senior subordinated credit facility with a group of lenders also led by affiliates of Deutsche Bank AG. In connection with the refinancing, we repurchased $100 million in aggregate principal amount of our 10.5% Senior Subordinated Notes due 2004 and repaid and terminated our previous $115 million revolving credit facility and approximately $30.2 million of other indebtedness. On January 29, 2001, we completed the sale of The Reserve to Station Casinos for $71.8 million. The proceeds of the sale were used (1) to partially repay and permanently reduce the revolving loan commitment and the term loan A under our senior credit facilities by a total of $50 million, (2) to repay revolving loans under our senior credit facilities (which may be reborrowed), and (3) to repay certain indebtedness associated with the assets sold in the transaction. On February 2, 2001, we issued $380 million in aggregate principal amount of 10 3/4% Senior Subordinated Notes due 2009. The net proceeds of the offering were used (1) to repay the $300 million in principal amount outstanding under our senior subordinated credit facility and accrued interest thereon, (2) to partially repay and permanently reduce the term loan B and the term loan C under our senior credit facilities by a total of $50 million, (3) to repay revolving loans under our senior credit facilities (which may be reborrowed) and (4) for working capital purposes. Thus, we currently have $475 million of senior credit facilities as follows: o $75 million revolving credit facility maturing in 2005 ($25 million of which is dedicated to the completion of the St. Charles expansion and will be available for general working capital purposes thereafter); o $75 million revolving credit/term loan facility maturing in 2005 (dedicated to the completion of the St. Charles expansion); o $50 million term loan A maturing in 2005; o $148.1 million term loan B maturing in 2006; and o $126.9 million term loan C maturing in 2007. The senior credit facilities bear interest at variable interest rates based on LIBOR or the prime rate plus a margin. For the revolving credit facility, the revolving credit/term facility and the term loan A, the margin is based on our leverage ratio, which is the ratio of our 57 58 consolidated debt to latest twelve months EBITDA, as defined, and ranges from 1.50% to 3.25% in the case of Eurodollar loans and from 0.50% to 2.25% in the case of base rate loans. For the term loan B and the term loan C, the margins are fixed at 3.75% and 4.00%, respectively, in the case of Eurodollar loans, and at 2.75% and 3.00%, respectively, in the case of base rate loans. The senior credit facilities contain certain affirmative and negative covenants, including promises to maintain certain financial ratios and tests within defined parameters, including a fixed charge coverage ratio test and senior and total debt ratio tests, as defined. We have entered into an interest rate collar agreement to manage interest expense which is subject to fluctuation due to the variable-rate nature of the debt under our senior credit facilities. Under the agreement, which covers $50.0 million of borrowings under the senior credit facilities, we have a LIBOR floor rate of 5.39 percent and a LIBOR ceiling rate of 6.75 percent, plus the applicable margin. In 1999, we paid approximately $49,000 in additional interest as a result of this agreement. We did not incur any additional interest in connection with this agreement in 2000. The agreement terminates on June 30, 2003. We continue to monitor interest rate markets and expect to enter into interest rate collar or swap agreements for additional amounts of principal under our senior credit facilities as market conditions warrant. Our $380 million 10 3/4% Senior Subordinated Notes due 2009 were issued by Ameristar on February 2, 2001 and are guaranteed by each of our subsidiaries. The notes are unsecured senior subordinated obligations of Ameristar and rank junior to all of our existing and future senior debt, including borrowings under our senior credit facilities. The guarantees by our subsidiaries are unsecured senior subordinated obligations of each of our subsidiaries and rank junior to all existing and future senior debt of our subsidiaries, including guarantees of borrowings under our senior credit facilities. The notes may be redeemed by us on or after February 15, 2006 in accordance with their terms and include certain affirmative and negative covenants, including limitations on our ability to incur additional debt. Pursuant to the terms of a registration rights agreement, we expect to offer to exchange the notes with notes having substantially identical terms that have been registered with the Securities and Exchange Commission. The 10 3/4% senior subordinated notes were issued by Ameristar, and all of Ameristar's current subsidiaries (the "Guarantors") have jointly and severally, and fully and unconditionally, guaranteed the notes. Each of the Guarantors is a wholly owned subsidiary of Ameristar, and the Guarantors constitute all of Ameristar's direct and indirect subsidiaries. Ameristar is a holding company with no operations 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 our assets, liabilities, earnings and equity 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 Ameristar in the form of cash dividends, loans or advances. 58 59 We exercised purchase options on two parcels of land at the Ameristar Vicksburg site in 2000. Both purchases were financed primarily with promissory notes issued to the sellers totaling $5.8 million with principal repayments through 2024. Each promissory note is payable in monthly installments and bears interest at various rates, approximating 10.0% at December 31, 2000. During the third quarter of 2000, we entered into four-year capital lease agreements and purchase money financing arrangements to acquire slot machines in the amounts of approximately $1.0 million at Cactus Petes and approximately $4.5 million at Ameristar Vicksburg at an interest rate of approximately 10.4%. In addition, in the fourth quarter of 2000, we entered into purchase money financing arrangements for slot machines and other equipment in the amount of approximately $1.6 million at Ameristar Council Bluffs, approximately $0.6 million at Cactus Petes and approximately $0.4 million at Ameristar Vicksburg. In addition to the capital requirements mentioned above, Ameristar St. Charles will incur costs related to the expansion of the property. Our current plans call for us to invest approximately $110 million to complete an expansion at Ameristar St. Charles, in which the former owner invested approximately $169 million prior to our acquisition of the property. Following the completion of the St. Charles expansion, the property will have available for future expansion up to an additional 70,000 square feet of gaming space and approximately 65,000 square feet of additional space in the land-based pavilion, each of which will require only interior build-out for completion. In 2001, we expect to complete an approximate $7.4 million renovation and enhancement project at Ameristar Council Bluffs and an approximately $10.0 million renovation and enhancement project at Ameristar Vicksburg. We historically have funded our daily operations through net cash provided by operating activities and our significant capital expenditures primarily through bank debt and other debt financing. We believe that our cash flow from operations, cash and cash equivalents and availability under our senior credit facilities will support our operations and liquidity requirements, including capital expenditure plans, for the foreseeable future. While we have availability under our senior credit facilities to fund up to $100 million of the St. Charles expansion costs, we expect to finance a significant portion of these costs from our cash flows from operations. As a result, we do not expect to draw the full amount dedicated under our senior credit facilities to complete the St. Charles expansion. At March 15, 2001, we had $123.6 million of available borrowing capacity under our senior credit facilities, including the $100 million dedicated to the St. Charles expansion. We have not declared any dividends on our Common Stock during the last three fiscal years, and we intend for the foreseeable future to retain all earnings for use in the development of our business instead of paying cash dividends. In addition, as described above, the senior credit facilities include covenants that may restrict or prohibit the payment of dividends. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and 59 60 Hedging Activities," which we will adopt in the first quarter of 2001. Because of our limited use of derivative instruments to hedge interest rate risk on a portion of our variable rate debt, the adoption of SFAS No. 133 will not have a significant impact on our results of operations or financial position. We continue to monitor interest rate markets and expect to enter into interest rate collar or swap agreements for additional amounts of principal under our senior credit facilities as market conditions warrant. We will account for any such agreements in accordance with SFAS No. 133. In November 2000, the Emerging Issues Task Force (EITF) of the FASB reached a consensus on EITF 00-14, "Accounting for Certain Sales Incentives." EITF 00-14 requires that discounts which result in a reduction in or refund of the selling price of a product or service in a single exchange transaction be recorded as a reduction of revenues. We will adopt EITF 00-14 in the second quarter of 2001, including reclassifying prior period amounts for programs where we offer customers "free plays" or coupons for gaming activity. The amount of "free plays" and coupons to date has not been significant. Our accounting policy related to free or discounted rooms, food and beverage and other services already complies with EITF 00-14. In February 2001, the EITF reached a partial consensus on EITF 00-22, "Accounting for `Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future." The consensus requires that vendors recognize the cash rebate or refund obligation associated with time- or volume-based cash rebates as a reduction of revenue based on a "systematic and rational allocation of the cost of honoring rebates or refunds earned and claimed to each of the underlying revenue transactions that result in progress by the customer toward earning the rebate or refund." The liability for such obligations should be based on the estimated amount of rebates or refunds to be ultimately earned, including an estimation of "breakage" if it can be reasonably estimated. The consensus is applicable beginning in the first quarter of 2001. Our players' clubs allow customers to earn certain complimentary services and/or cash rebates based on the volume of the customers' gaming activity. We currently account for our players' clubs in accordance with EITF 00-22, except that we record the charge for progress towards the complimentary services/cash rebates as a casino department expense instead of a reduction of revenue. We will change the classification for these charges, which totaled $7.9 million in the year ended December 31, 2000, in the first quarter of 2001, including reclassifying prior period amounts. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Except for certain long-term debt outstanding at December 31, 2000 in the aggregate amount of $477.3 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 LIBOR (in the case of Eurodollar loans) or the prime interest rate (in the case of base rate loans), plus an applicable margin. At December 31, 2000, the average interest rate applicable to the Variable Rate Debt was 12.1%. An increase of one percentage point in the average interest rate applicable to the Variable Rate Debt outstanding at December 31, 2000, would increase the Company's annual interest costs by approximately $4.8 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 prorated under the revolving credit/term facility and the term loan A. 60 61 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 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-24 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: 61 62 (a)1. FINANCIAL STATEMENTS Report of Independent Public Accountants. Consolidated Balance Sheets as of December 31, 1999 and 2000. Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1999 and 2000. Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000. 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.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING - ----------- ----------------------------------------------- ---------------------------------------------- 3.1 Articles of Incorporation of Ameristar Casinos, Incorporated by reference to Exhibit 3.1 to Inc. ("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 Certificate Incorporated by reference to Exhibit 4 to Amendment No. 2 to the Form S-1.
62 63 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING - ----------- ----------------------------------------------- ---------------------------------------------- 4.2(a) Credit Agreement (the "Credit Agreement") dated as Filed electronically herewith. of December 20, 2000 among ACI, the Lenders party thereto from time to time, Wells Fargo Bank, N.A., as Co-Arranger and Syndication Agent ("WFB"), Bear Stearns Corporate Lending Inc., as Documentation Agent ("BSCLI"), Deutsche Bank Securities Inc., as Lead Arranger and Sole Book Manager ("DBSI"), and Bankers Trust Company, as Administrative Agent ("BTCo"). 4.2(b) First Amendment to Credit Agreement dated as of Filed electronically herewith. January 30, 2001 among ACI, the Lenders party to the Credit Agreement, WFB, BSCLI, DBSI and BTCo. 4.2(c) Guaranty made by each of ACI's subsidiaries Filed electronically herewith. guaranteeing ACI's obligations under the Credit Agreement 4.2(d) Interest Rate Collar Agreement dated August 10, Incorporated by reference to Exhibit 4.2(b) to 1998 between ACI and Wells Fargo Bank, N.A. ACI's Annual Report on Form 10-K for the year ended December 31, 1998 4.3 Senior Subordinated Credit Agreement dated as of Filed electronically herewith. December 20, 2000 by and among ACI, the Guarantors named on the signature pages thereto, the Lenders named on the signature pages thereto, Bankers Trust Company, as Agent for the Lenders, and Bear Stearns Corporate Lending Inc., as Documentation Agent for the Lenders. 4.4 Indenture dated as of February 2, 2001 among ACI, Filed electronically herewith. the Guarantors (as defined therein) and U.S. Bank Trust National Association, as trustee.
63 64 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING - ----------- ----------------------------------------------- ---------------------------------------------- *10.1(a) Employment Agreement, dated November 15, 1993, Incorporated by reference to Exhibit 10.1(a) between ACI and Thomas M. Steinbauer. to ACI's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 10-K"). *10.1(b) Employment Agreement, dated as of August 23, 1999, Incorporated by reference to Exhibit 10.1 to between Ameristar Casinos, Inc. and Gordon R. ACI's Quarterly Report on Form 10-Q for the Kanofsky quarter ended September 30, 1999. *10.2 Ameristar Casinos, Inc. 1993 Non-Employee Director Incorporated by reference to Exhibit 10.2 to Stock Option Plan, as amended and restated. ACI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994. *10.3 Ameristar Casinos, Inc. Management Stock Option Incorporated by reference to Exhibit 10.3 to Incentive Plan, as amended and restated. ACI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. *10.4(a) 1999 Stock Incentive Plan of Ameristar Casinos, Inc. Incorporated by reference to Exhibit 10.6 to ACI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. *10.4(b) First Amendment to 1999 Stock Incentive Plan of Filed herewith. Ameristar Casinos, Inc. *10.5 Form of Indemnification Agreement between ACI and Incorporated by reference to Exhibit 10.33 to each of its directors and officers. Amendment No. 2 to the Form S-1. *10.6 Housing Agreement, dated November 15, 1993 between Incorporated by reference to Exhibit 10.17 to CPI and Craig H. Neilsen. the 1994 10-K. 10.7 Plan of Reorganization, dated November 15, 1993, Incorporated by reference to Exhibit 2.1 to between ACI and Craig H. Neilsen in his individual the 1994 10-K. capacity and as trustee of the testamentary trust created under the last will and testament of Ray Neilsen dated October 9, 1963.
64 65 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING - ----------- ----------------------------------------------- ---------------------------------------------- 10.8 Excursion Boat Sponsorship and Operations Incorporated by reference to Exhibit 10.15 to Agreement, dated September 15, 1994, between Iowa the 1995 10-K. West Racing Association and ACCBI. 10.9 Settlement, Use and Management Agreement and DNR Incorporated by reference to Exhibits 10.12 Permit, dated May 15, 1995, between the State of and 99.1 to ACI's Annual Report on Form 10-K Iowa acting through the Iowa Department of Natural for the year ended December 31, 1996. Resources and ACCBI as the assignee of Koch Fuels, Inc. 10.10** Asset Purchase and Sale Agreement, dated as of Incorporated by reference to Exhibit 10.12 to February 15, 2000, between Futuresouth, Inc., ACI's Annual Report on Form 10-K for the year Southboat Lemay, Inc., Southboat Limited ended December 31, 1999. Partnership and Ameristar Casino St. Louis, Inc. 10.11 Asset Purchase Agreement dated as of October 17, Incorporated by reference to Exhibit 10.1 to 2000 by and among Ameristar Casino Kansas City, ACI's Quarterly Report on Form 10-Q for the Inc., ACI, Kansas City Station Corporation and quarter ended September 30, 2000 (the Station Casinos, Inc. ("SCI") "September 2000 10-Q"). 10.12 Asset Purchase Agreement dated as of October 17, Incorporated by reference to Exhibit 10.2 to 2000 by and among Ameristar Casino St. Charles, the September 2000 10-Q. Inc., ACI, St. Charles Riverfront Station, Inc. and SCI 10.13 Asset Purchase Agreement dated as of October 17, Incorporated by reference to Exhibit 10.2 to 2000 by and among Lake Mead Station, Inc., SCI, the September 2000 10-Q. Ameristar Casino Las Vegas, Inc. and ACI *10.14 Ameristar Casinos, Inc. Deferred Compensation Plan Filed electronically herewith 21.1 Subsidiaries of ACI. Filed electronically herewith. 23.1 Consent of Arthur Andersen LLP. Filed electronically herewith.
65 66
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT METHOD OF FILING - ----------- ----------------------------------------------- ---------------------------------------------- 99.1 Agreement to furnish the Securities and Exchange Filed electronically 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 based on the Securities and Exchange Commission's granting of confidential treatment pursuant to Rule 24b-2 promulgated under the Securities Exchange Act. (B) REPORTS ON FORM 8-K None. 66 67 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, 2001 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 --------- -------------- ---- /s/ CRAIG H. NEILSEN Craig H. Neilsen, President, March 29, 2001 - ------------------------------ Chairman of the Board and CEO (principal executive officer) Thomas M. Steinbauer, Senior Vice President /s/ THOMAS M. STEINBAUER President of Finance and Administration March 29, 2001 - ------------------------------ (principal financial officer and principal accounting officer) and Director /s/ PAUL I. CORDDRY Paul I. Corddry, Director March 29, 2001 - ------------------------------ /s/ LARRY A. HODGES Larry A. Hodges, Director March 29, 2001 - ------------------------------
67 68 On this 29th of March, 2001, Craig H. Neilsen directed Connie Wilson in his presence as well as our own, to sign the foregoing document as "Craig H. Neilsen." Upon viewing the signatures as signed by Connie Wilson and in our presence, Craig H. Neilsen declared to us that he adopted them as his own signatures. Susan Vicchairelli -------------------------------- Witness Karen Ahmad -------------------------------- Witness STATE OF NEVADA ) ):ss. COUNTY OF CLARK ) I, Margene 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 Connie Wilson 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 Connie Wilson 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, 2001. Margene Otten ------------------------------ Notary Public My Commission Expires: July 23, 2002 Residing at: Las Vegas, NV 68 69 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, 1999 and 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. 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, 1999 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Las Vegas, Nevada February 28, 2001 F-1 70 AMERISTAR CASINOS, INC. CONSOLIDATED BALANCE SHEETS ASSETS (Amounts in Thousands)
December 31, -------- -------- 1999 2000 CURRENT ASSETS: Cash and cash equivalents $ 15,531 $ 36,245 Restricted cash 142 1,590 Accounts receivable, net 1,719 9,731 Income tax refund receivable 1,450 125 Inventories 2,468 4,501 Prepaid expenses 5,059 5,350 Deferred income taxes 3,716 2,502 Assets held for sale 129,822 73,195 -------- -------- Total current assets 159,907 133,239 -------- -------- PROPERTY AND EQUIPMENT, at cost: Buildings and improvements 202,079 415,761 Building under capitalized lease 800 -- Furniture, fixtures and equipment 69,251 135,894 Furniture, fixtures and equipment under capitalized leases 3,785 8,317 -------- -------- 275,915 559,972 Less: Accumulated depreciation and amortization 95,918 115,921 -------- -------- 179,997 444,051 Land 15,210 43,173 Land under capitalized leases 4,865 -- Construction in progress 14,639 154,881 -------- -------- Total property and equipment 214,711 642,105 -------- -------- EXCESS OF PURCHASE PRICE OVER FAIR MARKET VALUE OF NET ASSETS ACQUIRED -- 86,384 -------- -------- DEPOSITS AND OTHER ASSETS 4,027 29,193 -------- -------- TOTAL ASSETS 378,645 890,921 ======= =======
The accompanying notes are an integral part of these consolidated balance sheets. F-2 71 AMERISTAR CASINOS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY (Amounts in Thousands, Except Per Share Data)
December 31, 1999 2000 --------- --------- CURRENT LIABILITIES: Accounts payable $ 9,205 $ 13,124 Construction contracts payable 6,341 4,493 Accrued liabilities 27,725 41,374 Current obligations under capitalized leases 782 2,002 Current maturities of notes payable and long-term debt 10,615 8,956 Liabilities related to assets held for sale 7,443 6,837 --------- --------- Total current liabilities 62,111 76,786 --------- --------- OBLIGATIONS UNDER CAPITALIZED LEASES, net of current maturities 7,038 3,354 --------- --------- NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities 231,853 777,121 --------- --------- DEFERRED INCOME TAXES 9,474 5,616 --------- --------- 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 - 20,375,264 shares at December 31, 1999 and 20,442,963 shares at December 31, 2000 204 204 Additional paid-in capital 43,083 43,265 Retained earnings (Accumulated deficit) 24,882 (15,425) --------- --------- Total stockholders' equity 68,169 28,044 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 378,645 $ 890,921 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. F-3 72 AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data)
Years ended December 31, 1998 1999 2000 ----------- ----------- --------- REVENUES: Casino $ 216,319 $ 247,416 $ 286,438 Food and beverage 45,853 49,142 53,653 Rooms 14,201 17,257 18,121 Other 10,401 11,089 12,018 --------- --------- --------- 286,774 324,904 370,230 Less: Promotional allowances 22,092 24,618 28,224 --------- --------- --------- Net revenues 264,682 300,286 342,006 --------- --------- --------- OPERATING EXPENSES: Casino 103,387 114,357 134,948 Food and beverage 31,698 33,207 35,135 Rooms 5,809 6,372 6,944 Other 10,044 10,203 12,257 Selling, general and administrative 75,604 86,142 90,416 Depreciation and amortization 24,191 24,460 27,784 Preopening costs 10,611 -- -- Impairment loss on assets held for sale -- -- 57,153 --------- --------- --------- Total operating expenses 261,344 274,741 364,637 --------- --------- --------- Income (loss) from operations 3,338 25,545 (22,631) OTHER INCOME (EXPENSE): Interest income 296 300 161 Interest expense (22,699) (24,449) (28,316) Other (13) (851) (942) --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) (19,078) 545 (51,728) Income tax provision (benefit) (6,363) 340 (17,981) --------- --------- --------- INCOME (LOSS) BEFORE EXTRAORDINARY LOSS (12,715) 205 (33,747) EXTRAORDINARY LOSS ON EARLY RETIREMENT OF DEBT, net of income tax benefit of $3,479 -- -- 6,560 --------- --------- --------- NET INCOME (LOSS) $ (12,715) $ 205 $ (40,307) ========= ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. F-4 73 AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) (Amounts in Thousands, Except Per Share Data)
Years ended December 31, 1998 1999 2000 ----------- ------------ ------------- EARNINGS (LOSS) PER SHARE: Income (loss) before extraordinary loss Basic and diluted $ (0.62) $ 0.01 $ (1.65) Net income (loss) Basic and diluted $ (0.62) $ 0.01 $ (1.98) WEIGHTED AVERAGE SHARES OUTSTANDING 20,360 20,362 20,401
The accompanying notes are an integral part of these consolidated financial statements. F-5 74 AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Amounts in Thousands, Except Number of Shares)
Capital Stock Retained ----------------------------- Additional Earnings No. of Paid-in (Accumulated Shares Balance Capital Deficit) Total ----------- -------------- ------------ ------------- --------- 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 ---------- ---------- ---------- ---------- ---------- Net loss -- -- -- (40,307) (40,307) Issuance of shares upon exercise of stock options 67,699 -- 182 -- 182 ---------- ---------- ---------- ---------- ---------- Balance, December 31, 2000 20,442,963 $ 204 $ 43,265 $ (15,425) $ 28,044 ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-6 75 AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)
Years ended December 31, 1998 1999 2000 ------------ ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (12,715) $ 205 $ (40,307) --------- --------- --------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 24,191 24,460 27,784 Change in deferred income taxes (3,898) 2,166 (20,682) Net loss on disposition of assets 11 852 942 Amortization of debt issuance costs 661 668 734 Preopening costs 10,611 -- -- Extraordinary loss on early retirement of debt -- -- 10,039 Impairment loss on assets held for sale -- -- 57,153 Changes in current assets and liabilities: Restricted cash 34 (24) (1,448) Accounts receivable, net 561 (590) (346) Income taxes, net (712) 1,365 1,325 Inventories (1,314) (231) (1,124) Prepaid expenses (669) (593) (451) Accounts payable 1,552 2,865 3,920 Accrued liabilities 4,810 3,144 1,297 --------- --------- --------- Total adjustments 35,838 34,082 79,143 --------- --------- --------- Net cash provided by operating activities 23,123 34,287 38,836 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Missouri properties, net of cash acquired -- -- (486,800) Capital expenditures (32,312) (57,590) (33,357) Increase (decrease) in construction contracts payable (18,478) 5,444 (1,848) Proceeds from sale of assets -- 2,029 1,838 Decrease (increase) in deposits and other assets (3,073) 69 (1,039) --------- --------- --------- Net cash used in investing activities (53,863) (50,048) (521,206) --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements. F-7 76 AMERISTAR CASINOS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Amounts in Thousands)
Years ended December 31, 1998 1999 2000 ------------ ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt $ 42,606 $ 19,047 $ 788,227 Debt issuance costs -- -- (20,838) Principal payments of long-term debt and capitalized leases (6,688) (6,004) (264,487) Proceeds from exercise of stock options -- 40 182 --------- --------- --------- Net cash provided by financing activities 35,918 13,083 503,084 --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,178 (2,678) 20,714 CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 13,031 18,209 15,531 --------- --------- --------- CASH AND CASH EQUIVALENTS END OF YEAR $ 18,209 $ 15,531 $ 36,245 ========= ========= ========= SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for interest, net of amounts capitalized $ 22,515 $ 23,474 $ 30,946 Income taxes paid (refunds received) $ 350 $ (3,192) $ (2,162) NONCASH INVESTING AND FINANCING ACTIVITIES: Acquisition of assets with capital leases $ 7,180 $ 153 $ 4,531 Acquisition of assets with notes payable $ -- $ -- $ 3,641
The accompanying notes are an integral part of these consolidated financial statements. F-8 77 AMERISTAR CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements of Ameristar Casinos, Inc., a Nevada corporation ("ACI" or the "Company"), include the accounts of the Company and its wholly-owned subsidiaries, Cactus Pete's, Inc. ("CPI"), Ameristar Casino Vicksburg, Inc. ("ACVI"), Ameristar Casino Council Bluffs, Inc. ("ACCBI"), Ameristar Casino Las Vegas, Inc. ("ACLVI"), Ameristar Casino St. Louis, Inc. ("ACSLI"), Ameristar Casino St. Charles, Inc. ("ACSCI"), Ameristar Casino Kansas City, Inc. ("ACKCI") and A.C. Food Services, Inc. ("ACFSI"). ACSCI and ACKCI were formed in October 2000 to complete the acquisitions of two properties in St. Charles and Kansas City, Missouri, as described more fully in Note 10. ACSLI was formed in October 1999 to pursue a gaming license in South St. Louis County, Missouri. On December 20, 2000, AC Hotel Corp, a wholly owned subsidiary of ACVI, merged with and into ACVI and ceased to exist. CPI owns and operates two casino-hotels in Jackpot, Nevada - Cactus Petes Resort Casino and The Horseshu Hotel and Casino. ACVI owns and operates Ameristar Vicksburg, a riverboat-themed dockside casino and related hotel and other land-based facilities in Vicksburg, Mississippi. ACCBI owns and operates Ameristar Council Bluffs, a riverboat casino and related hotel and other land-based facilities in Council Bluffs, Iowa that serves the Council Bluffs and Omaha, Nebraska metropolitan area. ACSCI owns a riverboat casino in St. Charles, Missouri that serves the St. Louis metropolitan area. ACKCI owns a master-planned gaming and entertainment facility in Kansas City, Missouri, which features a casino, hotel, cinema multiplex and restaurants. ACLVI owned and operated The Reserve Hotel Casino in Henderson, Nevada, in metropolitan Las Vegas, until it sold the property in January 2001. The gaming licenses granted to ACSCI, ACKCI, 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. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates 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. All significant intercompany accounts and transactions have been eliminated from the accompanying consolidated financial statements. F-9 78 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 $731,000 and $629,000 at December 31, 1999 and 2000, 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. Depreciation and capitalization Property and equipment are recorded at cost, including interest charged on funds borrowed to finance construction. Interest of $1,434,000, $561,000 and $1,359,000 was capitalized for the years ended December 31, 1998, 1999 and 2000, respectively. Betterments, renewals and repairs that extend the life of an asset are capitalized. Ordinary maintenance and repairs are charged to expense as incurred. For major renovation projects, assets to be disposed of are identified and the Company writes down the value of these assets to realizable value when disposed of. Costs of major renovation projects are capitalized in accordance with existing policies. 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 Impairment of long-lived assets The Company accounts for impairment of long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The F-10 79 Company reviews long-lived assets for such events or changes in circumstances at each balance sheet date. If a long-lived asset is to be held and used, the Company assesses recoverability based on the future undiscounted cash flows of the related asset over the remaining life compared to the asset's book value. If an impairment exists, the asset is written down to fair value, based on quoted market prices or another valuation technique, such as discounted cash flow analysis. If a long-lived asset is to be sold, the asset is reported at the lower of carrying amount or fair value less cost to sell, with fair value measured as discussed above. The Company recognized an impairment loss related to the sale of The Reserve in 2000, as discussed more fully in Note 11. Debt issuance costs Debt issuance costs are capitalized and amortized to interest expense using the effective interest method or a method that approximates the effective interest method over the term of the related debt instrument. 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 is amortized over its estimated useful life. 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, 1998 1999 2000 -------- -------- ------- (Amounts in Thousands) Food and beverage $20,399 $20,189 $20,552 Room 1,024 1,336 1,089 Other 958 1,382 1,303 ------- ------- ------- $22,381 $22,907 $22,944 ======= ======= =======
Advertising The Company expenses advertising costs the first time the advertising takes place. Advertising expense included in selling, general and administrative expenses was approximately $9,966,000, $10,690,000 and $11,564,000 for the years ended December 31, 1998, 1999 and 2000, respectively. F-11 80 Preopening costs and business development expenses 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 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 or 2000 since the Company was not developing any new facilities. 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. Federal income taxes Income taxes are recorded in accordance with SFAS 109, "Accounting for Income Taxes." SFAS 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 The Company calculates earnings per share in accordance with SFAS 128, "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. All outstanding stock options were excluded from the calculation of diluted earnings per share for the periods presented because the effect of including the options would have been anti-dilutive in 1998 and 2000 and the dilutive effect was not significant in 1999. Reclassifications Certain reclassifications, having no effect on net income, have been made to the prior period's consolidated financial statements to conform to the current period's presentation. F-12 81 NOTE 3 - ACCRUED LIABILITIES Accrued liabilities consist of the following:
December 31, 1999 2000 -------- --------- (Amounts in Thousands) Compensation and related benefits $ 7,457 $12,643 Taxes other than income taxes 5,822 8,089 Players' clubs 1,693 6,220 Progressive slot machine jackpots 1,009 4,638 Interest 6,320 2,986 Deposits and other accruals 5,424 6,798 ------- ------- $27,725 $41,374
NOTE 4 - FEDERAL INCOME TAXES The provision for income taxes consists of the following:
Years ended December 31, 1998 1999 2000 --------- --------- --------- (Amounts in Thousands) Income from continuing operations $ (6,363) $ 340 $(17,981) Tax benefit from extraordinary item -- -- (3,479) -------- -------- -------- $ (6,363) $ 340 $(21,460) ======== ======== ========
The components of the income tax provision are as follows:
Years ended December 31, 1998 1999 2000 -------- -------- -------- (Amounts in Thousands) Current $ (5,312) $ (1,250) $ -- Deferred (1,051) 1,590 (21,460) -------- -------- -------- $ (6,363) $ 340 $(21,460) ======== ======== ========
F-13 82 The reconciliation of income tax at the federal statutory rates to income tax expense is as follows:
Years ended December 31, 1998 1999 2000 --------- --------- -------- Federal statutory rate (34.0)% 34.0% (35.0)% Nondeductible political and lobbying costs 0.2 11.0 -- Nondeductible meals and entertainment 0.1 4.2 0.1 Other nondeductible expenses 0.3 13.2 0.2 ----- ---- ----- (33.4)% 62.4% (34.7)% ===== ==== =====
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, 1999 2000 --------- -------- (Amounts in Thousands) Deferred tax assets: Preopening costs $ 3,019 $ 1,691 Accrued book expenses not currently deductible 2,757 2,465 Alternative minimum tax credit 2,882 2,045 Net operating loss carry forward 10,433 20,710 Impairment loss on assets held for sale -- 20,004 Other 1,252 739 -------- -------- Total deferred tax assets 20,343 47,654 -------- -------- Deferred tax liabilities: Temporary differences related to property and equipment (22,937) (47,021) Other (3,163) (3,747) -------- -------- Total deferred tax liabilities (26,100) (50,768) -------- -------- Net deferred tax liability $ (5,757) $ (3,114) ======== ========
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. At December 31, 2000, the Company has available $60,264,000 of unused operating loss carryforwards that may be applied against future taxable income. The unused operating loss carryforwards will expire in 2018 through 2020. No valuation allowance has been provided against deferred tax assets as the Company believes it is more likely than not that deferred tax assets are realizable based on expected future taxable income. 83 NOTE 5 - NOTES PAYABLE AND LONG-TERM DEBT Notes payable and long-term debt consist of the following:
December 31, 1999 2000 --------- -------- (Amounts in Thousands) Senior Credit Facilities, secured by first priority security interest in substantially all real and personal property assets of ACI and its subsidiaries, consisting the following facilities: Revolving Credit Facility, at variable interest (11.8 percent at December 31, 2000), with interest due at two-week to six-month periods (as elected by the Company), through December 20, 2005 -- 75,000 Term Loan A, at variable interest (11.8 percent at December 31, 2000), with interest due at two-week to six-month periods (as elected by the Company), principal due quarterly, through December 20, 2005 -- 75,000 Term Loan B, at variable interest (12.3 percent at December 31, 2000), with interest due at two-week to six-month periods (as elected by the Company), principal due quarterly, through December 20, 2006 -- 175,000 Term Loan C, with variable interest (12.5 percent at December 31, 2000), with interest due at two-week to six-month periods (as elected by the Company), principal due quarterly, through December 20, 2007 -- 150,000 Senior Subordinated Credit Facility, unsecured, variable interest (11.0 percent at December 31, 2000), payable quarterly, principal due June 20, 2008 -- 300,000 Previous Revolving Credit Facility 107,000 -- 10.5 percent Senior Subordinated Notes, interest only payable semiannually, principal due August 2004 100,000 --
F-15 84
December 31, 1999 2000 -------- -------- (Amounts in Thousands) Notes payable to former stockholders of Gem Gaming, Inc., with interest at 8.0 percent, interest payable quarterly, due December 2004 25,650 -- Other 9,818 11,077 -------- -------- 242,468 786,077 Less: Current maturities 10,615 8,956 -------- -------- $231,853 $777,121 ======== ========
On December 20, 2000, the Company refinanced substantially all of its long-term debt with new $575 million senior credit facilities provided by a group of lenders led by affiliates of Deutsche Bank AG and a $300 million senior subordinated credit facility provided by a group of lenders also led by affiliates of Deutsche Bank AG. In connection with the refinancing, the Company repurchased through a tender offer $100 million in aggregate principal amount of its 10.5 percent senior subordinated notes due 2004 and repaid and terminated its previous $115 million revolving credit facility and approximately $30.2 million of other indebtedness. As a result of the early repurchase of the 10.5 percent senior subordinated notes and the early termination of the Company's previous revolving credit facility, the Company incurred an extraordinary charge of $6,560,000 (net of associated tax benefit of $3,479,000), comprised of the premium paid to the noteholders, unamortized discount on the notes and the write-off of related loan costs and fees. The Company's new senior credit facilities consist of a revolving credit facility, a revolving credit/term loan facility and term loans A, B and C. Each of these facilities bears interest at a variable rate based on LIBOR or the prime rate plus a margin. For the revolving credit facility, the revolving credit/term loan facility and the term loan A, the interest rate margin fluctuates based on our leverage ratio, which is the ratio of our consolidated debt to latest twelve months EBITDA, as defined, and ranges from 1.50 percent to 3.25 percent in the case of Eurodollar loans and from 0.50 percent to 2.25 percent in the case of base rate loans. For term loans B and C, the margins are fixed at 3.75 percent and 4.00 percent, respectively, in the case of Eurodollar loans, and at 2.75 percent and 3.00 percent, respectively, in the case of base rate loans. The new senior credit facilities contain certain affirmative and negative covenants, including restrictions on the incurrence of additional indebtedness, restrictions on dividend payments and other restrictions, as well as promises to maintain certain financial ratios and tests within defined parameters. As of December 31, 2000 the Company was limited to a 3.25:1 senior debt ratio, defined as senior debt divided by EBITDA (as defined). The Company was also limited to a 5.25:1 total debt ratio, defined as consolidated debt divided by EBITDA, as of the same date. As of December 31, 2000, the Company's senior debt and total debt ratios were 2.66 and 4.75, respectively. F-16 85 As of December 31, 2000, the Company was required to maintain a minimum fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of 1.50:1. As of December 31, 2000, the Company's fixed charge coverage ratio was 1.84. The senior credit facilities also limit the Company's aggregate capital expenditures in each year. For the period from December 20, 2000 through December 31, 2001, the Company is limited to a maximum of $26 million of capital expenditures in addition to capital expenditures of $110 million in connection with the St. Charles expansion project, $9.5 million in connection with the ongoing renovation project at Ameristar Vicksburg and $8.0 million in connection with the ongoing renovation project at Ameristar Council Bluffs. The senior credit facilities also require the Company to maintain a consolidated tangible net worth (as defined) of at least $23 million plus 50 percent of net income (without any reduction for net losses) as of the end of each quarter plus net proceeds of certain future equity offerings. As of December 31, 2000, the Company's consolidated tangible net worth was $5.0 million more than required by this covenant. In 1997, the Company entered into an interest rate collar agreement with Wells Fargo Bank to manage interest expense, which is subject to fluctuation due to the variable-rate nature of the debt under the Company's senior credit facilities. Under the agreement, which covered $50.0 million of the borrowings under the previous credit facility and covers $50 million of the LIBOR borrowings under the revolving credit/term loan facility and the term loan A, 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 1999 and 2000, the Company paid approximately $49,000 and $0, respectively, in additional interest as a result of this agreement. The agreement terminates on June 30, 2003. On February 2, 2001, the Company issued $380 million in aggregate principal amount of 10 3/4% Senior Subordinated Notes due 2009. The notes were issued at a discount to yield 11.0 percent. The net proceeds of the offering were used (1) to repay the $300 million in principal amount outstanding under the Company's senior subordinated credit facility and accrued interest thereon, (2) to partially repay and permanently reduce the term loan B and the term loan C under the Company's senior credit facilities by a total of $50 million, (3) to partially repay the revolving credit facility under the Company's senior credit facilities and (4) for working capital purposes. The 10 3/4% Senior Subordinated Notes due 2009 are unsecured, and are guaranteed by each of the Company's subsidiaries and rank junior to all of the Company's existing and future senior debt, including borrowings under the Company's senior credit facilities. Pursuant to the terms of a registration rights agreement, the Company expects to offer to exchange the notes with notes having substantially identical terms that have been registered with the Securities and Exchange Commission. The unamortized debt issuance costs related to the senior subordinated credit facility totaled $2.3 million at the date of that facility's termination and will result in an extraordinary loss on extinguishment of debt in 2001. The 10 3/4% Senior Subordinated Notes were issued by the Company, and all of the Company's current subsidiaries (the "Guarantors") have jointly and severally, and fully and unconditionally, guaranteed the notes. Each of the Guarantors is a wholly owned subsidiary of the Company, and the Guarantors constitute all of the Company's direct and indirect subsidiaries. The Company 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 F-17 86 the assets, liabilities, earnings and equity on a consolidated basis of the Company. 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 the Company in the form of cash dividends, loans or advances. At December 31, 2000, 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, 2000 are as follows (amounts in thousands): 2001 $ 8,956 2002 11,801 2003 19,409 2004 26,842 2005 104,733 Thereafter 614,336 -------- $786,077
NOTE 6 - LEASES Capital leases The Company has various capital leases for slot machines, restaurant equipment, and computer and other equipment. These leases have interest rates ranging from 5.1% to 11.7% and require aggregate monthly payments of $183,500 at December 31, 2000. Future minimum lease payments required under capitalized leases for the five years subsequent to December 31, 2000 are as follows (amounts in thousands): 2001 $2,442 2002 1,459 2003 1,396 2004 786 2005 25 Thereafter 454 ------ 6,562 Less: Amount representing interest 1,206 ------ Present value of minimum lease payments $5,356 ======
Operating leases ACCBI, as lessor, has leased a portion of the Ameristar Council Bluffs site to an affiliate of an independent hospitality company, which operates a 188-room hotel on the F-18 87 property. ACCBI has leased another portion of the Ameristar Council Bluffs site to another affiliate of this independent hospitality company for the operation of a 96-room hotel on the property. Rental income recognized in the years-ended December 31, 1998, 1999 and 2000 was $60,000, $60,000 and $67,500, respectively. ACI leases office space in Las Vegas, Nevada to serve as its corporate offices. Monthly payments are approximately $63,000 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 Company recorded rental expense of approximately $533,000, $552,000 and $596,000 under these leases in the years ended December 31, 1998, 1999 and 2000, respectively. The Company entered into a three-year lease (with renewal options for an additional 24 years) for land on which Ameristar Vicksburg is situated. The lease initially requires quarterly payments of approximately $20,000. The lease contains a purchase option exercisable at various times during the term of the lease. NOTE 7 - BENEFIT PLANS 401(k) plan The Company maintains a defined contribution 401(k) plan 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 contributions were $485,000, $585,000, and $586,000 for the fiscal years ended December 31, 1998, 1999 and 2000 respectively. Insurance plan The Company has a qualified employee insurance plan covering all employees who work an average of 32 hours or more per week on a regular basis. The plan requires contributions from eligible employees and their dependents. The Company's contribution expense for the plan was approximately $5.0 million, $7.5 million and $9.8 million for the years ended December 31, 1998, 1999 and 2000, respectively. Stock Option Plans The Company has various stock incentive plans for directors, officers, employees, consultants and advisers of the Company. The plans permit grants of options to purchase common stock intended to qualify as incentive stock options or non-qualified stock options and also provides for grants of restricted stock. The maximum number of shares available for issuance under the plans is 4.6 million, subject to certain limitations. To date, the Company has not granted any awards of restricted stock. The Compensation Committee of the Board of Directors administers the plans and has broad discretion to establish the terms of stock option awards, including without limitation the power to set the term (up to 10 years), vesting schedule and exercise price of stock option awards. F-19 88 In December 1998, certain stock options granted under the plans 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. No other terms of these stock options were amended. In December 2000, in connection with the Company's acquisitions of two properties in Missouri (see Note 10), the Company granted 675,000 options to four members of the Missouri properties' senior management team. These options have an exercise price of $4.64 per share and the market price on the date of grant was $5.56 per share. Therefore, compensation expense of $623,000 will be recognized over the vesting period of the options based on the difference between the exercise price and fair market value. Options to purchase 270,000 shares vest equally over a four year period from January 1, 2002 through December 31, 2005. The remaining options vest on December 31, 2007, subject to acceleration through December 2005 if the Missouri properties meet certain performance targets (as established by the Board of Directors or, in its discretion, by a Committee of the Board of Directors). Summarized information for the Company's stock option plans is as follows:
Years Ended December 31, 1998 1999 2000 -------------------------- ----------------------- ----------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price ------------ ----------- ----------- --------- ----------- ---------- Outstanding at beginning of year 594,500 $ 6.12 1,140,110 $ 2.68 1,441,510 $ 2.99 Granted 833,610 2.69 579,170 3.52 1,969,542 4.67 Exercised - - (15,264) 2.64 (67,699) 2.69 Canceled (288,000) 6.22 (262,506) 2.86 (119,374) 2.25 --------- ------ --------- ------ --------- ------ Outstanding at end of year 1,140,110 $ 2.68 1,441,510 $ 2.99 3,223,979 $ 4.05 ========= ====== ========= ====== ========= ====== Options exercisable at end of year 184,300 $ 2.75 382,184 $ 2.78 608,632 $ 3.06 Options available for grant 467,890 - 1,158,490 - 1,293,058
Following is a summary of the status of options outstanding at December 31, 2000:
Outstanding Options Exercisable Options --------------------------------------------------------------------------------------------- Exercise Weighted Average Weighted Average Weighted Average Price Range Number Remaining Life Exercise Price Number Exercise Price - ----------------------------------------------------------------------------------------------------------------- $2.64 792,967 6.9 $ 2.64 461,688 $ 2.64 $2.75 - $4.59 788,671 8.9 3.73 103,944 3.48 $4.64 675,000 10.0 4.64 - - $4.72 - $6.75 965,341 9.6 5.04 4 1,000 6.10 $16.00 2,000 3.2 16.00 2,000 16.00 ------------ ---------- 3,223,979 608,632 ============ ==========
The Company accounts for its stock option plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under SFAS No. 123, "Accounting for Stock-Based Compensation", all employee stock option grants are considered compensatory. SFAS F-20 89 No. 123 is effective for fiscal years beginning after 1995 and provides, among other things, that companies may elect to account for employee stock options using APB 25. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income (loss) and earnings (loss) per share would have been adjusted to the pro forma amounts in the following table. The table also discloses the weighted average assumptions used in estimating the fair value of each option grant on the date of grant using the Black-Scholes option pricing model and the estimated weighted average fair value of the options granted. The model assumes no expected future dividend payments on the Company's common stock for the options granted in 1998, 1999 and 2000.
Years ended December 31, 1998 1999 2000 ------------ ------------- ------------ (Amounts in Thousands, Except Per Share Data) Net income (loss): As reported $ (12,715) $ 205 $ (40,307) Pro forma (13,002) (246) (40,989) Basic and diluted earnings (loss) per share: As reported $ (0.62) $ 0.01 $ (1.98) Pro forma (0.64) (0.01) (2.01) Weighted average assumptions: Expected stock price volatility 58% 58% 54% Risk-free interest rate 4.5% 5.8% 5.6% Expected option lives (years) 5 5 5 Estimated fair value of options granted $ 1.18 $ 1.94 $ 2.73
NOTE 8 - COMMITMENTS AND CONTINGENCIES Litigation E.L. Pennebaker, Jr., et. al. v. Ameristar Casinos, Inc., et. al. On February 23, 1998, E.L. Pennebaker, Jr. filed a complaint in the Circuit Court of Pike County, Mississippi against the Company and other parties (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 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 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, in violation of the antitrust laws and the gaming laws of Mississippi. 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 the Company and other defendants, on the conspiracy count and on the restraint of trade and tortiously interference counts. The net damages awarded to the plaintiffs total $3,792,000, of which the Company's pro rata F-21 90 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. The Company and the other defendants have appealed the case to the Mississippi Supreme Court, and the Company 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 the Company and the other defendants, to stop opposing the approval and construction of a casino on the Big Black River. The Company 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. Ameristar Casinos, Inc. et al. On November 22, 1999, Mr. Gibbes and Ms. Dozier filed a complaint in the Circuit Court of Pike County, Mississippi against the Company and other defendants. The matter is pending as case no. 99-0157-B. The Company 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 plaintiffs filed a motion to remand the case back to the Pike County circuit court, which was granted. The other defendants have filed a motion seeking the federal court to vacate its prior ruling, which motion is still pending. The Company intends to continue to vigorously defend against this cause of action. Other. The Company is engaged in several other 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 or otherwise believes that the ultimate outcome(s) will not have a material adverse impact on the Company's financial position. NOTE 9 - RELATED PARTY TRANSACTIONS The Company engages Neilsen and Company, a company that is owned and controlled by Craig H. Neilsen, the Company's president, chief executive officer and chairman, to provide certain construction and professional services, office space and other equipment and facilities. Total payments to Neilsen and Company were $33,000, $44,000 and $45,000 for the years ended December 31, 1998, 1999 and 2000, respectively. The Company also leased office space from the Lynwood Shopping Center, which until September 1999 was also controlled by Mr. Neilsen. Total payments to the Lynwood Shopping Center were $69,000, $17,000 and $0 for the years ended December 31, 1998, 1999 and 2000, respectively. F-22 91 Mr. Neilsen is the president, director and sole stockholder of Intermountain Express, Inc. ("Intermountain"), a transportation concern that provides CPI with package delivery services between Jackpot, Nevada and Twin Falls, Idaho. In 1998, 1999 and 2000, CPI paid $54,000, $35,000 and $26,000 respectively, for these services. CPI provided contracted driver services and miscellaneous other supplies to Intermountain Express, Inc. and in 1998, 1999 and 2000, CPI was paid $23,000, $21,000 and $23,000, respectively, for these services and supplies. 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 - ACQUISITION OF MISSOURI PROPERTIES On December 20, 2000, the Company, through two newly formed wholly owned subsidiaries, completed its acquisitions of substantially all of the assets of two gaming properties in St. Charles and Kansas City, Missouri from subsidiaries of Station Casinos, Inc. (the "Acquisitions"). The total purchase price for the Acquisitions, net of cash acquired, was $486.8 million. The Acquisitions were financed with a portion of the proceeds from the Company's new senior credit facilities and its senior subordinated credit facility, as described in Note 5. The purchase price has been allocated to the fair market value of the assets purchased and liabilities assumed, including identified intangible assets consisting primarily of customer lists valued at $6 million. The final purchase price is subject to change based on the results of a working capital adjustment. The purchase price allocation is preliminary and may be adjusted up to one year from the date of the Acquisitions. The excess of the purchase price over fair market value of net assets acquired is being amortized over 40 years. The preliminary purchase price was allocated as follows (In thousands): Purchase price, net of cash acquired $ 486,800 --------- Fair value of net assets acquired: Land $ 23,060 Other property and equipment 392,236 Identified intangible assets 6,000 Working capital, net of cash acquired (2,892) Deferred tax liability (18,039) --------- 400,365 Excess of purchase price over fair market value of net assets acquired $ 86,435 =========
F-23 92 The following unaudited pro forma data summarizes the Company's results of operations for the periods indicated as if the Acquisitions had occurred at the beginning of the periods presented:
December 31, 1999 2000 --------- -------- (Amounts in Thousands, Except Per Share Amounts) Revenues $ 614,934 $ 659,346 Loss before extraordinary item (1) (144,923) (37,807) Net loss (1) (144,923) (44,430) Basic and diluted loss per share before extraordinary item (1) (7.12) (1.85) Basic and diluted loss per share (1) (7.12) (2.18)
--------------------- (1) Includes an impairment loss on write-down of assets at the St. Charles property of $125.7 million in 1999 and an impairment loss of $57.2 million on The Reserve in 2000. NOTE 11 - SALE OF THE RESERVE On October 17, 2000, the Company, through ACLVI, agreed to sell substantially all of the assets of The Reserve to a wholly owned subsidiary of Station Casinos, Inc. On January 29, 2001, the Company completed its planned sale of The Reserve for a total consideration of approximately $71.8 million. The proceeds from the sale of The Reserve were used (1) to partially repay and permanently reduce the revolving loan commitment and the term loan A under our senior credit facilities by a total of $50 million, (2) to repay revolving loans under our senior credit facilities (which remain available for future borrowing), and (3) to repay certain indebtedness associated with the assets sold in the transaction. The sale of The Reserve resulted in a loss of approximately $57.2 million. This impairment loss was recorded in the third quarter of 2000 as required by SFAS No. 121. The assets and liabilities to be sold have been reclassified as current assets and liabilities in the accompanying consolidated balance sheets. The following table shows certain financial information of The Reserve for the periods indicated:
December 31, 1999 2000 -------- --------- (Amounts in Thousands) Net revenues $ 52,832 $ 62,044 Loss from operations (1) (7,089) (57,321)
--------------- (1) Includes an impairment loss of $57.2 million for the year ended December 31, 2000. F-24 EX-4.2(A) 2 v70464ex4-2a.txt EXHIBIT 4.2(A) 1 EXHIBIT 4.2(a) =============================================================================== CREDIT AGREEMENT among AMERISTAR CASINOS, INC., VARIOUS LENDERS, WELLS FARGO BANK, N.A., as CO-ARRANGER and SYNDICATION AGENT, BEAR STEARNS CORPORATE LENDING INC., as DOCUMENTATION AGENT, DEUTSCHE BANK SECURITIES INC., as LEAD ARRANGER and SOLE BOOK MANAGER and BANKERS TRUST COMPANY, as ADMINISTRATIVE AGENT ---------------------------- Dated as of December 20, 2000 ----------------------------- ================================================================================ 2 TABLE OF CONTENTS
Page SECTION 1. Amount and Terms of Credit............................................................................1 1.01 The Commitments....................................................................................1 1.02 Minimum Amount of Each Borrowing...................................................................5 1.03 Notice of Borrowing................................................................................5 1.04 Disbursement of Funds..............................................................................6 1.05 Notes..............................................................................................6 1.06 Conversions........................................................................................9 1.07 Pro Rata Borrowings................................................................................9 1.08 Interest...........................................................................................9 1.09 Interest Periods..................................................................................10 1.10 Increased Costs, Illegality, etc..................................................................11 1.11 Compensation......................................................................................13 1.12 Change of Lending Office..........................................................................14 1.13 Replacement of Lenders............................................................................14 1.14 Incremental Loan Commitments......................................................................15 SECTION 2. Letters of Credit....................................................................................18 2.01 Letters of Credit.................................................................................18 2.02 Letter of Credit Requests.........................................................................19 2.03 Letter of Credit Participations...................................................................19 2.04 Agreement to Repay Letter of Credit Drawings......................................................21 2.05 Increased Costs...................................................................................22 SECTION 3. Commitment Commission; Fees; Reductions of Commitment................................................23 3.01 Fees..............................................................................................23 3.02 Voluntary Termination and Reduction of Commitments................................................24 3.03 Mandatory Reduction of Commitments................................................................24 SECTION 4. Prepayments; Payments; Taxes.........................................................................26 4.01 Voluntary Prepayments.............................................................................26 4.02 Mandatory Repayments and Commitment Reductions....................................................27 4.03 Method and Place of Payment.......................................................................39 4.04 Net Payments......................................................................................39 SECTION 5. Conditions Precedent to Credit Events on the Initial Borrowing Date..................................42 5.01 Execution of Agreement; Notes.....................................................................42 5.02 Fees, etc.........................................................................................42 5.03 Opinions of Counsel...............................................................................42 5.04 Corporate Documents; Proceedings; etc.............................................................42
(i) 3 5.05 Shareholders' Agreements; Management Agreements; Tax Sharing Agreements; Employee Benefit Plans; Employment Agreements; Collective Bargaining Agreements; Debt Agreements; Material Contracts; Non-Compete Agreements; Affiliate Contracts................................43 5.06 Consummation of the Transaction...................................................................43 5.07 Pledge Agreement..................................................................................45 5.08 Security Agreement................................................................................46 5.09 Mortgages; Title Insurance; etc...................................................................46 5.10 Adverse Change, etc...............................................................................47 5.11 Solvency Certificate; Insurance...................................................................47 5.12 Financial Statements; Projections; Management Letters.............................................48 5.13 Engineering Reports; Environmental Analyses; Appraisals...........................................48 5.14 Litigation........................................................................................49 5.15 Subsidiary Guaranty...............................................................................49 5.16 Approvals, etc....................................................................................49 5.17 Ship Mortgages....................................................................................50 SECTION 6. Conditions Precedent to All Credit Events............................................................50 6.01 No Default; Representations and Warranties........................................................50 6.02 Notice of Borrowing; Letter of Credit Request.....................................................50 6.03 Facilities Expansion Certificate..................................................................50 SECTION 7. Representations and Warranties.......................................................................51 7.01 Corporate Status..................................................................................51 7.02 Corporate Power and Authority.....................................................................51 7.03 No Violation......................................................................................52 7.04 Governmental Approvals............................................................................52 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc..............52 7.06 Litigation........................................................................................53 7.07 True and Complete Disclosure......................................................................53 7.08 Use of Proceeds; Margin Regulations...............................................................54 7.09 Tax Returns and Payments..........................................................................54 7.10 Compliance with ERISA.............................................................................55 7.11 The Security Documents............................................................................56 7.12 Representations and Warranties in Documents.......................................................57 7.13 Properties........................................................................................57 7.14 Capitalization....................................................................................57 7.15 Subsidiaries......................................................................................57 7.16 Compliance with Statutes, etc.....................................................................57 7.17 Investment Company Act............................................................................57 7.18 Public Utility Holding Company Act................................................................57 7.19 Labor Relations...................................................................................57 7.20 Patents, Licenses, Franchises and Formulas........................................................58 7.21 Transaction.......................................................................................58 7.22 Indebtedness......................................................................................58
(ii) 4 7.23 Intellectual Property.............................................................................59 7.24 Environmental Matters.............................................................................59 7.25 Senior Debt........................................................................................60 SECTION 8. Affirmative Covenants................................................................................60 8.01 Information Covenants.............................................................................60 8.02 Books, Records and Inspections....................................................................63 8.03 Maintenance of Property; Insurance................................................................63 8.04 Corporate Franchises..............................................................................64 8.05 Compliance with Statutes, etc.....................................................................65 8.06 ERISA.............................................................................................65 8.07 End of Fiscal Years; Fiscal Quarters..............................................................66 8.08 Performance of Obligations........................................................................66 8.09 Payment of Taxes..................................................................................66 8.10 Intellectual Property Rights......................................................................66 8.11 Additional Security; Further Assurances...........................................................67 8.12 Permitted Acquisitions............................................................................68 8.13 Compliance with Environmental Laws................................................................70 8.14 Minimum Maintenance Capital Expenditures..........................................................71 SECTION 9. Negative Covenants...................................................................................72 9.01 Liens.............................................................................................72 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc............................................74 9.03 Dividends.........................................................................................76 9.04 Indebtedness......................................................................................76 9.05 Advances, Investments and Loans...................................................................78 9.06 Transactions with Affiliates......................................................................79 9.07 Maximum Capital Expenditures......................................................................80 9.08 Leverage Ratio....................................................................................81 9.09 Senior Leverage Ratio.............................................................................83 9.10 Consolidated Gross Fixed Charge Coverage Ratio....................................................84 9.11 Consolidated Adjusted Fixed Charge Coverage Ratio.................................................86 9.12 Minimum Consolidated Tangible Net Worth...........................................................87 9.13 Limitation on Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; Limitations of Prepayments and Modifications of Indebtedness; etc..................87 9.14 Limitation on Certain Restrictions on Subsidiaries................................................88 9.15 Limitation on Issuance of Capital Stock...........................................................89 9.16 Business..........................................................................................89 9.17 Limitations on Creation/Sale of Subsidiaries and Creation of Joint Ventures.......................89 9.18 No Other Designated Senior Indebtedness...........................................................90 SECTION 10. Events of Default...................................................................................90 10.01 Payments.........................................................................................90 10.02 Representations, etc.............................................................................90 10.03 Covenants........................................................................................90
(iii) 5 10.04 Default Under Other Agreements...................................................................90 10.05 Bankruptcy, etc..................................................................................91 10.06 ERISA............................................................................................91 10.07 Security Documents...............................................................................92 10.08 Guaranty.........................................................................................92 10.09 Judgments........................................................................................92 10.10 Gaming Authority.................................................................................92 10.11 Change of Control................................................................................93 SECTION 11. Definitions and Accounting Terms....................................................................93 11.01 Defined Terms....................................................................................93 SECTION 12. The Administrative Agent...........................................................................129 12.01 Appointment.....................................................................................129 12.02 Nature of Duties................................................................................129 12.03 Lack of Reliance on the Administrative Agent....................................................130 12.04 Certain Rights of the Administrative Agent......................................................130 12.05 Reliance........................................................................................130 12.06 Indemnification.................................................................................131 12.07 The Administrative Agent in Its Individual Capacity.............................................131 12.08 Holders.........................................................................................131 12.09 Resignation by the Administrative Agent.........................................................131 12.10 Amendments to Security Documents................................................................132 12.11 Other Agents....................................................................................132 SECTION 13. Miscellaneous......................................................................................132 13.01 Payment of Expenses, etc........................................................................132 13.02 Right of Setoff; Collateral Matters.............................................................133 13.03 Notices.........................................................................................133 13.04 Benefit of Agreement............................................................................134 13.05 No Waiver; Remedies Cumulative..................................................................137 13.06 Payments Pro Rata...............................................................................138 13.07 Calculations; Computations......................................................................138 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL..........................139 13.09 Counterparts....................................................................................140 13.10 Effectiveness...................................................................................140 13.11 Headings Descriptive............................................................................140 13.12 Amendment or Waiver; etc........................................................................140 13.13 Survival........................................................................................141 13.14 Domicile of Loans...............................................................................141 13.15 Confidentiality.................................................................................141 13.16 Registry........................................................................................142
(iv) 6 SCHEDULE I Commitments SCHEDULE II Bank Addresses SCHEDULE III Real Property SCHEDULE IV Insurance SCHEDULE V Existing Liens SCHEDULE VI Existing Indebtedness SCHEDULE VII Retained Indebtedness SCHEDULE VIII Tax Matters SCHEDULE IX Subsidiaries SCHEDULE X Intellectual Property SCHEDULE XI Ship Properties SCHEDULE XII Environmental Matters EXHIBIT A Form of Notice of Borrowing EXHIBIT B-1 Form of A Term Note EXHIBIT B-2 Form of B Term Note EXHIBIT B-3 Form of C Term Note EXHIBIT B-4 Form of RTL Note EXHIBIT B-5 Form of Revolving Note EXHIBIT B-6 Form of Swingline Note EXHIBIT C Form of Letter of Credit Request EXHIBIT D Form of Section 4.04(b)(ii) Certificate EXHIBIT E Opinion of Gibson, Dunn & Crutcher LLP, Special Counsel to the Credit Parties EXHIBIT F Form of Officers' Certificate EXHIBIT G Form of Pledge Agreement EXHIBIT H Form of Security Agreement EXHIBIT I Form of Mortgage EXHIBIT J Form of Subsidiary Guaranty EXHIBIT K Form of Assignment and Assumption Agreement EXHIBIT L Form of Solvency Certificate EXHIBIT M Form of Ship Mortgage EXHIBIT N Form of Intercompany Note EXHIBIT O Form of Incremental Commitment Agreement
(v) 7 CREDIT AGREEMENT, dated as of December 20, 2000, among AMERISTAR CASINOS, INC., a Nevada corporation (the "Borrower"), the Lenders party hereto from time to time, WELLS FARGO BANK, N.A., as Co-Arranger and Syndication Agent, BEAR STEARNS CORPORATE LENDING INC., as Documentation Agent, DEUTSCHE BANK SECURITIES INC., as Lead Arranger and sole Book Manager and BANKERS TRUST COMPANY, as Administrative Agent (all capitalized terms used herein and defined in Section 11 are used herein as therein defined). W I T N E S S E T H : - - - - - - - - - - WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrower the respective credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. 1.01 The Commitments. (a) Subject to and upon the terms and conditions set forth herein, each Lender with an A Term Loan Commitment severally agrees to make, on the Initial Borrowing Date, a term loan to the Borrower, which A Term Loans (i) shall be made and initially maintained as Base Rate Loans (subject to the option to convert such A Term Loans pursuant to Section 1.06) and (ii) shall be made by each Lender in that aggregate principal amount as is equal to the A Term Loan Commitment of such Lender on such date. Once repaid, A Term Loans borrowed hereunder may not be reborrowed. (b) Subject to and upon the terms and conditions set forth herein, each Lender with a B Term Loan Commitment severally agrees to make, on the Initial Borrowing Date, a term loan to the Borrower, which B Term Loans (i) shall be made and initially maintained as Base Rate Loans (subject to the option to convert such B Term Loans pursuant to Section 1.06) and (ii) shall be made by each Lender in that aggregate principal amount as is equal to the B Term Loan Commitment of such Lender on such date. Once repaid, B Term Loans incurred hereunder may not be reborrowed. (c) Subject to and upon the terms and conditions set forth herein, each Lender with a C Term Loan Commitment severally agrees to make, on the Initial Borrowing Date, a term loan to the Borrower, which C Term Loans (i) shall be made and initially maintained as Base Rate Loans (subject to the option to convert such C Term Loans pursuant to Section 1.06) and (ii) shall be made by each Lender in that aggregate principal amount as is equal to the C Term Loan Commitment of such Lender on such date. Once repaid, C Term Loans incurred hereunder may not be reborrowed. (d) Subject to and upon the terms and conditions set forth herein, each Lender with an RTL Commitment severally agrees, at any time and from time to time after the Initial Borrowing Date and prior to the RTL Conversion Date, to make a revolving loan or revolving loans (each, an "RTL Loan" and collectively, the "RTL Loans") to the Borrower, which RTL Loans (i) shall, at the option of the Borrower, be Base Rate Loans or, if incurred on or after the 8 Eurodollar Loan Availability Date, Eurodollar Loans, provided that, except as otherwise specifically provided in Section 1.10(b), and subject to the option to convert such Loans pursuant to Section 1.06, all RTL Loans comprising the same Borrowing shall at all times be of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, provided that, on and after the RTL Conversion Date, once repaid, RTL Loans incurred hereunder may not be reborrowed, (iii) shall not exceed for any Lender at any time outstanding the RTL Commitment of such Lender and (iv) shall not exceed for all Lenders at any time outstanding the Total RTL Commitment. (e) Subject to and upon the terms and conditions set forth herein, each Lender with a Revolving Loan Commitment severally agrees, at any time and from time to time after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, to make a revolving loan or revolving loans (each, a "Revolving Loan" and collectively, the "Revolving Loans") to the Borrower, which Revolving Loans (i) shall, at the option of the Borrower, be Base Rate Loans or, if incurred on or after the Eurodollar Loan Availability Date, Eurodollar Loans, provided, that except as otherwise specifically provided in Section 1.10(b), and subject to the option to convert such Loans pursuant to Section 1.06, all Revolving Loans comprising the same Borrowing shall at all times be of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any Lender at any time outstanding that aggregate principal amount which when added to the product of (x) such Lender's Revolving Loan Percentage and (y) the sum of (I) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, Revolving Loans) then outstanding, equals the Revolving Loan Commitment of such Lender at such time and (iv) shall not exceed for all Lenders at any time outstanding the sum of (I) the aggregate principal amount which, when added to the amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, Revolving Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Total Revolving Loan Commitment at such time. Notwithstanding the foregoing, the Borrower may not reborrow Revolving Loans, Swingline Loans or request that Letters of Credit be issued under the Total Revolving Loan Commitment if after giving effect thereto the Revolving Outstandings would exceed an amount equal to the Total Revolving Loan Commitment (before giving effect to the reduction thereto arising by reason of the Disposition) less the amount by which the Revolving Loans are repaid with the proceeds of the Disposition, unless after giving effect thereto, the Leverage Ratio would be no greater than 5:00 to 1:00 and the Senior Leverage Ratio would be no greater than 3:00 to 1:00. (f) Subject to and upon the terms and conditions set forth herein, the Swingline Lender agrees to make at any time and from time to time after the Initial Borrowing Date and prior to the Swingline Expiry Date, a loan or loans (each a "Swingline Loan", and collectively, the "Swingline Loans") to the Borrower, which Swingline Loans: (i) shall be made and maintained as Base Rate Loans; -2- 9 (ii) may be repaid and reborrowed in accordance with the provisions hereof; (iii) unless otherwise agreed by the Swingline Lender, shall be repaid no later than the date which is five Business Days following the date of incurrence thereof, provided that if any Defaulting Lender fails to fund a Revolving Loan requested to refinance such Swingline Loan, the portion of the Swingline Loan expected to be refinanced by such Defaulting Lender shall be repaid on or before the tenth Business Day following the date of the incurrence thereof; (iv) shall not exceed in aggregate principal amount at any time outstanding, when combined with (x) the aggregate principal amount of all Revolving Loans then outstanding and (y) the amount of all Letter of Credit Outstandings at such time, an amount equal to the Total Revolving Loan Commitment at such time (after giving effect to any reductions to the Total Revolving Loan Commitment on such date); and (v) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. The Swingline Lender shall not be obligated to make any Swingline Loans at a time when a Lender Default exists unless the Swingline Lender has entered into arrangements satisfactory to it to eliminate the Swingline Lender's risk with respect to the Lender which is subject of such Lender Default, including by cash collateralizing such Lender's Percentage of the outstanding Swingline Loans. Notwithstanding anything to the contrary contained in this Section 1.01(f), the Swingline Lender shall not make any Swingline Loan after receiving a written notice from the Borrower or the Required Lenders stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Lender shall have received written notice of (i) rescission of such notice from the party or parties originally delivering such notice, (ii) the waiver of such Default or Event of Default or (iii) the Administrative Agent in good faith believes that such Default or Event of Default has ceased to exist. (g) On any Business Day, the Swingline Lender may, in its sole discretion, give notice to the Lenders with Revolving Loan Commitments that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day from all Lenders with a Revolving Loan Commitment (without giving effect to any termination and/or reductions thereto pursuant to the last paragraph of Section 10) pro rata on the basis of their respective Revolving Loan Percentages (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the proceeds thereof shall be applied directly to the Swingline Lender to repay the Swingline Lender for such outstanding Swingline Loans. Each such Lender hereby irrevocably agrees to make Revolving Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Lender (i) notwithstanding that the amount of the Mandatory Borrowing may not comply with the minimum amount for Borrowings otherwise -3- 10 required hereunder, (ii) whether any conditions specified in Section 5 or 6 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) notwithstanding the date of such Mandatory Borrowing and (v) notwithstanding the amount of the Total Revolving Loan Commitment at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each such Lender with a Revolving Loan Commitment hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause such Lenders to share in such Swingline Loans ratably based upon their respective Revolving Loan Percentages (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10); provided, that (x) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation shall be payable to the participant from and after such date and (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay the Swingline Lender interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder for each day thereafter. (h) Subject to Section 1.14 and the other terms and conditions set forth herein, each Lender with an Incremental Term Loan Commitment severally agrees to make a term loan or term loans (each, an "Incremental Term Loan" and, collectively, the "Incremental Term Loans") to the Borrower, which Incremental Term Loans: (i) only may be incurred pursuant to a single drawing on the respective Incremental Term Loan Borrowing Date (which date, in any event, shall be the date set forth in the applicable Incremental Commitment Agreement pursuant to which such Incremental Term Loans are to be made and shall not be later than the Incremental Commitment Termination Date); (ii) shall be Term Loans under the Tranche specified in the applicable Incremental Commitment Agreement; (iii) except as hereafter provided, shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or, if incurred after the Eurodollar Loan Availability Date, Eurodollar Loans, provided that (x) all Incremental Term Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Incremental Term Loans of the same Type; and (iv) shall be made by each such Lender in that aggregate principal amount which does not exceed the Incremental Term Loan Commitment of such Lender under the relevant Tranche on any such Incremental Term Loan Borrowing Date (before giving effect to the termination thereof on such date pursuant to Section 3.03(e)). Once repaid, Incremental Term Loans incurred hereunder may not be reborrowed. 1.02 Minimum Amount of Each Borrowing. The aggregate principal amount of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount applicable thereto; provided that Mandatory Borrowings shall be in the amounts required by Section 1.01(g). More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than (x) six Borrowings of Eurodollar Loans under any one Tranche in the case -4- 11 of Revolving Loans and, prior to the RTL Conversion Date, RTL Loans and (y) three Borrowings of Eurodollar Loans under any one Tranche in the case of Term Loans and, after the RTL Conversion Date, RTL Loans. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Administrative Agent at its Notice Office at least one Business Day's prior written (or telephonic promptly confirmed in writing) notice of each Base Rate Loan and at least three Business Days' prior written (or telephonic promptly confirmed in writing) notice of each Eurodollar Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 12:00 Noon (New York time) on such day. Each such written notice or written confirmation of telephonic notice (each a "Notice of Borrowing") shall be given by the Borrower in the form of Exhibit A, appropriately completed to specify the aggregate principal amount of the Loans to be made pursuant to such Borrowing, the date of such Borrowing (which shall be a Business Day), the Tranche of the Loans being made pursuant to such Borrowing and whether the Loans being made pursuant to such Borrowing are to be initially maintained as Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto. The Administrative Agent shall promptly give each Lender which is required to make Loans of the Tranche specified in the respective Notice of Borrowing, notice of such proposed Borrowing, of such Lender's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. (b) (i) Whenever the Borrower desires to make a Borrowing of Swingline Loans hereunder, it shall give the Swingline Lender, not later than 1:00 p.m. (New York time) on the date that a Swingline Loan is to be made, written notice (or telephonic notice confirmed in writing) of each Swingline Loan to be made hereunder. Each such notice shall specify in each case (a) the date of Borrowing (which shall be a Business Day) and (b) the aggregate principal amount of Swingline Loans to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(g), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as set forth in Section 1.01(g). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing of Loans, the Administrative Agent or the Swingline Lender, as the case may be, may act without liability upon the basis of telephonic notice of such Borrowing, believed by the Administrative Agent or the Swingline Lender, as the case may be, in good faith to be from an Authorized Officer of the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's and the Swingline Lender's record of the terms of such telephonic notice of such Borrowing of Loans. 1.04 Disbursement of Funds. Except as otherwise specifically provided in the second succeeding sentence, no later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, no later than the close of business on the date specified pursuant to Section 1.03(b)(i) or (y) in case of Mandatory -5- 12 Borrowings, not later than 12:00 Noon (New York time) on the date specified in Section 1.01(g)), each Lender with a Commitment of the respective Tranche will make available its pro rata portion of each such Borrowing requested to be made on such date (or in the case of Swingline Loans, the Swingline Lender shall make available the full amount thereof). All such amounts shall be made available in Dollars and in immediately available funds at the Payment Office of the Administrative Agent, and the Administrative Agent will make available to the Borrower at the Payment Office the aggregate of the amounts so made available by the Lenders (prior to 1:00 P.M. on such day, to the extent of funds actually received by the Administrative Agent prior to 12:00 Noon on such day). Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender's portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, (x) at the overnight Federal Funds Rate for the first three days following the date the relevant amount was made available by the Administrative Agent and (y) the Base Rate for each day thereafter, and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be deemed to relieve any Lender from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any failure by such Lender to make Loans hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made by each Lender shall, if requested by such Lender, be evidenced (i) if A Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, an "A Term Note" and collectively, the "A Term Notes"), (ii) if B Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a "B Term Note" and collectively, the "B Term Notes"), (iii) if C Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-3 with blanks appropriately completed in conformity herewith (each a "C Term Note" and collectively, the "C Term Notes" and, together with the A Term Notes and the B Term Notes, the "Term Notes"), (iv) if RTL Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-4, with blanks appropriately completed in conformity herewith (each, an "RTL Note" and collectively, the "RTL Notes"), (v) if Revolving Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-5, with blanks appropriately -6- 13 completed in conformity herewith (each, a "Revolving Note" and collectively, the "Revolving Notes") and (vi) if Swingline Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-6, with blanks appropriately completed in conformity herewith (each, a "Swingline Note" and collectively, the "Swingline Notes"). (b) The A Term Note issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, in the case of A Term Notes issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the respective A Term Loan made by such Lender on the Initial Borrowing Date (or, in the case of any A Term Note issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding principal amount of the A Term Loans of such Lender on the date of the issuance thereof) and be payable in the principal amount of A Term Loans evidenced thereby, (iv) mature on the A Term Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The B Term Note issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, in the case of B Term Notes issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the respective B Term Loan made by such Lender on the Initial Borrowing Date (or, in the case of any B Term Note issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding principal amount of the B Term Loans of such Lender on the date of the issuance thereof) and be payable in the principal amount of B Term Loans evidenced thereby, (iv) mature on the B Term Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The C Term Note issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, in the case of C Term Notes issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the respective C Term Loan made by such Lender on the Initial Borrowing Date (or, in the case of any C Term Note issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding principal amount of the C Term Loans of such Lender on the date of the issuance thereof) and be payable in the principal amount of C Term Loans evidenced thereby, (iv) mature on the C Term Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) The RTL Note issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, in the case of RTL Notes issued after the Initial Borrowing Date, be dated the date of issuance thereof), -7- 14 (iii) be in a stated principal amount equal to the RTL Commitment of such Lender and be payable in the principal amount of the RTL Loans evidenced thereby, (iv) mature on the RTL Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (f) The Revolving Note issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, in the case of Revolving Notes issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Lender and be payable in the principal amount of the Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (g) The Swingline Note issued to the Swingline Lender shall (i) be executed by the Borrower, (ii) be payable to the order of the Swingline Lender and be dated the Initial Borrowing Date (or, in the case of any Swingline Note issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of the outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (h) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes (if applicable) endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in any such notation or endorsement shall not affect the Borrower's obligations in respect of such Loans. (i) Notwithstanding anything to the contrary contained above or elsewhere in this Agreement, Notes shall only be delivered to Lenders which at any time specifically request the delivery of such Notes. No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the various Credit Documents. Any Lender which does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (h). At any time when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to the respective Lender the requested Note or Notes in the appropriate amount or amounts to evidence such Loans. -8- 15 1.06 Conversions. The Borrower shall have the option to convert on any Business Day occurring on or after the Eurodollar Loan Availability Date, all or a portion equal to at least the Minimum Borrowing Amount for the relevant Tranche of the outstanding principal amount of Loans made pursuant to one or more Borrowings (so long as of the same Tranche) of one or more Types of Loans into a Borrowing (of the same Tranche) of another Type of Loan (other than Swingline Loans which may not be converted pursuant to this Section 1.06), provided that (i) prior to the Syndication Termination Date, no Base Rate Loan may be converted into a Eurodollar Loan except as otherwise permitted under Section 1.09(viii), (ii) Eurodollar Loans converted into Base Rate Loans on any day other than the last day of an Interest Period applicable to the Loans being converted shall be accompanied by costs set forth in Section 1.11 and no partial conversion of Eurodollar Loans shall reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single Borrowing to less than the Minimum Borrowing Amount applicable thereto, (iii) Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion and (iv) no conversion pursuant to this Section 1.06 shall result in a greater number of Eurodollar Loans than is permitted under Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at its Notice Office prior to 12:00 Noon (New York time) at least three Business Days' (in the case of a conversion of Base Rate Loans into Eurodollar Loans) and at least one Business Day (in the case of a conversion of Eurodollar Loans into Base Rate Loans) prior notice (each a "Notice of Conversion") specifying the Loans to be so converted, the Borrowing or Borrowings pursuant to which such Loans were made and, if to be converted into Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Pro Rata Borrowings. All Borrowings of Loans of a Tranche under this Agreement shall be incurred from the Lenders pro rata on the basis of their Commitments under such Tranche. It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder. 1.08 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration, optional or mandatory or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of the Applicable Margin plus the Base Rate in effect from time to time. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration, optional or mandatory or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period. -9- 16 (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum equal to the greater of (x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans of the respective Tranche of Loans from time to time and (y) the rate which is 2% in excess of the rate then borne by such Loans, in each case with such interest to be payable on demand. (d) Accrued (and theretofore unpaid) interest shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Term Loan, on any repayment or prepayment (on the amount repaid or prepaid), and in respect of any Loan at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to Eurodollar Loans and shall promptly notify the Borrower and the Lenders thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. 1.09 Interest Periods. At the time it gives any Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, any Eurodollar Loan (in the case of the initial Interest Period applicable thereto) or on the third Business Day prior to the expiration of an Interest Period applicable to such Eurodollar Loan (in the case of any subsequent Interest Period), the Borrower shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each an "Interest Period") applicable to such Eurodollar Loan, which Interest Period shall, at the option of the Borrower, be a one, two, three or six-month or, in the case of an Interest Period commencing prior to the Syndication Termination Date, a two-week period, provided that: (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Eurodollar Loan shall commence on the date of Borrowing of such Eurodollar Loan (including the date of any conversion thereto from a Loan of a different Type) and each Interest Period occurring thereafter in respect of such Eurodollar Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii) if any Interest Period relating to a Eurodollar Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for a Eurodollar Loan would otherwise -10- 17 expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) unless the Required Lenders otherwise agree, no Interest Period may be selected at any time when a Default or Event of Default is then in existence; (vi) no Interest Period in respect of any Borrowing of Loans of a Tranche shall be selected which extends beyond the Maturity Date for such Tranche; (vii) no Interest Period in respect of any Borrowing under a Tranche shall be selected which extends beyond any date upon which a mandatory repayment of Loans under such Tranche will be required to be made under Section 4.02(A)(b), (c), (d) or (e) if, after giving effect to the selection of such Interest Period, the aggregate principal amount of Loans of such Tranche, which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Loans under such Tranche then outstanding less the aggregate amount of such required repayment; and (viii) no Interest Period other than a two-week Interest Period may be selected prior to the Syndication Termination Date, and such an Interest Period may only be selected so long as (I) all outstanding Loans that are maintained as Eurodollar Loans are subject to the same two-week Interest Period which begins and ends on the same day and (II) the Administrative Agent has not notified the Borrower that the selection of such an Interest Period would interfere with the closing of the primary syndication of the Agreement. If upon the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect, a new Interest Period to be applicable to such Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loan because of (x) any change since the date of this Agreement in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for -11- 18 example, but not limited to: (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on such Eurodollar Loan or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Lender, or any corporation controlling such Lender, or any franchise tax based on the net income or profits of such Lender, or any corporation controlling such Lender, in either case pursuant to the laws of the United States of America or the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), but without duplication of any amounts payable in respect of Taxes pursuant to Section 4.04(a), or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances since the date of this Agreement affecting the interbank Eurodollar market or the position of lenders generally in such market; or (iii) at any time, that the making or continuance of any Eurodollar Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing the basis for the calculation thereof, submitted to the Borrower by such Lender in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. Each of the Administrative Agent and each Lender agrees that if it gives notice to the Borrower of any of the events described in clause (i) or (iii) above, it shall promptly notify the Borrower and, in the case of any such Lender, the Administrative Agent, if such event ceases to exist. If any such event described in clause (iii) above ceases to exist as to a Lender, the obligations of such Lender to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein shall be reinstated. -12- 19 (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected by the circumstances described in Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then being made initially or pursuant to a conversion, cancel the respective Borrowing by giving the Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower was notified by the affected Lender or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' written notice to the Administrative Agent, require the affected Lender to convert such Eurodollar Loan into a Base Rate Loan, provided that, if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 1.10(b). (c) If at any time after the date of this Agreement any Lender determines that the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender based on the existence of such Lender's Commitments hereunder or its obligations hereunder, then the Borrower shall pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Lender's reasonable good faith determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall show the basis for calculation of such additional amounts. 1.11 Compensation. The Borrower shall compensate each Lender, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding any loss of anticipated profit) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a) or (b)); (ii) if any repayment (including any repayment made pursuant to Section 4.02(A) or as a result of an acceleration of the Loans pursuant to Section 10) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Loans when required by the terms of this Agreement or any Note held by such Lender or (y) any election made pursuant to Section 1.10(b). -13- 20 1.12 Change of Lending Office. Each Lender agrees that upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Sections 1.10, 2.05 and 4.04. 1.13 Replacement of Lenders. (x) If any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, (y) if any Lender is incurring or is reasonably expected to incur costs which are or would be material in amount and are associated with a Gaming Authority's investigation of whether or not such Lender is a Qualified Person, or (z) upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs in excess of those being generally charged by the other Lenders, the Borrower shall have the right, if no Default or Event of Default will exist prior to or immediately after giving effect to the respective replacement, to either replace such Lender (the "Replaced Lender") with one or more other Qualified Person or Persons, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the "Replacement Lender") reasonably acceptable to the Administrative Agent, provided that (i) at the time of any replacement pursuant to this Section 1.13, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (B) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to such Replaced Lender pursuant to Section 3.01 and (y) any Issuing Lender an amount equal to such Replaced Lender's Revolving Loan Percentage of any Unpaid Drawing (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender and (z) the Swingline Lender an amount equal to such Replaced Lender's Revolving Loan Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such replaced Lender; and (ii) all Obligations of the Borrower owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the Borrower, (x) the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under -14- 21 this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such Replaced Lender. 1.14 Incremental Loan Commitments. (a) So long as no Default or Event of Default then exists or would result therefrom, the Borrower shall, in consultation with the Administrative Agent, have the right to request on one or more occasions on and after the Initial Borrowing Date and prior to the Incremental Commitment Termination Date that one or more Lenders (and/or one or more other Persons which will become Lenders as provided below) provide Incremental Commitments under any Tranche (other than the RTL Loan Tranche) and, subject to the terms and conditions contained in this Agreement, make Incremental Term Loans pursuant thereto or increase its Revolving Loan Commitment, as the case may be, it being understood and agreed, however, that (i) no Lender shall be obligated to provide an Incremental Commitment as a result of any such request by the Borrower, and until such time, if any, as such Lender has agreed in its sole discretion to provide an Incremental Commitment and executed and delivered to the Administrative Agent an Incremental Commitment Agreement as provided in clause (b) of this Section 1.14, such Lender shall not be obligated to fund any Incremental Term Loans or increase its Revolving Loan Commitment, (ii) any Lender (or, in the circumstances contemplated by clause (viii) below, any other Person which will qualify as a Qualified Person) may so provide an Incremental Commitment without the consent of any other Lender, (iii) each provision of Incremental Commitments pursuant to this Section 1.14 on a given date shall be in a minimum aggregate amount (for all Lenders (including in the circumstances contemplated by clause (viii) below, Qualified Persons who will become Lenders)) of at least $10,000,000, (iv) the aggregate amount of all Incremental Commitments permitted to be provided pursuant to this Section 1.14 shall not exceed $50,000,000, (v) the relevant Incremental Commitment Agreements shall specifically set forth the Tranche of the Incremental Commitments being provided thereunder, (vi) each Lender agreeing to provide an Incremental Commitment under a Term Loan Tranche, shall make Incremental Term Loans under the Term Loan Tranche specified in the relevant Incremental Commitment Agreement pursuant to Section 1.01(h) and such Loans shall thereafter be deemed to be Term Loans under the relevant Term Loan Tranche for all purposes of this Agreement and the other Credit Documents, (vii) the Revolving Loan Commitment of each Lender agreeing to provide an Incremental Commitment under the Revolving Loan Tranche shall be increased by the amount of such Incremental Commitment specified in the relevant Incremental Commitment Agreement effective on the date specified in such Incremental Commitment Agreement, -15- 22 (viii) if, within 10 Business Days after the Borrower has requested the then existing Lenders (other than Defaulting Lenders) to provide Incremental Commitments pursuant to this Section 1.14 the Borrower has not received Incremental Commitments in an aggregate amount equal to that amount of Incremental Commitments which the Borrower desires to obtain pursuant to such request (as set forth in the notice provided by the Borrower as provided below), then the Borrower may, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed), request Incremental Commitments from Persons which would qualify as Qualified Persons hereunder in an aggregate amount equal to such deficiency (and with the fees to be paid to such Qualified Person to be no greater than that to be paid to the then existing Lenders providing Incremental Commitments), and (ix) all actions taken by the Borrower pursuant to this Section 1.14 shall be done in coordination with the Administrative Agent. (b) At the time of any provision of Incremental Commitments pursuant to this Section 1.14, (i) the Borrower, the Administrative Agent and each such Lender or other Qualified Person (each an "Incremental Lender") which agrees to provide an Incremental Commitment shall execute and deliver to the Administrative Agent an Incremental Commitment Agreement substantially in the form of Exhibit O (appropriately completed), with the effectiveness of such Incremental Lender's Incremental Commitment to occur on the date set forth in such Incremental Commitment Agreement and the payment of any fees (including, without limitation, any fees payable pursuant to clause (ii) below) required in connection therewith, (ii) the Administrative Agent shall receive from the Borrower (or, to the extent agreed to by the Borrower and the respective Incremental Lender, from such respective Incremental Lender) the payment of a non-refundable fee of $3,500 for each Qualified Person which becomes a Lender pursuant to this Section 1.14, (iii) the Borrower and its Subsidiaries shall have delivered such amendments, modifications and/or supplements to the Security Documents as are necessary or in the reasonable opinion of the Administrative Agent, desirable to insure that the additional Obligations to be incurred pursuant to the Incremental Commitments are secured by, and entitled to the benefits of, the Security Documents, (iv) the Administrative Agent shall have received evidence satisfactory to it that the additional Obligations to be incurred pursuant to the Incremental Commitments are permitted by, and constitute "Senior Debt" under, the Senior Subordinated Financing Documents and the Permanent Senior Subordinated Notes Documents; and (v) the Borrower shall deliver to the Administrative Agent an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrower reasonably satisfactory to the Administrative Agent and dated such date, covering such of the matters set forth in the opinions of counsel delivered to the Administrative Agent on the Initial Borrowing Date pursuant to Section 5.03 as may be reasonably requested by the Administrative Agent, and such other matters as the Administrative Agent may reasonably request. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Commitment Agreement, and (i) at such time Annex I shall be deemed modified to reflect the Incremental Commitments of such Incremental Lenders under the relevant Tranche or Tranches and (ii) to the extent requested by such Incremental Lenders, the appropriate Notes will be issued, at the Borrower's expense, to such Incremental Lenders, to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the -16- 23 Incremental Term Loans made by such Incremental Lenders or the increased Revolving Loan Commitment of such Incremental Lender, as the case may be. (c) In connection with each incurrence of Incremental Term Loans pursuant to Section 1.01(h), the Lenders and the Borrower hereby agree that, notwithstanding anything to the contrary contained in this Agreement, the Borrower and the Administrative Agent may take all such actions as may be necessary to ensure that all Lenders with outstanding Term Loans under the relevant Tranche continue to participate in each Borrowing of outstanding Term Loans under such Tranche (after giving effect to the incurrence of Incremental Term Loans pursuant to Section 1.01(h) on a pro rata basis, including by adding the Incremental Term Loans to be so incurred to the then outstanding Borrowings of Term Loans on a pro rata basis even though as a result thereof such new Incremental Term Loan (to the extent required to be maintained as Eurodollar Loans), may effectively have a shorter Interest Period than the then outstanding Borrowings of Term Loans under such Tranche and it is hereby agreed that (x) to the extent any then outstanding Borrowings of Term Loans that are maintained as Eurodollar Loans are affected as a result thereof, any costs of the type described in Section 1.11 incurred by such Lenders in connection therewith shall be for the account of the Borrower or (y) to the extent the Incremental Term Loans to be so incurred are added to the then outstanding Borrowings of Term Loans which are maintained as Eurodollar Loans, the Lenders that have made such additional Incremental Term Loans shall be entitled to receive an effective interest rate on such additional Incremental Term Loans as is equal to the Eurodollar Rate as in effect two Business Days prior to the incurrence of such additional Incremental Term Loans plus the then Applicable Margin for such Tranche of Term Loans until the end of the respective Interest Period or Interest Periods with respect thereto. (d) On the effective date of any increase in the Revolving Loan Commitments pursuant to this Section 1.14, (i) the Borrower shall, in coordination with the Administrative Agent, repay outstanding Revolving Loans of certain of the Lenders with a Revolving Loan Commitment, and incur additional Revolving Loans from certain other Lenders with a Revolving Loan Commitment, in each case to the extent necessary so that all of the Lenders participate in each outstanding Borrowing of Revolving Loans pro rata on the basis of their respective Revolving Loan Commitments (after giving effect to any increase in the Total Revolving Loan Commitment pursuant to this Section 1.14) and with the Borrower being obligated to pay to the respective Lenders the costs of the type referred to in Section 1.11 in connection with any such repayment and/or Borrowing. SECTION 2. Letters of Credit. 2.01 Letters of Credit. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request that any Issuing Lender with a Revolving Loan Commitment issue, at any time and from time to time on and after the Initial Borrowing Date and prior to the 30th day preceding the Revolving Loan Maturity Date, (x) for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Obligations of the Borrower or any of its Subsidiaries, an irrevocable sight standby letter of credit in a form customarily used by such Issuing Lender or in such other form as has been approved by such Issuing Lender (each such standby letter of credit, a "Standby Letter of Credit") in support of such L/C Supportable Obligations and (y) for the -17- 24 account of the Borrower, an irrevocable sight trade letter of credit in a form customarily used by such Issuing Lender or in such other form as has been approved by such Issuing Lender (each such trade letter of credit, a "Trade Letter of Credit", and each such Trade Letter of Credit and each Standby Letter of Credit, a "Letter of Credit") in support of customary commercial transactions of the Borrower and its Subsidiaries. (b) Each Issuing Lender hereby agrees that it will, at any time and from time to time on or after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower one or more Letters of Credit (x) in the case of Standby Letters of Credit, in support of such L/C Supportable Obligations of the Borrower or any of its Subsidiaries as are permitted to remain outstanding without giving rise to a Default or Event of Default hereunder and (y) in the case of Trade Letters of Credit, in support of buyers of goods as referenced in Section 2.01(a), provided that the respective Issuing Lender shall be under no obligation to issue any Letter of Credit of the types described above if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to such Issuing Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Issuing Lender shall prohibit, or request that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuing Lender is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Issuing Lender as of the date hereof and which such Issuing Lender in good faith deems material to it; or (ii) such Issuing Lender shall have received notice prior to the issuance of such Letter of Credit of the type described in the penultimate sentence of Section 2.02(b). (c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed either (x) $15,000,000 or (y) when added to the aggregate outstanding principal amount of all Revolving Loans and all Swingline Loans then outstanding, the Total Revolving Loan Commitment; (ii) each Letter of Credit shall be denominated in Dollars and shall be issued only on a sight basis; and (iii) each Letter of Credit shall have an expiry date occurring not later than the earlier of (x) 12 months (or 180 days in the case of Trade Letters of Credit) after such Letter of Credit's date of issuance, provided that the expiry date of any Standby Letter of Credit may be automatically extendible for successive periods of up to 12 months and (y) the 30th day prior to the Revolving Loan Maturity Date. 2.02 Letter of Credit Requests. (a) Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the respective Issuing Lender at least three Business Days' (or such shorter period as is acceptable to the respective Issuing Lender) written notice thereof. In the case of Letters of Credit to be issued -18- 25 pursuant to Section 2.01, each notice shall be in the form of Exhibit C (each a "Letter of Credit Request"). (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.01(c). Unless the respective Issuing Lender has received notice from the Borrower or the Required Lenders before it issues a Letter of Credit that one or more of the conditions specified in Section 5 or Section 6 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.01(c), then such Issuing Lender may issue the requested Letter of Credit for the account of the Borrower in accordance with such Issuing Lender's usual and customary practices. Upon its issuance of or amendment to any Standby Letter of Credit, each Issuing Lender shall notify the Borrower and the Administrative Agent, in writing, of such issuance or amendment and such notice shall be accompanied by a copy of such issuance or amendment. Upon receipt of such notice, the Administrative Agent shall promptly notify each participating Lender, in writing, of such issuance or amendment and if any Lender so requests, the Administrative Agent shall provide copies of such issuance or amendment to the requesting Lender. (c) In the event that the Issuing Lender of Trade Letters of Credit is other than the Administrative Agent, such Issuing Lender will send by facsimile transmission to the Administrative Agent, promptly on the first Business Day, of each week, its daily aggregate Letter of Credit stated amount for Trade Letters of Credit for the previous week. The Administrative Agent shall deliver to each other Participant, upon each calendar month end, and upon each Letter of Credit fee payment, a report setting forth for such period the daily aggregate stated amount available to be drawn under the Trade Letters of Credit issued by all the Issuing Lenders during such period. 2.03 Letter of Credit Participations. (a) Immediately upon the issuance by any Issuing Lender of any Letter of Credit, such Issuing Lender shall be deemed to have sold and transferred to each Lender with a Revolving Loan Commitment, other than such Issuing Lender (each such Lender, in its capacity under this Section 2.03, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from such Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Percentage in such Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto (although the Letter of Credit Fee shall be payable directly to the Administrative Agent for the account of the Participants as provided in Section 3.01(b) and the Participants shall have no right to receive any portion of any Facing Fees). Upon any change in the respective Revolving Loan Commitments or Revolving Loan Percentages of the Lenders pursuant to Section 1.13 or 13.04, it is hereby agreed that, with respect to all such outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the new Percentages of the assignor and assignee Lender or of all Lenders with respective Revolving Loan Commitments. (b) In determining whether to pay under any Letter of Credit, such Issuing Lender shall have no obligation relative to the other Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they -19- 26 appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct as determined by a court of competent jurisdiction, shall not create for such Issuing Lender any resulting liability to the Borrower or any Lender. (c) In the event that any Issuing Lender makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Issuing Lender pursuant to Section 2.04(a), such Issuing Lender shall promptly notify the Administrative Agent, which shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to such Issuing Lender the amount of such Participant's Revolving Loan Percentage of such unreimbursed payment in Dollars and in same day funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to such Issuing Lender in Dollars such Participant's Revolving Loan Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Revolving Loan Percentage of the amount of such payment available to such Issuing Lender, such Participant agrees to pay to such Issuing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to such Issuing Lender at the overnight Federal Funds Rate. The failure of any Participant to make available to such Issuing Lender its Revolving Loan Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to such Issuing Lender its Revolving Loan Percentage of any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to such Issuing Lender such other Participant's Revolving Loan Percentage of any such payment. (d) Whenever any Issuing Lender receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, such Issuing Lender shall pay to each Participant which has paid its Revolving Loan Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (e) The obligations of the Participants to make payments to each Issuing Lender with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such -20- 27 transferee may be acting), the Administrative Agent, any Issuing Lender, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse the respective Issuing Lender, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by it under any Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid Drawing"), no later than three Business Days after the date of such payment or disbursement, with interest on the amount so paid or disbursed by such Issuing Lender, to the extent not reimbursed prior to 12:00 Noon (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date such Issuing Lender was reimbursed by the Borrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans; provided, however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New York time) on the Business Day following notice of such payment or disbursement, interest shall thereafter accrue on the amounts so paid or disbursed by such Issuing Lender (and until reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans plus 2%, in each such case, with interest to be payable on demand. The respective Issuing Lender shall give the Borrower prompt notice of each Drawing under any Letter of Credit, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 2.04 to reimburse the respective Issuing Lender with respect to drawings on Letters of Credit (each, a "Drawing") (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Lender (including in its capacity as the issuer of the Letter of Credit or as Participant), or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing, the respective Issuing Lender's only obligation to the Borrower being to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or -21- 28 willful misconduct as determined by a court of competent jurisdiction, shall not create for such Issuing Lender any resulting liability to the Borrower. 2.05 Increased Costs. If at any time after the date of this Agreement, the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any Issuing Lender or any Participant, or any corporation controlling such Person, with any request or directive issued after the date of this Agreement by any such authority (whether or not having the force of law), shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by any Issuing Lender or participated in by any Participant, or (ii) impose on any Issuing Lender or any Participant, or any corporation controlling such Person, any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Issuing Lender or any Participant of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by any Issuing Lender or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Issuing Lender or such Participant, or any corporation controlling such Person, or any franchise tax based on the net income or profits of such Lender or Participant, or any corporation controlling such Person, in either case pursuant to the laws of the United States of America, the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), but without duplication of any amounts payable in respect of taxes pursuant to Section 4.04(a), then, upon demand to the Borrower by such Issuing Lender or any Participant (a copy of which demand shall be sent by such Issuing Lender or such Participant to the Administrative Agent), the Borrower shall pay to such Issuing Lender or such Participant such additional amount or amounts as will compensate such Lender for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital. Any Issuing Lender or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.05, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by such Issuing Lender or such Participant (a copy of which certificate shall be sent by such Issuing Lender or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for the calculation of such additional amount or amounts necessary to compensate such Issuing Lender or such Participant. The certificate required to be delivered pursuant to this Section 2.05 shall, if delivered in good faith and absent manifest error, be final and conclusive and binding on the Borrower. SECTION 3. Commitment Commission; Fees; Reductions of Commitment. 3.01 Fees. (a) The Borrower agrees to pay the Administrative Agent for distribution to each Non-Defaulting Lender (i) in the case of the Total Revolving Loan Commitment, a commitment commission (the "Revolving Loan Commitment Commission") for the period from the Initial Borrowing Date to and including the Revolving Loan Maturity Date (or such earlier date as the Total Revolving Loan Commitment shall have been terminated), computed at a rate for each day equal to 1/2 of 1% per annum on the daily average Unutilized Revolving Loan Commitment of such Non-Defaulting Lender and (ii) in the case of the Total -22- 29 RTL Commitment, a commitment commission (the "RTL Commitment Commission" and, together with the Revolving Loan Commitment Commission, the "Commitment Commission") for the period from the Initial Borrowing Date to and including the RTL Conversion Date (or such earlier date as the Total RTL Commitment shall have been terminated), computed at a rate for each day equal to the Applicable RTL Commitment Commission Percentage per annum on the daily average Unutilized RTL Commitment of such Non-Defaulting Lender. Accrued Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan Maturity Date or the RTL Maturity Date, as the case may be, or such earlier date upon which the Total Revolving Loan Commitment or the Total RTL Maturity Date, as the case may be, is terminated. (b) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Lender with a Revolving Loan Commitment (based on their respective Percentages), a fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period from and including the date of issuance of such Letter of Credit, to and including the termination of such Letter of Credit computed at a rate per annum equal to the Applicable Margin for Revolving Loans maintained as Eurodollar Loans as in effect from time to time on the daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (c) The Borrower agrees to pay to the respective Issuing Lender, for its own account, a facing fee in respect of each Letter of Credit issued for its account hereunder (the "Facing Fee") for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily Stated Amount of such Letter of Credit, provided that in no event shall the annual Facing Fee in respect of any Letter of Credit be less than $500. Accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (d) The Borrower shall pay, upon each payment under, issuance of, or amendment to, any Letter of Credit, such amount as shall at the time of such event be the administrative charge which the respective Issuing Lender is generally imposing in connection with such occurrence with respect to letters of credit. (e) The Borrower shall pay to the Administrative Agent, for its own account, such other fees as have been agreed to in writing by the Borrower and the Administrative Agent. (f) The Borrower shall pay, at the time of (x) each voluntary prepayment of the B Term Loans or the C Term Loans and (y) any payment of the B Term Loans and the C Term Loans from the Permanent Senior Subordinated Notes Prepayment Amount, in each case on or prior to the second anniversary of the Initial Borrowing Date, the applicable Term Loan Prepayment Premium. -23- 30 3.02 Voluntary Termination and Reduction of Commitments. (a) Upon at least two Business Days' prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate or partially reduce the Total Unutilized Revolving Loan Commitment and/or, if prior to the RTL Conversion Date, the Total Unutilized RTL Commitment, in whole or in part, provided that (x) each such reduction shall apply proportionately to permanently reduce the Revolving Loan Commitment or RTL Commitment, as the case may be, of each Lender with such a Commitment, (y) any partial reduction pursuant to this Section 3.02 shall be in integral multiples of $5,000,000 and (z) the reduction to the Total Unutilized Revolving Loan Commitment or Total Unutilized RTL Commitment, as the case may be, shall in no case be in an amount which would cause the Revolving Loan Commitment or RTL Commitment, as the case may be, of any Lender to be reduced (as required by the preceding clause (x)) by an amount which exceeds (I) in the case of the Total RTL Commitment, the Unutilized RTL Commitment of such Lender as in effect immediately before giving effect to such reduction or (II) in the case of the Total Revolving Loan Commitment, the remainder of (x) the Unutilized Revolving Loan Commitment of such Lender as in effect immediately before giving effect to such reduction minus (y) such Lender's Percentage of the aggregate principal amount of Swingline Loans then outstanding. (b) Notwithstanding the foregoing, the Borrower may not terminate or partially reduce the Total Unutilized RTL Commitment, in whole or in part, prior to the RTL Conversion Date if after giving effect thereto the sum of the outstanding RTL Loans and the Total Unutilized RTL Commitment would be less than $37,500,000 without the prior written consent of the Required Lenders. 3.03 Mandatory Reduction of Commitments. (a) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total A Term Loan Commitment (and the A Term Loan Commitment of each Lender) shall (i) terminate in its entirety on the Initial Borrowing Date (after giving effect to the incurrence of A Term Loans on such date) and (ii) prior to the termination of the Total A Term Loan Commitment as provided in clause (i) above, be reduced from time to time to the extent required by Section 4.02(A). (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total B Term Loan Commitment (and the B Term Loan Commitment of each Lender) shall (i) terminate in its entirety on the Initial Borrowing Date (after giving effect to the making of the B Term Loans on such date) and (ii) prior to the termination of the Total B Term Loan Commitment as provided in clause (i) above, be reduced from time to time to the extent required by Section 4.02(A). (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total C Term Loan Commitment (and the C Term Loan Commitment of each Lender) shall (i) terminate in its entirety on the Initial Borrowing Date (after giving effect to the making of C Term Loans on such date) and (ii) prior to the termination of the Total C Term Loan Commitment as provided in clause (i) above, be reduced from time to time to the extent required by Section 4.02(A). -24- 31 (d) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total RTL Commitment (and the RTL Commitment of each Lender) shall (i) terminate in its entirety on the RTL Conversion Date (after giving effect to the making of RTL Loans on such date) and (ii) prior to the termination of the Total RTL Commitment as provided in clause (i) above, be reduced from time to time to the extent required by Section 4.02(A). (e) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Lender) shall terminate in its entirety on the Revolving Loan Maturity Date. (f) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Incremental Term Loan Commitment of each Lender provided pursuant to a particular Incremental Commitment Agreement shall terminate in its entirety on the respective Incremental Term Loan Borrowing Date specified in such Incremental Commitment Agreement (after giving effect to the incurrence of the Incremental Term Loans on each such date). (g) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Commitment (and the Commitment of each Lender under each Tranche) shall terminate in its entirety on April 30, 2001 unless the Transaction has been consummated and the Initial Borrowing Date has occurred on or prior to such date. (h) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on each date after the Initial Borrowing Date upon which a mandatory prepayment of Term Loans pursuant to Sections 4.02(A)(f), (g), (h), (i) or (j) is required (and exceeds in amount the aggregate principal amount of Term Loans then outstanding) or would be required if Term Loans were then outstanding, the Total Revolving Loan Commitment and/or the Total RTL Commitment shall be permanently reduced by the amount, if any, by which the amount required to be applied pursuant to said Section (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the aggregate principal amount of Term Loans then outstanding in the following manner: (1) first, if prior to the RTL Conversion Date, to the Total RTL Commitment; and (2) second, after the Total RTL Commitment has been terminated or reduced to zero, to the Total Revolving Loan Commitment. (i) The Total Revolving Loan Commitment and, if applicable, the Total RTL Commitment shall be reduced, and the Revolving Loan Commitment or RTL Commitment, as the case may be, of the respective Former Lender shall be terminated, in the amount and at the times provided in Section 13.04(d). (j) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on the date of the consummation of the Disposition, the Total Revolving Loan Commitment shall be reduced by the lesser of (x) $25,000,000 and (y) the amount by which the Net Asset Sale Proceeds of the Disposition exceed $25,000,000. (k) Each reduction to a Commitment under a Tranche pursuant to this Section 3.03 (or pursuant to Section 4.02(A)) shall be applied proportionately to reduce the Commitment -25- 32 under such Tranche of each Lender with such a Commitment, provided that the reduction to the Total Revolving Loan Commitment from clause (j) of this Section 3.03 shall be applied to the Revolving Commitments of the Designated Lenders on a pro rata basis. The repayment of the Revolving Loans from the proceeds of the Disposition shall be applied in a manner such that all of the Lenders with a Revolving Commitment participate in each Borrowing of Revolving Loans which remains outstanding following such payment pro rata on the basis of their respective Revolving Loan Commitments (after giving effect to the reduction of the Total Revolving Loan Commitment pursuant to Section 3.03(j)). SECTION 4. Prepayments; Payments; Taxes. 4.01 Voluntary Prepayments. The Borrower shall have the right to prepay the Loans, without premium or penalty (other than the Term Loan Prepayment Premium, if applicable), in whole or in part at any time and from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent prior to 11:00 A.M. (New York time) at its Notice Office (x) at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Base Rate Loans (or, in the case of Swingline Loans prior to 1:00 P.M. (New York time) on the date of such prepayment) and (y) at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Eurodollar Loans, the Tranche of Loans to be prepaid, the amount of such prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, which notice the Administrative Agent shall promptly transmit to each of the Lenders; (ii) each prepayment shall be in an aggregate principal amount of at least $5,000,000 and, if greater, in an integral multiple of $1,000,000 (or in the case of Swingline Loans, $10,000 and, if greater, in an integral multiple thereof), provided that if any partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for such Tranche, then such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; (iii) prepayments of Eurodollar Loans made pursuant to this Section 4.01 made on any day other than the last day of an Interest Period applicable thereto shall be subject to the provisions of Section 1.11; (iv) each prepayment in respect of any Loans made pursuant to a Borrowing shall, except as provided in clause (v) below, be applied pro rata among the Lenders which made such Loans; (v) at the Borrower's election in connection with any prepayment of Revolving Loans or, if prior to the RTL Conversion Date, RTL Loans, such prepayment shall not be applied to the Revolving Loans or RTL Loans, as the case may be, of a Defaulting Lender; (vi) subject to Section 4.02B, each voluntary prepayment of Term Loans made pursuant to this Section 4.01 shall be applied to each Tranche of Term Loans on a pro rata basis (based upon the then outstanding principal amount of A Term Loans, B Term Loans, C Term Loans and, if applicable, RTL Loans) and (vii) each voluntary prepayment of Term Loans of a Tranche shall be applied to reduce the then remaining Scheduled Repayments of the respective Tranche of Term Loans, pro rata based upon the then remaining amount of such Scheduled Repayments after giving effect to all prior reductions thereto. 4.02 Mandatory Repayments and Commitment Reductions. (A) (a) (i) On any day on which the sum of the aggregate outstanding principal amount of the Revolving Loans, Swingline Loans and the Letter of Credit Outstandings exceeds the Total Revolving Loan -26- 33 Commitment as then in effect, the Borrower shall prepay on such date the principal of Swingline Loans and after the Swingline Loans have been repaid in full, the principal of Revolving Loans in an amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and all outstanding Revolving Loans, the aggregate amount of the Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in effect, the Borrower shall pay to the Administrative Agent at the Payment Office on such date an amount of cash or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at such time), such cash or Cash Equivalents to be held as security for all obligations of the Borrower under Section 2.04(a) in a cash collateral account to be established by the Administrative Agent. So long as no Default or Event of Default is then continuing, such cash or Cash Equivalents shall be released to the Borrower when such obligations under Section 2.04(a) are satisfied or as may be necessary to insure that the amount of such cash or Cash Equivalents do not exceed the Letter of Credit Outstandings. (ii) On any day prior to the RTL Conversion Date on which the sum of the aggregate outstanding principal amount of RTL Loans exceeds the Total RTL Commitment as then in effect, the Borrower shall prepay on such date the principal of RTL Loans in an amount equal to such excess. (b) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), on each date set forth below the Borrower shall be required to repay A Term Loans, to the extent then outstanding, in an amount equal to that percentage set forth opposite such date multiplied by the aggregate principal amount of the A Term Loans (the "A Term Reference Amount") outstanding on the Initial Borrowing Date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(A)(k) or increased pursuant to the proviso to this clause (b), an "A Term Loan Scheduled Repayment"): Percentage of A Term Scheduled Repayment Date Reference Amount - ------------------------ ---------------- Quarterly Payment Date 1.25% in March, 2001 Quarterly Payment Date 1.25% in June, 2001 Quarterly Payment Date 1.25% in September, 2001 Quarterly Payment Date 1.25% in December, 2001 Quarterly Payment Date 2.50% in March, 2002 Quarterly Payment Date 2.50% in June, 2002 -27- 34 Quarterly Payment Date 2.50% in September, 2002 Quarterly Payment Date 2.50% in December, 2002 Quarterly Payment Date 5.00% in March, 2003 Quarterly Payment Date 5.00% in June, 2003 Quarterly Payment Date 5.00% in September, 2003 Quarterly Payment Date 5.00% in December, 2003 Quarterly Payment Date 7.50% in March, 2004 Quarterly Payment Date 7.50% in June, 2004 Quarterly Payment Date 7.50% in September, 2004 Quarterly Payment Date 7.50% in December, 2004 Quarterly Payment Date 8.75% in March, 2005 Quarterly Payment Date 8.75% in June, 2005 Quarterly Payment Date 8.75% in September, 2005 A Term Maturity Date 8.75% ; provided that (x) A Term Loans and all other amounts owed hereunder with respect to the A Term Loans shall be paid in full no later than A Term Maturity Date, and the final installment payable by the Borrower in respect of the A Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the A Term Loans and (y) if the aggregate principal amount of the A Term Loans is increased pursuant to Section 1.14, then each scheduled principal repayment to be made after such increase becomes effective shall be increased by an -28- 35 amount equal to (a) the aggregate principal amount of the increase in the A Term Loans pursuant to Section 1.14 multiplied by (b) an amount equal to (x) such scheduled repayment amount divided by (y) the aggregate outstanding principal amount of the A Term Loans, in each case, immediately prior to giving effect to the increase in the A Term Loans made pursuant to Section 1.14. (c) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), on each date set forth below, the Borrower shall be required to repay B Term Loans, to the extent then outstanding, in an amount equal to that percentage set forth opposite such date multiplied by the aggregate principal amount of the B Term Loans (the "B Term Reference Amount") outstanding on the Initial Borrowing Date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(A)(k) or increased pursuant to the proviso to this clause (c), a "B Term Loan Scheduled Repayment"): Percentage of B Term Scheduled Repayment Date Reference Amount - ------------------------ ---------------- Quarterly Payment Date 0.25% in March, 2001 Quarterly Payment Date 0.25% in June, 2001 Quarterly Payment Date 0.25% in September, 2001 Quarterly Payment Date 0.25% in December, 2001 Quarterly Payment Date 0.25% in March, 2002 Quarterly Payment Date 0.25% in June, 2002 Quarterly Payment Date 0.25% in September, 2002 Quarterly Payment Date 0.25% in December, 2002 Quarterly Payment Date 0.25% in March, 2003 Quarterly Payment Date 0.25% in June, 2003 -29- 36 Quarterly Payment Date 0.25% in September, 2003 Quarterly Payment Date 0.25% in December, 2003 Quarterly Payment Date 0.25% in March, 2004 Quarterly Payment Date 0.25% in June, 2004 Quarterly Payment Date 0.25% in September, 2004 Quarterly Payment Date 0.25% in December, 2004 Quarterly Payment Date 0.25% in March, 2005 Quarterly Payment Date 0.25% in June, 2005 Quarterly Payment Date 0.25% in September, 2005 Quarterly Payment Date 0.25% in December, 2005 Quarterly Payment Date 23.75% in March, 2006 Quarterly Payment Date 23.75% in June, 2006 Quarterly Payment Date 23.75% in September, 2006 B Term Maturity Date 23.75% ; provided that (x) B Term Loans and all other amounts owed hereunder with respect to the B Term Loans shall be paid in full no later than B Term Maturity Date, and the final installment payable by the Borrower in respect of the B Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the B Term Loans and (y) if the aggregate principal amount of the B Term Loans is increased pursuant to Section 1.14, then each scheduled principal repayment to be made after such increase becomes effective shall be increased by an -30- 37 amount equal to (a) the aggregate principal amount of the increase in the B Term Loans pursuant to Section 1.14 multiplied by (b) an amount equal to (x) such scheduled repayment amount divided by (y) the aggregate outstanding principal amount of the B Term Loans, in each case, immediately prior to giving effect to the increase in the B Term Loans made pursuant to Section 1.14. (d) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), on each date set forth below, the Borrower shall be required to repay C Term Loans, to the extent then outstanding, in an amount equal to that percentage set forth opposite such date multiplied by the aggregate principal amount of the C Term Loans (the "C Term Reference Amount") outstanding on the Initial Borrowing Date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(A)(k) or increased pursuant to the proviso to this clause (d), a "C Term Loan Scheduled Repayment"): Percentage of C Term Scheduled Repayment Date Reference Amount - ------------------------ ---------------- Quarterly Payment Date 0.25% in March, 2001 Quarterly Payment Date 0.25% in June, 2001 Quarterly Payment Date 0.25% in September, 2001 Quarterly Payment Date 0.25% in December, 2001 Quarterly Payment Date 0.25% in March, 2002 Quarterly Payment Date 0.25% in June, 2002 Quarterly Payment Date 0.25% in September, 2002 Quarterly Payment Date 0.25% in December, 2002 Quarterly Payment Date 0.25% in March, 2003 Quarterly Payment Date 0.25% in June, 2003 -31- 38 Quarterly Payment Date 0.25% in September, 2003 Quarterly Payment Date 0.25% in December, 2003 Quarterly Payment Date 0.25% in March, 2004 Quarterly Payment Date 0.25% in June, 2004 Quarterly Payment Date 0.25% in September, 2004 Quarterly Payment Date 0.25% in December, 2004 Quarterly Payment Date 0.25% in March, 2005 Quarterly Payment Date 0.25% in June, 2005 Quarterly Payment Date 0.25% in September, 2005 Quarterly Payment Date 0.25% in December, 2005 Quarterly Payment Date 0.25% in March, 2006 Quarterly Payment Date 0.25% in June, 2006 Quarterly Payment Date 0.25% in September, 2006 Quarterly Payment Date 0.25% in December, 2006 Quarterly Payment Date 23.50% in March, 2007 Quarterly Payment Date 23.50% in June, 2007 -32- 39 Quarterly Payment Date 23.50% in September, 2007 C Term Maturity Date 23.50% ; provided that (x) C Term Loans and all other amounts owed hereunder with respect to the C Term Loans shall be paid in full no later than C Term Maturity Date, and the final installment payable by the Borrower in respect of the C Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the C Term Loans and (y) if the aggregate principal amount of the C Term Loans is increased pursuant to Section 1.14, then each scheduled principal repayment to be made after such increase becomes effective shall be increased by an amount equal to (a) the aggregate principal amount of the increase in the C Term Loans pursuant to Section 1.14 multiplied by (b) an amount equal to (x) such scheduled repayment amount divided by (y) the aggregate outstanding principal amount of the C Term Loans, in each case, immediately prior to giving effect to the increase in the C Term Loans made pursuant to Section 1.14. (e) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), on each date set forth below, the Borrower shall be required to repay RTL Loans, to the extent then outstanding, in an amount equal to that percentage set forth opposite such date multiplied by the aggregate principal amount of the RTL Loans (the "RTL Reference Amount") outstanding on the RTL Conversion Date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(A)(k), an "RTL Loan Scheduled Repayment", and together with each A Term Loan Scheduled Repayment, B Term Loan Scheduled Repayment and C Term Loan Scheduled Repayment, the "Scheduled Repayments"): Percentage of RTL Scheduled Repayment Date Reference Amount - ------------------------ ---------------- Quarterly Payment Date 6.25% in March, 2003 Quarterly Payment Date 6.25% in June, 2003 Quarterly Payment Date 6.25% in September, 2003 Quarterly Payment Date 6.25% in December, 2003 Quarterly Payment Date 8.75% in March, 2004 Quarterly Payment Date 8.75% in June, 2004 -33- 40 Quarterly Payment Date 8.75% in September, 2004 Quarterly Payment Date 8.75% in December, 2004 Quarterly Payment Date 10% in March, 2005 Quarterly Payment Date 10% in June, 2005 Quarterly Payment Date 10% in September, 2005 RTL Maturity Date 10% ; provided that RTL Term Loans and all other amounts owed hereunder with respect to the RTL Loans shall be paid in full no later than RTL Maturity Date, and the final installment payable by the Borrower in respect of the RTL Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by the Borrower under this Agreement with respect to the RTL Loans. (f) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), by no later than the Business Day immediately following each date after the Effective Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any sale or issuance of its equity securities or any capital contribution, an amount equal to the Required Equity Percentage of the cash proceeds of the respective sale, issuance or contribution (net of all reasonable costs associated therewith, including, without limitation, all due diligence costs and expenses paid for, or reimbursed by, the Borrower and/or any of its Subsidiaries, underwriting or similar fees, discounts and commissions, attorneys' fees and expenses paid for, or reimbursed by, the Borrower and/or any of its Subsidiaries and other costs associated therewith) shall be applied as a mandatory repayment of principal of outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts shall be applied as a mandatory reduction to the Total Term Loan Commitment) in accordance with the requirements of Sections 4.02(A)(k) and (l), provided the Excluded Equity Proceeds shall not be required to be applied in accordance with this Section 4.02(A)(f). (g) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), by no later than the Business Day immediately following each date after the Effective Date upon which the Borrower or any of its Subsidiaries receives any proceeds from any incurrence by the Borrower or any of its Subsidiaries of Indebtedness for borrowed money (other than (i) Indebtedness for borrowed money permitted to be incurred pursuant to Section 9.04 (other than clause (vi) thereof) and (ii) Indebtedness permitted to be incurred pursuant to clause (vi) of Section 9.04 to the extent such proceeds are utilized to repay the Subordinated Bridge Loans), an amount equal to 100% of the cash proceeds of the respective incurrence of Indebtedness (net of all reasonable costs associated therewith, including, without limitation, all due diligence costs and expenses paid for, or reimbursed by, the Borrower and/or -34- 41 any of its Subsidiaries, any underwriting, agency, structuring or similar fees, discounts and commissions, attorneys' fees and expenses paid for, or reimbursed by, the Borrower and/or any of its Subsidiaries, all financing and/or commitment fees and other costs associated therewith) shall be applied as a mandatory repayment of principal of outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts shall be applied as a mandatory reduction to the Total Term Loan Commitment) in accordance with the requirements of Sections 4.02(A)(k) and (l). (h) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), by no later than the Business Day following each date after the Effective Date upon which the Borrower or any of its Subsidiaries receives proceeds from any Asset Sale, an amount equal to 100% of the Net Asset Sale Proceeds therefrom shall be applied as a mandatory repayment of principal of outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts shall be applied as a mandatory reduction to the Total Term Loan Commitment) in accordance with the requirements of Sections 4.02(A)(k) and (l), provided that (i) the Net Asset Sale Proceeds received in respect of the Disposition in excess of $25,000,000 shall not be required to be so applied so long as 100% of such excess Net Asset Sale Proceeds shall be applied to repay the then outstanding Revolving Loans and (ii) up to an aggregate of $25,000,000 of Net Asset Sale Proceeds from Asset Sales (other than the Disposition) shall not be required to be used to so repay Term Loans to the extent the Borrower elects, as hereinafter provided, to cause such Net Asset Sale Proceeds to be reinvested in Reinvestment Assets (a "Reinvestment Election"). The Borrower may exercise its Reinvestment Election (within the parameters specified in the preceding sentence) with respect to an Asset Sale if (x) no Default or Event of Default exists and (y) the Borrower delivers a Reinvestment Notice to the Administrative Agent within two Business Days following the date of the consummation of the respective Asset Sale, with such Reinvestment Election being effective with respect to the Net Asset Sale Proceeds of such Asset Sale equal to the Anticipated Reinvestment Amount specified in such Reinvestment Notice and, provided, that if all or any portion of such Net Asset Sale Proceeds not applied to the repayment of Term Loans due to a Reinvestment Election are not so used within 360 days after the date of receipt of such Net Asset Sale Proceeds then such remaining portion not used shall be applied on the date which is 360 days following the date of receipt of such Net Asset Sale Proceeds as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(A)(k) and (l). At the time of the acquisition of any Reinvestment Assets, the Borrower shall comply and shall cause its Subsidiaries to comply with Section 8.11, to the extent applicable. (i) In addition to any other mandatory repayments pursuant to this Section 4.02(A), on each Excess Cash Payment Date, an amount equal to 75% of the Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(A)(k) and (l). (j) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02(A), within five Business Days following each date on or after the Effective Date upon which the Borrower or any of its Subsidiaries receives any proceeds from any Recovery Event (other than an Excluded Recovery Event), an amount equal to 100% of the proceeds from such Recovery Event (net of reasonable costs including, without limitation, legal -35- 42 costs and expenses and taxes incurred in connection with such Recovery Event) shall be applied as a mandatory repayment of principal of outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts shall be applied as a mandatory reduction to the Total Term Loan Commitment) in accordance with the requirements of Sections 4.02(A)(k) and (l); provided that such proceeds shall not be required to be so applied on such date to the extent that the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used to replace or restore any properties or assets in respect of which such proceeds were paid within 180 days (or 360 days pursuant to binding commitments with third parties to complete such replacement or restoration to be entered into within 180 days) following the date of such Recovery Event and that in the Borrower's reasonable judgment such replacement or restoration of such properties or assets can indeed be carried out within such 180-day or 360-day, as the case may be, period (which certificate shall set forth the estimates of the proceeds to be so expended), and provided further, that (i) if the amount of such proceeds exceeds $10,000,000 or a Default under Section 10.01 or an Event of Default exists, then the entire amount of the proceeds from such Recovery Event and not just the portion in excess of $10,000,000 shall be deposited with the Administrative Agent pursuant to a cash collateral arrangement reasonably satisfactory to the Administrative Agent whereby such proceeds shall be disbursed to the Borrower from time to time as needed to pay actual costs incurred by it or its applicable Subsidiary in connection with the replacement or restoration of the respective properties or assets (pursuant to certification requirements to the effect that (x) unless the Required Lenders otherwise agree, no Default under Section 10.01 or Event of Default then exists, (y) the Borrower or its applicable Subsidiary has actually incurred such costs (which certification shall be accompanied by any paid invoices or invoices required to be paid within five Business Days thereafter) and (z) the Borrower believes in good faith that it has or will have sufficient cash from ordinary cash flow, business interruption insurance or from other sources reasonably satisfactory to the Administrative Agent and that the Borrower will be receiving regular payments thereunder in such amounts and at such times as are necessary to satisfy all obligations and expenses of the Borrower (including, without limitation, all debt service requirements, including pursuant to this Agreement) without any delay or extension thereof, for the period from the date of the respective casualty, condemnation or other event giving rise to the Recovery Event and continuing through the completion of the replacement or restoration of respective properties or assets), although at any time while an Event of Default has occurred and is continuing, the Required Lenders may direct the Administrative Agent (in which case the Administrative Agent shall, and is hereby authorized by the Borrower to, follow said directions) to apply any or all proceeds then on deposit in such collateral account to the repayment of Obligations hereunder, and (ii) if all or any portion of such proceeds not required to be applied to the repayment of principal of outstanding Term Loans pursuant to the preceding proviso are not so used within 180 days (or 360 days if (1) the Borrower has entered into binding commitments with third parties to complete such replacement or restoration on or prior to such 180th day and (2) the Borrower believes in good faith that it has or will have sufficient cash from ordinary cash flow, business interruption insurance or from other sources reasonably satisfactory to the Administrative Agent and that the Borrower will be receiving regular payments thereunder in such amounts and at such times as are necessary to satisfy all obligations and expenses of the Borrower (including, without limitation, all debt service requirements, including pursuant to this Agreement) without any delay or extension thereof, for the period from the date of the respective casualty, condemnation or other event giving rise to the Recovery Event and continuing through -36- 43 the completion of the replacement or restoration of respective properties or assets) after the date of the related Recovery Event such remaining portion shall be applied on the last day of such 180-day or 360-day, as the case may be, period as a mandatory repayment of principal of outstanding Term Loans as provided above in this Section 4.02(A)(j) without regard to the provisions of the preceding proviso. (k) Each amount required to be applied to repay Term Loans (or to reduce the Total Term Loan Commitment) pursuant to Sections 4.02(A)(f), (g), (h), (i) and (j) shall be applied (i) to each Tranche of Term Loans on a pro rata basis (based upon the then outstanding principal amount of A Term Loans, B Term Loans, C Term Loans and, following the RTL Conversion Date, the RTL Loans) and (ii) to reduce the then remaining Scheduled Repayments of the respective Tranche of Term Loans pro rata based upon the then remaining amount of Scheduled Repayments of such Tranche of Term Loans after giving effect to all prior reductions thereto, provided that (x) the Net Asset Sale Proceeds received in respect of the Disposition which are required to be applied to repay Term Loans shall be applied to the A Term Loans of the Designated Lenders on a pro rata basis and (y) the first $50,000,000 of the net proceeds of Permanent Senior Subordinated Notes in excess of $300,000,000 shall be applied to the B Term Loans and the C Term Loans (and not to the A Term Loans or the RTL Loans) on a pro rata basis (based on the then outstanding principal amount of the B Term Loans and the C Term Loans). (l) With respect to each repayment of Loans required by this Section 4.02(A), the Borrower may designate the Types of Loans of the respective Tranche which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings of the respective Tranche pursuant to which made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02(A) may only be made on the last day of an Interest Period applicable thereto unless all Eurodollar Loans of the respective Tranche with Interest Periods ending on such date of required repayment and all Base Rate Loans of the respective Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing under a Tranche shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for such Tranche, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a Borrowing shall be applied pro rata among the Lenders which made such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. (m) Notwithstanding anything to the contrary contained in this Section 4.02(A), (x) so long as no Default or Event of Default then exists, the Borrower's receipt of Net Asset Sale Proceeds or proceeds of a Recovery Event shall not require a mandatory prepayment pursuant to clause (f), (g), (h), (i) or clause (j) of this Section 4.02(A) until the proceeds not so applied by reason of this clause (x) equals or exceeds $1,000,000 and (y) if the Borrower is required to apply any portion of asset sale proceeds to prepay or offer to prepay the Subordinated Bridge Loan or the Permanent Senior Subordinated Notes, the Borrower shall apply such asset sale proceeds as a mandatory prepayment of the principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(A)(k) and (l). -37- 44 (B) Waiver of Certain Repayments by B and C Lenders. Notwithstanding anything to the contrary contained in this Section 4.01, Section 4.02 or anywhere in this Agreement (including, without limitation, in Section 13.12) the Lenders with outstanding B Term Loans (the "B Lenders"), and/or C Term Loans (the "C Lenders") shall have the option to waive (x) a voluntary prepayment of such Loans pursuant to Section 4.01 (each such prepayment, a "Waivable Voluntary Prepayment" or (y) a mandatory repayment of such Loans pursuant to Section 4.02(A)(g), (except for a prepayment from the Permanent Senior Subordinated Notes Prepayment Amount) (h), (i) and/or (j) (each such repayment, a "Waivable Mandatory Repayment") upon the terms and provisions set forth in this Section 4.02(B). The Borrower shall give to the Administrative Agent written notice of its intention to make a Waivable Repayment at least [five] Business Days prior to such repayment, which notice the Administrative Agent shall promptly forward to all B Lenders and/or C Lenders (indicating in such notice the amount of such repayment to be applied to each such Lender's outstanding Term Loans under such Tranches). In the event such B Lender or C Lender, as the case may be, desires to waive such Lender's right to receive any such Waivable Repayment in whole or in part, such Lender shall so advise the Administrative Agent no later than the close of business two Business Days after the date of such notice from the Administrative Agent, which notice shall also include the amount such Lender desires to receive in respect of such repayment. If any Lender does not reply to the Administrative Agent within the two Business Days, it will be deemed not to have waived any part of such repayment. If any Lender does not specify an amount it wishes to receive, it will be deemed to have accepted 100% of the total payment. In the event that any such Lender waives all or part of such right to receive any such Waivable Repayment, the Administrative Agent shall apply 100% of the amount so waived by such Lender to the A Term Loans in accordance with Section 4.02(A)(k) and (l). If the Term Lenders have the right to waive a voluntary prepayment or mandatory repayment, pursuant to this Section 4.02(B), the amount of the respective Waivable Voluntary Prepayment or Waivable Mandatory Repayment, as the case may be, shall be deposited with the Administrative Agent on the date the voluntary prepayment or mandatory repayment, as the case may be, would otherwise be required pursuant to the relevant provisions of Section 4.01 or Section 4.02(A)(f), (g), (h), (i), and/or (j), as the case may be (and held by the Administrative Agent as cash collateral for the B Term Loans or the C Term Loans, as the case may be, and, but only to the extent B Lenders or C Lenders, as the case may be, waive their right to receive their share of the Waivable Voluntary Prepayment or Waivable Mandatory Repayment, as the case may be, for the benefit of the A Term Loans, in a cash collateral account which shall permit the investment thereof in Cash Equivalents reasonably satisfactory to the Administrative Agent until the proceeds are applied to the secured obligations), and the respective voluntary prepayment or mandatory repayment, as the case may be, shall not be required to be made until the eighth Business Day occurring after the date the respective voluntary prepayment or mandatory repayment, as the case may be, would otherwise have been required to be made pursuant to any such Section (and with interest continuing to accrue on such Loans during such period at the rate otherwise provided for herein with respect to such Loans). Notwithstanding the foregoing, in no event shall the amount of a Waivable Repayment exceed the aggregate principal amount of A Term Loans that will be outstanding after Lenders with outstanding A Term Loans receive their respective shares of voluntary prepayments or mandatory repayments, as the case may be, pursuant to Section 4.01 or 4.02(k), as the case may be (i.e., before giving effect to any application of such Waivable Repayment to A Term Loans pursuant to this Section 4.02(B)). -38- 45 4.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York time) (or 1:00 p.m. (New York time) in the case of Swingline Loans) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of the Administrative Agent. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 4.04 Net Payments. (a) All payments made by the Borrower hereunder or under any Note will be made without set-off, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Lender, or any franchise tax based on the net income or net profits of a Lender, in either case pursuant to the laws of the jurisdiction in which it is organized or in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). Except as provided in Section 4.04(b), if any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence of this Section 4.04(a), then the Borrower agrees to reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income or net profits of such Lender, or any franchise tax based on the net income or net profits of such Lender, in either case pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of income or similar taxes as such Lender shall determine are payable by, or withheld from, such Lender in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes that arise from the failure of the Borrower to pay any Taxes when due to the appropriate Tax authority and that become payable by the Administrative Agent or any Lender as a result of any such failure. -39- 46 (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Sections 1.13 or 13.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit D (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption) (or successor form) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI , Form W-8BEN (with respect to the benefits of any income tax treaty), or Form W-8BEN (with respect to the portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such form or Certificate, in which case such Lender shall not be required to deliver any such form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Lender in respect of income or similar taxes imposed by the United States if (I) such Lender has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) -40- 47 (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes; provided that the Lender complies with the foregoing provisions of this Section 4.04(b) with respect to providing forms and certificates. (c) If the Borrower pays any additional amount under this Section 4.04 to a Lender and such Lender determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a "Tax Benefit"), such Lender shall pay to the Borrower an amount that the Lender shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Lender in such year as a consequence of such Tax Benefit; provided, however, that (i) any Lender may determine, in its sole discretion consistent with the policies of such Lender, whether to seek a Tax Benefit; (ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender that otherwise would not have expired) of any Tax Benefit with respect to which such Lender has made a payment to the Borrower pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrower is obligated to indemnify such Lender pursuant to this Section 4.04 without any exclusions or defenses; and (iii) nothing in this Section 4.04(c) shall require the Lender to disclose any confidential information to the Borrower (including, without limitation, its tax returns). SECTION 5. Conditions Precedent to Credit Events on the Initial Borrowing Date. The obligation of each Lender to make Loans and to participate in Letters of Credit, and the obligations of each Issuing Lender to issue Letters of Credit, in each case on the Initial Borrowing Date is subject, at the time of such Credit Event, to the satisfaction of the following conditions: 5.01 Execution of Agreement; Notes. On or prior to the Initial Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Lenders which has requested the same, the appropriate Note or Notes executed by the Borrower, in each case in the amount, maturity and as otherwise provided herein. 5.02 Fees, etc. On the Initial Borrowing Date, the Borrower shall have paid to the Administrative Agent and the Lenders all costs, fees and expenses (including, without limitation, legal fees and expenses to the extent invoiced) payable to the Administrative Agent and the Lenders to the extent then due. 5.03 Opinions of Counsel. On the Initial Borrowing Date, the Administrative Agent shall have received (i) from Gibson, Dunn & Crutcher LLP, special counsel to the Borrower and its Subsidiaries, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit E, (ii) from local counsel satisfactory to the Administrative Agent, opinions each of which shall be in form and substance reasonably satisfactory to the Administrative Agent and the Required -41- 48 Lenders and shall cover the perfection of the security interests granted pursuant to the Security Agreement and the Mortgages and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request and (iii) from local gaming counsel reasonably satisfactory to the Administrative Agent, opinions each of which shall be in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders and shall cover Missouri, Nevada, Mississippi and Iowa Gaming Regulations and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request. 5.04 Corporate Documents; Proceedings; etc. (a) On the Initial Borrowing Date, the Administrative Agent shall have received a certificate, dated the Initial Borrowing Date, signed by an Authorized Officer of each Credit Party, and attested to by the Secretary or any Assistant Secretary of such Credit Party, all in the form of Exhibit F with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of such Credit Party, as the case may be, and the resolutions, or such other administrative approval, of such Credit Party, as the case may be, referred to in such certificate, and the foregoing shall be reasonably acceptable to the Administrative Agent. (b) On the Initial Borrowing Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents shall be reasonably satisfactory in form and substance to the Administrative Agent and the Required Lenders, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings, governmental approvals, good standing certificates and bring-down telegrams or facsimiles, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. 5.05 Shareholders' Agreements; Management Agreements; Tax Sharing Agreements; Employee Benefit Plans; Employment Agreements; Collective Bargaining Agreements; Debt Agreements; Material Contracts; Non-Compete Agreements; Affiliate Contracts. On or prior to the Effective Date, there shall have been delivered to the Administrative Agent true and correct copies (which the Borrower hereby certifies are true and complete copies thereof) of (i) all agreements (if any) entered into by the Borrower or any of its Subsidiaries (after giving effect to the Transaction) governing the terms and relative rights of its capital stock and any agreements entered into by shareholders, relating to any such entity with respect to its capital stock (collectively, the "Shareholders' Agreements"), (ii) all agreements (if any) with senior members of, or with respect to, the management of the Borrower or any of its Subsidiaries (after giving effect to the Transaction) (collectively, the "Management Agreements"), (iii) all agreements (if any) relating to the sharing of tax liabilities and benefits among the Borrower and/or its Subsidiaries (each a "Tax Sharing Agreement" and collectively, the "Tax Sharing Agreements"), (iv) all significant "employee benefit plans", as defined in Section 3(3) of ERISA, and any other material agreements, plans or arrangements, with or for the benefit of current or former employees of the Borrower or any of its Subsidiaries or any ERISA Affiliate (the "Employee Benefit Plans"), (v) any employment agreements for senior management entered into by a Credit Party (collectively, the "Employment Agreements"), (vi) any collective bargaining agreements applying or relating to any employee of a Credit Party -42- 49 (collectively, the "Collective Bargaining Agreements"), (vii) any agreements evidencing or relating to Indebtedness in excess of $1,000,000 of a Credit Party (excluding the Loans) whether or not any such agreement shall remain outstanding after giving effect to the incurrence of Loans on the Initial Borrowing Date (collectively, the "Debt Agreements"), (viii) all other material contracts and licenses of a Credit Party (collectively, the "Material Contracts"), (ix) any non-compete agreement entered into by a Credit Party and restricting its operations or business (collectively, the "Non-Compete Agreements") and (x) all contracts or written agreements entered into between a Credit Party, on the one hand, and any of its Affiliates (other than a Credit Party) on the other hand (collectively, the "Affiliate Contracts"). 5.06 Consummation of the Transaction. (a) On or prior to the Initial Borrowing Date, (i) the Borrower shall have consummated a tender offer/consent solicitation with respect to the outstanding Existing Notes (the "Existing Notes Tender Offer/Consent Solicitation"), pursuant to which (x) the Borrower shall offer, subject to the terms and conditions contained in the Existing Notes Tender Offer/Consent Solicitation, to purchase all of the outstanding Existing Notes at the cash price set forth in the Existing Notes Tender Offer/Consent Solicitation and (y) consents shall be solicited to a proposed amendment to the Existing Notes Indentures on terms and conditions set forth in the Existing Notes Tender Offer Consent Solicitation, which amendment shall provide for the substantial elimination of the financial and certain operating covenants contained in the Existing Notes Indenture (including, without limitation, limitations on the incurrence of liens, transactions with affiliates and indebtedness); (ii) the period for tendering Existing Notes pursuant thereto shall terminate on or prior to the Initial Borrowing Date; (iii) the Borrower shall have received sufficient consents to authorize the execution and delivery of the Existing Notes Indenture Supplement; (iv) the Borrower and the trustee under the Existing Notes Indenture shall have duly executed and delivered the relevant Existing Notes Indenture Supplement; (v) the Borrower shall have repurchased or committed to repurchase all of the properly tendered Existing Notes (which shall in no event be less than a majority in aggregate principal amount of the Existing Notes), and not theretofore withdrawn, pursuant to the Existing Notes Tender Offer/Consent Solicitation (the "Existing Notes Tender Offer Repurchases"); and (vi) the Administrative Agent shall be reasonably satisfied that the Existing Notes Tender Offer/Consent Solicitation shall be consummated in accordance with the Existing Notes Tender Offer Documents and all applicable laws on the Initial Borrowing Date (all of the foregoing, the "Debt Retirement"). (b) On or prior to the Initial Borrowing Date, there shall have been delivered to the Lenders copies of all Acquisition Documents, all of which shall be certified by an Authorized Officer of the Borrower as true and correct and be in full force and effect and shall be in form and substance as provided to the Administrative Agent prior to the Effective Date, together with any changes reasonably satisfactory to the Administrative Agent and the Required Lenders. On the Initial Borrowing Date, the Acquisition shall have been consummated in accordance with the Acquisition Documents and all applicable laws. All material conditions to the Borrower's obligations in the Acquisition Agreement and related material agreements shall have been satisfied, without waiver or modification (except with the consent of the Administrative Agent, which consent shall not be unreasonably withheld). (c) On or prior to the Initial Borrowing Date, the total commitments, all letters of credit (if any) issued and any payment obligations under the Existing Indebtedness (other than -43- 50 Retained Indebtedness) shall have been terminated, and all loans and notes issued thereunder shall have been repaid in full, together with interest thereon, and all other amounts, including premiums, owing pursuant to the Existing Indebtedness (other than Retained Indebtedness) shall have been repaid in full and such Existing Indebtedness shall have been terminated and be of no further force or effect. On or prior to the Initial Borrowing Date or concurrently with the making of any Loan, the creditors under all Existing Indebtedness shall have terminated and released all security interests and Liens on capital stock of and the assets owned or to be owned by the Borrower or any of its Subsidiaries (after giving effect to the Transaction) granted in connection with the Existing Indebtedness (other than Retained Indebtedness). The Administrative Agent shall have received such releases of security interests in and Liens on the capital stock of and assets owned or to be owned by the Borrower and its Subsidiaries (after giving effect to the Transaction) as may have been requested by the Administrative Agent, which releases shall be in form and substance reasonably satisfactory to the Administrative Agent. Without limiting the foregoing, unless otherwise agreed by the Administrative Agent, there shall have been delivered (i) proper termination statements (Form UCC-3 or such other termination statements as shall be required by local law) (or commitments in customary form to deliver such termination statements) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to the Borrower or any of its Subsidiaries, or their respective predecessors in interest, in connection with the security interests created with respect to any Existing Indebtedness and the documentation related thereto, (ii) terminations or assignments (or commitments in customary form to deliver such terminations and assignments) of any security interest in, or Lien on, any Intellectual Property of the Borrower or any of its Subsidiaries, on which filings have been made, (iii) terminations of all mortgages, leasehold mortgages and deeds of trust created with respect to property of the Borrower or any of its Subsidiaries, or their respective predecessors in interest, in each case to secure the obligations under any Existing Indebtedness (other than the Retained Indebtedness), all of which shall be in form and substance reasonably satisfactory to the Required Lenders and (iv) subject to Section 13.17, all collateral owned by the Borrower and its Subsidiaries in the possession of any agent, collateral agent or trustee for the creditors under the Existing Indebtedness or any financial institution party to any agreement in respect of the Existing Indebtedness (other than Retained Indebtedness) or any related agreement. (d) On the Initial Borrowing Date and after giving effect to the Transaction, none of the Credit Parties shall have any Indebtedness or preferred stock outstanding except for the Loans, the Subordinated Bridge Loan and the Retained Indebtedness. (e) On the Initial Borrowing Date, the Borrower shall have (x) entered into the Senior Subordinated Financing Agreement and the Senior Subordinated Financing Agreement shall be in full force and effect and (y) received gross cash proceeds in a minimum aggregate principal amount equal to $300,000,000 from the incurrence of the Subordinated Bridge Loans, and the Borrower shall have utilized such amount to make payments owing in connection with the Transaction before (or simultaneously with) utilizing proceeds of any Loans for such purpose. On the Initial Borrowing Date, the Borrower shall have delivered to the Administrative Agent a true and correct copy of the Senior Subordinated Financing Agreement, the terms and conditions of which shall be in form and substance as provided to the Administrative Agent prior to the Effective Date, together with any changes satisfactory to the Administrative Agent and the Required Lenders. -44- 51 (f) The Administrative Agent shall have received evidence in form, scope and substance satisfactory to the Required Lenders that the matters set forth in this Section 5.06 have been satisfied on or prior to the Initial Borrowing Date. 5.07 Pledge Agreement. On the Initial Borrowing Date, the Borrower and its Subsidiaries shall have duly authorized, executed and delivered a Pledge Agreement in the form of Exhibit G (such Pledge Agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as Pledgee, all the Pledged Securities referred to therein then owned by such Credit Party (except as provided in Section 13.17), together with executed and undated stock powers, in the case of capital stock constituting Pledged Securities. 5.08 Security Agreement. On the Initial Borrowing Date, the Borrower and its Subsidiaries shall have duly authorized, executed and delivered a Security Agreement in the form of Exhibit H (as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, the "Security Agreement") covering all of the Borrower's and its Subsidiaries' present and future Security Agreement Collateral, together with: (a) proper Financing Statements (Form UCC-1) fully executed for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement; (b) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name the Borrower or any of its Subsidiaries as debtor and that are filed in the jurisdictions referred to in clause (a) above, together with copies of such other financing statements (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or in respect of which the Collateral Agent shall have received termination statements (Form UCC-3) or such other termination statements as shall be required by local law); (c) evidence of the completion (or that such completion will occur within 10 days of the Initial Borrowing Date) of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Security Agreement; and (d) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Security Agreement have been taken or will be taken within 10 days of the Initial Borrowing Date. 5.09 Mortgages; Title Insurance; etc. On the Initial Borrowing Date, the Collateral Agent shall have received: (a) duly authorized, fully executed, acknowledged, and delivered deeds of trust, mortgages, leasehold deeds of trust or leasehold mortgages substantially in the form of Exhibit I (as amended, modified, extended, renewed, replaced, restated or supplemented -45- 52 from time to time, each a "Mortgage" and collectively, the "Mortgages"), which Mortgages shall cover such of the Real Property owned or leased by the Borrower and/or its Subsidiaries as shall be designated as such on Schedule III as a mortgaged property thereunder (each, a "Mortgaged Property" and collectively, the "Mortgaged Properties"), together with evidence that counterparts of the Mortgages have been delivered to the title insurance company insuring the Lien of the Mortgages for recording in all places to the extent necessary or, in the reasonable opinion of the Collateral Agent, desirable to effectively create a valid and enforceable Lien on each Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; (b) duly authorized, fully executed, acknowledged, and delivered subordination, nondisturbance and attornment agreements, assignments of leases, landlord consents, tenant estoppel certificates, and such other documents relating to the Mortgages that the Collateral Agent may reasonably request; and (c) Extended coverage policies of mortgage title insurance covering each Mortgaged Property, together with all endorsements reasonably requested by the Collateral Agent relating thereto issued by title insurers reasonably satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts reasonably satisfactory to the Administrative Agent and the Required Lenders (but not in excess of the value of the respective Mortgaged Property) assuring the Collateral Agent that the Mortgages on such Mortgaged Properties are valid and enforceable first priority mortgage liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances and such Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders and shall include, as appropriate and to the extent available, an endorsement for future advances under this Agreement and the Notes and for any other matter that the Collateral Agent in its reasonable discretion may reasonably request, shall not include an exception for mechanics' liens, and shall provide for affirmative insurance (to the extent available) and such reinsurance as the Collateral Agent in its discretion may reasonably request. 5.10 Adverse Change, etc. On the Initial Borrowing Date, after giving effect to the Transaction, nothing shall have occurred (and the Lenders shall have become aware of no facts or conditions not previously known) since June 30, 2000 which (i) could reasonably be expected to have a material adverse effect on the rights or remedies of the Administrative Agent or the Lenders, or on the ability of the Credit Parties to perform their respective obligations to the Administrative Agent and the Lenders or which could reasonably be expected to have a Material Adverse Effect or (ii) reasonably indicates the inaccuracy in any material respect of the information previously provided to the Administrative Agent of the Lenders (taken as a whole) in connection with their analysis of the Transaction or reasonably indicates that the information previously provided omitted to disclose any material information. 5.11 Solvency Certificate; Insurance. On or before the Initial Borrowing Date, the Borrower shall have delivered or shall cause to be delivered to the Administrative Agent (i) a solvency certificate in the form of Exhibit L from the chief financial officer or treasurer of the Borrower, which shall be delivered to each of the Lenders and dated the Initial Borrowing Date, -46- 53 stating that, after giving effect to the Transaction and the incurrence of all financings contemplated herein, the Borrower and its Subsidiaries (on a consolidated basis) are not insolvent and will not be rendered insolvent by the Indebtedness incurred in connection herewith, will not be left with unreasonably small capital with which to engage in their respective businesses and will not have incurred debts beyond their ability to pay such debts as they mature and become due and (ii) evidence of insurance complying with the requirements of Section 8.03 for the business and properties of the Borrower and its Subsidiaries, in scope, form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be canceled or revised without 30 days' prior written notice by the insurer to the Collateral Agent. 5.12 Financial Statements; Projections; Management Letters. (a) On or prior to the Initial Borrowing Date, the Lenders shall have received (i) unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of September 30, 2000 and the related statements of income and retained earnings of the Borrower for the quarter then ended; (ii) unaudited balance sheets of Station Casino St. Charles as of September 30, 2000 and the related statements of income and retained earnings of Station Casino St. Charles for the quarter then ended; (iii) unaudited balance sheets of Station Casino Kansas City as of September 30, 2000 and the related statements of income and retained earnings for quarter then ended; (iv) audited consolidated balance sheets of the Borrower and its Subsidiaries as of December 31, 1997, December 31, 1998 and December 31, 1999 and the related statements of income and retained earnings and cash flow of each of the Borrower for the years then ended, together with the notes related thereto and accompanied by the audit report of Arthur Andersen LLP, independent certified public accountants; (v) unaudited balance sheets of each of the Acquired Businesses as of December 31, 1997, December 31, 1998 and December 31, 1999 and the related statements of income and retained earnings and cash flow for the years then ended; and (vi) internal unaudited financial statements of the Borrower and each Acquired Business as of and for the period ended September 30, 2000. The financial statements described in clauses (i) through (v) above (x) in the case of income statements only, set forth comparative figures for the corresponding period in the prior fiscal year; (y) have been prepared in accordance with GAAP consistently applied (except in each case as described in the notes thereto and except for the absence of footnotes and to year-end audit adjustments, in the case of unaudited statements) and (z) and shall not disclose any material adverse differences in the business, properties, assets, liabilities, results of operations, condition (financial or otherwise) or prospects of the Borrower and each Acquired Business from that previously disclosed to the Lenders. (b) On or prior to the Initial Borrowing Date, the Lenders shall have received (i) a pro forma consolidated opening balance sheet of the Borrower and its Subsidiaries after giving effect to the Transaction and (ii) the Projections described in Section 7.05(d), which pro forma balance sheet and Projections shall be in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders. 5.13 Engineering Reports; Environmental Analyses; Appraisals. On or prior to the Initial Borrowing Date, the Borrower shall cause to be delivered to the Administrative Agent and the Lenders (i) engineering reports with respect to each of the Specified Casino Properties from Eckland Consultants, Inc., which shall be in scope, and in form and substance, acceptable to -47- 54 the Administrative Agent and the Required Lenders, together with reliance letters in form and substance satisfactory to the Administrative Agent, (ii) environmental and hazardous substance analyses reports from (x) RTP Environmental Associates, Inc. with respect to each of the Specified Casino Properties and (y) IT Corporation with respect to each of the Acquired Businesses, which shall be in scope, and in form and substance, acceptable to the Administrative Agent and the Required Lenders, together with reliance letters in form and substance satisfactory to the Administrative Agent and (iii) real estate appraisals with respect to each of the Specified Casino Properties from HVS International, which shall be in scope, and in form and substance, acceptable to the Administrative Agent and the Required Lenders, setting forth an aggregate stabilized appraised value of the Specified Casino Properties (taken as a whole) of at least an amount satisfactory to the Administrative Agent, together with reliance letters in form and substance satisfactory to the Administrative Agent. 5.14 Litigation. On the Initial Borrowing Date, no litigation by any entity (private or governmental) shall be pending or threatened with respect to this Agreement, any other Document or any documentation executed in connection herewith or with respect to the Transaction, or which the Required Lenders shall determine could reasonably be expected to have a materially adverse effect on the Transaction or on the performance, business, assets, nature of assets, liabilities, operations, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole (after giving effect to the Transaction). 5.15 Subsidiary Guaranty. On the Initial Borrowing Date, subject to Section 13.17 each Subsidiary of the Borrower (after giving effect to the Transaction) shall have executed and delivered a guaranty agreement, substantially in the form of Exhibit J (as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, the "Subsidiary Guaranty"). 5.16 Approvals, etc. (a) On or prior to the Initial Borrowing Date, (i) except as provided in Section 13.17, all necessary governmental (domestic and foreign) and third party approvals and consents (including, in any event, (x) all required Gaming Authority approvals and consents and (y) all shareholder and board of director approvals and consents) required in connection with the Transaction and the other transactions contemplated by this Agreement and the other Credit Documents which are to occur by the Initial Borrowing Date and otherwise referred to herein or therein shall have been obtained and remain in full force and effect and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction and the other transactions contemplated by this Agreement and (ii) the Administrative Agent shall have received copies or other evidence reasonably satisfactory to it of all such approvals and consents. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the consummation of the Transaction or the other transactions contemplated by this Agreement or the other Credit Documents which are to occur by the Initial Borrowing Date. (b) On or prior to the Initial Borrowing Date, the Administrative Agent shall be satisfied in its discretion with any conditions or requirements imposed by the Missouri, Nevada, -48- 55 Mississippi and Iowa or other relevant Gaming Authorities upon the Lenders, this Agreement, the other Documents or the Transaction not disclosed to the Lenders prior to the Effective Date. (c) On or prior to the Initial Borrowing Date, and except as provided in Section 13.17 the Borrower and its Subsidiaries shall have received any approvals or qualifications required under applicable Gaming Regulations in connection with this Agreement and the other Credit Documents to be obtained prior to the Initial Borrowing Date, and the Borrower and the Subsidiary Guarantors shall have received all other approvals, authorizations or consents of, or notices to or registrations with any governmental body and required releases and consents from other appropriate Persons (including, without limitation, the shareholders of the Borrower) in connection with this Agreement and the other Credit Documents and shall have provided copies or other satisfactory evidence of all approvals, authorizations or consents referred to above to the Administrative Agent to the extent available. 5.17 Ship Mortgages. On the Initial Borrowing Date, the Collateral Agent shall have received duly authorized, fully executed, acknowledged, and delivered first preferred ship mortgages substantially in the form of Exhibit M (as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, each a "Ship Mortgage" and collectively, the "Ship Mortgages"), which Ship Mortgages shall cover such of the Ship Properties owned or leased by the Borrower and/or its Subsidiaries as shall be designated as such on Schedule XI as a mortgaged ship property thereunder (each, a "Mortgaged Ship Property" and collectively, the "Mortgaged Ship Properties"), together with evidence that the Ship Mortgages have been recorded or filed (or will be filed or recorded within 10 days of the Initial Borrowing Date) in all places to the extent necessary or, in the reasonable opinion of the Collateral Agent, desirable to effectively create a valid and enforceable Lien on each Mortgaged Ship Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors. SECTION 6. Conditions Precedent to All Credit Events. The obligation of each Lender to make Loans and participate in Letters of Credit (including Loans made and Letters of Credit issued on the Initial Borrowing Date), and the obligation of any Issuing Lender to issue any Letter of Credit (including any Letter of Credit issued on the Initial Borrowing Date), is subject, at the time of each such Credit Event (except as hereinafter indicated), to the satisfaction of the following conditions: 6.01 No Default; Representations and Warranties. At the time of each such Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in any other Credit Document shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of the making of such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making of each Loan (other than a Swingline Loan or a Mandatory Borrowing), the Administrative Agent -49- 56 shall have received the notice required by Section 1.03(a). Prior to the making of each Swingline Loan, the Swingline Lender shall have received the notice referred to in Section 1.03(b). (b) Prior to the issuance of each Letter of Credit, the Administrative Agent and the respective Issuing Lender shall have received a Letter of Credit Request meeting the requirements of Section 2.02. 6.03 Facilities Expansion Certificate. Prior to the making of (i) each RTL Loan and (ii) at any time if after giving effect to the incurrence or issuance thereof the aggregate outstanding principal amount of the Revolving Outstandings shall exceed the Revolving Loan Commitment Sublimit, each Revolving Loan Swingline Loan and Letter of Credit, the Borrower shall have delivered to the Administrative Agent a certificate (each, a "Facilities Expansion Certificate"), which certificate shall (x) state that the proceeds of such RTL Loans or Revolving Loans, Swingline Loans or Letter of Credit, as the case may be, the incurrence of which would cause the Revolving Outstandings to exceed the Revolving Loan Commitment Sublimit, shall be utilized solely to finance the Facilities Expansion, (y) set forth, in reasonable detail, the purposes for which the proceeds of such Loans will be utilized and (z) in the case of an RTL Loan, state that the Revolving Loan Facilities Expansion Amount equals or exceeds $25,000,000. The acceptance of the benefit of each Credit Event shall constitute a representation and warranty by the Borrower to the Administrative Agent and each of the Lenders that all the conditions specified in Section 5 and in this Section 6 and applicable to such Credit Event exist as of that time (except to the extent that any of the conditions specified in Section 5 are required to be satisfactory to or determined by any Lender, the Required Lenders and/or the Administrative Agent). All of the Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office or to counsel for the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders. SECTION 7. Representations and Warranties. In order to induce the Lenders to enter into this Agreement and to make the Loans, and issue (or participate in) the Letters of Credit as provided herein, the Borrower makes the following representations and warranties, in each case after giving effect to the Transaction consummated on the Initial Borrowing Date, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and the issuance of the Letters of Credit, with the occurrence of each Credit Event on or after the Initial Borrowing Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct on and as of the Initial Borrowing Date in all material respects and in all material respects on the date of each such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 7.01 Corporate Status. The Borrower and each of its Subsidiaries (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly -50- 57 qualified to do business and is in good standing in each jurisdiction where the conduct of its business requires such qualifications except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 7.02 Corporate Power and Authority. Each Credit Party has the corporate power and authority to execute, deliver and perform the terms and provisions of each of the Documents to which it is party and has taken all necessary corporate action, as the case may be, to authorize the execution, delivery and performance by it of each of such Documents. Each Credit Party has duly executed and delivered each of the Documents to which it is party, and each of such Documents constitutes such Credit Party's legal, valid and binding obligation enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 7.03 No Violation. Neither the execution, delivery or performance by any Credit Party of the Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any material provision of any applicable law, statute, rule or regulation or any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the material terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the material properties or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which the Borrower or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of the Borrower or any of its Subsidiaries. 7.04 Governmental Approvals. Except as provided in Section 13.17, no order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made prior to the Initial Borrowing Date or, if later, the date as of which this representation is being made), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of any Document or (ii) the legality, validity, binding effect or enforceability of any such Document, except, (x) in the case of any Document other than a Credit Document, in the case of any failure to obtain where such failure to so obtain would not have a Material Adverse Effect and (y) the approval of one or more Gaming Authorities may be required in connection with foreclosure under the Security Documents. 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc. (a) The balance sheets, statements of operations, statements of stockholders' equity, statements of changes in stockholders' equity and statements of cash flows of the Borrower and its Subsidiaries as furnished to the Lenders prior to the Effective Date fairly present the financial condition and operations of the Borrower and its Subsidiaries at and for the periods indicated. All such financial statements have been prepared in accordance with GAAP, consistently applied. After giving effect to the Transaction, since June 30, 2000, there has been -51- 58 no material adverse change in the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. (b) (i) On and as of the Initial Borrowing Date, after giving effect to the Transaction and to all Indebtedness incurred, and to be incurred, and Liens created, and to be created, by the Borrower and its Subsidiaries in connection therewith, (a) the sum of the assets, at a fair valuation, of the Borrower and its Subsidiaries will exceed their debts; (b) the Borrower and its Subsidiaries taken as a whole have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their ability to pay such debts as such debts mature; and (c) the Borrower and its Subsidiaries taken as a whole will have sufficient capital with which to conduct their businesses. For purposes of this Section 7.05(b), "debt" means any liability on a claim, and "claim" means (i) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (c) Except as fully disclosed in the financial statements delivered pursuant to Section 7.05(a) or as disclosed in writing to the Lenders prior to the Effective Date, there were as of the Initial Borrowing Date no liabilities or obligations with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would be material to the Borrower or to the Borrower and its Subsidiaries taken as a whole. As of the Initial Borrowing Date the Borrower does not know of any basis for the assertion against it of any liability or obligation of any nature whatsoever that is not fully disclosed in the financial statements delivered pursuant to Section 7.05(a) which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (d) On and as of the Initial Borrowing Date, the financial projections dated as of November 2000 (the "Projections") previously delivered to the Administrative Agent and the Lenders have been prepared on a basis consistent with the financial statements referred to in Section 7.05(a) (other than as set forth or presented in such Projections), and there are no statements or conclusions in any of the Projections which are based upon or include information known to the Borrower to be misleading in any material respect or which fail to take into account material information regarding the matters reported therein. On the Initial Borrowing Date, the Borrower believed that the Projections were reasonable estimates of the Borrower's anticipated performance, based on good faith assumptions and the best information available to the Borrower as of the date of delivery thereof and as of the Initial Borrowing Date. 7.06 Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of the Borrower, threatened (i) with respect to any Document on the Initial Borrowing Date or (ii) that could reasonably be expected to have a Material Adverse Effect. 7.07 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of the Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement, the other Credit Documents or any -52- 59 transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the Borrower in writing to the Administrative Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. 7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the Term Loans shall be utilized by the Borrower (i) to effect the Transaction and (ii) to pay fees and expenses related to the Transaction. (b) Proceeds of (x) RTL Loans and (y) to the extent that the incurrence thereof would cause Revolving Outstandings to exceed the Revolving Loan Commitment Sublimit, Revolving Loans, Swingline Loans, and Letters of Credit, shall be utilized by the Borrower solely (i) to effect the Facilities Expansion and (ii) to pay fees and expenses related to the Facilities Expansion. (c) Proceeds of Revolving Loans and Swingline Loans may be utilized, subject to clause (b) above, (w) to effect the Transaction, (x) to pay fees and expenses related to the Transaction, (y) for the Borrower's and its Subsidiaries' general corporate and working capital purposes and (z) to make payments required in connection with the Facilities Expansion following the Initial Borrowing Date, provided that no more than $75,000,000 of Revolving Loans and Swingline Loans may be utilized by the Borrower (i) to effect the Transaction or (ii) to pay fees and expenses related to the Transaction. (d) No part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. 7.09 Tax Returns and Payments. Each of the Borrower and its Subsidiaries has timely filed or caused to be timely filed, on the due dates thereof or within applicable grace periods, with the appropriate taxing authority, all Federal and all material state and foreign returns, statements, forms and reports for taxes (the "Returns") required to be filed by or with respect to the income, properties or operations of the Borrower and/or any of its Subsidiaries. The Returns accurately reflect in all material respects all liability for taxes of the Borrower and its Subsidiaries, as the case may be, for the periods covered thereby. Each of the Borrower and its Subsidiaries has paid all material taxes payable by them other than taxes which are not delinquent or are being contested in good faith and for which adequate reserves have been established in accordance with GAAP. Except as disclosed in the financial statements referred to in Section 7.05(a), as of the Initial Borrowing Date there is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of the Borrower or any of its Subsidiaries, threatened by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries. As of the Initial Borrowing Date, except as set forth in Schedule VII, neither the Borrower nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment -53- 60 or collection of taxes of the Borrower or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. Neither the Borrower nor any of its Subsidiaries has incurred, or will incur, any material income tax liability in connection with the Transaction and the other transactions contemplated hereby (other than as a result of the operations after the Initial Borrowing Date of properties acquired in the Transaction). 7.10 Compliance with ERISA. As of the Initial Borrowing Date, neither Borrower, any Subsidiary or any ERISA Affiliate sponsors, contributes to or maintains a Plan or has any actual or contingent liability under any Plan. To the extent that Borrower, any Subsidiary or any ERISA Affiliate becomes the sponsor, contributes to or maintains a Plan or has any actual or contingent liability under a Plan, Borrower shall schedule such Plan. To the extent applicable, each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws including, without limitation, ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received or has applied for a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred with respect to a Plan; to the knowledge of the Borrower, each of its Subsidiaries and each ERISA Affiliate, no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has a material Unfunded Current Liability; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither the Borrower nor any of its Subsidiaries nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or reasonably expects to incur any such liability under any of the foregoing Sections with respect to any Plan; to the knowledge of Borrower, each Subsidiary and each ERISA Affiliate, no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending or, to the knowledge of Borrower, Subsidiary and each ERISA Affiliate, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower, its Subsidiaries and their ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not exceed $5,000,000; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in compliance in all material respects with the provisions of Part 6 of -54- 61 subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability. 7.11 The Security Documents. (a) The provisions of the Security Agreement are effective to create in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable security interest in all right, title and interest of the Credit Parties in the Security Agreement Collateral described therein, and the Security Agreement, upon the filing of Form UCC-1 financing statements or the appropriate equivalent (which filing, if this representation is being made more than 10 days after Initial Borrowing Date, has been made), create a fully perfected lien on, and security interest in, all right, title and interest in all of the Security Agreement Collateral described therein which is capable of being perfected with such filings, subject to no other Liens other than Permitted Liens and Liens to be released in connection with the Transaction. (b) The security interests created in favor of the Collateral Agent, as Pledgee, for the benefit of the Secured Creditors under the Pledge Agreement constitute first priority perfected security interests in the Pledged Securities described in the Pledge Agreement, subject to no security interests of any other Person. No filings or recordings are required in order to perfect (or maintain the perfection or priority of) the security interests created in the Pledged Securities and the proceeds thereof under the Pledge Agreement, so long as the Collateral Agent maintains possession of such Pledged Securities consisting of certificated securities in the State of New York. (c) The Mortgages create, as security for the obligations purported to be secured thereby, a valid and enforceable perfected security interest in and mortgage lien on all of the Mortgaged Properties in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, superior to and prior to the rights of all third persons (except that the security interest and mortgage lien created in the Mortgaged Properties may be subject to the Permitted Encumbrances, Permitted Liens and Liens to be released in connection with the Transaction related thereto) and subject to no other Liens (other than Liens permitted under Section 9.01). Schedule III contains a true and complete list of each parcel of Real Property owned or leased by the Borrower and its Subsidiaries on the Initial Borrowing Date (after giving effect to the Transaction) and the type of interest therein held by the Borrower or such Subsidiary. (d) The Ship Mortgages create, as security for the obligations purported to be secured thereby, a valid and enforceable perfected security interest in and mortgage lien on all of the Ship Properties in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, superior to and prior to the rights of all third persons (except that the security interest and mortgage lien created in the Ship Properties may be subject to the Permitted Encumbrances, Permitted Liens and Liens to be released in connection with the Transaction related thereto) and subject to no other Liens (other than Liens permitted under Section 9.01). Schedule XI contains a true and complete list of each -55- 62 Ship Property owned or leased by the Borrower and its Subsidiaries on the Initial Borrowing Date and the type of interest therein held by the Borrower or such Subsidiary. 7.12 Representations and Warranties in Documents. All representations and warranties of the Borrower and its Subsidiaries set forth in the other Documents were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made). 7.13 Properties. The Borrower and each of its Subsidiaries have good and valid title to all properties (or a valid leasehold estate with respect to leased properties) owned by them after giving effect to the Transaction in accordance with the Transaction Documents, including all property reflected in the balance sheet of the Borrower referred to in Section 7.05(a) and in the pro forma balance sheet referred to in Section 5.12 (except for property sold or otherwise disposed of since the date of such balance sheet in the ordinary course of business or as otherwise permitted by this Agreement), free and clear of all Liens, other than (i) as referred to in the balance sheet or in the notes thereto or in such pro forma balance sheet or (ii) Permitted Liens. 7.14 Capitalization. On the Initial Borrowing Date and after giving effect to the Transaction and the other transactions contemplated hereby, the authorized capital stock of the Borrower shall consist of 30,000,000 shares of common stock, $0.01 par value per share, 20,441,254 of which shares are outstanding. All such outstanding shares of common stock have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights. As of the Initial Borrowing Date, neither the Borrower nor its Subsidiaries has outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 7.15 Subsidiaries. After giving effect to the Transaction, as of the Effective Date, the Borrower will have no direct or indirect Subsidiaries other than those listed on Schedule IX. 7.16 Compliance with Statutes, etc. Each of the Borrower and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as could not individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 7.17 Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 7.18 Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.19 Labor Relations. Neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material -56- 63 Adverse Effect. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries and (iii) to the best knowledge of the Borrower, no concerted and continuous effort to organize a union with respect to the employees of the Borrower or any of its Subsidiaries, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to have a Material Adverse Effect. 7.20 Patents, Licenses, Franchises and Formulas. Each of the Borrower and its Subsidiaries owns all material patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, necessary for the present conduct of its business, without any known conflict with the rights of others which, or the failure to obtain which, as the case may be, could reasonably be expected to have a Material Adverse Effect. 7.21 Transaction. As of the Initial Borrowing Date and after giving effect to the application of the proceeds thereof, the Transaction is being consummated in all material respects in accordance with the terms of the respective Transaction Documents and all applicable laws. As of the Initial Borrowing Date, all consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Transaction will have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained), except (x) where the failure to so obtain, give, file or take would not have a Material Adverse Effect; and (y) filings of reports of transactions required to be filed after the Initial Borrowing Date as provided in Section 13.17 and other matters set forth in Section 13.17. All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Transaction. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the Transaction, or any Credit Event or the performance by any Credit Party of its obligations under the respective Documents. All actions taken by each Credit Party pursuant to or in furtherance of the Transaction have been taken in material compliance with the respective Documents and all applicable laws. 7.22 Indebtedness. Schedule VII sets forth a true and complete list of all Indebtedness (other than the Loans and Indebtedness incurred under the Senior Subordinated Financing) of the Credit Parties as of the Initial Borrowing Date after giving effect to the Transaction and the other transactions contemplated hereby, in each case showing the aggregate amount thereof and the name of the respective obligor and any other entity which directly or indirectly guaranteed such debt (the "Retained Indebtedness"). -57- 64 7.23 Intellectual Property. Schedule X attached hereto contains a list of all United States and foreign patents, patent applications, registered and unregistered trademarks, trade names, service marks and registered copyrights, owned by, or licensed to any of the Credit Parties as of the Initial Borrowing Date that is material to the operation of the business of any of the Credit Parties. Each of the foregoing is collectively defined herein as "Intellectual Property". The business of each of the Credit Parties as presently conducted requires no rights under Intellectual Property other than rights owned by the Credit Parties or licensed to a Credit Party pursuant to a valid and effective license agreement, except to the extent the failure to possess any such Intellectual Property rights, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Except as otherwise disclosed on Schedule X as of the Initial Borrowing Date, the Credit Parties own all right and interest and full legal, equitable and beneficial ownership in the Intellectual Property owned by the Credit Parties including, without limitation, exclusive rights (except for rights granted under any license to any third party) to use, sell, transfer, assign and license the same. Except as otherwise disclosed on Schedule X as of the Initial Borrowing Date, no consent of third parties will be required for the use by the Credit Parties of any Intellectual Property as a consequence of the consummation of the transactions contemplated hereby. As of the Initial Borrowing Date, each item of Intellectual Property owned by the Credit Parties listed on Schedule X has been duly registered with, filed in, or issued by the appropriate domestic or foreign governmental agency, to the extent required, and each such registration, filing and issuance remains in full force and effect. To the knowledge of the Credit Parties, no Person has infringed or otherwise violated the Credit Parties' right in any of the Intellectual Property except for any such infringement or violation that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 7.24 Environmental Matters. Except for matters that either individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect or as is set forth on Schedule XII: (a) Each of the Borrower and its Subsidiaries has complied and is in compliance with all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no past, pending or, to the best knowledge of the Borrower or any of its Subsidiaries, threatened Environmental Claims against the Borrower or any of its Subsidiaries or any Real Property currently or, to the best knowledge of the Borrower or any of its Subsidiaries, previously owned or operated by the Borrower or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences on any Real Property currently owned or operated by the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower or any of its Subsidiaries, on any formerly owned or operated Real Property or any property adjoining or in the vicinity of any currently owned or operated Real Property that could reasonably be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any currently owned or operated Real Property or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, or Released on or from, any Real Property owned or operated by the Borrower or any of its Subsidiaries except in compliance with all Environmental -58- 65 Laws and reasonably required in connection with the operation, use and maintenance of any such Real Property by the Borrower's or such Subsidiary's business. There are not now any underground storage tanks owned or operated by the Borrower or any of its Subsidiaries located on any Real Property owned or operated by the Borrower or any of its Subsidiaries. 7.25 Senior Debt. All of the Obligations constitutes "Senior Debt" under the Subordinated Bridge Loans and Permanent Senior Subordinated Notes. SECTION 8. Affirmative Covenants. The Borrower hereby covenants and agrees that on and after the Effective Date and until the Total Commitment and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full: 8.01 Information Covenants. The Borrower will furnish to each Lender: (a) Monthly Reports. Within 30 days after the end of each fiscal month of the Borrower, the combined balance sheets of the Borrower and its Consolidated Subsidiaries as of the end of such month and the related combined statements of income and statements of cash flows for such month and for the last elapsed portion of the fiscal year ended with the last day of such month, in each case setting forth in the statements of income only, the comparative figures for the corresponding month in the prior fiscal year. (b) Quarterly Financial Statements. As soon as available and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower (subject to extension in the event of an SEC 12b-25 filing), the combined balance sheets of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related combined statements of income and statements of cash flows for such quarter and for the last elapsed portion of the fiscal year ended with the last day of such quarter and setting forth in the statements of income only, the comparative figures for the corresponding quarter in the prior fiscal year and the budgeted figures for such quarter as set forth in the respective budget delivered pursuant to Section 8.01(e), (ii) the consolidating balance sheets of each of the Borrower's Subsidiaries as of the end of such quarter and the related consolidating statements of income and consolidating statements of cash flows for such quarter and for the elapsed portion of the fiscal year ended with the last day of such quarter, in each case setting forth in the statements of income only, the comparative figures for the corresponding quarter in the prior fiscal year and the budgeted figures for such quarter as set forth in the respective budget delivered pursuant to Section 8.01(e), and (iii) management's discussion and analysis of the important operational and financial developments during such quarterly period in respect of the Borrower and its Subsidiaries. (c) Annual Financial Statements. Within 90 days after the close of each fiscal year of the Borrower (subject to extension in the event of an SEC 12b-25 filing), the consolidated balance sheets of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year and the related statements of income and retained earnings and of cash flows for such fiscal year and, setting forth comparative figures for the preceding fiscal year commencing fiscal year 2000 and certified, in the case of such consolidated statements, by Arthur Andersen LLP or such other independent certified public accountants of recognized national standing reasonably acceptable -59- 66 to the Administrative Agent, together with a report of such accounting firm (which report shall be unqualified as to scope) and a statement stating that in the course of its regular audit of the financial statements of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default under Sections 9.03, 9.04, 9.05 and 9.07 through 9.12, inclusive, which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, (ii) the consolidating balance sheets of each of the Borrower's Subsidiaries at the end of such fiscal year and the related consolidating statement of income and retained earnings and statement of cash flows for such fiscal year, in each case setting forth comparative figures for the preceding fiscal year, and (iii) management's discussions and analysis of the important operational and financial developments during such fiscal year in respect of the Borrower and its Subsidiaries. (d) Management Letters. Promptly after the receipt thereof by the Borrower or any of its Subsidiaries, a copy of any final "management letter" received by the Borrower or such Subsidiary from its certified public accountants and management's responses thereto. (e) Budgets. No later than 45 days following the commencement of the first day of each fiscal year of the Borrower, a budget in form reasonably satisfactory to the Administrative Agent prepared by the Borrower for (x) in the case of budgeted statements of income, each of the twelve months of such fiscal year prepared in detail, and (y) in the case of budgeted statements of sources and uses of cash and balance sheets, for such fiscal year on an annual basis and prepared in detail and for each of the five years immediately following such fiscal year prepared in summary form, accompanied by the statement of the Chief Executive Officer, President, Vice President or Chief Financial Officer of the Borrower to the effect that, to the best of knowledge of such Person, the budget is a reasonable estimate of anticipated performance, based on assumptions such Person believes to be reasonable, for the period covered thereby. (f) Officer's Certificates. At the time of the delivery of the financial statements provided for in Section 8.01(b) and (c), a certificate of the Chief Executive Officer, President, Vice President or Chief Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which certificate shall (x) set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Sections 9.03, 9.04, 9.05, and 9.07 through 9.12, inclusive, at the end of such fiscal quarter or year, as the case may be, (y) the Applicable Margin for the Margin Reduction Period commencing with the delivery of the respective financial statements and (z) if delivered with the financial statements required by Section 8.01(c), set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Section 4.02(A)(i) and set forth the amount of Excess Cash Flow for the respective Excess Cash Payment Period. (g) Notice of Default or Litigation. Promptly, and in any event within five Business Days after an Authorized Officer of the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default and (ii) any -60- 67 litigation or governmental investigation or proceeding (including, without limitation, any investigation by any Gaming Authority) pending against the Borrower or any of its Subsidiaries which could reasonably be expected to result in a Material Adverse Effect. (h) Other Reports and Filings. Promptly, copies of all (i) financial information, proxy materials and other information and reports, if any, which the Borrower or any of its Subsidiaries shall file with the Securities and Exchange Commission or any successor thereto (the "SEC"), (ii) notices of default in the observance or performance by the Borrower or any of its Subsidiaries of any agreement or condition relating to any Indebtedness in a principal amount equal to or exceeding $5,000,000 in the aggregate (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto and (iii) communications with holders of its public Indebtedness pursuant to the terms of the documentation governing such public Indebtedness. (i) Environmental Matters. Promptly upon, and in any event within thirty days after, an officer of the Borrower or any of its Subsidiaries obtains knowledge thereof, notice of one or more of the following environmental matters which occurs after the Initial Borrowing Date unless such environmental matters could not, individually or when aggregated with all other such environmental matters, be reasonably expected to have a Material Adverse Effect: (i) any material Environmental Claim pending or threatened in writing against the Borrower or any of its Subsidiaries or any Real Property owned, operated or occupied by the Borrower or any of its Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned, operated or occupied by the Borrower or any of its Subsidiaries that (a) results in material noncompliance by the Borrower or any of its Subsidiaries with any applicable Environmental Law or (b) would reasonably be expected to form the basis of a material Environmental Claim against the Borrower or any of its Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned, operated or occupied by the Borrower or any of its Subsidiaries that would reasonably be expected to cause such Real Property to be subject to any material restrictions on the ownership, occupancy, use or transferability by the Borrower or any of its Subsidiaries of such Real Property under any Environmental Law; and (iv) the taking of any material removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned, operated or occupied by the Borrower or any of its Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any event the Borrower shall deliver to the Administrative Agent all material notices received by it or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower's or such Subsidiary's -61- 68 response thereto. In addition, the Borrower will provide the Lenders with copies of all material communications with any government or governmental agency and all material communications with any Person relating to any Environmental Claim of which notice is required to be given pursuant to this Section 8.01(i), and such detailed reports of any such Environmental Claim as to which notice is required, as may reasonably be requested by the Administrative Agent or the Lenders. (j) Notice of Commitment Reductions and Mandatory Repayments. On or prior to the date of any reduction to the Total Commitment or any mandatory repayment of outstanding Term Loans pursuant to any of Sections 4.02(f) through (j), inclusive, the Borrower shall provide written notice of the amount of the respective reduction or repayment, as the case may be, the calculation thereof (in reasonable detail) and the event to which the respective reduction or repayment relates. (k) Annual Meetings with Lenders. At the request of the Administrative Agent, the Borrower shall within 120 days after the close of each fiscal year of the Borrower hold a meeting at a time and place selected by the Borrower and acceptable to the Administrative Agent with all of the Lenders at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Borrower and the budgets presented for the current fiscal year of the Borrower and its Subsidiaries. (l) Other Information. From time to time, such other information or documents (financial or otherwise) with respect to the Borrower or its Subsidiaries as any Lender may reasonably request in writing; provided that such written request shall be delivered by any such Lender to the Administrative Agent and such other information or documents shall be delivered by the Borrower to the Administrative Agent who shall promptly deliver same to the Lender making such written request. 8.02 Books, Records and Inspections. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in material conformity with generally accepted accounting principles in the United States and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of the Administrative Agent or any Lender to visit and inspect, during regular business hours, upon reasonable advance notice and under guidance of officers of the Borrower or such Subsidiary, any of the properties of the Borrower or such Subsidiary, and to examine the books of account of the Borrower or such Subsidiary and discuss the affairs, finances and accounts of the Borrower or such Subsidiary with, and be advised as to the same by, its and their officers, all at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or such Lender may request. 8.03 Maintenance of Property; Insurance. (a) Schedule IV sets forth a true and complete listing of all insurance maintained by the Borrower and its Subsidiaries as of the Effective Date. The Borrower will, and will cause each of its Subsidiaries to, (i) keep all property necessary in its business in good working order and condition (ordinary wear and tear excepted), (ii) maintain insurance on all its property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice and (iii) furnish to each -62- 69 Lender, upon written request, full information as to the insurance carried. In addition to the requirements of the immediately preceding sentence, the Borrower will at all times cause the liability and hazard insurance of the types described in Schedule IV to be maintained (with the same scope of coverage as that described in Schedule IV) at levels which are at least as great as the respective amount described opposite the respective type of insurance on Schedule IV under the column headed "Minimum Amount Required to be Maintained". Notwithstanding the foregoing, if such liability and hazard insurance ceases to be available or is no longer available on commercially reasonable terms, the Borrower may, with the consent of the Administrative Agent (not to be unreasonably withheld), cease to maintain such insurance or maintain such insurance at levels that are commercially reasonable. (b) All policies (including Mortgage Policies) or certificates (or certified copies thereof) with respect to such insurance (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee or as an additional insured), (ii) shall state that such insurance policies shall not be canceled without 30 days' prior written notice thereof by the respective insurer to the Collateral Agent, (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors, (iv) shall contain the standard non-contributory mortgagee clause endorsement in favor of the Collateral Agent with respect to hazard insurance coverage, and (v) shall, except in the case of public liability insurance, business interruption insurance and workers' compensation insurance, provide that any losses shall be payable notwithstanding (A) any act or neglect of the Borrower or any of its Subsidiaries, (B) the occupation or use of the properties for purposes more hazardous than those permitted by the terms of the respective policy if such coverage is obtainable at commercially reasonable rates and is of the kind from time to time customarily insured against by Persons owning or using similar property and in such amounts as are customary, (C) any foreclosure or other proceeding relating to the insured properties if such coverage is available at commercially reasonable rates or (D) any change in the title to or ownership or possession of the insured properties if such coverage is available at commercially reasonable rates. (c) If the Borrower or any of its Subsidiaries shall fail to maintain all insurance in accordance with this Section 8.03, or if the Borrower or any of its Subsidiaries shall fail to so endorse and deposit all policies or certificates with respect thereto, the Administrative Agent and/or the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and the Borrower agrees to reimburse the Administrative Agent or the Collateral Agent as the case may be, for all costs and expenses of procuring such insurance. 8.04 Corporate Franchises. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that nothing in this Section 8.04 shall prevent (i) sales of assets (including, without limitation, capital stock of, or other equity interests in, Subsidiaries of the Borrower) by the Borrower or any of its Subsidiaries in accordance with Section 9.02, (ii) the withdrawal by the Borrower or any of its Subsidiaries of their qualification as a foreign corporation or of their license under any Gaming Regulations in any jurisdiction where such withdrawal could not reasonably be expected -63- 70 to have a Material Adverse Effect or (iii) mergers or consolidations or liquidations permitted under Section 9.02. 8.05 Compliance with Statutes, etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 8.06 ERISA. To the extent that Borrower, any Subsidiary or any ERISA Affiliate sponsors, contributes to or maintains a Plan or has any actual or contingent liability under a Plan, as soon as possible and, in any event, within ten days after the Borrower or any of its Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to each of the Lenders a certificate of an Authorized Officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices then required or proposed to be given to or filed with or by the Borrower, such Subsidiary, the Plan administrator or such ERISA Affiliate to or with the PBGC or any other government agency, or a Plan participant and any material notices received by such Borrower, such Subsidiary or ERISA Affiliate from the PBGC or any other government agency, or a Plan participant with respect thereto: that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Lenders a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application is in the reasonable opinion of the Borrower, likely to be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 or Section 303 or 304 of ERISA of the Code with respect to a Plan; that any contribution required to be made with respect to a Plan has not been timely made; that a Plan has been or is reasonably expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings are in the reasonable opinion of the Borrower likely to be or have been instituted or notice has been given to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that the Borrower, any of its Subsidiaries or any ERISA Affiliate will or is reasonably expected to incur any material liability (including any indirect, contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA; or, with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under section 4980B of the Code; or that the Borrower or any of its Subsidiaries may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to -64- 71 retired employees or other former employees (other than as required by Section 601 of ERISA or benefits the full cost of which is borne by the employee or former employee) or any Plan. The Borrower will deliver to each of the Lenders copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. The Borrower will also deliver to each of the Lenders a complete copy of the annual report (Form 5500 series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the annual report. In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC or any other government agency, and any material notices received by the Borrower or any of its Subsidiaries or any ERISA Affiliate with respect to any Plan shall be delivered to the Lenders no later than ten days after the date such annual report has been filed or such records, documents or other information required to be furnished to the PBGC or any other government agency or such material notice has been received by the Borrower, the respective Subsidiary or the ERISA Affiliate, as applicable. 8.07 End of Fiscal Years; Fiscal Quarters. The Borrower shall cause (i) each of its fiscal years to end on December 31, and (ii) each of its fiscal quarters to end on March 31, June 30 and September 30. 8.08 Performance of Obligations. The Borrower will, and will cause each of its Subsidiaries to, perform all of their obligations under the terms of each mortgage, indenture, security agreement and other debt instrument by which it is bound, except such non-performances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 8.09 Payment of Taxes. The Borrower will pay and discharge or cause to be paid and discharged, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, in each case on a timely basis, and all lawful claims of governmental authorities which, if unpaid, might become a lien or charge upon any properties of the Borrower or any of its Subsidiaries; provided that neither of the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 8.10 Intellectual Property Rights. The Borrower shall, and shall cause each of its Subsidiaries to, maintain in full force and effect all material Intellectual Property rights necessary or appropriate to the business of the Credit Parties and take no action (including, without limitation, the licensing of Intellectual Property), or fail to take an action, as the case may be, in connection with such Intellectual Property rights which could reasonably be expected to result in a Material Adverse Effect. The Borrower shall, and shall cause each of its Subsidiaries to, use commercially reasonable efforts to prosecute all material pending applications filed in connection with perfecting or seeking to perfect the Intellectual Property rights and take all other reasonable actions necessary for the protection and maintenance of the material Intellectual -65- 72 Property rights necessary or appropriate to the business of the Credit Parties at all times from and after the Initial Borrowing Date. 8.11 Additional Security; Further Assurances. The Borrower will, and will cause each of its Subsidiaries to, grant to the Collateral Agent security interests and mortgages (an "Additional Mortgage") in such Real Property of the Borrower or any of its Subsidiaries as are not covered by the original Mortgages to the extent acquired after the Initial Borrowing Date (including to the extent acquired through a Permitted Acquisition) and having a fair market value in excess of $1,000,000 (as determined in good faith by the Borrower), or as may reasonably be requested from time to time by the Administrative Agent or the Required Lenders (each such Real Property, an "Additional Mortgaged Property"). (b) The Borrower will, and will cause each of its Subsidiaries to, grant to the Collateral Agent security interests and mortgages (an "Additional Ship Mortgage") in such ship, barge or other vessel of the Borrower or any of its Subsidiaries as are not covered by the original Ship Mortgages to the extent acquired after the Initial Borrowing Date, and as may reasonably be requested from time to time by the Administrative Agent or the Required Lenders (each such Ship Property, an "Additional Ship Mortgaged Property"). (c) In connection with the acquisition of the capital stock of a Person that becomes a Subsidiary of the Borrower or the formation of a new Subsidiary of the Borrower, the Borrower shall pledge or cause to be pledged all capital stock of any such Person so acquired which is owned by the Borrower or any Subsidiary Guarantor pursuant to the Pledge Agreement and cause such Person to enter into a guaranty substantially similar to the Subsidiary Guaranty and additional security documents substantially similar to the Security Documents (to the extent applicable), all as otherwise set forth in this Section 8.11, provided that for so long as such Subsidiary does not constitute a Material Subsidiary the Borrower shall not be required to pledge, or cause to be pledged, the capital stock of any Subsidiary acquired or created after the Initial Borrowing Date if such pledge is prohibited by applicable Gaming Regulations. (d) The Borrower will cause each Subsidiary acquired established or created after the Initial Borrowing Date to grant to the Collateral Agent a first priority Lien, subject to Permitted Liens, on all personal property (tangible and intangible) of such Subsidiary upon terms substantially similar to those set forth in the Security Documents (including, without limitation, the Pledge Agreement and the Security Agreement) as appropriate, provided that for so long as such Subsidiary does not constitute a Material Subsidiary, such Subsidiary shall not be required to be a Subsidiary Guarantor or grant Liens pursuant to the Security Documents to the extent any such action is prohibited by applicable Gaming Regulations. (e) The Borrower will, and will cause each of its Subsidiaries to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/ or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require pursuant to this Section 8.11. Furthermore, the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may -66- 73 be reasonably requested by the Collateral Agent to assure itself that this Section 8.11 has been complied with. (f) The security interests required to be granted pursuant to this Section 8.11 shall be granted pursuant to security documentation which shall be substantially similar to the Security Documents already executed and delivered by the Borrower or its Subsidiaries, as applicable and otherwise reasonably satisfactory in form and substance to the Administrative Agent and shall constitute valid and enforceable perfected security interests prior to the rights of all third Persons and subject to no other Liens except such Liens and priority as are permitted by Section 9.01. The Additional Security Documents and other instruments related thereto shall be duly recorded or filed in such manner and in such places and at such times as are required by law to establish, perfect, preserve and protect the Liens, in favor of the Collateral Agent for the benefit of the respective Secured Creditors, required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall be paid in full by the Borrower. At the time of the execution and delivery of the Additional Security Documents, the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, Mortgage Policies, title surveys, real estate appraisals and other related documents as may be reasonably requested by the Administrative Agent or the Required Lenders to assure themselves that this Section 8.11 has been complied with. (g) The Borrower agrees that each action required above by Section 8.11(a), (b) and (e) shall be completed as soon as possible, but in no event later than 60 days after such action is requested to be taken by the Administrative Agent or the Required Lenders. The Borrower further agrees that each action required by Sections 8.11(c) and (d) shall be completed within 10 days of the creation or acquisition of a new Subsidiary (or within 10 days of the date a Subsidiary first becomes a Material Subsidiary, as the case may be). 8.12 Permitted Acquisitions. (a) Subject to the provisions of this Section 8.12 and the requirements contained in the definition of Permitted Acquisition, the Borrower and any of its Wholly-Owned Domestic Subsidiaries may from time to time effect Permitted Acquisitions, so long as (in each case except to the extent the Required Lenders otherwise specifically agree in writing in the case of a specific Permitted Acquisition): (i) no Default or Event of Default shall be in existence at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (ii) the Borrower shall have given the Administrative Agent and the Lenders at least ten Business Days' prior written notice of any Permitted Acquisition and shall have given the Lenders such other information related to the Person or business, division or product line being acquired and the Permitted Acquisition as any Lenders shall reasonably request, including, without limitation, due diligence materials, organizational documents, good standing certificates, governmental approvals and consents as the Required Lenders shall reasonably request; (iii) calculations are made by the Borrower of compliance with the covenants contained in Sections 9.08, 9.09, 9.10, 9.11 and 9.12, on a Pro Forma Basis as if the -67- 74 respective Permitted Acquisition (as well as all other Permitted Acquisitions theretofore consummated) had occurred on the first day of the relevant calculation period, and such recalculations shall show that such financial covenants would have been complied with if the Permitted Acquisition had occurred on the first day of such calculation period; (iv) the Borrower in good faith believes, based on calculations made by the Borrower, on a Pro Forma Basis that the financial covenants contained in Sections 9.08 through 9.12, inclusive, will continue to be met following the date of the consummation of the respective Permitted Acquisition; (v) the Maximum Permitted Consideration payable in connection with the proposed Permitted Acquisition, when combined with the aggregate Maximum Permitted Consideration paid in connection with all other Permitted Acquisitions consummated after the Initial Borrowing Date and on or prior to the date of the consummation of the proposed Permitted Acquisition does not exceed $25,000,000; (vi) all representations and warranties contained herein and in the other Credit Documents (other than those excepted by the Administrative Agent with respect to the Permitted Acquisition) shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Permitted Acquisition (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; (vii) the Borrower provides to the Administrative Agent and the Lenders as soon as available but not later than 10 Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to such Permitted Acquisition; (viii) after giving effect to such Permitted Acquisition and the payment of all post-closing purchase price adjustments required (in the good faith determination of the Borrower) in connection with such Permitted Acquisition (and all other Permitted Acquisitions for which such purchase price adjustments may be required to be made) and all Capital Expenditures (and the financing thereof) reasonably anticipated by the Borrower to be made in the business acquired pursuant to such Permitted Acquisition within the 180-day period (such period for any Permitted Acquisition, a "Post-Closing Period") following such Permitted Acquisition (and in the businesses acquired pursuant to all other Permitted Acquisitions with Post-Closing Periods ended during the Post-Closing Period of such Permitted Acquisition), the Total Unutilized Revolving Loan Commitment shall equal or exceed $15,000,000; (ix) the Administrative Agent shall be satisfied in its sole discretion that the proposed Permitted Acquisition could not reasonably be expected to result in a material increase in tax (other than taxes on earnings generated by the relevant Permitted Acquisition), ERISA, environmental or other contingent liabilities with respect to the Borrower or any of its Subsidiaries; and -68- 75 (x) the Borrower shall have delivered to the Administrative Agent an officer's certificate executed by an Authorized Officer of the Borrower, certifying to the best of his knowledge, compliance with the requirements of preceding clauses (i) through (ix), inclusive, containing the calculations required by the preceding clauses (iii), (iv), (v) and (viii). (b) At the time of each Permitted Acquisition involving the creation or acquisition of a Subsidiary, or the acquisition of capital stock or other equity interest of any Person, the capital stock or other equity interests thereof created or acquired in connection with such Permitted Acquisition shall be pledged for the benefit of the Secured Creditors pursuant to the Pledge Agreement in accordance with the requirements of Sections 8.11. (c) The Borrower shall cause each Subsidiary which is formed to effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and to execute and deliver, all of the documentation required by, Sections 8.11 to the satisfaction of the Administrative Agent. (d) The consummation of each Permitted Acquisition shall be deemed to be a representation and warranty by the Borrower that the certifications by the Borrower (or by one or more of its authorized officers) pursuant to Section 8.12(a) are true and correct and that all conditions thereto have been satisfied and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 6 and 10. 8.13 Compliance with Environmental Laws. (a) (i) The Borrower will comply, and will use its best efforts to cause each of its Subsidiaries to comply, with all Environmental Laws applicable to the ownership or use of its Real Property now or hereafter owned or operated by the Borrower or any of its Subsidiaries, will promptly pay or cause to be paid all costs and expenses incurred in connection with such compliance, and will keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws and (ii) neither the Borrower, nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of Hazardous Materials on any Real Property now or hereafter owned or operated by the Borrower or any of its Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any such Real Property, except to the extent that the failure to comply with the requirements specified in clause (i) or (ii) above, either individually or in the aggregate, could not reasonably be expected to result in liability under Environmental Laws that could have a Material Adverse Effect. If required to do so under any applicable legally binding directive or order of any governmental agency, the Borrower agrees to undertake, and cause each of its Subsidiaries to undertake, to the extent required under applicable Environmental Laws, any cleanup, removal, remedial or other action necessary to remove and clean up any Hazardous Materials from any Real Property owned or operated by the Borrower or any of its Subsidiaries in accordance with the requirements of all applicable Environmental Laws and in accordance with such legally binding orders and directives of all governmental authorities, except to the extent that (x) the Borrower or such Subsidiary is contesting such order or directive in good faith and by appropriate proceedings and for which adequate reserves have been established to the extent required by generally accepted accounting principles or (y) the failure to take any such action could not reasonably be expected to have a Material Adverse Effect. -69- 76 (b) At the written request of the Administrative Agent or the Required Lenders, at any time and from time to time as is reasonable after (i) the Obligations have become due and payable pursuant to Section 10 or (ii) the Lenders receive notice under Section 8.01(i) for any event for which notice is required to be delivered with respect to conditions at any Real Property, the Borrower and its Subsidiaries will provide, at their sole cost and expense, an environmental site assessment report of reasonable scope and expense concerning any relevant Real Property now or hereafter owned or operated by the Borrower or any of its Subsidiaries, prepared by an environmental consulting firm approved by the Administrative Agent in its reasonable discretion, indicating the presence or absence of Hazardous Materials and the potential cost of any removal or remedial action in connection with any Hazardous Materials on such Real Property. If the Borrower and any of its Subsidiaries fail to provide the same within 45 days after such request was made, the Administrative Agent may order the same, and the Borrower and its Subsidiaries, to the extent the Borrower and any of its Subsidiaries have the authority to do so, shall grant and hereby grants, to the Administrative Agent and the Lenders and their Administrative Agents, access to such Real Property and specifically grants the Administrative Agent and the Lenders an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower's and its Subsidiary's expense. 8.14 Minimum Maintenance Capital Expenditures. The Borrower and its Subsidiaries will make Maintenance Capital Expenditures during each period commencing on the Initial Borrowing Date and ending on a date set forth below in an aggregate amount equal to no less than the amount set forth applicable to the relevant period below: Period Amount ------ ------ Initial Borrowing Date to and including the last day of the Fiscal Year ending December 31, $13,000,000 2001 Initial Borrowing Date to and including the last day of the Fiscal Year ending December 31, $28,000,000 2002 Initial Borrowing Date to and including the last day of the Fiscal Year ending $43,000,000 December 31, 2003 Initial Borrowing Date to and including the last day of the Fiscal Year ending December 31, $58,000,000 -70- 77 Period Amount ------ ------ 2004 Initial Borrowing Date to and including the last day of the Fiscal Year ending December 31, $73,000,000 2005 Initial Borrowing Date to and including the last day of the Fiscal Year ending December 31, $88,000,000 2006 Initial Borrowing Date to and including the last day of the Fiscal Year ending December 31, $103,000,000 2007 SECTION 9. Negative Covenants. The Borrower covenants and agrees that on and after the Effective Date and until the Total Commitment and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full: 9.01 Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to the Borrower or any of its Subsidiaries), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as "Permitted Liens"): (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP or Liens for property taxes on property which is to be abandoned or for which the sole recourse for such tax, assessment or governmental charge or levy is to such property; -71- 78 (ii) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the Borrower's or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) Liens in existence on the Effective Date which are listed, and the property subject thereto described, in Schedule V, but only to the respective date, if any, set forth in such Schedule V for the removal and termination of any such Liens, plus renewals, replacements and extensions of such Liens to the extent set forth on Schedule V, provided that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal, replacement or extension and (y) any such renewal, replacement or extension does not encumber any additional assets or properties of the Borrower or any of its Subsidiaries; (iv) Permitted Encumbrances; (v) Liens created pursuant to the Security Documents; (vi) licenses, leases or subleases granted to other Persons in the ordinary course of business not materially interfering with the conduct of the business of the Borrower and its Subsidiaries taken as a whole; (vii) Liens upon assets subject to Capitalized Lease Obligations to the extent permitted by Section 9.04(iv), provided that (x) such Liens only serve to secure the payment of Indebtedness arising under such Capitalized Lease Obligation (and replacements, extensions, refinancings and renewals thereof) and (y) the Lien encumbering the assets giving rise to the Capitalized Lease Obligation does not encumber any other asset of the Borrower or any Subsidiary of the Borrower; (viii) Liens placed upon equipment or machinery or other personal or real property used in the ordinary course of business of the Borrower or any of its Subsidiaries at the time of acquisition thereof by the Borrower or any such Subsidiary or within 180 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase price thereof and all renewals, replacements, refinancings or extensions thereof, provided that (x) Indebtedness secured by Liens permitted by this clause (viii) is permitted by Section 9.04(iv) and (y) in all events, the Lien encumbering the equipment or machinery so acquired does not encumber any other asset of the Borrower or such Subsidiary; (ix) easements, rights-of-way, restrictions (including zoning restrictions), encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies, in each case whether now or hereafter in existence, not securing -72- 79 Indebtedness for borrowed money and not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (x) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by the Borrower or any of its Subsidiaries; (xi) Liens arising out of the existence of judgments or awards not constituting an Event of Default under Section 10.09, provided that no cash or property in excess of $1,000,000 is deposited or delivered to secure the respective judgment or award; (xii) statutory, contractual and common law landlords' liens under leases to which the Borrower or any of its Subsidiaries is a party; (xiii) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (xiv) any interest or title of a lessor, sublessor, licensee or licensor under any lease or license agreement permitted by this Agreement; (xv) Liens in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry; (xvi) Liens arising in connection with transactions relating to accounts receivable permitted under Section 9.02(xi); and (xvii) Liens not otherwise permitted by this Section 9.01 so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair market value (determined as of the date such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower and all of its Subsidiaries) $1,000,000 at any one time. 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. The Borrower will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets, or enter into any sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials, equipment and intangible assets, including property acquired by way of trade or barter agreements, in the ordinary course of business) of any Person, except that: -73- 80 (i) the Borrower and its Subsidiaries may make Capital Expenditures to the extent not in violation of Section 9.07 or Section 8.14; (ii) the Borrower and its Subsidiaries may sell, lease or otherwise dispose of any assets, provided that (a) the aggregate Net Asset Sale Proceeds of all assets subject to sales or other dispositions pursuant to this clause (ii) shall not exceed $15,000,000 in any fiscal year of the Borrower, (b) each such disposition is for fair market value, (c) at least 80% of the consideration received in respect thereof is cash (or Cash Equivalents) (including assumption of Indebtedness) and (d) the Net Asset Sale Proceeds of such sale, lease or other disposition are applied and/or reinvested in accordance with Section 4.02; (iii) the Borrower and its Subsidiaries may sell, lease, transfer, convey or otherwise dispose of property, equipment or other assets that is (a) obsolete or worn out or (b) no longer useful or necessary in the operation of the business of such Person; (iv) the Borrower and its Subsidiaries may make Investments to the extent permitted by Section 9.05; (v) the Borrower and its Subsidiaries may lease (as lessee) real or personal property in the ordinary course of business (so long as such lease does not create a Capitalized Lease Obligation not otherwise permitted by Section 9.04(iv)); (vi) the Borrower and its Subsidiaries may make sales, conveyances, dispositions of inventory in the ordinary course of business; (vii) the Borrower and its Subsidiaries may license or sublicense software, trademarks, patents and other Intellectual Property in the ordinary course of business and which do not materially interfere with the business of the Borrower or any Subsidiary; (viii) the Borrower or any Subsidiary Guarantor may transfer assets to or lease assets to or acquire or lease assets from the Borrower or any other Subsidiary Guarantor (so long as the security interests granted pursuant to the Security Documents is not, in the reasonable judgment of the Collateral Agent, adversely affected thereby) or any Subsidiary of the Borrower may be merged or consolidated with or into, or be liquidated into, the Borrower or any Subsidiary Guarantor (so long as the Borrower or such Subsidiary Guarantor is the surviving corporation); (ix) the Borrower and its Subsidiaries may consummate the Acquisition; (x) the Borrower and its Subsidiaries may consummate the Disposition in accordance with the Disposition Documents, provided that the Net Asset Sale Proceeds therefrom are applied in accordance with Section 4.02; (xi) the Borrower and its Subsidiaries may sell or discount, in each case without recourse (except for customary indemnities, representations, warranties and agreements) and in the ordinary course of business, accounts receivable arising in the ordinary course of business (x) which are overdue or (y) which the Borrower may -74- 81 reasonably determine are difficult to collect, but only in connection with the compromise or collection thereof (and not as part of any bulk sale or financing of receivables); (xii) the Borrower and its Subsidiaries may make Permitted Acquisitions so long as such Permitted Acquisitions are effected in accordance with Section 8.12; and (xiii) the Borrower may liquidate and dissolve Subsidiaries which are not Material Subsidiaries. To the extent the Required Lenders waive the provisions of this Section 9.02 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 9.02 (other than to another Credit Party or pursuant to clause (vii) thereof), such Collateral shall be sold free and clear of the Liens created by the Security Documents, and the Administrative Agent and Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing and shall, at the request of the Borrower, take any such actions reasonably appropriate to effect the foregoing. 9.03 Dividends. The Borrower shall not, and shall not permit any of its Subsidiaries to, authorize, declare or pay any Dividends with respect to the Borrower or any of its Subsidiaries except that: (i) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower; and (ii) so long as no Default or Event of Default exists or would result therefrom, (A) the Borrower may pay amounts required for any repurchase, redemption or other acquisition for value of any capital stock or options to acquire capital stock of the Borrower held by any director, officer, employee or consultant of the Borrower or any of its Subsidiaries pursuant to any equity subscription agreement or stock option agreement or similar agreement, or otherwise upon their death, disability, retirement or termination of employment or departure from the board of directors of the Borrower (provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired capital stock and options (other than payments described in Section 9.03(ii)(B)) shall not exceed (x) $1,000,000 in any twelve-month period or (y) $5,000,000 in the aggregate from and after the Effective Date), (B) the Borrower may pay amounts required under the Missouri Stock Option Agreements in effect on the Initial Borrowing Date if the trading market for Ameristar common stock is not sufficiently liquid as provided therein and (C) any Non Wholly-Owned Subsidiary of the Borrower may pay Dividends to its stockholders on a pro rata basis. 9.04 Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (ii) accrued expenses and current trade accounts payable incurred in the ordinary course of business; -75- 82 (iii) Indebtedness under Interest Rate Protection or Other Hedging Agreements to the extent entered into pursuant to Section 9.05; (iv) Indebtedness of the Borrower and any Subsidiary of the Borrower evidenced by Capitalized Lease Obligations to the extent permitted pursuant to Section 9.07 and purchase money Indebtedness of the Borrower and the Subsidiaries of the Borrower secured by Liens permitted under Section 9.01(viii) and any refinancings, renewals or extensions thereof; provided that the aggregate amount of Indebtedness evidenced by Capitalized Lease Obligations and the aggregate principal amount of such purchase money Indebtedness and all such refinancings, renewals or extensions, outstanding under this clause (iv) at any one time shall not exceed $15,000,000; (v) Indebtedness of the Borrower, and subordinated guaranties thereof by the Subsidiary Guarantors, constituting Subordinated Bridge Loans incurred under the Senior Subordinated Financing Agreement and the other Senior Subordinated Financing Documents in an aggregate principal amount not to exceed at any one time outstanding the sum of (x) $300,000,000 plus (y) the principal amount of additional loans or notes issued in payment of accrued interest on the Subordinated Bridge Loans pursuant to the Senior Subordinated Financing Agreement; (vi) Indebtedness of the Borrower, and subordinated guaranties thereof by the Subsidiary Guarantors, under the Permanent Senior Subordinated Notes and the other Permanent Senior Subordinated Notes Documents; (vii) the Retained Indebtedness and any refinancing, renewals or extensions thereof (provided that the principal amount thereof is not increased); (viii) Contingent Obligations of the Borrower or any Subsidiary as a guarantor of the lessee under any lease pursuant to which the Borrower or a Subsidiary is the lessee so long as such lease is otherwise permitted hereunder; (ix) (x) the Borrower may make loans or advances to any of its Subsidiaries that are Subsidiary Guarantors and (y) any Subsidiary of the Borrower may make loans or advances to the Borrower or to another Subsidiary of the Borrower that is a Subsidiary Guarantor so long as, in each case (A) any such loan or advance shall be evidenced by an Intercompany Note, which Intercompany Note shall be pledged to the Collateral Agent for the benefit of the Secured Creditors in accordance with, and to the extent provided by, the Pledge Agreement, and (B) in the case of any intercompany loans or advances made to the Borrower, the Intercompany Note shall contain subordination provisions contained in Exhibit N; (x) Indebtedness of the Borrower or its Subsidiaries in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations and trade-related letters of credit, in each case provided in the ordinary course of business, and any extension, renewal or refinancing thereof to the extent not provided to secure the repayment of other Indebtedness and to the extent that the amount of refinancing Indebtedness is not greater than the amount of Indebtedness being refinanced; and -76- 83 (xi) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against sufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within two Business Days of its incurrence; and (xii) additional Indebtedness of the Borrower and its Subsidiaries not to exceed $5,000,000 in aggregate principal amount outstanding at any time. 9.05 Advances, Investments and Loans. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents (each of the foregoing an "Investment" and collectively, the "Investments"), except that the following shall be permitted: (i) the Borrower and its Subsidiaries may acquire and hold accounts receivables owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms; (ii) the Borrower and its Subsidiaries may acquire and hold cash and Cash Equivalents; (iii) the Borrower and its Subsidiaries may make loans and advances in the ordinary course of business to their respective officers, directors and employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $5,000,000; (iv) the Borrower may enter into non-speculative Interest Rate Protection or Other Hedging Agreements on terms satisfactory to the Administrative Agent; (v) the Borrower and any of its Subsidiaries may make Investments necessary to form Subsidiaries of the Borrower under Section 9.17; (vi) the Borrower and its Subsidiaries may acquire and own promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with dispositions permitted by Section 9.02; (vii) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (viii) the Borrower or any Subsidiary may make Investments in any Subsidiary Guarantor; -77- 84 (ix) the Borrower and its Subsidiaries may make Permitted Acquisitions permitted under Section 9.02(xii); (x) the Borrower and its Subsidiaries may incur Indebtedness permitted under Section 9.04; and (xi) in addition to investments permitted by clauses (i) through (x) of this Section 9.05, the Borrower and its Subsidiaries may make Investments on any date in an amount not to exceed the Available Investment Basket Amount on such date (after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Investment), it being understood and agreed that to the extent the Borrower or one or more other Credit Parties (after the respective Investment has been made) receives a cash return from the respective Investment of amounts previously invested pursuant to this clause (xi) (which cash return may be made by way of repayment of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) in the case of equity investments) or a return in the form of an asset distribution in respect of the respective Investment of any asset previously contributed pursuant to this clause (xi), then the amount of such cash return of investment or the fair market value of such distributed asset (as determined in good faith by senior management of the Borrower), as the case may be, shall, upon the Administrative Agent's receipt of a certification of the amount of the return of investment from an Authorized Officer, apply to increase the Available Investment Basket Amount, provided that the aggregate amount of increases to the Available Investment Basket Amount described above in respect of any Investment shall not exceed the amount previously invested pursuant to this clause (xi) in such Investment. 9.06 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of the Borrower or any of its Subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would reasonably be obtained by the Borrower or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that: (i) Dividends may be paid to the extent provided in Section 9.03; (ii) loans may be made and other transactions may be entered into by the Borrower and its Subsidiaries to the extent permitted by Sections 9.02, 9.04 and 9.05; (iii) customary fees, indemnities and reimbursements may be paid to non-officer directors of the Borrower; (iv) the Borrower and its Subsidiaries may enter into and make payments pursuant to employment arrangements with executive officers and senior management employees in the ordinary course of business; (v) the Borrower and its Subsidiaries may make payments pursuant to employment agreements existing on the Initial Borrowing Date; -78- 85 (vi) the Borrower and its Subsidiaries may make payments pursuant to the Tax Sharing Agreements; (vii) the Borrower and the Subsidiary Guarantors may enter into transactions among themselves; and (viii) the Borrower may issue its capital stock (other than Disqualified Stock). 9.07 Maximum Capital Expenditures. (a) The Borrower will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures including Maintenance Capital Expenditures required to be made pursuant to Section 8.14, except that during any fiscal period set forth below (taken as one accounting period) the Borrower and its Subsidiaries may make Capital Expenditures so long as the aggregate amount of such Capital Expenditures including Maintenance Capital Expenditures required to be made pursuant to Section 8.14 made under this Section 9.07(a) does not exceed in any period set forth below the amount set forth opposite such period below: Period Amount ------ ------ Initial Borrowing Date to $26,000,000 and including the last day of the Fiscal Year ending December 31, 2001 Fiscal Year ending $28,500,000 December 31, 2002 Fiscal Year ending $29,500,000 December 31, 2003 Fiscal Year ending $30,500,000 December 31, 2004 Fiscal Year ending $31,500,000 December 31, 2005 Fiscal Year ending $32,500,000 December 31, 2006 Fiscal Year ending $33,500,000 December 31, 2007 (b) In addition to Capital Expenditures permitted to clause (a) above, the Borrower and its Subsidiaries may make Capital Expenditures in connection with (i) the Facilities Expansion provided that the aggregate amount thereof shall not exceed $110,000,000, (ii) the construction of covered parking at the Kansas City facility, provided that the aggregate amount thereof shall not exceed $20,000,000, (iii) the renovation of the Council Bluffs Facility, -79- 86 provided that the aggregate amount thereof shall not exceed $8,000,000 and (iv) the renovation of the Vicksburg Facility provided that the aggregate amount thereof shall not exceed $9,500,000. (c) In addition to the Capital Expenditures permitted pursuant to preceding clauses (a) and (b) above, to the extent that the Capital Expenditures made by the Borrower and its Subsidiaries in any period set forth in clause (a) above are less than the amount permitted to be made in such period (without giving effect to any additional amount available as a result of this clause (c), clause (b) above or clause (d) below), up to 50% of the amount of such difference may be carried forward and used to make Capital Expenditures in the succeeding fiscal year of the Borrower. (d) In addition to the Capital Expenditures permitted pursuant to preceding clauses (a), (b) and (c), the Borrower and its Subsidiaries may make additional Capital Expenditures consisting of (i) the reinvestment of Net Asset Sale Proceeds of Asset Sales not required to be applied to prepay the Loans pursuant to Section 4.02(A)(h) as a result of a Reinvestment Election and (ii) the reinvestment of proceeds of Recovery Events not required to be applied to repay the Loans pursuant to Section 4.02(A)(j). 9.08 Leverage Ratio. The Borrower will not permit the Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below: Period Ratio - ------ ----- Fiscal Quarter ending 5.25:1.00 December 31, 2000 Fiscal Quarter ending 5.25:1.00 March 31, 2001 Fiscal Quarter ending 5.00:1.00 June 30, 2001 Fiscal Quarter ending 5.00:1.00 September 30, 2001 Fiscal Quarter ending 5.00:1.00 December 31, 2001 Fiscal Quarter ending 5.00:1.00 March 31, 2002 Fiscal Quarter ending 5.00:1.00 June 30, 2002 Fiscal Quarter ending 5.00:1.00 -80- 87 September 30, 2002 Fiscal Quarter ending 5.00:1.00 December 31, 2002 Fiscal Quarter ending 4.75:1.00 March 31, 2003 Fiscal Quarter ending 4.75:1.00 June 30, 2003 Fiscal Quarter ending 4.50:1.00 September 30, 2003 Fiscal Quarter ending 4.25:1.00 December 31, 2003 Fiscal Quarter ending 4.25:1.00 March 31, 2004 Fiscal Quarter ending 4.00:1.00 June 30, 2004 Fiscal Quarter ending 4.00:1.00 September 30, 2004 Fiscal Quarter ending 3.75:1.00 December 31, 2004 Fiscal Quarter ending 3.75:1.00 March 31, 2005 Fiscal Quarter ending 3.50:1.00 June 30, 2005 Fiscal Quarter ending 3.50:1.00 September 30, 2005 Fiscal Quarter ending 3.50:1.00 December 31, 2005 Thereafter 3.50:1.00 9.09 Senior Leverage Ratio. The Borrower will not permit the Senior Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below: -81- 88 Period Ratio - ------ ----- Fiscal Quarter ending 3.25:1.00 December 31, 2000 Fiscal Quarter ending 3.25:1.00 March 31, 2001 Fiscal Quarter ending 3.00:1.00 June 30, 2001 Fiscal Quarter ending 3.00:1.00 September 30, 2001 Fiscal Quarter ending 3.00:1.00 December 31, 2001 Fiscal Quarter ending 3.00:1.00 March 31, 2002 Fiscal Quarter ending 3.00:1.00 June 30, 2002 Fiscal Quarter ending 3.00:1.00 September 30, 2002 Fiscal Quarter ending 3.00:1.00 December 31, 2002 Fiscal Quarter ending 2.75:1.00 March 31, 2003 Fiscal Quarter ending 2.75:1.00 June 30, 2003 Fiscal Quarter ending 2.50:1.00 September 30, 2003 Fiscal Quarter ending 2.25:1.00 December 31, 2003 Fiscal Quarter ending 2.25:1.00 March 31, 2004 Fiscal Quarter ending 2.00:1.00 June 30, 2004 Fiscal Quarter ending 2.00:1.00 -82- 89 September 30, 2004 Fiscal Quarter ending 1.75:1.00 December 31, 2004 Fiscal Quarter ending 1.75:1.00 March 31, 2005 Fiscal Quarter ending 1.50:1.00 June 30, 2005 Fiscal Quarter ending 1.50:1.00 September 30, 2005 Fiscal Quarter ending 1.50:1.00 December 31, 2005 Thereafter 1.50:1.00 9.10 Consolidated Gross Fixed Charge Coverage Ratio. The Borrower will not permit the Consolidated Gross Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, ended on the last day of any fiscal quarter set forth below to be less than the ratio set forth opposite such fiscal quarter below: Fiscal Quarter Ratio - -------------- ----- Fiscal Quarter ending 1.50:1.00 December 31, 2000 Fiscal Quarter ending 1.50:1.00 March 31, 2001 Fiscal Quarter ending 1.50:1.00 June 30, 2001 Fiscal Quarter ending 1.50:1.00 September 30, 2001 Fiscal Quarter ending 1.50:1.00 December 31, 2001 Fiscal Quarter ending 1.50:1.00 March 31, 2002 -83- 90 Fiscal Quarter ending 1.50:1.00 June 30, 2002 Fiscal Quarter ending 1.50:1.00 September 30, 2002 Fiscal Quarter ending 1.50:1.00 December 31, 2002 Fiscal Quarter ending 1.50:1.00 March 31, 2003 Fiscal Quarter ending 1.50:1.00 June 30, 2003 Fiscal Quarter ending 1.75:1.00 September 30, 2003 Fiscal Quarter ending 1.75:1.00 December 31, 2003 Fiscal Quarter ending 1.75:1.00 March 31, 2004 Fiscal Quarter ending 1.75:1.00 June 30, 2004 Fiscal Quarter ending 1.75:1.00 September 30, 2004 Fiscal Quarter ending 2.00:1.00 December 31, 2004 Fiscal Quarter ending 2.00:1.00 March 31, 2005 Fiscal Quarter ending 2.00:1.00 June 30, 2005 Fiscal Quarter ending 2.00:1.00 September 30, 2005 Fiscal Quarter ending 2.00:1.00 December 31, 2005 Thereafter 2.00:1.00 9.11 Consolidated Adjusted Fixed Charge Coverage Ratio. The Borrower will not permit the Consolidated Adjusted Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, ended on the last day of -84- 91 any fiscal quarter set forth below to be less than the ratio set forth opposite such fiscal quarter below: Fiscal Quarter Ratio - -------------- ----- Fiscal Quarter ending 1.50:1.00 December 31, 2000 Fiscal Quarter ending 1.50:1.00 March 31, 2001 Fiscal Quarter ending 1.50:1.00 June 30, 2001 Fiscal Quarter ending 1.50:1.00 September 30, 2001 Fiscal Quarter ending 1.50:1.00 December 31, 2001 Fiscal Quarter ending 1.50:1.00 March 31, 2002 Fiscal Quarter ending 1.50:1.00 June 30, 2002 Fiscal Quarter ending 1.50:1.00 September 30, 2002 Fiscal Quarter ending 1.50:1.00 December 31, 2002 Fiscal Quarter ending 1.50:1.00 March 31, 2003 Fiscal Quarter ending 1.50:1.00 June 30, 2003 Fiscal Quarter ending 1.50:1.00 September 30, 2003 Fiscal Quarter ending 1.50:1.00 December 31, 2003 Fiscal Quarter ending 1.50:1.00 March 31, 2004 Fiscal Quarter ending 1.50:1.00 -85- 92 June 30, 2004 Fiscal Quarter ending 1.50:1.00 September 30, 2004 Fiscal Quarter ending 1.50:1.00 December 31, 2004 Fiscal Quarter ending 1.50:1.00 March 31, 2005 Fiscal Quarter ending 1.50:1.00 June 30, 2005 Fiscal Quarter ending 1.50:1.00 September 30, 2005 Fiscal Quarter ending 1.50:1.00 December 31, 2005 Thereafter 1.50:1.00 9.12 Minimum Consolidated Tangible Net Worth. The Borrower will not permit Consolidated Tangible Net Worth at any time to be less than an amount equal to the sum of (x) $23,000,000 plus (y) the sum of 50% of Consolidated Net Income, if positive, for each prior fiscal year of the Borrower, if any, ending after December 31, 2000 plus (z) the amount by which Consolidated Tangible Net Worth is increased by the proceeds of any capital stock issued, or capital contributions made, after the Initial Borrowing Date. 9.13 Limitation on Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; Limitations of Prepayments and Modifications of Indebtedness; etc. The Borrower will not, and will not permit any of its Subsidiaries to (i) in any manner adverse to the interests of the Lenders, amend, modify or change its Certificate of Incorporation (except as contemplated by the Shareholders' Agreements as in effect on the Effective Date) (including, without limitation, by the filing or modification of any certificate of designation) or By-Laws, other than any amendments, modifications or changes which would not be reasonably likely to be materially adverse to the interest of the Lenders, (ii) amend or modify, or permit the amendment or modification of, any provision of any Senior Subordinated Financing Document, any Permanent Senior Subordinated Notes Document or of any agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating thereto or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate or amount of interest required to be paid in cash on the Bridge Subordinated Loans or the Permanent Senior Subordinated Notes, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate or decrease the scope of any such event of default or increase any grace -86- 93 period related thereto), change (to earlier dates or greater amounts) the redemption, mandatory prepayment or defeasance provisions thereof, change the subordination provisions of such Bridge Subordinated Loans or Permanent Senior Subordinated Notes, as the case may be (or of any guaranty thereof), or change any collateral therefor (other than to release such collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Bridge Subordinated Loans or Permanent Senior Subordinated Notes, as the case may be (or a trustee or other representative on their behalf), which could, in the reasonable judgment of the Administrative Agent, reasonably be expected to be materially adverse to any Credit Party or Lenders, and (iii) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto monies or securities before due for the purpose of paying when due) or exchange of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Permanent Senior Subordinated Notes or the Bridge Subordinated Loan, provided that the Borrower may prepay the Bridge Subordinated Loan from the proceeds of equity (other than Disqualified Stock) issued by the Borrower or the Permanent Senior Subordinated Notes. 9.14 Limitation on Certain Restrictions on Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the Borrower or (c) transfer any of its properties or assets to the Borrower or any Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement, the other Credit Documents and the Transaction Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any contract or licensing agreement entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business, (v) the Senior Subordinated Financing Documents and on and after the execution and delivery thereof, the Permanent Senior Subordinated Notes Documents, (vi) purchase money obligations or Capital Lease Obligations (or refinancings thereof that impose no more restrictive restrictions) for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (c) above solely on the property so acquired, (vii) Permitted Liens on assets securing Indebtedness permitted under Section 9.04, and (viii) restrictions applicable to Indebtedness or capital stock of a Person acquired by the Borrower or any Subsidiary as in effect at the time of acquisition, except if such restriction was in incurred in connection with, or in contemplation of such acquisition or such restriction applies to the Borrower, any Subsidiary (other than the Person acquired) or the assets thereof (other than the assets of the Person so acquired) or any after-acquired property. 9.15 Limitation on Issuance of Capital Stock. (a) The Borrower shall not issue any Disqualified Stock. -87- 94 (b) The Borrower will not permit any of its Subsidiaries to issue, any capital stock or other equity interests (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and similar issuances which do not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of the capital stock of such Subsidiary, (iii) to qualify directors to the extent required by applicable law, (iv) in connection with the creation of Subsidiaries of the Borrower in compliance with Section 9.17 and (v) to the Borrower or a Wholly-Owned Subsidiary. 9.16 Business. The Borrower will not, and will not permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than the type of business in which the Borrower and its Subsidiaries are engaged on the Effective Date and reasonable extensions thereof. 9.17 Limitations on Creation/Sale of Subsidiaries and Creation of Joint Ventures. (a) The Borrower shall not establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Lenders; provided that (A) the Borrower may establish or create one or more Wholly-Owned Subsidiaries of the Borrower without such consent so long as, (i) 100% of the capital stock of any such new Subsidiary is upon the creation, establishment or acquisition of any such new Subsidiary pledged and delivered to the Collateral Agent for the benefit of the Secured Creditors under the Pledge Agreement and (ii) upon the creation or establishment of any such new Subsidiary, such Subsidiary executes the Additional Security Documents and guaranty required to be executed by it in accordance with Section 8.11 and (B) the Borrower may establish or create one or more Non Wholly-Owned Subsidiaries of the Borrower without such consent so long as (i) the Borrower shall own at least 90% of the capital stock of any such new Non Wholly-Owned Subsidiary, (ii) capital stock consisting of 100% of the equity interest of the Borrower in any such new Non Wholly-Owned Subsidiary is upon the creation, establishment or acquisition of any such new Non Wholly-Owned Subsidiary pledged and delivered to the Collateral Agent for the benefit of the Secured Creditors under the Pledge Agreement and (iii) upon the creation or establishment of any such new Non Wholly-Owned Subsidiary, such Non Wholly-Owned Subsidiary executes the Additional Security Documents and guaranty required to be executed by it in accordance with Section 8.11. (b) The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Joint Venture except to the extent permitted by Section 9.05(xi). (c) The Borrower will not, and will not permit any of its Subsidiaries to, sell or otherwise dispose of any of the capital stock or other equity interests of any of their respective Subsidiaries, provided that (x) the Borrower or any of its Subsidiaries may sell or otherwise dispose of 100% of the capital stock of a Subsidiary of such Person owned by the Borrower and its Subsidiaries so long as such sale is permitted by Section 9.02 and the Net Asset Sale Proceeds of such sale or other disposition are applied and/or reinvested in accordance with Section 4.02 and (y) the Borrower may liquidate and dissolve Subsidiaries which are not Material Subsidiaries. -88- 95 9.18 No Other Designated Senior Indebtedness. The Borrower will not, and will not permit any Subsidiary to, create or permit the creation after the Initial Borrowing Date of, any class of "Designated Senior Debt" as defined in the Senior Subordinated Financing Documents or, on and after the execution and delivery thereof, in any Permanent Senior Subordinated Notes Document other than the Obligations. SECTION 10. Events of Default. Upon the occurrence of any of the following specified events (each an "Event of Default"): 10.01 Payments. The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any other amounts owing hereunder, thereunder or under any other Credit Document; or 10.02 Representations, etc. Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 10.03 Covenants. The Borrower shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Sections 7.08, 8.01(g)(i), 8.07, 8.14 or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement (other than as described in Section 10.01, 10.02 or 10.03(i)), and such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Administrative Agent or any Lender; or 10.04 Default Under Other Agreements. The Borrower or any of its Subsidiaries shall (i) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due or required to be repurchased prior to its stated maturity, provided that (x) it shall not be a Default or Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses (i) through (ii), inclusive, is at least $5,000,000; or 10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Borrower or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all -89- 96 or substantially all of the property of the Borrower or any of its Subsidiaries, or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Subsidiaries, or there is commenced against the Borrower or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 10.06 ERISA. To the extent that Borrower, any Subsidiary or any ERISA Affiliate sponsors, contributes to or maintains a Plan or has any actual or contingent liability under a Plan at any time during the course of a loan under this Agreement, (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is reasonably likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan has not been timely made, the Borrower or any of its Subsidiaries or any ERISA Affiliate has incurred or is reasonably likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower or any of its Subsidiaries has incurred or is reasonably likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA or benefits the full cost of which are borne by the employee or former employee); (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually and/or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect; or 10.07 Security Documents. At any time after the execution and delivery thereof, any of the Security Documents shall cease to be in full force and effect, or shall cease in any material respect to give the Collateral Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a -90- 97 perfected security interest in, and Lien on, all of the Collateral), in favor of the Collateral Agent, superior to and prior to the rights of all third Persons (except as permitted by Section 9.01), and subject to no other Liens (except as permitted by Section 9.01), in each case other than release or termination in accordance with the terms of the Security Documents, or any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any of the Security Documents and, other than in the case of any such default which adversely affects the validity, perfection or priority of any Lien created thereby in any material respect (each of which defaults shall constitute an Event of Default without notice or lapse of time), such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Administrative Agent; or 10.08 Guaranty. Any Guaranty or any provision thereof shall cease to be in full force or effect as to the relevant Guarantor or other party thereunder (other than in accordance with the express terms thereof) or any Guarantor or other party thereunder or Person acting by or on behalf of such Guarantor or such party shall deny or disaffirm such Guarantor's or such party's obligations under the relevant Guaranty, or any Guarantor or such party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any Guaranty; or 10.09 Judgments. One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate for the Borrower and its Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 60 consecutive days, and the aggregate amount of all such judgments exceeds $1,000,000; or 10.10 Gaming Authority. Any Gaming Authority having jurisdiction over any Material Gaming Facility shall determine that the Borrower or any of its Subsidiaries that is required to be licensed, registered or qualified under the Gaming Regulations does not qualify, or that the qualification, registration or license of any of them with respect to any Material Gaming Facility should be revoked, not renewed or suspended for more than 30 days, or any such Gaming Authority shall have appointed a conservator, supervisor or trustee to oversee any of the operations of any of them; or 10.11 Change of Control. A Change of Control shall occur; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of any Note to enforce its claims against any Credit Party (provided that, if an Event of Default specified in Section 10.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon all Commitments of each Lender shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans -91- 98 and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms; (iv) direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default specified in Section 10.05 with respect to the Borrower, it will pay) to the Collateral Agent at the Payment Office such additional amount of cash, to be held as security by the Collateral Agent, as is equal to the aggregate Stated Amount of all Letters of Credit issued for the account of the Borrower and then outstanding; (v) enforce, as Collateral Agent, all of the Liens and security interests created pursuant to the Security Documents (subject to compliance with Gaming Regulations) and (vi) apply any cash collateral held pursuant to Section 4.02(A) in satisfaction of the Obligations. SECTION 11. Definitions and Accounting Terms. 11.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A Term Loan" shall mean each Loan made pursuant to Section 1.01(a) and each Incremental Term Loan made under the A Term Loan Tranche. "A Term Loan Commitments" shall mean for each Lender the amount set forth opposite such Lender's name in Schedule I hereto in the column entitled "A Term Loan Commitment" as same may be (x) reduced from time to time pursuant to Sections 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b). "A Term Reference Amount" shall have the meaning provided in Section 4.02(A)(b). "A Term Loan Scheduled Repayments" shall have the meaning provided in Section 4.02(A)(b). "A Term Maturity Date" shall mean December 20, 2005. "A Term Notes" shall have the meaning provided in Section 1.05(a). "ACLVI" shall mean Ameristar Casino Las Vegas, Inc., a Nevada corporation. "Acquired Business" shall mean each of Station Casino St. Charles and Station Casino Kansas City. "Acquisition" shall mean the acquisition by the Borrower of the Gaming Property comprising the Station Casino St. Charles and Station Casino Kansas City businesses of Station. "Acquisition Documents" shall mean, collectively, (i) that certain Asset Purchase Agreement dated as of October 17, 2000 by and among Ameristar Casino Kansas City, Inc., the -92- 99 Borrower, Kansas City Station Corporation and Station, and (ii) that certain Asset Purchase Agreement dated as of October 17, 2000 by and among Ameristar Casino St. Charles, Inc., the Borrower, St. Charles Riverfront Station, Inc. and Station, as in effect on the Effective Date and without giving effect to any subsequent amendment, modification and supplement thereto made without the prior written consent of the Required Lenders. "Additional Ship Mortgage" shall have the meaning provided in Section 8.11(c). "Additional Ship Mortgaged Property" shall have the meaning provided in Section 8.11(c). "Additional Collateral" shall mean all property (whether real or personal) in which security interests are granted (or have been purported to be granted) (and continue to be in effect at the time of determination) pursuant to Section 8.11. "Additional Mortgage" shall have the meaning provided in Section 8.11(b). "Additional Mortgaged Property" shall have the meaning provided in Section 8.11(b). "Additional Security Documents" shall mean all mortgages, pledge agreements, security agreements and other security documents entered into pursuant to Section 8.11 with respect to Additional Collateral. "Adjusted Consolidated Net Income" for any period shall mean Consolidated Net Income for such period (i) plus, without duplication, the sum of the amount of all net non-cash charges including, without limitation, depreciation, amortization, deferred tax expense, non-cash interest expense and other non-cash charges included in arriving at Consolidated Net Income for such period and (ii) less the sum of, without duplication, (x) the amount of all net non-cash gains or losses (exclusive of items reflected in Adjusted Consolidated Working Capital) included in arriving at Consolidated Net Income for such period and (y) gains or losses from sales of assets (other than sales of inventory in the ordinary course of business) and Recovery Events included in arriving at Consolidated Net Income for such period. "Adjusted Consolidated Working Capital" at any time shall mean Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities. "Administrative Agent" shall mean Bankers Trust Company, in its capacity as Administrative Agent for the Lenders hereunder, and shall include any successor to the Administrative Agent appointed pursuant to Section 12.09. "Affected Eurodollar Loans" shall have the meaning provided in Section 4.02(A)(l). "Affiliate" shall mean, with respect to any Person, any other Person (including for purposes of Section 9.06 only, all directors, officers and partners of such Person) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; -93- 100 provided, however, that for purposes of Section 9.06, an Affiliate of the Borrower shall include any Person that directly or indirectly owns more than 10% of any class of the capital stock of the Borrower. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Affiliate Contracts" shall have the meaning provided in Section 5.05. "Agreement" shall mean this Credit Agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time. "Anticipated Reinvestment Amount" shall mean, with respect to any Reinvestment Election, the amount specified in the Reinvestment Notice delivered by the Borrower in connection therewith as the amount of Net Asset Sale Proceeds from the related Asset Sale that the Borrower and/or its Subsidiaries intend to use to purchase, construct or otherwise acquire Reinvestment Assets. "Applicable Margin" shall mean: (a) with respect to A Term Loans, RTL Loans, Revolving Loans and Swingline Loans, from and after any Start Date to and including the corresponding End Date, the respective percentage per annum set forth below under the respective Type of A Term Loans, RTL Loans, Revolving Loans or Swingline Loans and opposite the respective Level (i.e., Level 1, Level 2, Level 3, Level 4, Level 5, Level 6, Level 7 or Level 8, as the case may be) indicated to have been achieved on the applicable Test Date for such Start Date (as shown on the respective officer's certificate delivered pursuant to Section 8.01(f) or the first proviso below):
A Term Loans, RTL Loans, Revolving Loans A Term Loans, RTL Loans and Swingline Loans and Revolving Loans maintained as maintained as Level Leverage Ration Base Rate Loans Eurodollar Loans ----- --------------- --------------------------------- ----------------------- 1 Less than or equal to 0.50% 1.50% 1.00:1.00 2 Greater than 0.75% 1.75% 1.00:1.00 but less than or equal to 2.00:1.00 3 Greater than 1.00% 2.00% 2.00:1.00 but less than or equal to 2.50:1.00 4 Greater than 1.25% 2.25% 2.50:1.00 but less than or equal to
-94- 101 3.00:1.00 5 Greater than 1.50% 2.50% 3.00:1.00 but less than or equal to 3.50:1.00 6 Greater than 1.75% 2.75% 3.50:1.00 but less than or equal to 3.75:1.00 7 Greater than 2.00% 3.00% 3.75:1.00 but less than or equal to 4.25:1.00 8 Greater than 2.25% 3.25% 4.25:1.00 but less than or equal to 5.00:1.00
; provided, however, that if the Borrower fails to deliver the financial statements required to be delivered pursuant to Section 8.01(b) or (c) (accompanied by the officer's certificate required to be delivered pursuant to Section 8.01(f) showing the applicable Leverage Ratio on the relevant Test Date) on or prior to the respective date required by such Sections, then Level 8 pricing shall apply until such time, if any, as the financial statements required as set forth above and the accompanying officer's certificate have been delivered showing the pricing for the respective Margin Reduction Period is at a level which is less than Level 8 (it being understood that, in the case of any late delivery of the financial statements and officer's certificate as so required, the Applicable Margin, if any, shall apply only from and after the date of the delivery of the complying financial statements and officer's certificate); provided further, that, unless the Majority Grid Lenders otherwise agree, Level 8 pricing shall apply at any time when any Default under Section 10.01 is in existence or any Event of Default is in existence. Notwithstanding anything to the contrary contained in the immediately preceding sentence, Level 8 pricing shall apply for the period from the Initial Borrowing Date to but not including the date which is the first Start Date after the Borrower's fiscal quarter ending on June 30, 2001; (b) with respect to B Term Loans maintained as (i) Base Rate Loans, a percentage per annum equal to 2.75%, and (ii) Eurodollar Loans, a percentage per annum equal to 3.75%; and (c) with respect to C Term Loans maintained as (i) Base Rate Loans, a percentage per annum equal to 3.00%, and (ii) Eurodollar Loans, a percentage per annum equal to 4.00%. -95- 102 "Applicable RTL Commitment Commission Percentage" shall mean (i) for each day during which clause (ii) below is not applicable, 3/4 of 1% and (ii) for each day on which the aggregate outstanding principal amount of RTL Loans exceeds 50% of the Total RTL Commitment, 1/2 of 1%. "Asset Sale" shall mean the sale, transfer or other disposition by the Borrower or any of its Subsidiaries to any Person other than the Borrower or any of its Subsidiaries of any asset of the Borrower or such Subsidiary (other than sales, transfers or other dispositions (a) in the ordinary course of business of goods or inventory and/or obsolete, worn out or excess equipment (including gaming equipment replaced in the ordinary course of business) or intellectual property, (b) mergers among Credit Parties or where a Credit Party is the surviving Person permitted by Section 9.02, (c) dispositions to a Credit Party, (d) the sale or issuance of any capital stock of any Subsidiary of the Borrower to any Credit Party, (e) dispositions of the trailer park in Vicksburg, Mississippi to the extent that the Net Asset Sale Proceeds therefrom are less than $1,250,000, (f) leases or subleases of real or personal property in the ordinary course of business on commercially reasonable terms to the extent that the Borrower determines that such property is immaterial and no longer necessary in the conduct of its business or such lease or sublease is to an operator of a restaurant, store or other enterprise within or adjacent to a casino facility of the Borrower or its Subsidiaries or (g) the proceeds of which do not exceed $500,000 for any transaction or series of related transactions. "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit K (appropriately completed). "Authorized Officer" of any Credit Party shall mean any of the Chairman of the Board, the President, the Chief Executive Officer, any Vice President, the Treasurer, the Secretary, any Assistant Secretary, any Assistant Treasurer, the Chief Financial Officer or the Controller of such Credit Party or any other officer of such Credit Party which is designated in writing to the Administrative Agent, BTCo and the Issuing Lender by any of the foregoing officers of such Credit Party as being authorized to give such notices under this Agreement. "Available Investment Basket Amount" shall mean, on any date of determination, an amount equal to the sum (without duplication) of (i) $7,500,000 minus (ii) the aggregate amount of Investments made (including for such purpose the fair market value of any assets contributed to any Investment Entity (as determined in good faith by senior management of the Borrower), net of Indebtedness assigned to, and assumed by, the respective Investment Entity in connection therewith) pursuant to Section 9.05(xi) after the Effective Date, minus (iii) the aggregate amount of Indebtedness or other obligations (whether absolute, accrued, contingent or otherwise and whether or not due) of any Investment Entity for which the Borrower or any of its Subsidiaries (other than the respective Investment Entity) is liable on such date of determination, minus (iv) all payments made by the Borrower or any of its Subsidiaries (other than the respective Investment Entity) in respect of Indebtedness or other obligations of the respective Investment Entity (including, without limitation, payments in respect of obligations described in preceding clause (iii) after the Effective Date, plus (vi) the amount of any increase to the Available Investment Basket Amount made after the Effective Date in accordance with the provisions of Section 9.05(xi). -96- 103 "B Lender" shall have the meaning provided in Section 4.02(B). "B Term Loan" shall mean each Loan made pursuant to Section 1.01(b) and each Incremental Term Loan made under the B Term Loan Tranche. "B Term Loan Commitments" shall mean for each Lender the amount set forth opposite such Lender's name in Schedule I hereto in the column entitled "B Term Loan Commitment" as same may be (x) reduced from time to time pursuant to Sections 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b). "B Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(A)(c). "B Term Maturity Date" shall mean December 20, 2006. "B Term Notes" shall have the meaning provided in Section 1.05(a). "B Term Reference Amount" shall have the meaning provided in Section 4.02(A)(c). "Bankruptcy Code" shall have the meaning provided in Section 10.05. "Base Rate" at any time shall mean the highest of (i) 1/2 of 1% in excess of the Federal Funds Rate and (ii) the Prime Lending Rate. "Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each Loan designated or deemed designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrowing" shall mean the borrowing of one Type of Loan of a single Tranche from all the Lenders having Commitments of the respective Tranche (or from the Swingline Lender in the case of Swingline Loans) on a given date (or resulting from a conversion or conversions on such date) having in the case of Eurodollar Loans the same Interest Period, provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company in its individual capacity. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day -97- 104 described in clause (i) above and which is also a day for trading by and between banks in the New York interbank Eurodollar market. "C Lender" shall have the meaning provided in Section 4.02(B). "C Term Loan" shall mean each Loan made pursuant to Section 1.01(c) and each Incremental Term Loan made pursuant to the C Term Loan Tranche. "C Term Loan Commitments" shall mean for each Lender the amount set forth opposite such Lender's name in Schedule I hereto in the column entitled "C Term Loan Commitment" as same may be (x) reduced from time to time pursuant to Sections 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b). "C Term Loan Scheduled Repayments" shall have the meaning provided in Section 4.02(A)(d). "C Term Maturity Date" shall mean December 20, 2007. "C Term Notes" shall have the meaning provided in Section 1.05(a). "C Term Reference Amount" shall have the meaning provided in Section 4.02(A)(d). "Calculation Date" shall mean the date of the respective Permitted Acquisition, incurrence, assumption or issuance of Indebtedness, repayment of Indebtedness, or other event, as the case may be, which gives rise to the requirement to calculate compliance with the financial covenants under this Agreement on a Pro Forma Basis. "Calculation Period" shall mean the Test Period (taken as one accounting period) most recently ended prior to a given Calculation Date. "Capital Expenditures" shall mean, with respect to any Person, all expenditures (excluding barter transactions effected in the ordinary course of business) by such Person which should be capitalized in accordance with GAAP, including all such expenditures with respect to fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with GAAP) and the amount of capital assets associated with Capitalized Lease Obligations incurred by such Person (which shall be deemed to include (i) expenditures by such person to acquire stock or other evidence of beneficial ownership of any other Person for the purpose of acquiring the capital assets of such Person (to the extent of such capital assets) and (ii) expenditures for fixed or capital equipment at customers and property additions). "Capitalized Lease Obligations" of any Person shall mean all rental obligations which, under GAAP, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with GAAP. -98- 105 "Cash Equivalents" shall mean, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit with maturities of not more than one year from the date of acquisition by such Person of any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any State thereof, the District of Columbia or any foreign jurisdiction having capital, surplus and undivided profits aggregating in excess of $200,000,000, (iii) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation or at least P-1 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing not more than one year after the date of acquisition by such Person, (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above and (vi) demand deposit accounts maintained in the ordinary course of business not in excess of $1,000,000 in the aggregate. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., and any successor thereto. "Change of Control" shall mean (i) that the Neilsen Family Group shall fail to own or control more than 50% of the Voting Stock of the Borrower or (ii) a "change of control" or similar event shall occur as provided in any Senior Subordinated Financing Document or, on and after the execution and delivery thereof, in any Permanent Senior Subordinated Note Document. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement, and to any subsequent provision of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Security Agreement Collateral, all Mortgaged Properties, all Ship Properties and all cash and Cash Equivalents delivered as collateral pursuant to Section 4.02(A) or Section 10 hereof and all Additional Collateral, if any. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents. "Collective Bargaining Agreements" shall have the meaning provided in Section 5.05. -99- 106 "Commitment" shall mean any of the commitments of any Lender, i.e., whether the Term Loan Commitments, RTL Commitment or Revolving Loan Commitment. "Commitment Commission" shall have the meaning provided in Section 3.01(a). "Consolidated Adjusted EBITDA" shall mean, for any period, Consolidated EBITDA, adjusted by subtracting therefrom the sum of (i) the amount of all cash payments made or required to be made by the Borrower and its Subsidiaries in respect of taxes or tax liabilities measured by taxable income for such period after giving effect to applicable net operating loss and AMT carry forwards and all other applicable tax credits and (ii) the amount of all cash Dividends actually paid during such period (including, without limitation, treasury stock repurchases during such period). Notwithstanding anything to the contrary contained above, to the extent Consolidated Adjusted EBITDA is to be determined for any Test Period which ends prior to the first anniversary of the Initial Borrowing Date, Consolidated Adjusted EBITDA for all portions of such period occurring prior to the Initial Borrowing Date shall be calculated in accordance with the definition of Test Period contained herein. "Consolidated Adjusted Fixed Charge Coverage Ratio" shall mean, for any period the ratio of (x) Consolidated Adjusted EBITDA for such period to (y) Consolidated Fixed Charges for such period. "Consolidated Cash Interest Expense" shall mean, for any period, the total consolidated interest expense of the Borrower and its Consolidated Subsidiaries (excluding amortization or write-off of debt discount and debt issuance costs but including commissions and other fees and charges associated with Indebtedness and all commissions and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under any Interest Rate Protection or Other Hedging Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP) determined on a consolidated basis in accordance with GAAP for such period and which are required to be paid in cash during that period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP representing the interest factor for such period and any interest expense capitalized during such period. Notwithstanding anything to the contrary contained above, to the extent Consolidated Cash Interest Expense is to be determined for any Test Period which ends prior to the first anniversary of the Initial Borrowing Date, Consolidated Cash Interest Expense for all portions of such period occurring prior to the Initial Borrowing Date shall be calculated in accordance with the definition of Test Period contained herein. "Consolidated Current Assets" shall mean, at any time, the consolidated current assets of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" shall mean, at any time, the consolidated current liabilities of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP at such time, but excluding (i) the current portion of any Indebtedness under this Agreement and any other long-term Indebtedness which would -100- 107 otherwise be included therein, (ii) accrued but unpaid interest with respect to the Indebtedness described in clause (i), and (iii) the current portion of Capitalized Lease Obligations. "Consolidated EBIT" shall mean, for any period, the Consolidated Net Income of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP, before Consolidated Net Interest Expense, provision for taxes and non-cash compensation expense and without giving effect to any extraordinary or unusual or nonrecurring gains or losses. "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT, adjusted by adding thereto the amount of all depreciation and amortization charges and the amount of pre-opening expenses that were deducted in arriving at Consolidated EBIT for such period. Notwithstanding anything to the contrary contained above, to the extent Consolidated EBITDA is to be determined for any Test Period which ends prior to the first anniversary of the Initial Borrowing Date, Consolidated EBITDA for all portions of such period occurring prior to the Initial Borrowing Date shall be calculated in accordance with the definition of Test Period contained herein. Notwithstanding the foregoing, Consolidated EBITDA shall be determined without giving effect to any gain or loss arising from the Disposition. "Consolidated Fixed Charges" shall mean, for any period, the sum, without duplication, of (i) Consolidated Cash Interest Expense for such period and (ii) the scheduled principal amount of all amortization payments on all Indebtedness (including, without limitation, the principal component of all Capitalized Lease Obligations) of the Borrower and its Subsidiaries for such period (as determined on the first day of such period). Notwithstanding anything to the contrary contained above, to the extent Consolidated Fixed Charges is to be determined for any Test Period which ends prior to the first anniversary of the Initial Borrowing Date, Consolidated Fixed Charges for all portions of such period occurring prior to the Initial Borrowing Date shall be calculated in accordance with the definition of Test Period contained herein. "Consolidated Gross Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of (x) Consolidated EBITDA for such period to (y) Consolidated Fixed Charges for such period. "Consolidated Indebtedness" shall mean, at any time, without duplication, the sum of the aggregate outstanding principal amount of all Indebtedness and the principal component of Capitalized Lease Obligations, of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" shall mean, for any period, net after tax income of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Net Interest Expense" shall mean, for any period, the total interest expense of any Person for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of such -101- 108 Person representing the interest factor for such period in each case net of the total consolidated cash interest income of such Person for such period. "Consolidated Subsidiaries" shall mean, as to any Person, all Subsidiaries of such Person which are consolidated with such Person for financial reporting purposes in accordance with GAAP. "Consolidated Tangible Net Worth" shall mean at any date (i) the sum of all amounts which, in conformity with GAAP, would be included under the caption "redeemable preferred stock" and "total stockholders' equity" (or like captions) on a consolidated balance sheet of the Borrower on and as at such date, less (ii) any cash Dividends on the capital stock of the Borrower theretofore declared but not yet paid, but only to the extent not already deducted when determining the amount specified in clause (i) less (iii) all intangible assets of the Borrower and its Subsidiaries on such date (other than intangible assets arising as a result of the Acquisition). "Contingent Obligation" shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obli gation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "CPI" shall mean Cactus Pete's, Inc., a Nevada corporation. "Credit Documents" shall mean this Agreement and, after the execution and delivery thereof pursuant to the terms of this Agreement, each Note, each Security Document and each Subsidiary Guaranty. "Credit Event" shall mean the making of any Loan or the issuance of any Letter of Credit. "Credit Party" shall mean the Borrower and each Subsidiary thereof party to a Credit Document. -102- 109 "Debt Agreements" shall have the meaning provided in Section 5.05. "Debt Retirement" shall have the meaning provided in Section 5.06(a). "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" shall mean any Lender with respect to which a Lender Default is in effect. "Designated Lenders" shall mean Bankers Trust Company, Wells Fargo Bank, N.A. and Bear Stearns Corporate Lending Inc.. "Development Agreement" shall mean that certain Development Agreement dated April 24, 1995 by and between Kansas City Station Corporation and The Port Authority of Kansas City, Missouri, as amended. "Disposition" shall mean the sale by ACLVI of The Reserve to Lake Mead Station, Inc. pursuant to the Disposition Documents. "Disposition Documents" shall mean that certain Asset Purchase Agreement dated as of October 17, 2000 by and among ACLVI, the Borrower, Lake Mead Station, Inc. and Station, as in effect on the Effective Date and without giving effect to any subsequent amendment, modification and supplement thereto made without the prior written consent of the Required Lenders (other than amendments, modifications and supplements that, when considered either individually or in the aggregate, are not materially less favorable to the Company and its Subsidiaries, taken as a whole, or the Lenders with respect thereto). "Disqualified Stock" shall mean any capital stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event (including a Change of Control Event), (i) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to December 20, 2008, (ii) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (a) debt securities or (b) any capital stock referred to in (i) above, in each case at any time prior to the first anniversary of the latest Maturity Date or (iii) contains any restrictive covenants other than those which are reasonably satisfactory to the Administrative Agent. "Dividend" with respect to any Person shall mean that such Person has declared or paid a dividend or returned any equity capital to its stockholders or authorized or made any other distribution, payment or delivery of property (other than common stock of such Person) or cash to its stockholders as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any shares of any class of its capital stock outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of such Person outstanding on or after the Effective Date (or any options or war- -103- 110 rants issued by such Person with respect to its capital stock). Without limiting the foregoing, "Dividends" with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes to the extent such payments do not result in a deduction to Consolidated Net Income. "Documents" shall mean the Credit Documents and the Transaction Documents. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Domestic Subsidiary" shall mean each Subsidiary that is incorporated or organized in the United States or any State thereof. "Drawing" shall have the meaning provided in Section 2.04(b). "Effective Date" shall have the meaning provided in Section 13.10. "Employee Benefit Plan" shall have the meaning provided in Section 5.05. "Employee Stock Option Plan" shall mean any plan, for the compensation of management, employees, directors and consultants of the Borrower or any of its Subsidiaries, or any arrangement for the benefit of management, employees, directors and consultants of the Borrower or any of its Subsidiaries. "Employment Agreement" shall have the meaning provided in Section 5.05. "End Date" shall mean, with respect to any Margin Reduction Period, the last day of such Margin Reduction Period. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, written demands, demand letters, written claims, liens, written notices of non-compliance or violation, investigations or proceedings arising under any Environmental Law (hereafter "Claims") or any permit issued under any such law, including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" shall mean any applicable Federal, state, provincial, foreign or local statute, law, rule, regulation or rule of common law now or hereafter in effect and in each case as amended, and any legally binding judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of -104- 111 1990, 33 U.S.C. Section 2701 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a "single employer" (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of the Borrower being or having been a general partner of such person. "Eurodollar Loan" shall mean each Loan designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Eurodollar Loan Availability Date" shall mean the fifth Business Day following the Initial Borrowing Date. "Eurodollar Rate" shall mean (a) the arithmetic average (rounded to the nearest 1/16 of 1%) of the offered quotation to first-class banks in the New York interbank Eurodollar market by the Reference Lender for Dollar deposits of amounts in immediately available funds comparable to the outstanding principal amount of the Eurodollar Loan of the Reference Lender with maturities comparable to the Interest Period applicable to such Eurodollar Loan commencing two Business Days thereafter as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period, divided by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 10. "Excess Cash Flow" shall mean, for any period, the remainder of (a) the sum of (i) Adjusted Consolidated Net Income for such period and (ii) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, minus (b) the sum of (i) the amount of Capital Expenditures made by the Borrower and its Subsidiaries on a consolidated basis during such period pursuant to and in accordance with Sections 9.07(a), (b) and (c), except to the extent financed with the proceeds of Indebtedness or pursuant to Capitalized Lease Obligations, (ii) the aggregate amount of permanent principal payments of Indebtedness for borrowed money of the Borrower and the repayment of the principal component of Capitalized Lease Obligations of the Borrower and its Subsidiaries (excluding, without duplication (1) payments with proceeds of issuances of Indebtedness or equity or with proceeds -105- 112 of asset sales, (2) payments of Loans or other Obligations pursuant to Sections 4.02(A)(f), (g), (h) and (j) and (3) payment of the Bridge Subordinated Loans from the proceeds of the Permanent Senior Subordinated Notes or equity proceeds), (iii) cash Dividends paid during such period, and (iv) the increase, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period. "Excess Cash Payment Date" shall mean the date occurring 110 days after the last day of each fiscal year of the Borrower (beginning with its fiscal year ending December 31, 2001). "Excess Cash Payment Period" shall mean with respect to the repayment required on each Excess Cash Payment Date, the immediately preceding fiscal year of the Borrower. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Excluded Equity Proceeds" shall mean proceeds from the sale or issuance of equity securities or capital contributions (i) received by a Credit Party or a Subsidiary receiving an Investment permitted Section 9.05, in each case, from another Credit Party or (ii) to the extent such proceeds are utilized to repay the Subordinated Bridge Loans or (iii) received by the Borrower from the issuance of its common stock (including as a result of the exercise of options with respect thereto) or options to purchase shares of its common stock, to officers, directors, consultants and employees of the Borrower and its subsidiaries in an aggregate amount not to exceed $2,000,000 in any fiscal year. "Excluded Recovery Event" shall mean (x) any Recovery Event or series of related Recovery Events the proceeds of which do not exceed $500,000, (y) a Recovery Event which occurred prior to the Effective Date relating to claims under one or more insurance policies maintained at any time by the Borrower and/or its Subsidiaries for reimbursement of prior emergency measures to minimize loss and prior necessary extra expenses incurred to avoid and reduce the suspension of business operations and resulting loss of income from business interruption and related claims at operations in Vicksburg, Mississippi, and (z) a Recovery Event relating to claims for reimbursement or payment of legal expenses or damages being litigated in the case of American Guarantee and Liability Insurance Co. v. Ameristar Casinos, et al., in the United States District Court for the Southern District of Mississippi, Jackson Division, Civil Action No. 3:00CV257WS. "Existing Indebtedness" shall mean the Indebtedness set forth on Schedule VI hereto (which shall include the Retained Indebtedness). "Existing Notes" shall mean the Series A and Series B 10 1/2 Senior Subordinated Notes due 2004 issued by the Borrower under the Existing Notes Indentures. "Existing Notes Indenture" shall mean that certain indenture dated as of July 15, 1997, between the Borrower and First Trust National Association as trustee. "Existing Notes Indenture Supplements" shall mean the Supplemental Indentures' to the Existing Notes Indenture in form and substance satisfactory to the Administrative Agent -106- 113 and entered into by the Borrower and First Trust National Association, as trustee in connection with the Existing Notes Tender Offer/Consent Solicitation. "Existing Notes Tender Offer Documents" shall mean the Existing Notes Indenture Supplement and the Existing Notes Tender Offer/Consent Solicitation, as in effect on the Initial Borrowing Date and as same may be amended, modified or supplemented from time to time pursuant to the terms thereof and hereof. "Existing Notes Tender Offer Repurchases" shall have the meaning provided in Section 5.06(a)(i). "Existing Notes Tender Offer/Consent Solicitation" shall have the meaning set forth in Section 5.06(a)(i). "Facilities Expansion" shall mean the completion of expansion of the facilities at Station Casino St. Charles as described to the Administrative Agent prior to the Effective Date. "Facilities Expansion Certificate" shall have the meaning provided in Section 6.03. "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Rate" shall mean for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to or referred to in Section 3.01. "Former Lender" shall have the meaning provided in Section 13.04(c). "Futuresouth Royalty" shall mean the royalty payment required to be made pursuant to the Asset Purchase and Sale Agreement, dated as of February 15, 2000, by and between Futuresouth, Southboat Lemay, Inc., Southboat Limited Partnership and Ameristar Casino St. Louis, Inc., as in effect on the Effective Date and without giving effect to any subsequent amendment, modification and supplement thereto made without the prior written consent of the Required Lenders. "GAAP" shall have the meaning provided in Section 13.07(a). "Gaming Authority" shall mean the governmental authorities charged with the administration and enforcement of the Gaming Regulations. -107- 114 "Gaming Business" shall mean the businesses and operations of the Borrower and its Subsidiaries with respect to, and the properties and assets of the Borrower and its Subsidiaries used in connection with, the Specified Casino Properties and any other casinos, hotel casinos or gaming businesses now or in the future owned by the Borrower or any of its Subsidiaries or in which the Borrower or any of its Subsidiaries has an interest either through a joint venture or as a party to a management agreement. "Gaming Property" of any Person shall mean those properties and assets of such Person which relate to such Person's casino or hotel casino businesses and operations. "Gaming Regulations" shall mean the laws, rules, regulations and orders applicable to the casino and gaming businesses or activities of the Borrower or any of its Subsidiaries in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities. "Guaranteed Obligations" shall mean the irrevocable and unconditional guaranty made by each Subsidiary Guarantor (i) to each Lender for the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note issued by the Borrower to such Lender, and Loans made, under the Credit Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to such Lender now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower and (ii) to each Lender and each Affiliate of a Lender which enters into an Interest Rate Protection or Other Hedging Agreement with the Borrower, which by its express terms are entitled to the benefit of the Subsidiary Guaranty with the written consent of the Borrower and the Administrative Agent, the full and prompt payment when due (whether by acceleration or otherwise) of all obligations of the Borrower owing under any such Interest Rate Protection or Other Hedging Agreement, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" shall mean each Subsidiary Guarantor. "Guaranty" shall mean the Subsidiary Guaranty made pursuant to Section 5.15, and any Subsidiary Guaranty executed pursuant to Section 8.11(f). "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous materials," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar meaning and regulatory effect under any applicable Environmental Law. -108- 115 "Incremental Commitment" shall mean a commitment to make additional Term Loans or increase the Revolving Loan Commitment pursuant to Section 1.14. "Incremental Commitment Agreement" shall mean an Incremental Commitment Agreement substantially in the form of Exhibit O (appropriately completed). "Incremental Commitment Termination Date" shall mean December 31, 2002. "Incremental Lender" shall have the meaning provided in Section 1.14(b). "Incremental Term Loan" shall have the meaning provided in Section 1.01(h). "Incremental Term Loan Borrowing Date" shall mean for any Incremental Term Loan, the date specified in the respective Incremental Commitment Agreement pursuant to which such Incremental Term Loans are to be made; provided that no such date shall occur after the Incremental Commitment Termination Date. "Incremental Term Loan Commitment" shall mean, for each Incremental Lender, the commitment of such Incremental Lender to make Incremental Term Loans under a term Loan Tranche pursuant to Section 1.01(h) on a given Incremental Term Loan Borrowing Date, as such commitment (x) is set forth in the respective Incremental Commitment Agreement delivered pursuant to Section 1.14(b) or (y) may be terminated pursuant to Sections 3.03 and/or 10. "Indebtedness" shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services (other than, to the extent deferred in the ordinary course of business, deferred payments in respect of services by employees) due more than 90 days after acquisition of the property or receipt of services or which is otherwise represented by a note, (ii) the maximum amount available to be drawn under all letters of credit issued for the account of such Person and all unpaid drawings in respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v) or (vi) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (to the extent of the lesser of the amount of such Indebtedness and the value of the respective property), (iv) Capitalized Lease Obligations, (v) all Contingent Obligations of such Person, (vi) all obligations under any Interest Rate Protection or Other Hedging Agreement or under any similar type of agreement and (vii) all obligations under Synthetic Leases of such Person. The principal amount of Indebtedness arising from royalty obligations representing the deferred purchase price of property or services shall equal the greater of (x) the principal amount thereof as determined in accordance with GAAP and (y) the present value of the amounts the management of the Borrower believes in good faith will be required to be paid under such royalty obligation, provided that in the case of the Futuresouth Royalty, the principal amount of such Indebtedness shall equal the present value of the greater of (x) the minimum royalty payments and (y) the amount actually paid in respect of the Futuresouth Royalty in respect of the most recently ended period. "Initial Borrowing Date" shall mean the date occurring on or after the Effective Date on which the initial Borrowing of Term Loans hereunder occurs. -109- 116 "Intellectual Property" shall have the meaning provided in Section 7.23. "Interest Determination Date" shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan. "Interest Period" shall have the meaning provided in Section 1.09. "Interest Rate Protection or Other Hedging Agreement" shall have the meaning provided in the Security Documents. "Investment" shall have the meaning provided in Section 9.05. "Investment Entity" shall mean an Person in which an Investment is made by the Borrower and its Subsidiaries. "Issuing Lender" shall mean BTCo or any of its Affiliates including, but not limited to, Deutsche Bank AG, New York Branch, and, in the event BTCo or such Affiliate declines to become an Issuing Lender for the purpose of issuing Letters of Credit pursuant to Section 2, any Lender which at the request of the Borrower and with the consent of the Administrative Agent agrees, in such Lender's sole discretion, to become an Issuing Lender for the purpose of issuing Letters of Credit pursuant to Section 2. On the Initial Borrowing Date, the sole Issuing Lender is (x) in the case of Standby Letters of Credit, BTCo and (y) in the case of Trade Letters of Credit, Deutsche Bank AG, New York Branch. "Joint Venture" shall mean any Person, other than an individual or a Subsidiary of the Borrower, (i) in which the Borrower or a Subsidiary of the Borrower holds or acquires an ownership interest (whether by way of capital stock, partnership or limited liability company interest, or other evidence of ownership) and (ii) which is engaged in a business permitted under Section 9.16. "L/C Supportable Obligations" shall mean obligations of the Borrower or its Subsidiaries incurred in the ordinary course of business including, without limitation, the Borrower's obligations under the Revenue Bonds Guaranty Agreement and the Development Agreement. "Leaseholds" of any Person means all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Lender" shall mean each financial institution listed on Schedule I, as well as any Person which becomes a "Lender" hereunder pursuant to Sections 1.13 and 13.04(b), provided that in any event, each such institution shall be a Qualified Person. "Lender Default" shall mean (i) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing (including a Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.03(c) or (ii) a Lender having notified in writing the Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 1.01(d), Section 1.01(e), Section 1.01(g) or Section 2. -110- 117 "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b). "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings relating to Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Leverage Ratio" shall mean on the date of determination thereof the ratio of (i) Consolidated Indebtedness on such date to (ii) Consolidated EBITDA for the Test Period ended on the last day of the fiscal quarter last ended prior to the date such determination is made, provided that all calculations of compliance with Section 9.08 and 9.09 shall be on a Pro Forma Basis. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Loan" shall mean each Term Loan, each RTL Loan, each Revolving Loan and each Swingline Loan. "Maintenance Capital Expenditures" shall mean any Capital Expenditures by the Borrower or any of its Subsidiaries that are made to maintain, restore or refurbish the condition or usefulness of property of the Borrower or any of its Subsidiaries (including, without limitation, upgrading gaming devices in the ordinary course of business), or otherwise to support the continuation of such Person's day-to-day operations as then conducted, but that are not properly chargeable to repairs and maintenance in accordance with GAAP. "Majority Grid Lenders" shall mean Non-Defaulting Lenders, the sum of whose outstanding A Term Loans, RTL Loans (or if prior to the earlier of the RTL Conversion Date and the termination thereof, RTL Commitments) and Revolving Loan Commitments (or after the termination thereof, outstanding Revolving Loans and Revolving Loan Percentage of outstanding Swingline Loans and Letter of Credit Outstandings) represent an amount greater than 50% of the sum of (x) all outstanding A Term Loans of Non-Defaulting Lenders, (y) all RTL Loans of Non-Defaulting Lenders (or if prior to the earlier of the RTL Conversion Date and the termination thereof, the Total RTL Commitment) and (z) the Total Revolving Loan Commitment (or after the termination thereof, the sum of the then total outstanding Revolving Loans and Revolving Loan Percentage of Non-Defaulting Lenders of the then outstanding Swingline Loans and Letter of Credit Outstandings at such time) of Non-Defaulting Lenders. "Majority Lenders" shall mean collectively (and not individually) with respect to any Tranche, Non-Defaulting Lenders whose outstanding Term Loans of such Tranche (or, if prior to the Initial Borrowing Date, Term Loan Commitments of such Tranche) constitute at least -111- 118 a majority of the total outstanding Term Loans of such Tranche (or, if prior to the Initial Borrowing Date, Term Loan Commitments of such Tranche) of all Non-Defaulting Lenders. "Management Agreements" shall have the meaning provided in Section 5.05. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(g). "Margin Reduction Period" shall mean each period which shall commence on the date occurring after the Effective Date upon which the respective officer's certificate is delivered pursuant to Section 8.01(f) and which shall end on the date of actual delivery of the next officer's certificates pursuant to Section 8.01(f) or the latest date on which such next officer's certificate is required to be so delivered. "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on (i) the business, operations, properties, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole (after giving effect to the Transaction), (ii) the ability of the Credit Parties to perform their material obligations under the Credit Documents or (iii) the rights and remedies of the Administrative Agent and the Lenders under the Credit Documents. "Material Contracts" shall have the meaning provided in Section 5.05. "Material Gaming Facility" means any gaming facility the absence, loss or closing of which could reasonably be expected to have a Material Adverse Effect, including in any event the Specified Casino Properties. "Material Subsidiary" shall mean each Subsidiary of Borrower now existing or hereafter acquired or formed by Borrower which, (a) on a consolidated basis for such Subsidiary and its Subsidiaries, (i) for the four fiscal quarters most recently ended accounted for more than 1% of the Consolidated EBITDA of the Borrower and its Subsidiaries, or (ii) as at the end of such four fiscal quarters, was the owner of more than 1% of the consolidated assets of Company and its Subsidiaries, (b) owns, supplies, operates or uses any assets or function necessary for the conduct of business at any Material Gaming Facility, or (c) owns any material Intellectual Property necessary for the conduct of business at any of the Material Gaming Facilities; provided that the Subsidiaries of the Borrower which are not otherwise Material Subsidiaries but for this proviso shall be Material Subsidiaries to the extent that on a consolidated basis all such Subsidiaries and their Subsidiaries (i) for the four fiscal quarters most recently ended accounted for more than 5% of the Consolidated EBITDA of the Borrower and its Subsidiaries or (ii) as at the end of such four fiscal quarters were the owner of more than 5% of the consolidated assets of the Borrower and its Subsidiaries, provided that in any event each Subsidiary which is required to be a guarantor of the Subordinated Bridge Loans or the Permanent Senior Subordinated Notes shall be a "Material Subsidiary". "Maturity Date" shall mean, with respect to any Tranche the final maturity date under such Tranche (i.e., the A Term Maturity Date, the B Term Maturity Date, the C Term -112- 119 Maturity Date, the RTL Maturity Date, the Revolving Loan Maturity Date and the Swingline Expiry Date, as the case may be). "Maximum Permitted Consideration" shall mean, with respect to any Permitted Acquisition, the sum (without duplication) of (i) the fair market value of Borrower capital stock issued as consideration in connection with such Permitted Acquisition, (ii) the aggregate principal amount of all cash paid by the Borrower or any of its Subsidiaries in connection with such Permitted Acquisition (including payments of fees and costs and expenses in connection therewith), and (iii) the fair market value (determined in good faith by senior management of the Borrower) of all other consideration payable in connection with such Permitted Acquisition. "Maximum Swingline Amount" shall mean $10,000,000. "Minimum Borrowing Amount" shall mean (A) with respect to Base Rate Loans, (i) for Term Loans of any Tranche, $1,000,000 (and, if greater, in an integral multiple thereof), (ii) for RTL Loans, $1,000,000 (and, if greater, in an integral multiple thereof), (iii) for Revolving Loans, $1,000,000 (and, if greater, in an integral multiple thereof) and (iv) for Swingline Loans, $1,000,000 (and, if greater, in an integral multiple thereof) and (B) with respect to Eurodollar Loans, (i) for Term Loans of any Tranche, $10,000,000 (and, if greater, in an integral multiple of $1,000,000), (ii) for RTL Loans, $10,000,000 (and, if greater, in an integral multiple of $1,000,000) and (iii) for Revolving Loans, $5,000,000 (and, if greater, in an integral multiple of $1,000,000). "Missouri Stock Option Agreements" shall mean the four Non-qualified Stock Option Agreements dated as of December 18, 2000 between the Borrower on the one hand, and John Finamore, Troy Stremming, Thomas Burke and Anthony Raymon on the other hand, in each case as in effect on the Initial Borrowing Date and without giving effect to any amendment, modification or supplement thereto made without the prior written consent of the Administrative Agent. "Mortgage" shall have the meaning provided in Section 5.09(a), and, after the execution and delivery thereof, shall include each Additional Mortgage delivered pursuant to Section 8.11. "Mortgage Policies" shall have the meaning provided in Section 5.09(c). "Mortgaged Property" shall have the meaning provided in Section 5.09(a) and, after the execution or delivery thereof, shall include each property covered by an Additional Mortgage. "Mortgaged Ship Property" shall have the meaning provided in Section 5.17 and, after the execution or delivery thereof, shall include each property covered by an Additional Ship Mortgage. "Neilsen Family Group" shall mean collective reference to (i) Craig Neilsen, Ray Neilsen and their respective executors, administrators, testamentary trustees, heirs, legatees and beneficiaries, (ii) Craig Neilsen or Ray Neilsen in their respective capacities as a trustee under a revocable trust, together with each successor trustees thereof, (iii) any corporation, partnership, -113- 120 trust or other Person in which no one has any interest (directly or indirectly) except for Craig Neilsen, Ray Neilsen and any spouse and descendants (whether by blood or adoption and including stepchildren) and the spouses of any such natural person and (iv) Craig Neilsen or Ray Neilsen as the executor of the estate of Gwendolyn Anderson or of any Person named above. "Net Asset Sale Proceeds" shall mean for any sale, lease, transfer or other disposition of assets, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received by the Borrower and/or any of its Subsidiaries from such sale, lease, transfer or other disposition, net of reasonable transaction costs (including, without limitation, any underwriting, brokerage or other customary selling commissions and reasonable legal, advisory and other fees and expenses, including title and recording expenses and reasonable expenses incurred for preparing such assets for sale, associated therewith) and payments of unassumed liabilities relating to the assets sold at the time of, or within 30 days after, the date of such sale, the amount of such gross cash proceeds required to be used to repay any Indebtedness (other than Indebtedness of the Lenders pursuant to this Agreement) which is secured by the respective assets which were sold, and the estimated marginal increase in income taxes which will be payable in cash by the Borrower's consolidated group with respect to the fiscal year in which the sale occurs as a result of such sale; but excluding any portion of any such gross cash proceeds which the Borrower determines in good faith should be reserved for post-closing adjustments (to the extent the Borrower delivers to the Lenders a certificate signed by an Authorized Officer as to such determination), it being understood and agreed that on the day that all such post-closing adjustments have been determined (which shall not be later than 60 days following the date of the respective asset sale), the amount (if any) by which the reserved amount in respect of such sale or disposition exceeds the actual post-closing adjustments payable by the Borrower or any of its Subsidiaries shall constitute Net Asset Sale Proceeds on such date). "Non-Compete Agreements" shall have the meaning provided in Section 5.05. "Non-Defaulting Lender" shall mean and include each Lender which is not a Defaulting Lender. "Non-Wholly-Owned Subsidiary" shall mean, as to any Person, a Subsidiary of such Person which is not a Wholly-Owned Subsidiary. "Note" shall mean each Term Note, each RTL Note, each Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.03. "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent located at 130 Liberty Street, New York, New York 10006, Attention: Gloria Argueta, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. -114- 121 "Obligations" shall mean all amounts owing to the Administrative Agent, the Collateral Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document. "Participant" shall have the meaning provided in Section 2.03(a). "Payment Office" shall mean the office of the Administrative Agent located at 130 Liberty Street, New York, New York 10006, Attention: Mary Rodwell, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permanent Exchange Senior Subordinated Notes" shall mean senior subordinated notes issued pursuant to the Permanent Senior Subordinated Notes Indenture, which Permanent Exchange Senior Subordinated Notes are substantially identical securities to the Permanent Senior Subordinated Notes and shall be issued pursuant to a registered exchange offer or private exchange offer for the Permanent Senior Subordinated Notes; provided that in no event will the issuance of any Permanent Exchange Senior Subordinated Notes increase the aggregate principal amount of Permanent Senior Subordinated Notes theretofore outstanding or otherwise result in an increase in an interest rate applicable to the Permanent Senior Subordinated Notes. "Permanent Senior Subordinated Notes" shall mean any Indebtedness of the Borrower evidenced by senior subordinated notes and incurred pursuant to one or more issuances of such subordinated notes to Refinance all or a portion of the then outstanding Subordinated Bridge Loans, so long as (a) such refinancing or renewal does not add guarantors, obligors or security from that which applied to the Subordinated Bridge Loans, (b) such Indebtedness has substantially the same (or, from the perspective of the Lenders, more favorable) subordination provisions as those contained in the Senior Subordinated Financing Agreement, (c) such Indebtedness does not mature prior to December 31, 2008 and (d) all other terms of such refinancing (including, without limitation, with respect to the redemption provisions, maturities, covenants, defaults and remedies), are reasonably satisfactory to the Administrative Agent and are not, taken as a whole, materially less favorable to the Borrower than those previously existing with respect to the Subordinated Bridge Loans; provided that the aggregate principal amount of any issuance of Permanent Senior Subordinated Notes may not exceed the principal amount of the Subordinated Bridge Loans unless 100% of the net cash proceeds of the principal amount of Permanent Senior Subordinated Notes which exceeds the principal amount of Subordinated Bridge Loans is applied to repay Term Loans and/or reduce the Total Revolving Loan Commitment and/or the Total RTL Commitment as provided pursuant to Section 4.02(A)(g). As used herein, the term "Permanent Senior Subordinated Notes" shall also include any Permanent Exchange Senior Subordinated Notes issued pursuant to the Permanent Senior Subordinated Notes Indenture in exchange for theretofore outstanding Permanent Senior Subordinated Notes as contemplated by the definition of Permanent Exchange Senior Subordinated Notes. The issuance of Permanent Senior Subordinated Notes shall be deemed to be a representation and warranty by the Borrower that all conditions thereto have been satisfied in all material respects and that same is permitted in accordance with the terms of this Agreement, which representation -115- 122 and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 6 and 10. "Permanent Senior Subordinated Notes Documents" shall mean the Permanent Senior Subordinated Notes Indenture, the Permanent Senior Subordinated Notes and each other agreement, document or instrument relating to the issuance of the Permanent Senior Subordinated Notes. "Permanent Senior Subordinated Notes Indenture" shall mean any indenture entered into in connection with the issuance of Permanent Senior Subordinated Notes. "Permanent Senior Subordinated Notes Prepayment Amount" shall mean the first $50,000,000 of the net proceeds of Permanent Senior Subordinated Notes in excess of $300,000,000. "Permitted Acquisition" shall mean the acquisition by the Borrower or any of its Wholly-Owned Domestic Subsidiaries of assets constituting a business, division or product line of any Person not already a Subsidiary of the Borrower or any of its Wholly-Owned Subsidiaries or of 100% of the capital stock or other equity interests of any such Person, provided that (A) those acquisitions that are structured as stock acquisitions shall be effected through a purchase of at least 90% of the capital stock or other equity interests of such Person by the Borrower or such Domestic Wholly-Owned Subsidiary or through a merger between such Person and a Domestic Wholly-Owned Subsidiary of the Borrower, so that after giving effect to such merger, at least 90% of the capital stock or other equity interests of the surviving corporation of such merger is owned by the Borrower or a Domestic Wholly-Owned Subsidiary, (B) in the case of the acquisition of at least 90% of the capital stock or other equity interests of any Person, such Person (the "Acquired Person") shall own no capital stock or other equity interests of any other Person unless the Acquired Person owns 100% of the capital stock or other equity interests of such other Person, (C) substantially all of the business, division or product line acquired pursuant to the respective Permitted Acquisition, or the business of the Acquired Person and its Subsidiaries taken as a whole, is in the United States, (D) the assets acquired, or the business of the Acquired Person and its Subsidiaries, shall be in a business permitted to be conducted pursuant to Section 9.16 and (E) all applicable requirements of Section 8.12 applicable to Permitted Acquisitions are satisfied. "Permitted Encumbrance" shall mean, with respect to any Mortgaged Property, such exceptions to title as are set forth in the title insurance policy or title commitment delivered with respect thereto, all of which exceptions must be acceptable to the Administrative Agent in its reasonable discretion. "Permitted Liens" shall have the meaning provided in Section 9.01. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan, as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an -116- 123 obligation to contribute of), the Borrower or a Subsidiary of the Borrower or an ERISA Affiliate, and each such plan with respect to which the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed or had an obligation to contribute to such plan and with respect to which any such entity has any actual or contingent liability. "Pledge Agreement" shall have the meaning provided in Section 5.07. "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the Pledge Agreement. "Pledged Securities" shall mean "Pledged Securities" as defined in the Pledge Agreement. "Prime Lending Rate" shall mean the rate which Bankers Trust Company announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers Trust Company may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Pro Forma Basis" shall mean, in connection with any calculation of compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (i) the assumption, incurrence or issuance of any Indebtedness (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance Permitted Acquisitions) after the first day of the relevant Calculation Period as if such Indebtedness had been assumed, incurred or issued (and the proceeds thereof applied) on the first day of the relevant Calculation Period, (ii) the permanent repayment of any Indebtedness (other than such revolving Indebtedness) after the first day of the relevant Calculation Period as if such Indebtedness had been retired or repaid on the first day of the relevant Calculation Period and (iii) the Permitted Acquisition, if any, then being consummated as if such Permitted Acquisition (and all other Permitted Acquisitions consummated after the first day of the relevant Calculation Period and on or prior to the Calculation Date) had been effected on the first day of the respective Calculation Period, with the following rules to apply in connection therewith: (a) all Indebtedness (x) (other than revolving Indebtedness, except to the extent same is incurred to finance the Transaction, to refinance other outstanding Indebtedness, or to finance Permitted Acquisitions) assumed, incurred or issued after the first day of the relevant Calculation Period and on or prior to the Calculation Date (whether incurred to finance a Permitted Acquisition, to refinance Indebtedness or otherwise) shall be deemed to have been assumed, incurred or issued (and the proceeds thereof applied) on the first day of the respective Calculation Period and remain outstanding through the Calculation Date and (y) (other than revolving Indebtedness unless the commitments with respect thereto have been terminated) permanently retired or redeemed after the first day of the relevant Calculation Period shall be deemed to have been retired or redeemed on the first day of the respective Calculation Period and remain retired through the Calculation Date; -117- 124 (b) all Indebtedness assumed to be outstanding pursuant to preceding clause (i) shall be deemed to have borne interest (x) at the rate applicable thereto, in the case of fixed rate Indebtedness or (y) at the rates which would have been applicable thereto during the respective period when same was deemed outstanding, in the case of floating rate Indebtedness (although interest expense with respect to any Indebtedness for periods while same was actually outstanding during the respective period shall be calculated using the actual rates applicable thereto while same was actually outstanding); and (c) in making any determination of Consolidated EBITDA, pro forma effect shall be given to any Permitted Acquisition for the respective period being tested, taking into account, cost savings and expenses which would otherwise be accounted for as an adjustment pursuant to Article 11 of Regulation S-X under the Securities Act, as if such cost-savings or expenses were realized on the first day of the respective period. Notwithstanding anything to the contrary contained above, (x) for the purposes of Sections 9.08 and 9.09 pro forma effect (as otherwise provided above) shall only be given for events or occurrences which occurred during the respective Test Period but not thereafter and (y) for purposes of Section 8.12, pro forma effect (as otherwise provided above) shall be given for events or occurrences which occurred during the respective Calculation Period and thereafter but on or prior to the respective date of determination. "Projections" shall have the meaning provided in Section 7.05(d). "Qualified Person" shall mean, with respect to any Lender party to this Agreement on the Initial Borrowing Date or that becomes a Lender pursuant to Section 1.13, 13.04(b) or 13.04(c), any Person which shall not have been found unsuitable under the Gaming Regulations of any, and which meets the requirements of all, jurisdictions regulating the Gaming Business of the Borrower and its Subsidiaries to the extent that the Borrower has so notified the Lenders of such requirements of such jurisdictions pursuant to Section 13.04(e). "Quarterly Payment Date" shall mean the last Business Day of each March, June, September and December commencing with March 2001. "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Recovery Event" shall mean the receipt by the Borrower or any of its Subsidiaries of any (i) cash insurance proceeds payable (x) by reason of theft, loss, physical destruction or damage or any other similar event with respect to any property or assets of the Borrower or any of its Subsidiaries and (y) under any policy of insurance required to be maintained under Section 8.03 or (ii) condemnation award payable by reason of eminent domain or deed in lieu thereof. "Reference Lender" shall mean Bankers Trust Company. "Refinance" shall mean, with respect to any the outstanding Indebtedness, the issuance of Indebtedness issued or given in exchange for, or the proceeds of which are used to, extend, refinance, renew, replace, substitute or refund such theretofore outstanding Indebtedness. -118- 125 "Refinanced Indebtedness" shall mean, collectively, all Existing Indebtedness (other than Retained Indebtedness) repaid in connection with the Transaction. "Refinancing" shall mean, collectively, the Debt Retirement and the payment of all obligations under the Existing Indebtedness (other than Retained Indebtedness). "Refinancing Documents" shall mean all documents executed in connection with the Refinancing. "Register" shall have the meaning set forth in Section 13.16. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Reinvestment Assets" shall mean any capital assets to be employed in the business of the Borrower and its Subsidiaries or capital stock of a Person that becomes a Subsidiary Guarantor. "Reinvestment Election" shall have the meaning provided in Section 4.02(A)(h). "Reinvestment Notice" shall mean a written notice signed by the Authorized Officer of the Borrower stating that the Borrower, in good faith, intends and expects to use all or a specified portion of the Net Asset Sale Proceeds of an Asset Sale to purchase, construct or otherwise acquire Reinvestment Assets. "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment. "Replaced Lender" shall have the meaning provided in Section 1.13. "Replacement Lender" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043. -119- 126 "Required Equity Percentage" shall mean (i) at any time that clause (ii) below is not applicable, 100% and (ii) at any time when the Leverage Ratio is less than 4.00 to 1.00, 50%. "Required Lenders" shall mean Non-Defaulting Lenders, the sum of whose outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitments), RTL Loans (or, if prior to the RTL Conversion Date, RTL Commitments) and Revolving Loan Commitments (or after the termination thereof, outstanding Revolving Loans and Revolving Loan Percentage of outstanding Swingline Loans and Letter of Credit Outstandings) represent an amount greater than 50% of the sum of (x) all outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitments) of Non-Defaulting Lenders, (y) all outstanding RTL Loans (or, if prior to the RTL Conversion Date, RTL Commitments) of Non-Defaulting Lenders and (z) the Total Revolving Loan Commitment (or after the termination thereof, the sum of the then total outstanding Revolving Loans and Revolving Loan Percentage of Non-Defaulting Lenders of the then outstanding Swingline Loans and Letter of Credit Outstandings at such time) of Non-Defaulting Lenders. "Retained Indebtedness" shall have the meaning provided in Section 7.22. "Returns" shall have the meaning provided in Section 7.09. "Revenue Bonds Guaranty Agreement" shall mean that certain Guaranty Agreement dated as of July 15, 1999 between The 210 Highway Transportation Development District and Kansas City Station Corporation, as such Guaranty may be amended, modified or otherwise replaced provided that the obligation of the Borrower and its Subsidiaries thereunder are not increased. "Revolving Loan" shall have the meaning provided in Section 1.01(e). "Revolving Loan Commitment" shall mean, for each Lender, the amount set forth opposite such Lender's name in Schedule I hereto directly below the column entitled "Revolving Loan Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02(A) and/or 10, (y) increased pursuant to Section 1.14 or (z) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b). "Revolving Loan Commitment Commission" shall have the meaning provided in Section 3.01(a). "Revolving Loan Commitment Sublimit" shall mean, on any date, the sum of (i) (x) prior to the consummation of the Disposition, $75,000,000 (or $85,000,000 at any time prior to March 31, 2001) and (y) on and after the consummation of the Disposition, $50,000,000, (ii) the Revolving Loan Facility Expansion Amount (as determined before giving effect to any Revolving Loans, Swingline Loans or Letters of Credit being made or issued on such date) and (iii) the amount by which the Total Revolving Loan Commitment shall be increased pursuant to Section 1.14.. "Revolving Loan Facility Expansion Amount" shall mean the aggregate principal amount of Revolving Loans, Swingline Loans and Letters of Credit the proceeds of which have been utilized to finance the Facilities Expansion. -120- 127 "Revolving Loan Maturity Date" shall mean December 20, 2005. "Revolving Note" shall have the meaning provided in Section 1.05(a). "Revolving Outstandings" shall mean, at any time, the sum of the aggregate principal amount of the Revolving Loans, Swingline Loans and Letter of Credit Outstanding at such time. "Revolving Loan Percentage" shall mean, at any time, for each Lender with a Revolving Loan Commitment, the percentage obtained by dividing such Lender's Revolving Loan Commitment by the Total Revolving Loan Commitment; provided that, if the Total Revolving Loan Commitment has been terminated, the Revolving Loan Percentage of each such Lender shall be determined by dividing such Lender's Revolving Loan Commitment immediately prior to such termination by the Total Revolving Loan Commitment immediately prior to such termination. "RTL Commitment" shall mean, for each Lender, the amount set forth opposite such Lender's name in Schedule I hereto directly below the column entitled "RTL Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b). "RTL Commitment Commission" shall have the meaning provided in Section 3.01(a). "RTL Conversion Date" shall mean December 31, 2002. "RTL Loan" shall have the meaning provided in Section 1.01(d). "RTL Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(A)(e). "RTL Maturity Date" shall mean December 20, 2005. "RTL Note" shall have the meaning provided in Section 1.05(a). "RTL Reference Amount" shall have the meaning provided in Section 4.02(A)(e). "Scheduled Repayments" shall have the meaning provided in Section 4.02(A)(d). "SEC" shall mean the Securities and Exchange Commission. "Section 4.04(b)(ii) Certificate" shall have the meaning provided in Section 4.04(b). "Secured Creditors" shall have the meaning assigned that term in the Security Documents. -121- 128 "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" shall have the meaning provided in Section 5.08 and include any Additional Security Document delivered pursuant to Section 8.11. "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Document" shall mean and include the Pledge Agreement, the Security Agreement, each Mortgage, each Ship Mortgage and, after the execution and delivery thereof, each Additional Mortgage, Additional Ship Mortgage and each Additional Security Document required to be delivered pursuant to Section 8.11. "Senior Consolidated Indebtedness" shall mean all Consolidated Indebtedness other than (x) the Subordinated Bridge Loans and the Permanent Senior Subordinated Notes and (y) any other Indebtedness which by its terms is contractually subordinated to any other Indebtedness of the Borrower and its Subsidiaries. "Senior Leverage Ratio" shall mean on the date of determination thereof the Leverage Ratio at such date except that the reference therein to "Consolidated Indebtedness" shall be deemed to be a reference to "Senior Consolidated Indebtedness". "Senior Subordinated Financing" shall mean the credit facilities provided to the Borrower on a bridge basis pursuant to the Senior Subordinated Financing Agreement. "Senior Subordinated Financing Agreement" shall mean that certain loan agreement dated as of December 20, 2000 by and between the Borrower, the Subsidiary Guarantors, the lenders named therein and Bankers Trust Company. "Senior Subordinated Financing Documents" shall mean the Senior Subordinated Financing Agreement and all other documents executed in connection with the Senior Subordinated Financing. "Shareholders' Agreements" shall have the meaning provided in Section 5.05. "Ship Mortgage" shall have the meaning provided in Section 5.17 and, after the execution and delivery thereof, shall include each Additional Ship Mortgage delivered pursuant to Section 8.11. "Ship Property" shall mean each of the vessels listed on Schedule XI on which the riverboat casino hotel businesses and related activities of the Borrower and its Subsidiaries are conducted. "Specified Casino Properties" shall mean, collectively, the Acquired Businesses, and the properties of the Borrower known as "Ameristar Vicksburg", "Ameristar Council Bluffs", "Cactus Pete's" and "The Horseshu". -122- 129 "Standby Letter of Credit" shall have the meaning provided in Section 2.01(a). "Start Date" shall mean, with respect to any Margin Reduction Period, the first day of such Margin Reduction Period. "Stated Amount" of each Letter of Credit shall, at any time, mean the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Station" shall mean Station Casinos, Inc., a Nevada corporation. "Station Casino Kansas City" shall mean the gaming and entertainment facility commonly known as Station Casino Kansas City prior to the Acquisition. "Station Casino St. Charles" shall mean the gaming and entertainment facility commonly known as Station Casino St. Charles prior to the Acquisition. "Subordinated Bridge Loans" shall mean the loans incurred by the Borrower under the Senior Subordinated Financing Agreement. "Subsidiary" shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower. "Subsidiary Guaranty" shall have the meaning provided in Section 5.15. "Substitute Lender" shall have the meaning provided in Section 13.04(c). "Swingline Expiry Date" shall mean the date which is five Business Days prior to the Revolving Loan Maturity Date. "Swingline Lender" shall mean Bankers Trust Company, in its capacity as the lender of Swingline Loans. "Swingline Loans" shall have the meaning provided in Section 1.01(f). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Termination Date" shall mean the date which is the earlier of (i) the 60th day after the Initial Borrowing Date or (ii) the date on which the Administrative Agent, in its -123- 130 sole discretion, determines (and notifies the Borrower) that the primary syndication (and the resultant addition of institutions as Lenders pursuant to Section 13.04) has been completed. "Synthetic Lease" shall mean, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (x) that is not a capital lease in accordance with GAAP and (y) in respect of which the lessee retains or obtains ownership of the property so leased for federal income tax purposes, other than any such lease under which that Person is the lessor. "Tax Benefit" shall have the meaning provided in Section 4.04(c). "Tax Sharing Agreement" shall have the meaning provided in Section 5.05. "Taxes" shall have the meaning provided in Section 4.04(a). "Term Loan" shall mean A Term Loans, B Term Loans, C Term Loans and, after the RTL Conversion Date, RTL Loans. "Term Loan Commitment" shall mean for each Lender, the A Term Loan Commitment, B Term Loan Commitment or C Term Loan Commitment, if any, of such Lender. "Term Loan Prepayment Premium" shall mean (x) in all cases other than as covered in clause (y) below, (i) for the period commencing on the Initial Borrowing Date and ending on the first anniversary of the Initial Borrowing Date, an amount equal to 2% of the aggregate principal amount of the applicable prepayment and (ii) for the period commencing on the day after the first anniversary of the Initial Borrower Date and ending on the second anniversary of the Initial Borrowing Date, an amount equal to 1% of the aggregate principal amount of the applicable prepayment and (y) with respect to a payment of the Term Loans with the Permanent Senior Subordinated Notes Prepayment Amount, an amount equal to 1% of the aggregate principal amount of the applicable prepayment. "Term Notes" shall have the meaning provided in Section 1.05(a). "Term Loan Tranche" shall mean a Tranche of Term Loans (i.e. the A Term Loan Tranche, the B Term Loan Tranche, the C Term Loan Tranche and the RTL Loan Tranche). "Test Date" shall mean, with respect to any Start Date, the last day of the most recent fiscal quarter of the Borrower ended immediately prior to such Start Date. "Test Period" shall mean for any determination the four consecutive fiscal quarters then last ended (taken as one accounting period). Notwithstanding anything to the contrary contained above or in Section 13.07 or otherwise required by GAAP, in the case of any Test Period ending prior to the first anniversary of the Initial Borrowing Date, such period shall be a one-year period ending on the last day of the fiscal quarter last ended, with any calculations of Consolidated Cash Interest Expense, Consolidated EBITDA, Consolidated Adjusted EBITDA and Consolidated Fixed Charges for (x) the fiscal quarters ended on each of March 31, 2000, June 30, 2000 and September 30, 2000, to be determined as set forth below: -124- 131
Fiscal Quarter Consolidated Cash Consolidated Consolidated Consolidated Ended Interest Expense EBITDA Adjusted EBITDA Fixed Charges - -------------- ----------------- ------------ --------------- ------------- March 31, 2000 $19,165,936 $38,898,154 $38,648,154 $20,853,436 June 30, 2000 $19,165,936 $33,851,471 $33,601,471 $20,853,436 September 30, 2000 $19,165,936 $37,792,881 $37,542,881 $20,853,436
and (y) the fiscal quarter ended on December 31, 2000 to be determined by (i) taking the actual Consolidated Cash Interest Expense, Consolidated EBITDA, Consolidated Adjusted EBITDA and the Consolidated Fixed Charges, determined in accordance with the definitions thereof, for any period beginning on, and ending after, the Initial Borrowing Date, and (ii) for each day of such fiscal quarter occurring prior to the Initial Borrowing Date, using a per-day amount of $210,038, for Consolidated Cash Interest Expense, using a per-day amount of $417,090, for Consolidated EBITDA, using a per-day amount of $414,351 for Consolidated Adjusted EBITDA and using a per-day amount of $228,531, for Consolidated Fixed Charges. In addition, for purposes of the Test Period ended on December 31, 2000 only, Consolidated EBITDA shall be reduced by $1,500,000 and Consolidated Indebtedness shall be reduced by $68,000,000 for purposes of determining the Leverage Ratio and the Senior Leverage Ratio. "The Reserve" shall mean the property of the Borrower known as The Reserve and located at 777 West Lake Mead Drive, Henderson, Nevada. "Total A Term Loan Commitment" shall mean, at any time, the sum of the A Term Loan Commitments of each Lender. "Total B Term Loan Commitment" shall mean, at any time, the sum of the B Term Loan Commitments of each Lender. "Total C Term Loan Commitment" shall mean, at any time, the sum of the C Term Loan Commitments of each Lender. "Total Commitment" shall mean the sum of the Total Term Loan Commitment, the Total RTL Commitment and the Total Revolving Loan Commitment. "Total Revolving Loan Commitment" shall mean, at any time, the sum of the Revolving Loan Commitments of each of the Lenders. "Total RTL Commitment" shall mean, at any time, the sum of the RTL Commitments of each of the Lenders. "Total Term Loan Commitment" shall mean, at any time, the sum of the A Term Loan Commitments, the B Term Loan Commitments and the C Term Loan Commitments of each of the Lenders. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, the sum of the Unutilized Revolving Loan Commitments of each of the Lenders. "Total Unutilized RTL Commitment" shall mean, at any time, the sum of the Unutilized RTL Commitments of each of the Lenders. -125- 132 "Trade Letter of Credit" shall have the meaning provided in Section 2.01(a). "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being six separate Tranches, i.e., A Term Loans, B Term Loans, C Term Loans, RTL Loans, Revolving Loans and Swingline Loans. "Transaction" shall mean the Acquisition, the Refinancing, the incurrence of the Senior Subordinated Financing and the incurrence of Loans on the Initial Borrowing Date. "Transaction Documents" shall mean the Acquisition Documents, the Senior Subordinated Financing Documents, the Refinancing Documents and all other documents effectuating the Transaction or executed in connection therewith. "Type" shall mean the type of Loan determined with regard to the interest option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the value of the accumulated plan benefits under the Plan, determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions). "United States" and "U.S." shall each mean the United States of America. "Unpaid Drawing" shall have the meaning provided in Section 2.04(a). "Unutilized Revolving Loan Commitment" with respect to any Lender, at any time, shall mean such Lender's Revolving Loan Commitment at such time less (i) the aggregate outstanding principal amount of Revolving Loans made by such Lender plus (ii) such Lender's Percentage of all Letter of Credit Outstandings. "Unutilized RTL Commitment" with respect to any Lender, at any time, shall mean such Lender's RTL Commitment at such time less the aggregate outstanding principal amount of RTL Loans made by such Lender. "Voting Stock" shall mean, as to any Person, any class or classes of capital stock of such Person pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such Person, or any class or classes of capital stock convertible into such stock at the option of the holders thereof. -126- 133 "Waivable Mandatory Repayment" shall have the meaning provided in Section 4.02(B). "Waivable Repayment" shall mean either a Waivable Voluntary Prepayment or a Waivable Mandatory Repayment. "Waivable Voluntary Prepayment" shall have the meaning provided in Section 4.02(B). "Wholly-Owned Domestic Subsidiary" shall mean each Wholly-Owned Subsidiary of the Borrower incorporated or organized under the laws of the United States or any State thereof. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. Any reference to a Wholly-Owned Subsidiary, unless expressly to a Wholly-Owned Subsidiary of another Person, shall mean a Wholly-Owned Subsidiary of the Borrower. "Withdrawal Period" shall have the meaning provided in Section 13.04(d). SECTION 12. The Administrative Agent. 12.01 Appointment. The Lenders hereby designate Bankers Trust Company as Administrative Agent (for purposes of this Section 12, the term "Administrative Agent" shall include Bankers Trust Company in its capacity as Collateral Agent pursuant to the Security Documents) to act as specified herein and in the other Credit Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates. 12.02 Nature of Duties. The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and the Security Documents. Neither the Administrative Agent nor any of its respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any -127- 134 obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein. 12.03 Lack of Reliance on the Administrative Agent. Independently and without reliance upon the Administrative Agent, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and its Subsidiaries and, except as expressly provided in this Agreement, the Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. The Administrative Agent shall not be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrower and its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrower and its Subsidiaries or the existence or possible existence of any Default or Event of Default. 12.04 Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from the Required Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining provided, however, that this shall not affect the obligations of the Administrative Agent or any Lender to the Borrower. Without limiting the foregoing, neither any Lender nor the holder of any Note shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders. 12.05 Reliance. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the Administrative Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent. 12.06 Indemnification. To the extent the Administrative Agent is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and indemnify the Administrative Agent, in proportion to their respective "percentages" as used in determining the Required Lenders, for and against any and all liabilities, obligations, losses, damages, penalties, claims, -128- 135 actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. 12.07 The Administrative Agent in Its Individual Capacity. With respect to its obligation to make Loans under this Agreement, the Administrative Agent shall have the rights and powers specified herein for a "Lender" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "Lenders", "Required Lenders", "Majority Lenders", "Majority Grid Lenders", "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. 12.08 Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 12.09 Resignation by the Administrative Agent. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days' prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower and eligible to act as such under Gaming Regulations as a Qualified Person. (c) If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower, shall then appoint a successor Administrative Agent eligible to act as such under Gaming Regulations as a Qualified Person who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Lenders appoint a successor Administrative Agent as provided above. -129- 136 (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 20th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Lenders appoint a successor Administrative Agent as provided above. 12.10 Amendments to Security Documents. The Collateral Agent is authorized to enter into such amendments to the Security Documents as are necessary or, in the opinion of the Collateral Agent, to insure that the Collateral thereunder secures all of the obligations intended to be secured thereby (including, without limitation, additional extensions of credit under the Incremental Commitments and the Interest Rate Protection or Other Hedging Agreements. 12.11 Other Agents. No Person listed on the signature pages hereto as a Co-Arranger, Syndication Agent, Documentation Agent, Lead Arranger or Sole Book Manager shall have any obligations hereunder in its capacity as such. SECTION 13. Miscellaneous. 13.01 Payment of Expenses, etc. (a) The Borrower shall: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and disbursements of White & Case LLP and local counsel) in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Administrative Agent in connection with its syndication efforts with respect to this Agreement and, following an Event of Default, each of the Lenders in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent and, following an Event of Default, for each of the Lenders including any reasonable allocated costs of in-house counsel); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp, excise and other similar taxes with respect to the foregoing matters (including, without limitation, Mississippi personal property tax) and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) defend, protect, indemnify and hold harmless the Administrative Agent and each Lender, and each of their respective officers, directors, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys' and consultants' fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not the Administrative Agent or any Lender is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the use of any Letter of Credit or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein (including, without -130- 137 limitation, the Transaction) or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) any non-compliance with any Environmental Law relating to any Real Property at any time owned or operated by the Borrower or any of its Subsidiaries; (c) the actual or alleged generation, presence or Release of Hazardous Materials on or from, or the transportation of Hazardous Materials to or from, any Real Property owned or at any time operated by the Borrower or any of its Subsidiaries; (d) any Environmental Claim relating to the Borrower or any of its Subsidiaries or any Real Property owned or at any time operated by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding. To the extent that the undertaking to indemnify, pay or hold harmless the Administrative Agent or any Lender set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. (b) The Borrower further agrees to pay the reasonable legal fees of gaming counsel for the Administrative Agent in Missouri, Nevada, Mississippi and Iowa and any other relevant state or other jurisdiction and all reasonable costs (including costs of investigation) associated with any qualification (or exemption or waiver therefrom) of any Lender under, or compliance in connection with the Gaming Regulations in connection with the syndication under this Agreement. 13.02 Right of Setoff; Collateral Matters. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon any amount becoming due and payable by the Borrower hereunder (whether at stated maturity, by acceleration or otherwise), each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations and liabilities of the Borrower to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 13.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, at the Borrower's address specified opposite its signature below; if to any Lender, at its address specified on Schedule II; and if to the Administrative Agent, at its Notice Office; or, as to any Credit Party or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Lender, at such other address as shall be designated by such Lender in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when -131- 138 mailed, be effective (5) Business Days after deposit in the mails, and when telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective one Business Day after dispatch, except that notices and communications to the Administrative Agent and the Borrower shall not be effective until received by the Administrative Agent or the Borrower, as the case may be. 13.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, no Credit Party may assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Lenders (it being understood that this Section 13.04 shall not prevent a merger or consolidation otherwise permitted by this Agreement) and, provided further, that, although any Lender may transfer, assign or grant participations in its rights hereunder, such Lender shall remain a "Lender" for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a "Lender" hereunder and, provided further, that no Lender shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except (x) in connection with a waiver of applicability of any post-default increase in interest rates and (y) any amendment or modification that is not agreed to by each Lender directly affected thereby to the financial definitions in this Agreement or to Section 13.07(a) shall not constitute a reduction in the rate of interest or fees for purposes of this clause (i), notwithstanding the fact that such amendment or modification would otherwise actually result in such a reduction, so long as the primary purpose (as determined in good faith by the Borrower and the Administrative Agent) of the respective amendment or modification was not to decrease the pricing pursuant to this Agreement) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the Obligations in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation. (b) Notwithstanding the foregoing, any Lender (or any Lender together with one or more other Lenders) may (x) assign all or a portion of its Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitment) and/or its outstanding RTL Loans (or, if prior -132- 139 to the RTL Conversion Date, RTL Commitment) to (i) its parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or to one or more Lenders or (ii) in the case of any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is managed by the same investment advisor of any Lender or by an Affiliate of such investment advisor and (y) assign all, or if less than all, a portion equal to at least (A) in the case of assignments of A Term Loans, RTL Loans or Revolving Loans, $5,000,000 and (B) in the case of B Term Loans and C Term Loans, $2,500,000 in the aggregate for the assigning Lender or assigning Lenders, of such Revolving Loan Commitments and/or outstanding principal amount of Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitment) and/or outstanding principal amount of RTL Loans (or, if prior to the RTL Conversion Date, RTL Commitment) hereunder to one or more Qualified Persons (treating any fund that invests in bank loans and any other fund that invests in bank loans and is managed by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Qualified Person), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement, provided that, (i) at such time Schedule I shall be deemed modified to reflect the Commitments (and/or outstanding Term Loans and/or RTL Loans, as the case may be) of such new Lender and of the existing Lenders, (ii) upon surrender of the old Notes, new Notes will be issued, at the Borrower's expense, to such new Lender and to the assigning Lender, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Term Loans and/or RTL Loans, as the case may be) and requested by such new Lender and/or assigning Lender, (iii) the consent of the Administrative Agent and, with respect to assignments of Revolving Loans and/or Revolving Loan Commitments, each Issuing Lender shall be required in connection with any such assignment pursuant to clause (y) of this Section 13.04(b) (which consent shall not be unreasonably withheld or delayed), (iv) unless an Event of Default shall have occurred and is continuing, the consent of the Borrower shall be required in connection with any such assignment pursuant to clause (y) of this Section 13.04(b) (such consent not to be unreasonably withheld or delayed), it being understood and agreed that for the first fifteen (15) days following the Initial Borrowing Date, the consent of the Borrower shall not be required in connection with any such assignments to the extent occurring in connection with the primary syndication of this facility and (v) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,500 and, provided further, that such transfer or assignment will not be effective until recorded by the Administrative Agent on the Register pursuant to Section 13.16 hereof. To the extent of any assignment pursuant to this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments. At the time of each assignment pursuant to this Section 13.04(b) to a person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Lender's Commitments and related outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased -133- 140 costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). (c) If any Gaming Authority shall determine that any Lender is not qualified as an approved financial source or otherwise does not meet the standards pursuant to the Gaming Regulations in the relevant jurisdiction, or any Gaming Authority with jurisdiction over the Gaming Business of the Borrower and its Subsidiaries shall determine that any Lender does not meet its suitability standards (in any such case, a "Former Lender"), the Administrative Agent and each Issuing Lender or the Borrower shall have the right (but not the duty) to designate a lender or lenders (in each case, a "Substitute Lender", which may be any Lender or Lenders that agree to become a Substitute Lender) that has agreed to assume the rights and obligations of the Former Lender, subject to receipt by the Administrative Agent of evidence satisfactory to the Administrative Agent that such Substitute Lender is a Qualified Person, or has a reasonable basis for a belief that the Substitute Lender is eligible to be a Qualified Person, and compliance with Gaming Regulations. The Substitute Lender shall assume the rights and obligations of the Former Lender under this Agreement pursuant to an Assignment and Assumption Agreement, which assumption shall be required to comply with, and shall become effective in accordance with, the provisions of Section 13.04(b), provided that the purchase price to be paid by the Substitute Lender to the Administrative Agent for the account of the Former Lender for such assumption shall equal the sum of (i) the unpaid principal amount of any Notes held or Loans made by the Former Lender plus accrued interest thereon plus (ii) the Former Lender's pro rata share of the aggregate amount of Drawings under all Letters of Credit that have not been reimbursed by the Borrower, plus accrued interest thereon, plus (iii) such Former Lender's pro rata share of accrued Fees to the date of the assumption, and, provided further, the Borrower shall pay all obligations owing to the Former Lender under the Credit Documents (including all obligations, if any, owing pursuant to Section 1.11, but excluding those amounts in respect of which the purchase price is being paid as provided above). Each Lender agrees that if it becomes a Former Lender, upon payment to it by the Borrowers of all such amounts, if any, owing to it under the Credit Documents, it will execute and deliver an Assignment and Assumption Agreement upon payment of such purchase price. (d) Notwithstanding the provisions of subsection (c) of this Section 13.04, but subject to applicable Gaming Regulations if any Lender becomes a Former Lender, and if the Administrative Agent or the Borrower fails to find a Substitute Lender pursuant to subsection (c) of this Section within any time period specified by the appropriate Gaming Authority for the withdrawal of a Former Lender (the "Withdrawal Period"), the Borrower shall immediately (i) prepay in full the outstanding principal amount of each Note held or Loan made by such Former Lender, together with accrued interest thereon to the earlier of (x) the date of payment or (y) the last day of any Withdrawal Period, and (ii) at the option of the Borrower either (A) place an amount equal to such Former Lender's Percentage in each Letter of Credit in a separate cash collateral account with the Administrative Agent for each outstanding Letter of Credit, which amount will be applied by the Administrative Agent to satisfy the Borrower's reimbursement obligations to the respective Issuing Lender in respect of Drawings under the applicable Letter of Credit or (B) if no Default or Event of Default then exists, terminate the Revolving Loan Commitment (and, if applicable, RTL Commitment) of such Former Lender at which time the other Lenders' Revolving Percentages will be automatically adjusted as a result thereof, provided that the option specified in this clause (B) may only be exercised if, immediately after giving -134- 141 effect thereto, no Lender's outstanding Revolving Loans, when added to the product of (a) such Lender's Revolving Percentage and (b) the sum of (I) the aggregate amount of all Letter of Credit Outstandings at such time and (II) the aggregate amount of all Swingline Loans then outstanding, would exceed such Lender's Revolving Loan Commitment at such time. (e) Subject to the last sentence of this Section 13.04(e), each Lender agrees that all participations and assignments made hereunder shall be subject to, and made in compliance with, all Gaming Regulations applicable to lenders. Each Lender agrees further that it will not grant participations or assignments (other than to funds that invest in bank loans and are managed by the same investment advisor of such assigning Lender) prior to receiving notice from the Administrative Agent that it has completed the primary syndication of this facility. The Administrative Agent shall provide such notice to the Lenders and the Borrower promptly after completing such primary syndication. The Borrower hereby acknowledges that unless the Borrower has provided the Lenders with a written opinion of counsel as to the suitability standards applicable to lenders of any relevant Gaming Authority with jurisdiction over the Gaming Business of the Borrower and its Subsidiaries, no Lender shall have the responsibility of determining whether or not a potential assignee of such Lender would be a Qualified Person under the Gaming Regulations of any such jurisdiction. (f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder to a Federal Reserve Lender in support of borrowings made by such Lender from such Federal Reserve Bank and, with notice to the Administrative Agent, any Lender which is a fund may pledge all or any portion of its Loans and Notes to its trustee in support of its obligations to its trustee. 13.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent or any Lender or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Administrative Agent or any Lender or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent or any Lender or the holder of any Note would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or any Lender or the holder of any Note to any other or further action in any circumstances without notice or demand. 13.06 Payments Pro Rata. (a) Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. -135- 142 (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or lender's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders. 13.07 Calculations; Computations. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders and except that monthly and quarterly financial statements may not include notes and are subject to year-end adjustments); provided that, except as otherwise specifically provided herein, all computations of Excess Cash Flow and all computations determining compliance with Sections 9.07 through 9.12, inclusive, and the Applicable Margin shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements delivered to the Lenders pursuant to Section 7.05(a) (with the foregoing generally accepted accounting principles, subject to the preceding proviso, herein called "GAAP"). In the event of any changes ("Accounting Changes") in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion of the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC, if such Accounting Changes result in a change in the method of calculation of financial covenants, standards or terms of this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants standards and terms in this Agreement shall continue to be calculated as if such Accounting Changes had not occurred. (b) All computations of interest payable at the Eurodollar Rate, Commitment Commission and Fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for -136- 143 which such interest, Commitment Commission or Fees are payable. All computations of interest payable at the Base Rate shall be made on the basis on a year of 365 (or 366, as applicable) days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. (b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. -137- 144 13.10 Effectiveness. This Agreement shall become effective on the date (the "Effective Date") on which the Borrower, the Administrative Agent and each of the Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent at its Notice Office or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written or telex notice (actually received) at such office that the same has been signed and mailed to it. The Administrative Agent will give the Borrower and each Lender prompt written notice of the occurrence of the Effective Date. 13.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 13.12 Amendment or Waiver; etc. Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) with Obligations being directly affected, (i) extend the final scheduled maturity of any Loan or Note or extend the Stated Maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time of payment of interest, Fees or Term Loan Prepayment Premium thereon (except (x) in connection with a waiver of applicability of any post-default increase in interest rates and (y) any amendment or modification that is not agreed to by each Lender directly affected thereby to the financial definitions in this Agreement or to Section 13.07(a) shall not constitute a reduction in the rate of interest or fees for purposes of this clause (i), notwithstanding the fact that such amendment or modification would otherwise actually result in such a reduction, so long as the primary purpose (as determined in good faith by the Borrower and the Administrative Agent) of the respective amendment or modification was not to decrease the pricing pursuant to this Agreement), or reduce the principal amount thereof (except to the extent repaid in cash), (ii) release all or substantially all of the Collateral (except as expressly provided in the Credit Documents) under all the Security Documents or release all or substantially all of the Guarantors, (iii) amend, modify or waive any provision of this Section 13.12, (iv) reduce the percentage specified in the definition of Required Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Term Loans, RTL Commitments and Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further, that no such change, waiver, discharge or termination shall (1) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase in the Commitment of such Lender), (2) without the consent of the Swingline Lender, amend, modify or waive any provision relating to the rights or obligations of the Swingline Lender or with respect to Swingline Loans (including, without limitation, the obligations of the other Lenders with -138- 145 Revolving Loan Commitments to fund Mandatory Borrowings), (3) without the consent of the Administrative Agent, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit, (4) without the consent of the Administrative Agent, amend, modify or waive any provision of Section 12 as same applies to the Administrative Agent or any other provision as same relates to the rights or obligations of the Administrative Agent, (5) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent, and (6) without the consent of the Majority Lenders of any Tranche of Term Loans, amend the definition of Majority Lenders with respect to such Tranche, or this clause (6), or alter the required application of any prepayments or repayments (or commitment reductions), as between the various Tranches, pursuant to Section 4.01 or 4.02(A) (excluding Sections 4.02(A)(b), (c), (d) or (e)) with respect to such Tranche (although the Required Lenders may waive, in whole or in part, any such prepayment, repayment or commitment reduction, except pursuant to Sections 4.02(A)(b), (c), (d) or (e), so long as the application, as amongst the various Tranches, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered) or reduce the amount of, or extend the date of, any Scheduled Repayment with respect to such Tranche. 13.13 Survival. All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans. 13.14 Domicile of Loans. Each Lender may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Lender. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes giving rise to such increased costs after the date of the respective transfer to the extent such costs would have been applicable had such transfer not occurred). 13.15 Confidentiality. (a) Subject to the provisions of clause (b) of this Section 13.15, each Lender agrees that it will not disclose without the prior consent of the Borrower (other than to its employees, auditors, advisors or counsel or to another Lender if the Lender or such Lender's holding or parent company in its sole discretion determines that any such party should have access to such information in connection with this Agreement and the Transaction, provided such Persons shall be subject to the provisions of this Section 13.15 to the same extent as such Lender) any information with respect to the Borrower or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document, provided that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, (e) to the Administrative Agent or the Collateral Agent, (f) to any -139- 146 prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Lender, provided that such prospective transferee agrees with such Lender on terms and conditions substantially the same as those contained in this Section 13.15 and (g) to any Person (or such Person's investment advisor) with whom such Lender has entered into or proposes to enter into (in each case either directly or indirectly) any credit swap agreement with respect to such Lender's Loans and/or Commitments, provided such Person (and such investment advisor, if any) agrees to be bound by the confidentiality provisions contained in this Section 13.15. (b) The Borrower hereby acknowledges and agrees that each Lender may share with any of its affiliates any information related to the Borrower or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Borrower and its Subsidiaries, if the Lender or such Lender's holding or parent company in its sole judgment determines that any such party should have access to such information in connection with this Agreement and the Transaction, provided such Persons shall be subject to the provisions of this Section 13.15 to the same extent as such Lender and provided such sharing of information is undertaken in connection with this Agreement and the Transaction. 13.16 Registry. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 13.16, to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. The entries in the Register shall be conclusive, absent manifest error. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.16 except for gross negligence or willful misconduct. 13.17 Post-Closing Actions. Notwithstanding anything to the contrary contained in this Agreement or the other Credit Documents, the parties hereto acknowledge and agree that on the Initial Borrowing Date, (i) the capital stock of ACLVI and CPI shall not be pledged pursuant to Section 5.07 of this Agreement, and restrictions on transfers and agreements not to -140- 147 encumber stock of ACLVI and CPI shall be inapplicable, and (ii) ACLVI shall not be required by this Agreement or any other Credit Document to become a Subsidiary Guarantor or a party to the Security Documents. The Borrower hereby agrees that the Borrower shall use its commercially reasonable efforts to obtain the necessary approvals from the applicable Gaming Authority in order to pledge or cause to be pledged all capital stock of ACLVI and CPI pursuant to the Pledge Agreement and to cause the restrictions on transfers and agreements not to encumber stock of ACLVI and CPI to be applicable by no later than March 31, 2001. It is understood and agreed that (x) in the event the Disposition has not occurred on or prior to March 31, 2001, on such date, and subject to receipt of approval from the applicable Gaming Authority, the Borrower shall pledge or cause to be pledged all capital stock of ACLVI pursuant to the Pledge Agreement and cause such Person to enter into a guaranty substantially similar to the Subsidiary Guaranty and additional security documents substantially similar to the Security Documents (to the extent applicable) granting a Lien on its assets (including, without limitation, The Reserve) and (y) the Borrower shall cause the stock of CPI to pledged to the Collateral Agent pursuant to the Pledge Agreement as promptly as possible following receipt of the approval therefore from the relevant Gaming Authority. In addition, the parties hereto acknowledge that certain notice filings with respect to the Transaction need to be completed following the Initial Borrowing Date pursuant to the Gaming Regulations applicable to the Borrower and its Subsidiaries. The Borrower agrees to complete all such filings in a timely manner and to notify the Administrative Agent upon the completion thereof. All provisions of this Credit Agreement and the other Credit Documents (including, without limitation, all conditions precedent, representations, warranties, covenants, events of default and other agreements herein and therein) shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions and the satisfaction of the conditions described above within the time periods required hereby (and, rather than as otherwise provided in the Credit Documents)); provided, that (x) to the extent any representation and warranty would not be true because the foregoing actions were not taken, or conditions were not satisfied, on the Initial Borrowing Date, the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken or condition is satisfied (or was required to be taken or satisfied) in accordance with the foregoing provisions of this Section 13.17 and (y) all representations and warranties relating to the Security Documents shall be required to be true immediately after the actions required to be taken, or the conditions required to be satisfied, by this Section 13.17 have been taken or satisfied (or were required to be taken or satisfied). 13.18 Application of Gaming Regulations. This Agreement is subject to the Gaming Regulations and laws involving the sale and distribution of liquor (the "Liquor Laws"). Without limiting the foregoing, the Administrative Agent and the Lenders acknowledge that (i) they are subject to being called forward by the Gaming Authorities or such other governmental authorities enforcing the Liquor Laws, in their discretion, for licensing or a finding of suitability or to file or provide other information, and (ii) all rights, remedies and powers in or under this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Regulations and Liquor Laws and only to the extent that required approvals (including prior approvals) are obtained from the requisite Gaming -141- 148 Authorities and such other governmental authorities. The Administrative Agent and the Lenders agree to cooperate with all Gaming Authorities and such other governmental authorities in connection with the provision of such documents or other information as may be requested by such Gaming Authorities and such other governmental authorities. -142- 149 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. Address: - ------- AMERISTAR CASINOS, INC. Ameristar Casinos, Inc. 3773 Howard Hughes Parkway Suite 490S Las Vegas, Nevada 89109 By: /s/ Gordon R. Kanofsky Attention: Chief Financial Officer Name: Gordon R. Kanofsky Title: Senior Vice President of Legal Affairs Fax: 702-369-8860 with copies to: Ameristar Casinos Inc. 1663 Ventura Blvd. Suite 1050 Encino, California 91436 Attention: Senior Vice President of Legal Affairs Fax: 818-995-7099 and Gibson, Dunn & Crutcher LLP 333 S. Grand Avenue Los Angeles, CA 90071 Attention: Jeff Hudson, Esq. Fax: 213-229-6332 130 Liberty Street BANKERS TRUST COMPANY, New York, New York 10006 Individually and as Tel: (212) 250-2863 Administrative Agent Fax: (212) 669-0743 By: /s/ Laura D. Burwell Attention: George R. Reynolds Title: Principal 150 WELLS FARGO BANK, N.A. Individually and as Co-Arranger and Syndication Agent By: /s/ Casey Potter Name: Casey Potter Title: Vice President 151 BEAR STEARNS CORPORATE LENDING INC. Individually and as Documentation Agent By: /s/ Keith C. Barnish Name: Keith Barnish Title: Senior Managing Director 152 NATIONAL CITY BANK By: /s/ Mark A. Minnick Name: Mark A. Minnick Title: Senior Vice President 153 THE CIT GROUP/EQUIPMENT FINANCING, INC. By: /s/ Barry Blailock Name: Barry Blailock Title: Assistant Vice President/Credit EX-4.2(B) 3 v70464ex4-2b.txt EXHIBIT 4.2(B) 1 EXHIBIT 4.2(b) FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of January 30, 2001, among AMERISTAR CASINOS, INC., a Nevada corporation (the "Borrower"), the various lenders party to the Credit Agreement referred to below (the "Lenders"), WELLS FARGO BANK, N.A., as Co-Arranger and Syndication Agent, BEAR STEARNS CORPORATE LENDING INC., as Documentation Agent, DEUTSCHE BANK SECURITIES INC., as Lead Arranger and sole Book Manager and BANKERS TRUST COMPANY, as Administrative Agent (all capitalized terms used herein and not otherwise defined herein shall have the respective meaning provided such terms in the Credit Agreement as defined below). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, the Lead Arranger, the Syndication Agent, the Documentation Agent and the Administrative Agent are party to a Credit Agreement, dated as of December 20, 2000 (the "Credit Agreement"); and WHEREAS, the Borrower and the undersigned Lenders wish to provide the amendment provided for herein; NOW, THEREFORE, it is agreed: 1. Section 4.02(A)(g) of the Credit Agreement is hereby amended by adding the following proviso at the end thereof ", provided that the net proceeds of the Permanent Senior Subordinated Notes exceeding $350,000,000 shall not be required to be applied pursuant to this clause (g) to the extent that such net proceeds not so applied pursuant to this proviso do not exceed $25,000,000". 2. Section 4.02(A)(h) of the Credit Agreement is hereby amended by deleting, in the first sentence thereof, "and" at the end of clause (i) thereof, inserting a comma in lieu thereof and adding at the end of the first sentence thereof the following: "and (iii) the net Asset Sale Proceeds received in respect of the Disposition being applied to repay the Term Loans and the then outstanding Revolving Loans shall not be required to be so applied until February 1, 2001." 3. Section 3.03(j) of the Credit Agreement is hereby amended by deleting "on the date of the consummation of the Disposition" and inserting, in lieu thereof, the following: "on the later of the date of the consummation of the Disposition and February 1, 2001." 4. The Borrower hereby represents and warrants that (i) no Default or Event of Default exists as of the Amendment Effective Date (as defined below) after giving effect to this Amendment and (ii) on the Amendment Effective Date, both before and after giving effect to this Amendment, all representations and warranties (other than those representations made as of 2 a specified date) contained in the Credit Agreement and in the other Credit Documents are true and correct in all material respects. 5. This Amendment shall become effective on the date (the "Amendment Effective Date") when the Required Lenders and the Borrower shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Administrative Agent at its Notice Office. 6. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 7. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent. 8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. * * * 3 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written. AMERISTAR CASINOS, INC. By: /s/ Gordon R. Kanofsky --------------------------------------------- Name: Gordon R. Kanofsky Title: Senior Vice President of Legal Affairs BANKERS TRUST COMPANY, Individually and as Administrative Agent By: /s/ Steven P. Lapham --------------------------------------------- Title: Director WELLS FARGO BANK, N.A. Individually and as Co-Arranger and Syndication Agent By: /s/ Casey Potter --------------------------------------------- Title: Vice President BEAR STEARNS CORPORATE LENDING INC. Individually and as Documentation Agent By: /s/ Victor F. Bulzuchelli --------------------------------------------- Title: Managing Director 4 SIGNATURE PAGE TO FIRST AMENDMENT DATED AS OF JANUARY 30, 2001 , TO THE CREDIT AGREEMENT DATED AS OF DECEMBER 20, 2000, AMONG AMERISTAR CASINOS, INC., A NEVADA CORPORATION , THE VARIOUS LENDERS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW, WELLS FARGO BANK, N.A., AS CO-ARRANGER AND SYNDICATION AGENT, BEAR STEARNS CORPORATE LENDING INC., AS DOCUMENTATION AGENT, DEUTSCHE BANK SECURITIES INC., AS LEAD ARRANGER AND SOLE BOOK MANAGER AND BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT NATIONAL CITY BANK OF INDIANA By: /s/ Mark A. Minnick -------------------------------------------- Title: Senior Vice President THE CIT GROUP/EQUIPMENT FINANCING, INC. By: -------------------------------------------- Title: HELLER FINANCIAL, INC. By: /s/ Robert M. Reeg -------------------------------------------- Title: Assistant Vice President THE SUMITOMO TRUST AND BANKING CO., LTD., NEW YORK BRANCH By: /s/ Stephen A. Stratico -------------------------------------------- Title: Vice President 5 AMMC CDO II, LIMITED, By: American Money Management Corp. as Collateral Manager By: /s/ David P. Meyer -------------------------------------------- Title: Vice President MUIRFIELD TRADING LLC By: /s/ Ann E. Morris -------------------------------------------- Title: Asst. Vice President SRV-HIGHLAND, INC. By: /s/ Ann E. Morris -------------------------------------------- Title: Asst. Vice President SRF 200 LLC By: /s/ Ann E. Morris -------------------------------------------- Title: Asst. Vice President GLENEAGLES TRADING LLC By: /s/ Ann E. Morris -------------------------------------------- Title: Asst. Vice President OLYMPIC FUNDING TRUST, SERIES 1999-1 By: /s/ Ann E. Morris -------------------------------------------- Title: SRF 2000 LLC By: /s/ Ann E. Morris -------------------------------------------- Title: Asst. Vice President BLACK DIAMOND CDO 2000-1 LTD. By: /s/ David Dyer -------------------------------------------- Title: Director 6 CARLYLE HIGH YIELD PARTNERS, LP By: /s/ Linda M. Pace --------------------------------------------- Title: Vice President CARLYLE HIGH YIELD PARTNERS II, LP By: /s/ Linda M. Pace --------------------------------------------- Title: Vice President CARLYLE HIGH YIELD PARTNERS III, LP By: /s/ Linda M. Pace --------------------------------------------- Title: Vice President SIERRA CLO - I By: /s/ John Casparian --------------------------------------------- Title: Chief Operating Office SEQUILS - CUMBERLAND I, LTD., By: Deerfield Capital Management LLC, as its Collateral Manager By: /s/ Matt Stouffer --------------------------------------------- Title: Vice President HIGHLAND LEGACY LIMITED, By: Highland Capital Management, L.P., as Collateral Manager By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio Manager HIGHLAND OFFSHORE PARTNERS, L.P., By: Highland Capital Management, L.P., as Collateral Manager By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio 7 ELF FUNDING TRUST I, By: Highland Capital Management, L.P., as Collateral Manager By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio Manager SL LOANS I LIMITED By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio Manager ARCHIMEMDES FUNDING III, LTD., By: ING Capital Advisors LLC, as Collateral Manager By: /s/ Wade T. Winter, CFA --------------------------------------------- Title: Vice President ARCHIMEMDES FUNDING IV (CAYMAN), LTD., By: ING Capital Advisors LLC, as Collateral Manager By: /s/ Wade T. Winter, CFA ---------------------------------------------- Title: Vice President NEMEAN CLO, LTD., By: ING Capital Advisors LLC, as Investment Manager By: /s/ Wade T. Winter, CFA --------------------------------------------- Title: Vice President SEQUILS-ING I (HBDGM), LTD., By: ING Capital Advisors LLC, as Collateral Manager By: /s/ Wade T. Winter, CFA --------------------------------------------- Title: Vice President 8 DEBT STRATEGIES FUND, INC. By: /s/ John M. Johnson --------------------------------------------- Title: Authorized Signatory SENIOR HIGH INCOME PORTFOLIO, INC. By: /s/ John M. Johnson --------------------------------------------- Title: Authorized Signatory MASTER SENIOR FLOATING RATE TRUST By: /s/ John M Johnson --------------------------------------------- Title: Authorized Signatory MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: /s/ John M. Johnson --------------------------------------------- Title: Authorized Signatory LONGHORN CDO (CAYMAN) LTD. By: Merrill Lynch Investment Managers, L.P. its Investment Advisor By: /s/ John M. Johnson --------------------------------------------- Title: Authorized Signatory STANDFIELD CLO LTD., By: Stanfield Capital Partners LLC as its Collateral Manager By: /s/ Gregory L. Smith --------------------------------------------- Title: Partner 9 STANDFIELD/RMF TRANSATLANTIC CDO LTD., By: Stanfield Capital Partners LLC as its Collateral Manager By: /s/ Gregory L. Smith --------------------------------------------- Title: Partner WINDSOR LOAN FUNDING, LIMITED, By: Stanfield Capital Partners LLC as its Collateral Manager By: /s/ Gregory L. Smith --------------------------------------------- Title: Partner STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY By: /s/ Brian W. Good --------------------------------------------- Title: Senior Vice President LIBERTY - STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND By: Stein Roe & Farnham Incorporated, as Advisor By: /s/ Brian W. Good --------------------------------------------- Title: Sr. Vice President & Portfolio Manager TORONTO DOMINION (NEW YORK), INC. By: /s/ Gwen Zirkle --------------------------------------------- Title: Vice President EMERALD ORCHARD LIMITED By: /s/ Gwen Zirkle --------------------------------------------- Title: Attorney In Fact 10 STEIN ROE & FARNHAM CLO I LTD., by Stein Roe & Farnham Incorporated By: /s/ Brian W. Good --------------------------------------------- Title: Senior Vice President & Portfolio Manager EX-4.2(C) 4 v70464ex4-2c.txt EXHIBIT 4.2(C) 1 EXHIBIT 4.2 (c) SUBSIDIARY GUARANTY GUARANTY, dated as of December 20, 2000 (as amended, modified or supplemented from time to time, this "Guaranty"), made by each of the undersigned guarantors (each, a "Guarantor" and, together with any other entity that becomes a party hereto pursuant to Section 24 hereof, the "Guarantors"). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Ameristar Casinos, Inc. (the "Borrower"), the financial institutions from time to time party thereto (the "Lenders"), Wells Fargo Bank, N.A., as Co-Arranger and Syndication Agent (the "Syndication Agent"), Bear Stearns Corporate Lending Inc., as Documentation Agent (the "Documentation Agent"), Deutsche Bank Securities Inc., as Lead Arranger and sole Book Manager (the "Lead Arranger") and Bankers Trust Company, as Administrative Agent (together with any successor Administrative Agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of December 20, 2000 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to, and the issuance of, and participation in, Letters of Credit for the account of, the Borrower as contemplated therein (such Lenders, the Issuing Lenders, the Syndication Agent, the Documentation Agent, the Lead Arranger and the Administrative Agent are hereinafter called the "Lender Creditors"); WHEREAS, the Borrower may from time to time be party to one or more (i) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements or other similar agreement or arrangements, and/or (ii) other types of hedging agreements (each such agreement or arrangement with an Interest Rate Creditor (as hereinafter defined), an "Interest Rate Protection or Other Hedging Agreement") with any Lender or any Affiliate of any Lender (each such Lender or Affiliate, even if the respective Lender ceases to be a Lender under the Credit Agreement for any reason, and their successors and subsequent assigns, if any, collectively the "Interest Rate Creditors", and together with the Lender Creditors, are hereinafter called the "Secured Creditors"); WHEREAS, each Guarantor is a Subsidiary of the Borrower; WHEREAS, it is a condition to the making of Loans and issuing of Letters of Credit under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty; and WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the Borrower under the Credit Agreement and the entering into of Interest Rate Protection or Other Hedging Agreements and, accordingly, desires to execute this Guaranty in order to satisfy the conditions described in the preceding paragraph and to induce the Lenders to make Loans and issue Letters of Credit to the Borrower and the Interest Rate Creditors to enter into Interest Rate Protection or Other Hedging Agreements with the Borrower; 2 NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby makes the following representations and warranties to the Secured Creditors and, subject to Gaming Regulations, hereby covenants and agrees with each Secured Creditor as follows: 1. Each Guarantor, jointly and severally, irrevocably and unconditionally guarantees: (i) to the Lender Creditors the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to the Lender Creditors under the Credit Agreement (including, without limitation, indemnities, Fees and interest thereon) and the other Credit Documents to which the Borrower is a party, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any such other Credit Document and the due performance and compliance with the terms of the Credit Documents by the Borrower (all such principal, interest, liabilities and obligations under this clause (i), except to the extent consisting of obligations or liabilities with respect to Interest Rate Protection or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); and (ii) to each Interest Rate Creditor the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to one or more Interest Rate Creditors under any Interest Rate Protection or Other Hedging Agreements, whether now in existence or hereafter arising, and the due performance and compliance by the Borrower with all terms, conditions and agreements contained therein (all such obligations and liabilities being herein collectively called the "Other Obligations," and together with the Credit Document Obligations are herein collectively called the "Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that this Guaranty is a guarantee of payment and not of collection, and that the Secured Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against such Guarantor without proceeding against any other Guarantor, the Borrower, against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations. 2. Additionally, but subject to the proviso to the provisions of Section 26 hereof, each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations of the Borrower to the Secured Creditors whether or not due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 10.05 of the Credit Agreement, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Secured Creditors, or order, on demand, in lawful money of the United States. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as 3 to application of payment by the Borrower or by any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of any other guarantor or of any other party as to the Guaranteed Obligations of the Borrower, (c) any payment on or in reduction of any such other guaranty or undertaking, (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, (e) any payment made to any Secured Creditor on the Guaranteed Obligations which any Secured Creditor repays the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding or (f) any action or inaction by the Secured Creditors as contemplated in Section 6 hereof. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor of any of the Borrower's obligations or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor of any of the Borrower's obligations or the Borrower and whether or not any other Guarantor, any other guarantor of the Borrower or the Borrower is joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. 5. Each Guarantor hereby waives (to the fullest extent permitted by applicable law) notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Secured Creditor against, and any other notice to, any party liable thereon (including such Guarantor or any other guarantor or the Borrower). 6. Any Secured Creditor may (except as shall be required by applicable statute and cannot be waived) at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part, subject to applicable Gaming Regulations: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; 4 (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to creditors of the Borrower; (e) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Secured Creditors regardless of what liabilities of the Borrower remain unpaid; (f) consent to or waive any breach of, or any act, omission or default under, any of the Interest Rate Protection or Other Hedging Agreements, the Credit Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any of the Interest Rate Protection or Other Hedging Agreements, the Credit Documents or any of such other instruments or agreements; (g) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Borrower to recover full indemnity for any payments made pursuant to this Guaranty; and/or (h) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of any Secured Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall 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. Subject to Gaming Regulations, the rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Secured Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Secured Creditor to any other or further action in any circumstances without notice or demand. It is not necessary for any Secured Creditor to inquire into the capacity or powers of the Borrower or any of its Subsidiaries or the officers, directors, partners or agents acting or purporting to act on its behalf, and any 5 indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 9. Any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Borrower to the Secured Creditors; and such indebtedness of the Borrower to any Guarantor, if the Administrative Agent, after an Event of Default has occurred and is continuing, so requests, shall be collected, enforced and received by such Guarantor as trustee for the Secured Creditors and be paid over to the Secured Creditors on account of the indebtedness of the Borrower to the Secured Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Secured Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full. 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute or law and cannot be waived) to require the Secured Creditors to: (i) proceed against the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party; (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party; or (iii) pursue any other remedy in the Secured Creditors' power whatsoever. Each Guarantor waives (to the fullest extent permitted by applicable law) any defense based on or arising out of any defense of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party other than payment in full of the Guaranteed Obligations, including, without limitation, any defense based on or arising out of the disability of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Secured Creditors may, at their election but subject to Gaming Regulations, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Secured Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Secured Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. Each Guarantor waives any defense arising out of any such election by the Secured Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other party or any security. To the extent permitted by Nevada Revised Statutes ("NRS") 40.495, Guarantor waives any and all defenses and benefits now or hereafter arising or asserted based on the one-action rule under NRS 40. 430. (b) Each Guarantor waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation 6 or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Secured Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. 11. By their acceptance hereof, the Secured Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the Required Lenders (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least a majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Guaranty or to realize upon the security to be granted by the Security Documents, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent or the holders of at least a majority of the outstanding Other Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Guaranty and the Security Documents. By their acceptance hereof, the Secured Creditors further agree that this Guaranty may not be enforced against any director, officer, employee, stockholder, partner or member of any Guarantor (except to the extent such stockholder, partner or member is also a Guarantor hereunder). 12. In order to induce the Lenders to make Loans and issue Letters of Credit pursuant to the Credit Agreement, and in order to induce the Interest Rate Creditors to execute, deliver and perform the Interest Rate Protection or Other Hedging Agreements, each Guarantor represents, warrants and covenants that: (a) Such Guarantor (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business requires such qualification except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) Such Guarantor has the corporate power and authority to execute, deliver and perform the terms and provisions of this Guaranty and each other Credit Document to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each such Credit Document. Such Guarantor has duly executed and delivered this Guaranty and each other Credit Document to which it is a party, and each such Credit Document constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 7 (c) Neither the execution, delivery or performance by such Guarantor of this Guaranty or any other Credit Document to which it is a party, nor compliance by it with the terms and provisions hereof and thereof, (i) will contravene any provision of any applicable law, statute, rule or regulation (other than Gaming Regulations), or any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the property or assets of such Guarantor or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, credit agreement, or any other material agreement or other instrument to which such Guarantor or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the certificate of incorporation or by-laws (or equivalent organizational documents) of such Guarantor or any of its Subsidiaries. (d) No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except (x) as have been obtained or made, (y) if this representation is being made at any time prior to the tenth day following the Initial Borrowing Date, filings or recordations of financing statements or Mortgages pursuant to the terms of the Security Documents and (z) as required by the Gaming Regulations), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Guaranty or any other Credit Document to which such Guarantor is a party or (ii) the legality, validity, binding effect or enforceability of this Guaranty or any other Credit Document to which such Guarantor is a party. (e) There are no actions, suits or proceedings (private or governmental) pending or threatened (i) with respect to any Credit Documents to which such Guarantor is a party or (ii) with respect to such Guarantor that could reasonably be expected to have a Material Adverse Effect. 13. Each Guarantor covenants and agrees that on and after the date hereof and until the termination of the Total Commitment, and all Interest Rate Protection or Other Hedging Agreements and when no Note or Letter of Credit remains outstanding and all Guaranteed Obligations have been paid in full, such Guarantor shall take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Section 8 or 9 of the Credit Agreement, and so that no Default or Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 14. The Guarantors hereby jointly and severally agree to pay all reasonable out-of-pocket costs and expenses of each Secured Creditor in connection with the enforcement of this Guaranty and any amendment, waiver or consent relating hereto (including, without limitation, the reasonable fees and disbursements of counsel employed by any of the Secured Creditors). 8 15. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of each Guarantor directly affected thereby and either (x) the Required Lenders (or to the extent required by Section 13.12 of the Credit Agreement, with the written consent of each Lender) at all times prior to the time on which all Credit Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Credit Document Obligations have been paid in full; provided, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class of Secured Creditors (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released). For the purpose of this Guaranty the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Lender Creditors as holders of the Credit Document Obligations or (y) the Interest Rate Creditors as the holders of the Other Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Document Obligations, the Required Lenders (or to the extent required by Section 13.12 of the Credit Agreement, each Lender) and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection or Other Hedging Agreements. 16. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit Documents and Interest Rate Protection or Other Hedging Agreements has been made available to its principal executive officers and such officers are familiar with the contents thereof. 17. In addition to any rights now or hereafter granted under applicable law or otherwise (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon any amount becoming due and payable by the Borrower under the Credit Agreement (whether at stated maturity, by acceleration or otherwise) or any payment default under any Interest Rate Protection or Other Hedging Agreement continuing after any applicable grace period), each Secured Creditor is hereby authorized at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Secured Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Secured Creditor under this Guaranty, irrespective of whether or not such Secured Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. By its acceptance hereof, each Secured Creditor acknowledges and agrees that the provisions set forth in this Section 17 are subject to the sharing provisions set forth in Section 13.06 of the Credit Agreement. 18. All notices, requests, demands or other communications pursuant hereto shall be deemed to have been duly given or made when delivered to the Person to which such notice, request, demand or other communication is required or permitted to be given or made under this Guaranty, addressed to such party at (i) in the case of any Lender Creditor, as provided 9 in the Credit Agreement, (ii) in the case of any Guarantor, at its address set forth opposite its signature below and (iii) in the case of any Interest Rate Creditor, at such address as such Interest Rate Creditor shall have specified in writing to the Guarantor; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing. 19. If a claim is ever made upon any Secured Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected in good faith by such payee with any such claimant (including the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 20. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES. Any legal action or proceeding with respect to this Guaranty or any other Credit Document to which any Guarantor is a party may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the personal jurisdiction of the aforesaid courts in any such legal action or proceeding. Each Guarantor hereby further irrevocably waives any claim that any such courts lack personal jurisdiction over such Guarantor, and agrees not to plead or claim, in any legal action or proceeding with respect to this Guaranty or any other Credit Document to which such Guarantor is a party brought in any of the aforesaid courts, that any such court lacks personal jurisdiction over such Guarantor. Each Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Guarantor at its address set forth opposite its signature below. Each Guarantor hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document to which such Guarantor is a party that such service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any of the Secured Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against each Guarantor in any other jurisdiction. (B) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other Credit Document to which such Guarantor is a party brought in the courts referred to in clause (A) above and hereby further 10 irrevocably waives and agrees not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum. (C) EACH GUARANTOR AND EACH CREDITOR (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 21. In the event that all of the capital stock of one or more Guarantors is sold or otherwise disposed of (except to the Borrower or a Subsidiary) or liquidated in compliance with the requirements of Section 9.02 of the Credit Agreement (or such sale or other disposition or liquidation has been approved in writing by the Required Lenders or all of the Lenders if required by Section 13.12 of the Credit Agreement) and the proceeds of such sale, disposition or liquidation are applied in accordance with the provisions of the Credit Agreement, to the extent applicable, such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of one or more Persons that own, directly or indirectly, all of the capital stock or partnership interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 21). 22. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 23. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense, and on the same basis as payments are made by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement. 24. It is understood and agreed that any Subsidiary of Borrower that is required to execute a counterpart of this Guaranty after the date hereof pursuant to the Credit Agreement shall automatically become a Guarantor hereunder by executing a counterpart hereof and delivering the same to the Administrative Agent. 25. At any time a payment in respect of the Guaranteed Obligations is made under this Guaranty, the right of contribution of each Guarantor against each other Guarantor shall be determined as provided in the immediately following sentence, with the right of contribution of each Guarantor to be revised and restated as of each date on which a payment (a "Relevant Payment") is made on the Guaranteed Obligations under this Guaranty. At any time that a Relevant Payment is made by a Guarantor that results in the aggregate payments made by such Guarantor in respect of the Guaranteed Obligations to and including the date of the Relevant Payment exceeding such Guarantor's Contribution Percentage (as defined below) of the aggregate payments made by all Guarantors in respect of the Guaranteed Obligations to and including the date of the Relevant Payment (such excess, the "Aggregate Excess Amount"), each 11 such Guarantor shall have a right of contribution against each other Guarantor who has made payments in respect of the Guaranteed Obligations to and including the date of the Relevant Payment in an aggregate amount less than such other Guarantor's Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Guarantors in respect of the Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate Deficit Amount") in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate Deficit Amount of such other Guarantor. A Guarantor's right of contribution pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment to the time of each computation; provided that no Guarantor may take any action to enforce such right until the Guaranteed Obligations have been irrevocably paid in full, it being expressly recognized and agreed by all parties hereto that any Guarantor's right of contribution arising pursuant to this Section 25 against any other Guarantor shall be expressly junior and subordinate to such other Guarantor's obligations and liabilities in respect of the Guaranteed Obligations and any other obligations owing under this Guaranty. As used in this Section 25: (i) each Guarantor's "Contribution Percentage" shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net Worth" of each Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero; and (iii) the "Net Worth" of each Guarantor shall mean the amount by which the fair saleable value of such Guarantor's assets on the date of any Relevant Payment exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to any Guaranteed Obligations arising under this Guaranty or any guaranteed obligations arising under any guaranty of the Subordinated Obligations (as defined below)) on such date. All parties hereto recognize and agree that, except for any right of contribution arising pursuant to this Section 25, each Guarantor who makes any payment in respect of the Guaranteed Obligations shall have no right of contribution or subrogation against any other Guarantor in respect of such payment until all of the Guaranteed Obligations have been irrevocably paid in full. Each of the Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution. In this connection, each Guarantor has the right to waive its contribution right against any Guarantor to the extent that after giving effect to such waiver such Guarantor would remain solvent, in the determination of the Required Lenders. 26. Each Guarantor and each Secured Creditor (by its acceptance of the benefits of this Guaranty) hereby confirms that it is its intention that this Guaranty not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state law. To effectuate the foregoing intention, each Guarantor and each Secured Creditor (by its acceptance of the benefits of this Guaranty) hereby irrevocably agrees that the Guaranteed Obligations guaranteed by such Guarantor shall be limited to such amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws (it being understood that it is the intention of the parties to this Guaranty and the parties to any guaranty of the Subordinated Bridge Loans and the Permanent Senior Subordinated Notes (collectively, the "Subordinated Obligations") that, to the maximum extent permitted under applicable laws, the liabilities in respect of the guarantees of the Subordinated Obligations shall not be included for the foregoing purposes and that, if any reduction is required to the amount 12 guaranteed by any Guarantor hereunder and with respect to the Subordinated Obligations that its guarantee of amounts owing in respect of the Subordinated Obligations shall first be reduced) and after giving effect to any rights to contribution pursuant to any agreement providing for an equitable contribution among such Guarantor and the other Guarantors, result in the Guaranteed Obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance. Notwithstanding the provisions of the two preceding sentences, as between the Secured Creditors and the holders of the Subordinated Obligations, it is agreed (and the provisions of the Senior Subordinated Financing Agreement so provide and the provisions of the Permanent Senior Subordinated Note Documents shall so provide) that any diminution (whether pursuant to court decree or otherwise) of any Guarantor's obligation to make any distribution or payment pursuant to this Guaranty shall have no force or effect for purposes of the subordination provisions contained in such agreements, and that any payments received in respect of a Guarantor's obligations with respect to the Subordinated Obligations shall be turned over to the holders of the Senior Debt (or obligations which would have constituted Senior Debt if same had not been reduced or disallowed) of such Guarantor (which Senior Debt shall be calculated as if there were no diminution thereto pursuant to this Section 26 or for any other reason other than the irrevocable payment in full in cash of the respective obligations which would otherwise have constituted Senior Debt) until all such Senior Debt (or obligations which would have constituted Senior Debt if same had not been reduced or disallowed) has been irrevocably paid in full. 27. This Guaranty is subject to the Gaming Regulations and laws involving the sale and distribution of liquor (the "Liquor Laws"). Without limiting the foregoing, the Secured Creditors acknowledge that (i) they are subject to being called forward by the Gaming Authorities or such other governmental authorities enforcing the Liquor Laws, in their discretion, for licensing or a finding of suitability or to file or provide other information and (ii) all rights, remedies and powers in or under this Guaranty may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Regulations and Liquor Laws and only to the extent that required approvals (including prior approvals) are obtained from the requisite Gaming Authorities. The Secured Creditors agree to cooperate with all Gaming Authorities in connection with the provision of such documents or other information as may be requested by such Gaming Authorities. 13 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Address: c/o Ameristar Casinos, Inc. AMERISTAR CASINO VICKSBURG, INC., 3773 Howard Hughes Parkway AMERISTAR CASINO COUNCIL BLUFFS, INC., Suite 490S CACTUS PETE'S, INC., Las Vegas, Nevada 89109 A.C. FOOD SERVICES, INC., Attention: Vice President AMERISTAR CASINO ST. LOUIS, INC., Tel: 702-567-7000 AMERISTAR CASINO KANSAS CITY, INC., Fax: 702-369-8860 AMERISTAR CASINO ST. CHARLES, INC., each as a Guarantor with copies to: Ameristar Casinos, Inc. By: /s/ Thomas M. Steinbauer 16633 Ventura Blvd. ----------------------------------- Suite 1050 Title: Vice President, Treasurer & Encino, California 91436 Secretary Attention: Senior Vice President of Legal Affairs Tel: 818-817-6480 Fax: 818-995-7099 and Gibson, Dunn & Crutcher LLP 333 S. Grand Avenue Los Angeles, CA 90071 Attention: Jeff Hudson, Esq. Tel: 213-229-7332 Fax: 213-229-6332 Accepted and Agreed to: BANKERS TRUST COMPANY, as Administrative Agent and as Collateral Agent By /s/ Laura Burwick --------------------------- Title: Principal EX-4.3 5 v70464ex4-3.txt EXHIBIT 4.3 1 EXHIBIT 4.3 ================================================================================ SENIOR SUBORDINATED CREDIT AGREEMENT dated as of December 20, 2000 among AMERISTAR CASINOS, INC., as Borrower, THE SUBSIDIARY GUARANTORS named herein, THE LENDERS named herein and BANKERS TRUST COMPANY, as Agent and BEAR STEARNS, as Documentation Agent ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1 DEFINITIONS.............................................................................1 1.1 Certain Defined Terms...................................................................1 1.2 Accounting Terms.......................................................................36 1.3 Other Definitional Provisions; Anniversaries...........................................36 SECTION 2 AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES...................................37 2.1 Bridge Loan and Bridge Note............................................................37 2.2 Term Loan and Term Note................................................................38 2.3 Interest on the Loans..................................................................39 2.4 Fees...................................................................................41 2.5 Prepayments and Payments...............................................................41 2.6 Use of Proceeds........................................................................45 SECTION 3 CONDITIONS.............................................................................45 3.1 Conditions to Bridge Loan..............................................................45 3.2 Conditions to Term Loan................................................................50 SECTION 4 REPRESENTATIONS AND WARRANTIES.........................................................51 4.1 Company Status.........................................................................51 4.2 Company Power and Authority............................................................52 4.3 No Violation...........................................................................52 4.4 Governmental Approvals.................................................................52 4.5 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc...................................................................53 4.6 Litigation.............................................................................54 4.7 True and Complete Disclosure...........................................................54 4.8 Tax Returns and Payments...............................................................54 4.9 Compliance with ERISA..................................................................55 4.10 Representations and Warranties in Documents............................................56 4.11 Properties.............................................................................56 4.12 Capitalization.........................................................................57 4.13 Subsidiaries...........................................................................57 4.14 Compliance with Statutes, etc..........................................................57 4.15 Investment Company Act.................................................................58 4.16 Public Utility Holding Company Act.....................................................58 4.17 Environmental Matters..................................................................58
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Page ---- 4.18 Labor Relations........................................................................59 4.19 Patents, Licenses, Franchises and Formulas.............................................59 4.20 Indebtedness...........................................................................59 4.21 Transactions...........................................................................60 4.22 Insurance..............................................................................60 4.23 No Default.............................................................................60 4.24 Compliance with Contracts, etc.........................................................60 4.25 Use of Proceeds; Margin Stock, etc.....................................................61 4.26 Survival of Representations and Warranties.............................................61 4.27 Guarantees.............................................................................61 4.28 Senior Subordinated Indenture; etc.....................................................62 SECTION 5 AFFIRMATIVE COVENANTS..................................................................62 5.1 Financial Statements and Other Reports.................................................62 5.2 Books, Records and Inspections.........................................................65 5.3 Maintenance of Property; Insurance.....................................................65 5.4 Corporate Franchises...................................................................66 5.5 Compliance with Statutes, etc..........................................................66 5.6 Compliance with Environmental Laws.....................................................66 5.7 ERISA..................................................................................67 5.8 Performance of Obligations.............................................................68 5.9 Payment of Taxes.......................................................................69 5.10 Ownership of Subsidiaries..............................................................69 5.11 Take-Out Financing.....................................................................69 5.12 Exchange of Term Notes.................................................................70 5.13 Payments in U.S. Dollars...............................................................71 5.14 Register...............................................................................71 SECTION 6 NEGATIVE COVENANTS.....................................................................71 6.1 Limitation on Incurrence of Additional Indebtedness....................................71 6.2 Limitation on Liens....................................................................72 6.3 Limitation on Restricted Payments......................................................73 6.4 Prohibition on Incurrence of Senior Subordinated Debt..................................76 6.5 Merger, Consolidation and Sale of Assets...............................................76 6.6 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.......................................................................79 6.7 Limitations on Transactions with Affiliates............................................81 6.8 Subsidiary Stock.......................................................................82 6.9 Conduct of Business....................................................................82 6.10 Amendments or Waivers of Certain Documents.............................................82 6.11 Refinancing of the Loans in Part.......................................................82
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Page ---- 6.12 Limitation on Asset Sales..............................................................83 6.13 Additional Subsidiary Guarantees.......................................................84 6.14 Limitation on Preferred Stock of Restricted Subsidiaries...............................84 SECTION 7 EVENTS OF DEFAULT......................................................................84 7.1 Failure To Make Payments When Due......................................................85 7.2 Default in Other Agreements............................................................85 7.3 Breach of Certain Covenants............................................................85 7.4 Breach of Warranty.....................................................................85 7.5 Other Defaults Under Agreement or Loan Documents.......................................85 7.6 Involuntary Bankruptcy; Appointment of Custodian, etc..................................86 7.7 Voluntary Bankruptcy; Appointment of Custodian, etc....................................86 7.8 Judgments and Attachments..............................................................86 7.9 Guarantee..............................................................................87 7.10 Foreclosure............................................................................87 7.11 Gaming Licenses........................................................................87 SECTION 8 SUBORDINATION..........................................................................88 8.1 Securities Subordinated to Senior Debt.................................................88 8.2 Suspension of Payment When Senior Debt Is in Default...................................88 8.3 Loan Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company..............................90 8.4 Payments May Be Paid Prior to Dissolution..............................................91 8.5 Lenders To Be Subrogated to Rights of Holders of Senior Debt...........................92 8.6 Loan Obligations of the Company Unconditional..........................................92 8.7 Reliance on Judicial Order or Certificate of Liquidating Agent.........................93 8.8 Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt.............................................................93 8.9 Lenders Authorize Agent To Effectuate Subordination of Loan Obligations................94 8.10 This Section 8 Not To Prevent Events of Default........................................94 8.11 Amendments or Modifications to Section 8...............................................94 SECTION 9 THE AGENT..............................................................................95 9.1 Appointment............................................................................95 9.2 Delegation of Duties...................................................................95 9.3 Exculpatory Provisions.................................................................95 9.4 Reliance by Agent......................................................................96 9.5 Notice of Default......................................................................96 9.6 Non-Reliance on Agent..................................................................97
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Page ---- 9.7 Indemnification........................................................................97 9.8 Agent in Its Individual Capacity.......................................................98 9.9 Resignation of the Agent; Successor Agent..............................................98 9.10 Documentation Agent....................................................................98 SECTION 10 GUARANTEE..............................................................................98 10.1 Unconditional Guarantee................................................................98 10.2 Subordination of Guarantee.............................................................99 10.3 Severability..........................................................................100 10.4 Release of a Guarantor................................................................100 10.5 Limitation of Guarantor's Liability...................................................100 10.6 Guarantors May Consolidate, etc., on Certain Terms....................................101 10.7 Contribution..........................................................................101 10.8 Waiver of Subrogation.................................................................102 10.9 Evidence of Guarantee.................................................................102 10.10 Waiver of Stay, Extension or Usury Laws...............................................102 SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS................................................103 11.1 Guarantee Obligations Subordinated to Guarantor Senior Debt...........................103 11.2 Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default..........103 11.3 Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor..............104 11.4 Payments May Be Paid Prior to Dissolution.............................................106 11.5 Lenders To Be Subrogated to Rights of Holders of Guarantor Senior Debt................106 11.6 Guarantee Obligations of the Guarantors Unconditional.................................106 11.7 Reliance on Judicial Order or Certificate of Liquidating..............................107 11.8 Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt..................................................107 11.9 Lenders Authorize Agent To Effectuate Subordination of Guarantee Obligations..........108 11.10 This Section 11 Not To Prevent Events of Default......................................108 11.11 Amendments or Modifications to Section 11.............................................108 SECTION 12 MISCELLANEOUS.........................................................................109 12.1 Representation of the Lenders.........................................................109 12.2 Participations in and Assignments of Loans and Notes..................................109 12.3 Expenses..............................................................................111 12.4 Indemnity.............................................................................112
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Page ---- 12.5 Setoff................................................................................112 12.6 Amendments and Waivers................................................................113 12.7 Independence of Covenants.............................................................114 12.8 Entirety..............................................................................114 12.9 Notices...............................................................................114 12.10 Survival of Warranties and Certain Agreements.........................................114 12.11 Failure or Indulgence Not Waiver; Remedies Cumulative.................................115 12.12 Severability..........................................................................115 12.13 Headings..............................................................................115 12.14 Applicable Law........................................................................115 12.15 Successors and Assigns; Subsequent Holders of Notes...................................115 12.16 Counterparts; Effectiveness...........................................................116 12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial..................................116 12.18 Payments by Agent.....................................................................117 12.19 Taxes.................................................................................117 12.20 Waiver of Stay, Extension or Usury Laws...............................................119 12.21 Requirements of Law...................................................................119 12.22 Confidentiality.......................................................................119 12.23 Application of Gaming Regulations.....................................................120 12.24 Post-Closing Actions..................................................................120
-v- 7 SCHEDULES A - TAXES B - SUBSIDIARIES C - INTELLECTUAL PROPERTY D - EXISTING DEBT E - INSURANCE F - ENVIRONMENTAL EXHIBITS I FORM OF BRIDGE NOTE II FORM OF TERM NOTE III FORM OF COMPLIANCE CERTIFICATE IV-A FORM OF NOTICE OF BORROWING IV-B FORM OF NOTICE OF CONVERSION V FORM OF REGISTRATION RIGHTS AGREEMENT VI-A FORM OF OPINION OF GIBSON, DUNN & CRUTCHER LLP, COUNSEL FOR THE COMPANY AND THE GUARANTORS VI-B FORM OF LOCAL COUNSEL OPINIONS VI-C FORM OF OPINION OF GAMING COUNSEL FOR THE COMPANY AND THE GUARANTORS VII FORM OF OPINION OF CAHILL GORDON & REINDEL, COUNSEL FOR THE LENDERS VIII FORM OF NOTATION OF GUARANTEE IX FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT X FORM OF SECTION 12.2E CERTIFICATE XI FORM OF SENIOR SUBORDINATED INDENTURE -vi- 8 This Senior Subordinated Credit Agreement is dated as of December 20, 2000, and entered into by and among Ameristar Casinos, Inc., a Nevada corporation (the "Company"), the Guarantors named on the signature pages hereto, the Lenders named on the signature pages hereto (the "Lenders"), Bankers Trust Company ("BTCo"), as Agent for the Lenders (in such capacity, the "Agent") and Bear Stearns Corporate Lending Inc. ("Bear Stearns"), as Documentation Agent for the Lenders (in such capacity, the "Documentation Agent").. RECITALS WHEREAS, the Company desires that the Lenders extend a senior subordinated credit facility to the Company in connection with the Transactions (as defined herein); NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereby agree as follows: SECTION 1 DEFINITIONS 1.1 Certain Defined Terms The following terms used in this Agreement shall have the following meanings: "Acceleration Notice" shall have the meaning ascribed to such term in Section 7. "ACLVI" shall mean Ameristar Casino Las Vegas, Inc., a Nevada corporation. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with or into the Company or any of its Subsidiaries or assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation. "Acquired Properties" means the assets and liabilities acquired by the Company pursuant to the Acquisition Agreements. "Acquisition Agreements" means (i) the Asset Purchase Agreement dated as of October 17, 2000 by and among Ameristar Casino Kansas City, Inc., the Company, Kansas City Station Corporation and Station Casinos, Inc. and (ii) the Asset Purchase Agreement dated as of October 17, 2000 by and among Ameristar Casino St. Charles, Inc., the Company, 9 -2- St. Charles Riverfront Station, Inc. and Station Casinos, Inc., in each case together with all related and ancillary documents and in each case as such agreements as amended on December 13, 2000 and as in effect on the Closing Date. "Acquisitions" shall mean the acquisition by the Company through its wholly owned subsidiaries of the operating assets of Station Casino St. Charles and Station Casino Kansas City from Station Casinos, Inc. and/or its affiliates pursuant to the terms of the respective Acquisition Agreements . "Adjusted Net Assets" shall have the meaning provided in Section 10.7. "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. "Affiliate Transaction" has the meaning ascribed to such term in Section 6.7. "Agent" has the meaning ascribed to such term in the introduction to this Agreement. "Agreement" means this Senior Subordinated Credit Agreement dated as of December 20, 2000, as it may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Ameristar 10.50% Notes" shall mean the Company's 10.50% Senior Subordinated Notes due 2004. "Applicable Rate" means for each Monthly Period, the greater of (i) 11.00% per annum or (ii) the LIBOR Rate then in effect plus the Applicable Spread provided, that, in no event, other than that set forth in Section 2.3.C. will the interest rate on any Loan exceed 15.50% per annum. "Applicable Spread" means 4.25% per annum for the period from and including the Closing Date and to but excluding the 180th day following the Closing Date; 5.25% per annum for the 90-day period from and including the 180th day following the Closing Date; and for each subsequent 90-day period the Applicable Spread in effect for the immediately preceding 90-day period plus 0.5%. "Asset Acquisition" means (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall 10 -3- become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company, a Guarantor or a Wholly Owned Restricted Subsidiary of the Company of: (1) any Capital Stock of any Restricted Subsidiary of the Company; or (2) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that asset sales or other dispositions shall not include: (a) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $2.0 million; (b) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 6.5; (c) any foreclosure sale of FF&E pursuant to a FF&E Financing; (d) any Restricted Payment permitted by Section 6.3 or that constitutes a Permitted Investment; (e) leases or subleases of real or personal property in the ordinary course of business on commercially reasonable terms to the extent that the Company determines that such property is immaterial and no longer necessary in the conduct of its business or such lease or sublease is to an operator of a restaurant, store or other enterprise within or adjacent to a casino facility of the Company or its Subsidiaries. "Bankruptcy Law" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute or any other United States federal, state or local law or the law of any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors, whether in effect on the date hereof or hereafter. "Bankruptcy Order" means any court order made in a proceeding pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, winding up, dissolution or reorganization, or appointing a custodian of a debtor or of all or any substantial part of a debtor's property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. 11 -4- "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Agent. "Bridge Loan" means, collectively, the loans made by the Lenders pursuant to Section 2.1A. "Bridge Loan Commitment" means the commitment of the Lenders to make the Bridge Loan as set forth in Section 2.1A. "Bridge Notes" has the meaning ascribed to such term in Section 2.1D. "Business Day" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of New York, New York or is a day on which banking institutions therein located are authorized or required by law or other governmental action to close. "Capital Stock" means: (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person; and (2) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means: (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time 12 -5- of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250.0 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. "Cash Proceeds" means, with respect to any Asset Sale, cash payments (including any cash received by way of deferred payment pursuant to, or monetization of, a note receivable or otherwise (other than the portion of such deferred payment constituting interest, which shall be deemed not to constitute Cash Proceeds) but only as and when so received) received from such Asset Sale. "Change of Control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Agreement), other than to the Permitted Holders or a Guarantor and other than a transaction where the holders of the Capital Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Capital Stock of the acquiring Person; (2) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Agreement); 13 -6- (3) any Person or Group (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company and at such time (i) the Permitted Holders together do not beneficially own, directly or indirectly, a greater percentage of the aggregate ordinary voting power of the Capital Stock of the Company than is beneficially owned by such other Person or Group and (ii) the Permitted Holders do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company; or (4) the replacement of a majority of the Board of Directors of the Company over a two-year period from the directors who constituted the Board of Directors of the Company at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved. "Change of Control Date" has the meaning ascribed to such term in Section 2.5A(iv). "Change of Control Offer" has the meaning ascribed to such term in Section 2.5A(iv). "Closing Date" means December 20, 2000. "Commission" means the Securities and Exchange Commission or any successor agency. "Commitment Letter" means the letter agreement dated October 16, 2000, between the Company and Bankers Trust Corporation, pursuant to which Bankers Trust Corporation committed to provide the Loans to the Company, subject to the terms and conditions thereof, and the Company committed to pay Bankers Trust Corporation certain fees and to satisfy certain other obligations to Bankers Trust Corporation in respect of such commitment. "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Closing Date or issued after the Closing Date, and includes, without limitation, all series and classes of such common stock. "Company" has the meaning ascribed to such term in the introduction to this Agreement. 14 -7- "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of: (1) Consolidated Net Income; and (2) to the extent Consolidated Net Income has been reduced thereby: (a) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business); (b) Consolidated Interest Expense; (c) all preopening expenses of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP; and (d) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or re payment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and 15 -8- (2) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness (as determined under the definition of "Indebtedness"). Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio": (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (1) Consolidated Interest Expense; plus (2) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person and, to the extent permitted under this Agreement, its Restricted Subsidiaries (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current 16 -9- effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (1) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation: (a) any amortization of debt discount and amortization or write-off of deferred financing costs; (b) the net costs under Interest Swap Obligations; (c) all capitalized interest; and (d) the interest portion of any deferred payment obligation; and (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom: (1) after-tax gains from Asset Sales (without regard to the $2.0 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto; (2) after-tax items classified as extraordinary or nonrecurring gains; (3) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Restricted Subsidiary of the referent Person; (4) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions bythat Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise; (5) the net income of any Person, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such Person; 17 -10- (6) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Closing Date; (7) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); (8) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets; and (9) non-cash charges relating to compensation expense arising upon exercise, vesting or termination of employee stock options. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to Disqualified Capital Stock of such Person. "Consolidated Non-cash Charges" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (including amortization of goodwill and other intangibles and excluding any such charges constituting an extraordinary item or loss or any such charge which requires an accrual of or a reserve for cash charges for any future period). "Contested Claim" means any Tax, Indebtedness or other claim or liability (i) the validity or amount of which is being diligently contested in good faith, (ii) for which adequate reserve, or other appropriate provision, if any, as required in conformity with GAAP shall have been made, and (iii) with respect to which any right to execute upon or sell any assets of the Company or of any of its Subsidiaries has not matured or has been and continues to be effectively enjoined, superseded or stayed. "Contractual Obligation", as applied to any Person, means any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Conversion Date" means the one year anniversary of the Closing Date or such later date to which the Conversion Date may be deferred pursuant to Section 3.2D. "Covered Taxes" has the meaning ascribed to it in Section 12.19. 18 -11- "Credit Agreement" means the Credit Agreement dated as of December 20, 2000, between the Company, the lenders party thereto in their capacities as lenders thereunder and Bankers Trust Company, as administrative agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by Section 6.1) or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Custodian" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator or similar official charged with maintaining possession or control over property for one or more creditors, whether under any Bankruptcy Law or otherwise. "Demand Take-Out Notes" means senior subordinated notes of the Company issued under an indenture (i) with such terms, conditions and covenants as are customary for similar high-yield financings and as are reasonably satisfactory in all respects to the Agent and the Company and (ii) the proceeds of which shall be used to repay the Notes in whole or in part, which Demand Take-Out Notes shall be guaranteed by each entity that guarantees the Bridge Loan. "Designated Senior Debt" means (1) Indebtedness under or in respect of the Credit Agreement and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount (available or committed) of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "Disposition" shall mean the sale by ACLVI of The Reserve to Lake Mead Station, Inc. pursuant to the Disposition Documents. "Disposition Documents" shall mean that certain Asset Purchase Agreement dated as of October 17, 2000 by and among ACLVI, the Company, Lake Mead Station, Inc. and Station, as in effect on the Closing Date and without giving effect to any subsequent amendment, modification and supplement thereto made without the prior written consent of the Majority Lenders (other than amendments, modifications and supplements that, when considered either individually or in the aggregate, are not materially less favorable to the Company and its Subsidiaries, taken as a whole, or the Lenders with respect thereto). 19 -12- "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control) on or prior to the final maturity date of the Notes. "Documents" means the Loan Documents, the Acquisition Agreements, the Credit Agreement and the Tender Offer Documents. "Dollars" or the sign "$" means the lawful money of the United States of America. "Domestic Restricted Subsidiary" means a Restricted Subsidiary incorporated or otherwise organized or existing under the laws of the United States, any state thereof or any territory or possession of the United States. "Eligible Assignee" means (A) (i) a commercial bank organized under the laws of the United States of America or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies, in each case (under clauses (i) through (iv) above) that is reasonably acceptable to the Agent; and (B) any Lender and any Affiliate of any Lender. An Eligible Assignee must also be a Qualified Person. "Employment Agreements" has the meaning ascribed to such term in Section 3.1L. "Environmental Claim" shall mean any and all administrative, regulatory or judicial actions, suits, written demands, demand letters, written claims, liens, written notices of non-compliance or violation, investigations or proceedings arising under any Environmental Law (hereafter "Claims") or any permit issued under any such law, including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Haz- 20 -13- ardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" shall mean any applicable Federal, state, provincial, foreign or local statute, law, rule, regulation or rule of common law now or hereafter in effect and in each case as amended, and any legally binding judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, as amended, 42 U.S.C. SECTION 6901, et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Company or a Subsidiary of the Company would be deemed to be a "single employer" (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Company or a Subsidiary of the Company being or having been a general partner of such person. "Event of Default" means each of the events set forth in Section 7. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "Exchange Notes" has the meaning ascribed to it in Section 5.12(ii). "Exchange Request" has the meaning ascribed to it in Section 5.12. "Existing Debt" means the Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Closing Date and set forth on Schedule D. "fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of 21 -14- Directors of the Company acting reasonably and in good faith whose determination shall be conclusive if evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Agent. "Federal Funds Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal Funds brokers of recognized standing selected by the Agents. "FF&E Financing" means Indebtedness the proceeds of which will be used to finance the acquisition or lease by the Company or its Restricted Subsidiaries of furniture, fixtures or equipment ("FF&E") used in the operation of its business and secured by a Lien on such FF&E. "Fixed Rate" has the meaning ascribed to it in Section 2.3(A)(ii). "Fixed Rate Loans" means Loans described in Section 2.3A(ii). "Floating Rate Loans" means Loans described in Section 2.3A(i). "Four Quarter Period" has the meaning provided in the definition of Consolidated Fixed Charge Coverage Ratio. "Funding Guarantor" has the meaning ascribed to it in Section 10.7. "Futuresouth Royalty" means the royalty payments required to be made pursuant to the Asset Purchase and Sale Agreement, dated as of February 15, 2000, by and between Futuresouth, Southboat Lemay, Inc., Southboat Limited Partnership and Ameristar Casino St. Louis, Inc., as in effect on the Closing Date and without giving effect to any subsequent amendment, modification and supplement. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the date hereof. 22 -15- "Gaming Authority" means any governmental authority with regulatory oversight of, authority to regulate or jurisdiction over any gaming businesses or enterprises, including the Nevada State Gaming Control Board, the Nevada Gaming Commission, the Mississippi Gaming Commission, the Mississippi State Tax Commission, the Missouri Gaming Commission, the Iowa Racing and Gaming Commission, and any agency established by a federally recognized Indian tribe to regulated gaming on such tribe's reservation with regulatory oversight of, authority to regulate or jurisdiction over any gaming operation (or proposed gaming operation) owned, managed or operated by the Company or any Subsidiary. "Gaming Regulations" shall mean the laws, rules, regulations and orders applicable to the casino and gaming businesses or activities of the Company or any of its Subsidiaries in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities. "Grace Period" shall have the meaning ascribed to it in Section 3.2D. "Guarantee Obligations" shall mean, as to any Guarantor, all Obligations of every nature of such Guarantor from time to time owing to the Lenders and the Agent under the Loan Documents to which it is a party (including its Guarantee). "Guarantees" means, collectively, the guarantees delivered to the Lenders by the Guarantors pursuant to Section 10 which are evidenced by notations of guarantee substantially in the form of Exhibit IX. "Guarantor" means: (1) each of the Company's existing Subsidiaries other than ACLVI; and (2) each of the Company's Restricted Subsidiaries that in the future agrees to be bound by the terms of this Agreement as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of this Agreement. "Guarantor Senior Debt" means, with respect to any Guarantor: the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of a Guarantor, whether outstanding on the Closing Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: 23 -16- (x) all monetary obligations of every nature of such Guarantor under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (y) all Interest Swap Obligations (and guarantees thereof); in each case whether outstanding on the Closing Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (1) any Indebtedness of such Guarantor to a Subsidiary of such Guarantor; (2) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of such Guarantor or any Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Credit Agreement; (3) Indebtedness to trade creditors; (4) Indebtedness represented by Preferred Stock and Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by such Guarantor; (6) that portion of any Indebtedness incurred in violation of Section 6.1 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Agreement); (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "Guarantor Senior Debt Obligations" means all obligations of any Guarantor for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages 24 -17- and other liabilities payable under the documentation governing any Guarantor Senior Debt, and all guarantees by such Guarantor of any of the foregoing. "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous materials," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar meaning and regulatory effect under any applicable Environmental Law. "incur" has the meaning set forth in Section 6.1 (and "incurrence," "incurred," "incurrable" and "incurring" shall have meanings correlative to the foregoing). "Indebtedness" means with respect to any Person, without duplication: (1) all Obligations of such Person for borrowed money; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all Obligations of such Person for the deferred purchase price of property or services (other than, to the extent deferred in the ordinary course of business, deferred payments in respect of services by employees) which remain unpaid more than 120 days after the due date therefor other than payments which are being contested in good faith; (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below; (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured; (8) all Interest Swap Obligations of such Person; and 25 -18- (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price at any time prior to its stated repurchase date, but excluding accrued dividends, if any. For purposes hereof, (1) the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock and (2) the principal amount of Indebtedness arising from royalty obligations representing the deferred purchase price of property or services shall equal the greater of (x) the principal amount thereof as determined in accordance with GAAP and (y) the present value of the amounts the management of the Company believes in good faith will be required to be paid under such royalty obligation, provided that in the case of the Futuresouth Royalty, the principal amount of such Indebtedness shall equal the present value of the greater of (x) the minimum royalty payments and (y) the amount actually paid in respect of the Futuresouth Royalty in respect of the most recently ended period. "Indemnified Liabilities" has the meaning ascribed to such term in Section 12.4. "Indemnitees" has the meaning ascribed to such term in Section 12.4. "Independent Financial Advisor" means a firm: (1) which does not, and whose directors, officers and employees or Affiliates do not, have any material a direct or indirect financial interest in the Company; and (2) which, in the good faith judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Request Date" shall have the meaning ascribed to it in Section 5.11A. "Interest Rate Determination Date" means, with respect to any Monthly Period, the second Business Day on which banks in New York and London are open prior to the first Business Day of such Monthly Period. "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by 26 -19- such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Internal Revenue Code" or "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor code or statute. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Restricted Subsidiary is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Laws" means all applicable statutes, laws, ordinances, regulations, rules, orders, judgments, writs, injunctions or decrees of any state, commonwealth, nation, territory, possession or province, or Tribunal, and "Law" means each of the foregoing. "Leaseholds" of any Person means all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Lenders" has the meaning ascribed to that term in the introduction to this Agreement and shall include any assignee of any Loan, Note or Loan Commitment to the extent of such assignment. "LIBOR Rate" means the rate determined on the basis of the offered rates for deposits in U.S. Dollars in the London interbank market for a period of three months which is published by the British Bankers' Association and currently appears on Telerate page 3750 as of 11:00 a.m., London time, on the Interest Rate Determination Date for such Monthly Period; provided that if, for any reason, such a rate is not published by the British Bankers' Association, the LIBOR Rate shall be equal to a rate per annum equal to the average rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which the Agent determines that U.S. Dollars in an amount comparable to the amount of the applicable Loans are being offered to prime banks at approximately 11:00 a.m., London time, on the Interest Rate Determination 27 -20- Date for such Monthly Period for settlement in immediately available funds by leading banks in the London interbank market selected by the Agent divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including without limitation any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "License Subsidiary" means each Subsidiary of the Company on the Closing Date and any future Subsidiary, in either case that holds any gaming license from any Gaming Authority requiring approval for the incurrence of Indebtedness of such Subsidiary for the incurring of any Lien on the Capital Stock of such Subsidiary. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Litigation" means any action, suit, proceeding, claim, lawsuit and/or investigation conducted or threatened by or before any Tribunal. "Loan Commitment" means the Bridge Loan Commitment and the Term Loan Commitment. "Loan Documents" means this Agreement, the Bridge Notes, the Term Notes, the Guarantees, the Senior Subordinated Indenture, the Exchange Notes and the Registration Rights Agreement. "Loan Obligations" means all Obligations of every nature of the Company from time to time owing to the Lenders and Agent under the Loan Documents. "Loans" means the Bridge Loan and the Term Loan as each may be outstanding. "Majority Lenders" means the Agent together with Lenders holding in the aggregate more than 50% of the outstanding principal amount of Notes. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Change" means a material adverse change in the business, results of operations, properties, assets, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole. 28 -21- "Material Adverse Effect" means a material adverse effect on the business, results of operations, properties, assets, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole. "Material Subsidiary" means, with respect to any accounting period, any Restricted Subsidiary of the Company (i) whose revenues constitute greater than 10% of the aggregate dollar value of the revenues of Company and its Restricted Subsidiaries, taken as a whole, for such accounting period or (ii) the fair market value of whose assets at any time during such accounting period is greater than 10% of the fair market value of all of the assets of Company and its Restricted Subsidiaries taken as a whole at such time. "Maturity Date" has the meaning ascribed to such term in Section 2.2D. "Missouri Stock Option Agreements" means the four Non-Qualified Stock Option Agreements dated as of December 18, 2000 between the Company on the one hand, and John Finamore, Troy Stremming, Thomas Burke and Anthony Raymon on the other hand, in each case as in effect on the Closing Date and without giving effect to any amendment, modification or supplement thereto made without the prior written consent of the Agent. "Monthly Period" shall mean the period commencing on the first calendar day of each month, if such day is a Business Day, or the first Business Day succeeding the first calendar day of each month and ending on the day next preceding the first Business Day of the following Monthly Period; provided that the first Monthly Period shall commence on the Closing Date. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayment of Indebtedness that is secured by the property or assets that are the subject of such Asset Sale; and 29 -22- (4) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained (or indemnified against) by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Non-payment Default" shall have the meaning ascribed to such term in Section 8.2(b). "Notes" means, collectively, the Bridge Notes and the Term Notes. "Notice of Borrowing" means a notice substantially in the form of Exhibit IV-A with respect to a proposed borrowing. "Notice of Conversion" means a notice substantially in the form of Exhibit IV-B with respect to a proposed conversion. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the documentation governing any such obligation. "Offer Payment Date" has the meaning ascribed to such term in Section 2.5A(iv)(c)(2). "Officer" means the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Controller, the Treasurer, the Secretary or Assistant Secretary. "Officers' Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by an Officer. "Other Taxes" has the meaning ascribed to such term in Section 12.19B. "Payment Blockage Notice" has the meaning ascribed to such term in Section 8.2(b). "Payment Blockage Period" has the meaning ascribed to such term in Section 8.2(b). "Payment Default" shall have the meaning ascribed to such term in Section 8.2(a). 30 -23- "Payment Office" shall mean the office of the Agent located at One Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent may designate to the Company and the Lenders from time to time. "PBGC" means the Pension Benefit Guaranty Corporation, and any successor to all or any of the Pension Benefit Guaranty Corporation's functions under ERISA. "Permitted Holders" shall mean and include (i) Craig H. Neilsen or Ray Neilsen, their respective estates, spouses, heirs, ancestors, lineal descendants, legatees, legal representatives or the trustee of any bona fide trust of which no one other than the foregoing has any interests and (ii) any entity controlled, directly or indirectly, by any of the foregoing referred to in the previous clause (i), whether through the ownership of voting securities, by contract or otherwise, and (iii) Craig H. Neilsen or Ray Neilsen (a) in their respective capacity as a trustee under a revocable trust of which no one other than the persons and entities listed in the foregoing clause (i) has any interest, together with each successor trustee thereof or (b) as the executor of the estate of Gwendolyn Anderson or of any Person named in clause (i). "Permitted Indebtedness" means, without duplication, each of the following: (1) the Loans, this Agreement and the Guarantees and all Obligations under the Loan Documents; (2) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $575.0 million less the amount of all permanent repayments actually made (which are accompanied by a corresponding permanent commitment reduction) thereunder as a result of the application of the Net Cash Proceeds of any Asset Sale; (3) the Existing Debt, reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (4) Interest Swap Obligations of the Company or any Restricted Subsidiary of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided, however, that such Interest Swap Obligations are entered into to protect the Company and its Restricted Subsidiaries from fluctuations in interest rates on their outstanding Indebtedness to the extent the notional principal amount of such Interest Swap Obligation does not, at the time of the incurrence thereof, exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates; (5) Indebtedness of a Restricted Subsidiary of the Company to the Company or a Guarantor for so long as such Indebtedness is held by the Company or a 31 -24- Guarantor, in each case subject to no Lien held by a Person other than the Company, a Guarantor or the Agent acting on behalf of the lenders under the Credit Agreement; provided that if as of any date any Person other than the Company, a Guarantor or the Agent acting on behalf of the lenders under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (6) Indebtedness of the Company to a Guarantor for so long as such Indebtedness is held by a Guarantor, subject to no Lien held by any person other than a Guarantor or the Agent acting on behalf of the lenders under the Credit Agreement; provided that if as of any date any Person other than a Guarantor or the Agent acting on behalf of the lenders under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company; (7) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within three business days of notice of incurrence; (8) Indebtedness of the Company or any of its Restricted Subsidiaries in respect of bankers' acceptances, workers' compensation claims, appeal bonds, payment obligations in connection with self-insurance or similar obligations, deferred compensation to employees and bank overdrafts (and letters of credit in respect thereof), in each case in the ordinary course of business; (9) Indebtedness of the Company or any of its Restricted Subsidiaries incurred solely in respect of performance, surety and similar bonds or completion guarantees, to the extent that such incurrence does not result in the incurrence of any obligation for the payment of borrowed money of others; (10) Indebtedness represented by Capitalized Lease Obligations of the Company and its Restricted Subsidiaries incurred in the ordinary course of business (including any refinancing thereof) not to exceed (x) $10.0 million less the aggregate amount outstanding pursuant to clause (11)(x) of this definition at any one time outstanding before the Conversion Date and (y) $30.0 million less the aggregate amount outstanding pursuant to clause (11)(y) of this definition at any one time outstanding after the Conversion Date; (11) FF&E Financing and Purchase Money Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business (including 32 -25- any refinancing thereof) not to exceed (x) $10.0 million less the aggregate amount outstanding pursuant to clause (10)(x) of this definition in the aggregate at any one time outstanding before the Conversion Date and (y) $30.0 million less the aggregate amount outstanding pursuant to clause (10)(y) of this definition in the aggregate at any one time outstanding after the Conversion Date; (12) Refinancing Indebtedness; (13) the guarantee by the Company or any Guarantors of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this covenant (other than Indebtedness that is subordinate or junior in right of payment to the Notes); (14) Indebtedness under the Futuresouth Royalty; and (15) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed (x) $5.0 million at any one time outstanding before the Conversion Date and (y) $10.0 million at any one time outstanding after the Conversion Date (in each case which amount may, but need not, be incurred in whole or in part under the Credit Agreement). For purposes of determining compliance with Section 6.1, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (15) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of Section 6.1, the Company shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with Section 6.1. Accrual of interest, accretion or amortization of original issue dis count, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of Section 6.1. "Permitted Investments" means: (1) Investments by the Company or any Restricted Subsidiary of the Company in any Person that is or will become immediately after such Investment a Restricted Subsidiary of the Company engaged in a Permitted Line of Business or that will merge or consolidate into the Company or a Restricted Subsidiary of the Company engaged in a Permitted Line of Business; (2) Investments in the Company by any Guarantor; 33 -26- (3) investments in cash and Cash Equivalents; (4) loans and advances to employees and officers of the Company and its Restricted Subsidiaries (or Guarantees of third party loans to employees and officers) in the ordinary course of business for bona fide business purposes not in excess of (x) $1.0 million at any one time outstanding prior to the Conversion Date and (y) $2.5 million at any one time outstanding subsequent to the Conversion Date; (5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Agreement; (6) Investments in entities engaged or to be engaged in Permitted Lines of Business in an amount not to exceed (x) $2.5 million in the aggregate at any one time outstanding prior to the Conversion Date and (y) $10.0 million in the aggregate at any one time outstanding subsequent to the Conversion Date; (7) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers in good faith settlement of delinquent obligations of such trade creditors or customers; (8) Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 6.12 or in connection with any disposition of assets not constituting an Asset Sale; and (9) the redemption, repurchase, retirement, defeasance or other acquisition of any Senior Debt, any Guarantor Senior Debt or the Notes. "Permitted Liens" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums that not yet delinquent, are bonded or are being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; 34 -27- (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with industry practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) judgment Liens not giving rise to an Event of Default; (5) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation; (7) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (8) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (9) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (10) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Agreement; (11) Liens securing Indebtedness permitted pursuant to clause (10) of the definition of "Permitted Indebtedness"; provided, however, that the Indebtedness shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property or assets subject to such initial Capitalized Lease Obligation. (12) Liens securing Indebtedness permitted pursuant to clause (11) of the definition of "Permitted Indebtedness"; provided, however, that (a) the Indebtedness 35 -28- shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired, installed, constructed or improved and (b) the initial Lien securing such Indebtedness shall be created within 180 days of such acquisition, installation, construction or improvement or, in the case of a refinancing of any such Indebtedness, within 180 days of such refinancing; (13) Liens securing Refinancing Indebtedness permitted to be incurred under this Agreement or amendments or renewals of Liens that were permitted to be incurred; provided, in each case, that such Liens do not extend to any additional property or asset that did not secure the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or that did not secure the Indebtedness affected by such amendment or renewal; (14) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations that do not exceed $1,000,000 at any one time outstanding; and (15) Liens securing Acquired Indebtedness incurred in accordance with Section 6.1; provided that: (a) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; and (b) such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and, when considered as a whole, are not materially more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company. "Permitted Lines of Business" means, with respect to any Person, any casino gaming business of such Person (whether owned, leased or managed by such Person) or any business that is related to, ancillary to or supportive of, connected with or arising out of the gaming business of such Person (including, without limitation, developing and operating lodging, dining, amusement, sports or entertainment facilities, transportation services or other related activities or enterprises and any additions or improvements thereto). 36 -29- "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Plan" shall mean any multiemployer or single-employer plan, as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of), the Company or a Subsidiary of the Company or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Company, a Subsidiary of the Company or an ERISA Affiliate maintained, contributed or had an obligation to contribute to such plan. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Agreement, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act as interpreted by the Company's chief financial officer or Board of Directors in consultation with its independent certified public accountants. "Pro Forma Balance Sheet" has the meaning ascribed to such term in Section 4.5(a). "Projections" means the financial projections dated as of November 2000, previously distributed to the Agent. "Purchase Money Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Qualified Person" shall mean, with respect to any Lender party to this Agreement on the Closing Date or that becomes a Lender pursuant to Section 12.2, any Person which shall not have been found unsuitable under the Gaming Regulations of any, and which meets the requirements of all, jurisdictions regulating the gaming business of the Company and its Subsidiaries to the extent that the Company has so notified the Lenders of such requirements of such jurisdictions pursuant to Section 12.2E. "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. 37 -30- "Reference Date" shall have the meaning ascribed to such term in Section 6.3(iii)(w). "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any Restricted Subsidiary of the Company of Indebtedness incurred in accordance with Section 6.1 (other than pursuant to clauses (2), (4), (5), (6), (7), (8), (9), (10), (11), (13), (14) or (15) of the definition of "Permitted Indebtedness"), in each case that does not: (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing); or (2) create Indebtedness with: (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refi nanced; or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness being Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Notes or the Guarantees, then such Refinancing Indebtedness shall be subordinate to the Notes or the Guarantees at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Register" has the meaning ascribed to such term in Section 5.14. "Registration Rights Agreement" means a registration rights agreement substantially in the form of Exhibit V (with such changes therein as the Agent and the Company shall approve). "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment. "Reportable Event" means an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043. 38 -31- "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Request" shall have the meaning ascribed to such term in Section 5.11A. "Restricted Payment" has the meaning ascribed to such term in Section 6.3. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "Returns" has the meaning ascribed to such term in Section 4.8. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person, or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Closing Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit sharing agreement or arrangement, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Closing Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect 39 -32- thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (1) all monetary obligations of every nature of the Company under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (2) all Interest Swap Obligations (and guarantees thereof); in each case whether outstanding on the Closing Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (1) any Indebtedness of the Company to a Subsidiary of the Company; (2) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Credit Agreement; (3) Indebtedness to trade creditors; (4) Indebtedness represented by Preferred Stock and Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by the Company; (6) that portion of any Indebtedness incurred in violation of Section 6.1 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate Section 6.1); (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company. 40 -33- "Senior Debt Obligations" means all obligations of the Company for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Senior Debt, and all guarantees by the Company of any of the foregoing. "Senior Subordinated Indenture" means an indenture between the Company and a trustee substantially in the form of Exhibit XI hereto (with such changes as the Agent and the Company shall approve, and, at such time, if any, as notes issued thereunder are sold in a public offering, with other appropriate changes to reflect such public offering), as the same may at any time be amended, modified and supplemented and in effect. "Significant Subsidiary", with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Exchange Act. "Solvent Entity" has the meaning ascribed to such term in Section 4.5(c). "Station" shall mean Station Casinos, Inc., a Nevada corporation. "Subordinated Indebtedness" means Indebtedness of the Company or any Guarantor which is expressly subordinated in right of payment to the Notes or the Guarantee of such Guarantor, as the case may be. "Subsidiary", with respect to any Person, means: (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Surviving Entity" shall have the meaning ascribed to such term in Section 6.5(b). "Syndication" has the meaning ascribed to such term in Section 12.2A. "Take-Out Bank" has the meaning ascribed to such term in Section 3.1H(i). "Take-Out Securities" means (i) any Securities of the Company and/or the Guarantors the proceeds of which are used to repay the Notes in full and (ii) any Securities of the Company issued in accordance with Section 6.11 the proceeds of which are used to Refinance the Notes in part, including, without limitation, the Demand Take-Out Notes. 41 -34- "Taxes" means all taxes, assessments, fees, levies, imposts, duties, penalties, deductions, liabilities, withholdings or other charges of any nature whatsoever, including interest penalties, from time to time or at any time imposed by any Law or any Tribunal. "Tender Offer" means the Company's Offer to Purchase and Consent Solicitation Statement dated November 20, 2000, as amended, with respect to the Ameristar 10.50% Notes. "Tender Offer Documents" means the documents relating to the Tender Offer. "Term Loan" shall have the meaning ascribed to such term in Section 2.2A. "Term Loan Commitment" has the meaning ascribed to such term in Section 2.2A. "Term Notes" has the meaning ascribed to such term in Section 2.2E. "The Reserve" shall mean the property known as The Reserve Hotel Casino and located at 777 West Lake Mead Drive, Henderson, Nevada. "Transaction Costs" means the fees, costs and expenses payable by the Company pursuant hereto and other fees, costs and expenses payable by the Company or a Subsidiary of the Company in connection with the Transactions. "Transaction Date" has the meaning ascribed to such term in the definition of "Consolidated Fixed Charge Coverage Ratio." "Transactions" shall mean, collectively, (i) the Acquisitions, (ii) the incurrence of the loans drawn down on the Closing Date under the Credit Agreement, (iii) the incurrence of the Bridge Loan hereunder on the Closing Date, (iv) the Tender Offer, (v) any other transaction on the Closing Date contemplated in relation to the foregoing and (vi) the payment of fees and expenses in connection with the foregoing. "Transferee" has the meaning ascribed to such term in Section 12.19A. "Tribunal" means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency, authority or instrumentality of the United States or any state, province, commonwealth, nation, territory or possession whether now or hereafter constituted and/or existing, including, but not limited to, any Gaming Authority. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the value of the accumulated plan benefits under the Plan, determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those pre- 42 -35- scribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions). "Unrestricted Subsidiary" of any Person means: (1) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary), other than Ameristar Casino Council Bluffs, Inc., Ameristar Casino Vicksburg, Inc., Ameristar Casino Kansas City, Inc., Ameristar Casino St. Charles, Inc., Cactus Pete's, Inc. and (prior to the sale of The Reserve) ACLVI, to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that: (1) the Company certifies to the Agent that such designation complies with Section 6.3; and (2) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (1) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 6.1; and (2) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Agent by promptly filing with the Agent a copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. 43 -36- "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "Voting Stock" means, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the board of directors or other governing body of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person means any Wholly Owned Subsidiary of such Person which at the time of determination is a Restricted Subsidiary of such Person. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person of which all the outstanding voting securities (other than in the case of a foreign Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person. 1.2 Accounting Terms For the purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. 1.3 Other Definitional Provisions; Anniversaries Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. 44 -37- SECTION 2 AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES 2.1 Bridge Loan and Bridge Note A. Bridge Loan Commitment. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Company herein set forth, the Lenders hereby severally and not jointly agree to lend to the Company on the Closing Date $300,000,000 in the aggregate (the "Bridge Loan"), each such Lender committing to lend the amount set forth next to such Lender's name on the signature pages hereto. The Lender's commitment to make the Bridge Loan to the Company pursuant to this Section 2.1A are herein called individually, the "Bridge Loan Commitment" and collectively the "Bridge Loan Commitments." B. Notice of Borrowing. When the Company desires to borrow under this Section 2.1, it shall deliver to the Agent a Notice of Borrowing no later than 3:00 P.M. (New York time) at least one Business Day in advance of the Closing Date or such later date as shall be agreed to by the Agent. The Notice of Borrowing shall specify the applicable date of borrowing (which shall be a Business Day). Upon receipt of such Notice of Borrowing, the Agent shall promptly notify each Lender of its pro rata share of the Bridge Loan and the other matters covered by the Notice of Borrowing. C. Disbursement of Funds. (a) No later than 11:00 A.M. on the Closing Date, each Lender will make available its pro rata share of the Bridge Loan requested to be made on such date in the manner provided below. All amounts shall be made available to the Agent in U.S. Legal Tender and immediately available funds at the Payment Office and the Agent immediately will make available to the Company by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Agent shall have been notified by any Lender prior to the Closing Date that such Lender does not intend to make available to the Agent its pro rata share of the Bridge Loan to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on such date, and the Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Company a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender and the Agent have made available same to the Company, the Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Company, and the Company shall immediately pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from such Lender or the Company, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Company to the date such corresponding amount is recovered by the Agent, at a rate per an- 45 -38- num equal to (x) if paid by such Lender, the overnight Federal Funds Rate or (y) if paid by the Company, the then applicable rate of interest on the Loans. (b) Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Bridge Loan Commitment hereunder or to prejudice any rights which the Company may have against any Lender as a result of any default by such Lender hereunder. D. Bridge Notes. The Company shall execute and deliver to each Lender on the Closing Date a Bridge Note dated the Closing Date substantially in the form of Exhibit I to evidence such Lender's pro rata share of the Bridge Loan Commitment and with appropriate insertions (the "Bridge Notes"). E. Scheduled Payment of Bridge Loan. Subject to Section 2.2, the Company shall pay in full the out standing amount of the Bridge Loan and all other Obligations owing hereunder no later than the Conversion Date. F. Termination of Bridge Loan Commitment. The Bridge Loan Commitment hereunder shall terminate on the earlier of (i) the termination of either Acquisition Agreement in accordance with the respective terms thereof or (ii) April 30, 2001 if no portion of the Bridge Loan has been funded (other than as a result of the failure of the Lenders to fulfill their obligations hereunder) on or before such date. G. Pro Rata Borrowings. The Bridge Loan made under this Agreement shall be made by the Lenders pro rata on the basis of their respective Bridge Loan Commitments. It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make its portion of the Bridge Loan hereunder and that each Lender shall be obligated to make its portion of the Bridge Loan hereunder, regardless of the failure of any other Lender to fulfill its commitments hereunder. 2.2 Term Loan and Term Note A. Term Loan Commitment. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Company herein set forth, the Lenders hereby agree, on the Conversion Date, upon the request of the Company, to convert the then outstanding principal amount of the Bridge Notes of each such Lender into a term loan (the "Term Loan"), such Term Loan to be in the aggregate principal amount of the then outstanding principal amount of the Bridge Notes. The Lenders' commitments under this Section 2.2A are herein called collectively, the "Term Loan Commitment." B. Notice of Conversion/Borrowing. If the Company has not repaid the Bridge Loan in full on or prior to the Conversion Date, then the Company shall convert the then outstanding principal amount of the Bridge Notes into a Term Loan under this Section 2.2. The Company shall deliver to the Lenders a Notice of Conversion no later than 11:00 46 -39- A.M. (New York time), at least two Business Days in advance of the Conversion Date. The Notice of Conversion shall specify the principal amount of the Bridge Notes outstanding on the Conversion Date to be converted into a Term Loan. C. Making of Term Loan. Upon satisfaction or waiver of the conditions precedent specified in Section 3.2, each Lender shall extend to the Company the Term Loan to be issued on the Conversion Date by such Lender by canceling on its records a corresponding principal amount of the Bridge Notes held by such Lender. D. Maturity of Term Loan. The Term Loan shall mature and the Company shall pay in full the outstanding principal amount thereof and accrued interest thereon on June 20, 2008 (the "Maturity Date"). E. Term Notes. The Company, as borrower, shall execute and deliver to each Lender on the Conversion Date a Term Note dated the Conversion Date substantially in the form of Exhibit II to evidence the Term Loan made on such date, in the principal amount of the Bridge Notes held by such Lender on such date and with other appropriate insertions (collectively the "Term Notes"). 2.3 Interest on the Loans A. Rate of Interest. The Loans shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by prepayment, acceleration or otherwise) at a rate determined as set forth below. (i) Floating Rate Loans. Subject to Sections 2.3A(ii) and (iii), the Loans shall bear interest for each Monthly Period at a rate per annum equal to the Applicable Rate for such period. (ii) Fixed Rate Loans. Subject to Section 2.3A(iii), at any time on and after the Conversion Date, at the request of any Lender and with the written consent of the Majority Lenders, all or any portion of the Term Loan owing to such Lender shall bear interest at a fixed rate per annum equal to the rate of interest borne by the Term Loans at the time of such request (such rate of interest equal to the Applicable Rate (the "Fixed Rate" and such a Loan, a "Fixed Rate Loan"), effective as of the first interest payment date with respect to such Term Loan after such notice so long as the 30 Business Days' notice set forth below is given; provided that no such conversion shall be permitted in respect of amounts to be voluntarily prepaid following receipt of a notice of prepayment pursuant to Section 2.5A. In order to request the conversion of a Floating Rate Loan to a Fixed Rate Loan, the Lender shall notify the Agent in writing of its intention to do so at least 45 Business Days prior to an interest payment date, indicating the amount of the Term Loan for which it is requesting conversion to a Fixed Rate Loan, which shall be not less than $5,000,000 and increments of $100,000 in ex- 47 -40- cess thereof, and the Agent shall notify the other Lenders, and if the Majority Lenders consent to such request, the Agent shall so notify the Company at least 30 Business Days prior to such next succeeding interest payment date. Upon the conversion of a portion of a Floating Rate Loan to a Fixed Rate Loan an appropriate notation will be made on the Term Note and, on and after the first interest payment date following the receipt by the Company of a notice hereunder, such portion of the Term Loan which is converted to a Fixed Rate Loan shall bear interest at the Fixed Rate until repaid. (iii) Notwithstanding clause (i) or (ii) of this Section 2.3A or any other provision herein, in no event, other than that set forth below in Section 2.3C, will the interest rate on any Loan exceed the cash and combined interests rates set forth in Section 2.3B(ii). B. Interest Payments. (i) Interest shall be payable (a) with respect to the Bridge Loan, in arrears on April 1, 2001, July 1, 2001, October 1, 2001, January 1, 2002, and upon any prepayment of the Bridge Loan (to the extent accrued on the amount being prepaid) and at maturity of the Bridge Loan in respect of any amounts paid on such date and not converted to Term Loans and (b) with respect to the Term Loan, (X) in arrears on April 1, July 1, October 1, and January 1 of each year, in the case of Floating Rate Loans, and (Y) in arrears on April 1 and October 1 of each year, in the case of Fixed Rate Loans, in each case commencing on the first of such dates to follow the Conversion Date, upon any prepayment of the Term Loan (to the extent accrued on the amount being prepaid) and at maturity of the Term Loan. (ii) Interest on the Bridge Loan and the Term Loan will be paid in cash to the extent that the combined sum of the interest on the Bridge Loan and the Term Loan is less than or equal to a rate per annum of 13.50%. To the extent that such combined sum is not paid in cash, it shall be paid in debt securities having terms and provisions identical to the Bridge Loan or the Term Loan, as the case may be; provided, however, that in no event, other than that set forth below in Section 2.3C, will the combined sum of interest (cash or otherwise) on the Bridge Loan and the Term Loan exceed 15.50% per annum. C. Post-Maturity Interest. Notwithstanding any other provision of this Agreement to the contrary, any principal payments on the Loans not paid when due and, to the extent permitted by applicable law, any interest payment on the Loans not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is 2.00% per annum in excess of the rate of interest otherwise payable under this Agreement for the Loans. D. Computation of Interest. Interest on the Loans shall be computed on the basis of a 365-day year and, with respect to any amount of the Loans which are Floating Rate Loans, the actual number of days elapsed in the period during which it accrues or, with respect to any amount of the Loans which are Fixed Rate Loans, twelve 30-day months. In 48 -41- computing interest on the Loans, the date of the making of the Loans shall be included and the date of payment shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. 2.4 Fees The Company agrees to pay to Bankers Trust Corporation all fees and other obligations in accordance with, and at the times specified by, the Commitment Letter. 2.5 Prepayments and Payments A. Prepayments (i) Voluntary Prepayments. The Company may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to the Agent at any time and from time to time, prepay the Loans made to the Company in whole or in part; provided that unless Loans are to be prepaid in full, without the written consent of the Majority Lenders, such voluntary prepayments (i) shall not result in the aggregate amount of the Loans outstanding being less than $150,000,000 or (ii) shall not be made at a time when the aggregate amount of the Loans outstanding is less than $150,000,000; provided, further, that at such time as all or part of the Term Loan bears interest at the Fixed Rate, the Term Loan or such part that bears interest at the Fixed Rate, as the case may be, will not be redeemable prior to January 1, 2005, and thereafter will be redeemable at the option of the Company, in whole or in part, at any time at the redemption prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest (which shall be paid in cash) to the redemption date, if redeemed during the 12-month period beginning January 1 of the years indicated below:
Year Percentage ---- ---------- 2005 ...................................................... 106.75% 2006 ...................................................... 104.50% 2007 ...................................................... 102.25% 2008 ...................................................... 100.00%
Notice of prepayment having been given as aforesaid, the principal amount of the Loans to be prepaid shall become due and payable on the prepayment date. Amounts of the Loans so prepaid may not be reborrowed. No such prepayment shall be made without the consent of the Lenders unless all amounts owing are paid in full. 49 -42- (ii) Mandatory Prepayments. (a) Prepayments from Asset Sales. Upon receipt by the Company or any Restricted Subsidiary of the Company of Cash Proceeds of any Asset Sale permitted by Section 6.12, the Company or any Restricted Subsidiary of the Company shall, or shall cause its Restricted Subsidiaries to, apply the Net Cash Proceeds of such Asset Sale (w) to prepay the term loans outstanding under the Credit Agreement, (x) to prepay revolving loans outstanding under the Credit Agreement; provided that the commitment under the Credit Agreement is permanently reduced to the extent of the prepayment, (y) to prepay any other Senior Debt or Guarantor Senior Debt or (z) apply any Net Cash Proceeds remaining after application pursuant to clauses (w), (x) and (y) above to a Permitted Line of Business; provided, that with respect to the Disposition, the Company may apply up to $20.0 million of Net Cash Proceeds to prepay revolving loans under the Credit Agreement without a permanent reduction of the commitment thereunder and shall apply the balance pursuant to clause (w). Promptly after the consummation of an Asset Sale, the Company shall deliver to the Agent an Officers' Certificate demonstrating the derivation of Net Cash Proceeds from the gross sales price of such Asset Sale. To the extent not used as above, the Company shall, or shall cause its Restricted Subsidiaries to, prepay the Floating Rate Loans and make offers to repurchase the Fixed Rate Loans and the Exchange Notes, all on a pro rata basis, with the Net Cash Proceeds received from any Asset Sale on a date not later than the Business Day next succeeding the 365th day after the consummation of such Asset Sale if and to the extent that such Net Cash Proceeds are not applied by the Company or any Restricted Subsidiary of the Company within 365 days as provided in the immediately preceding paragraph; provided that the offers to repurchase Fixed Rate Loans and Exchange Notes shall be at 100% of the principal amount thereof plus accrued and unpaid interest thereon (in cash) to the date of repurchase; provided, further, that to the extent holders of Fixed Rate Loans or Exchange Notes do not accept such offer the Company will apply any Net Cash Proceeds not accepted by such holders (1) to prepay additional amounts of Floating Rate Loans and (2) to the extent additional Net Cash Proceeds remain after application of clause (1), to purchase additional Fixed Rate Loans or Exchange Notes, as the case may be, which were tendered for repurchase and not accepted. Notwithstanding the foregoing provisions of this paragraph, after the Conversion Date, so long as no Default or Event of Default shall have occurred and be continuing, no mandatory repayments shall be required pursuant to this paragraph until the date on which the aggregate Net Cash Proceeds from all Asset Sales not reinvested within the time periods specified by this paragraph equal or exceed $5.0 million. (b) Prepayments from Issuances of Take-Out Securities. Concurrently with the receipt by the Company of proceeds from the issuance of Take-Out Securities the 50 -43- Company shall prepay the Bridge Loans (at a price per Note equal to the principal amount of such Note plus accrued and unpaid interest (in cash), if any, to the date of payment). (c) Notice. The Company shall notify the Agent of any prepayment to be made pursuant to this Section 2.5A(ii) at least two Business Days prior to such prepayment date (unless shorter notice is satisfactory to the Agent). (iii) Company's Mandatory Prepayment Obligation; Application of Prepayments. All prepayments shall include payment of accrued interest on the principal amount so prepaid and shall be applied to payment of interest before application to principal. (iv) Mandatory Offer to Purchase Notes. (a) Upon the occurrence of a Change of Control (the date of such occurrence, the "Change of Control Date"), the Lenders shall have the right to require the repurchase of all of the Notes pursuant to an offer to purchase (the "Change of Control Offer") at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued interest thereon to the date of repurchase. Prior to the mailing of the notice to the Agent provided for in paragraphs (b) and (c) below but in any event within 30 days following any Change of Control, the Company hereby covenants to (i) repay in full and terminate all commitments under Indebtedness under the Credit Agreement and all other Senior Debt the terms of which require repayment upon a Change of Control (or that prohibits consummation of the Change of Control Offer) or to offer to repay in full and terminate all commitments under all Indebtedness under the Credit Agreement and all other such Senior Debt and to repay the Indebtedness of each lender which has accepted such offer or (ii) obtain the requisite consents under the Credit Agreement and all other such Senior Debt to permit the repurchase of the Notes as provided for in paragraph (d) below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase the Notes pursuant to this Section 2.5A(iv). (b) The notice to the Agent shall contain all instructions and materials necessary to enable the Lenders to tender Notes pursuant to the Change of Control Offer. (c) Within 30 days following the Change of Control Date the Company shall mail a notice to the Agent stating: (1) that the Change of Control Offer is being made pursuant to this Section 2.5A(iv) and that all Notes validly tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be a Business Day that is no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Offer Payment Date"); (3) that any Note not tendered will continue to accrue interest; 51 -44- (4) that any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Offer Payment Date unless the Company shall default in the payment of the repurchase price of the Notes; (5) that if a Lender elects to have a Note purchased pursuant to the Change of Control Offer it will be required to surrender the Note, with the form entitled "Op tion of Holder to Elect Purchase" on the reverse of the Note completed, to the Company prior to 9:00 a.m. New York time on the Offer Payment Date; (6) that a Lender will be entitled to withdraw its election if the Company receives, not later than 9:00 a.m. New York time on the Business Day preceding the Offer Payment Date, a telegram, telex, facsimile transmission or letter setting forth the principal amount of Notes such Lender delivered for purchase, and a statement that such Lender is withdrawing its election to have such Note purchased; and (7) that if Notes are purchased only in part a new Note of the same type will be issued in principal amount equal to the unpurchased portion of the Notes surrendered. (d) On or before the Offer Payment Date, the Company shall (i) accept for payment Notes or portions thereof which are to be purchased in accordance with the above, and (ii) deposit at the Payment Office U.S. Legal Tender sufficient to pay the purchase price of all Notes to be purchased. The Agent shall promptly mail to the Lenders whose Notes are so accepted payment in an amount equal to the purchase price unless such payment is prohibited pursuant to Section 8 hereof or otherwise. (e) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes pursuant to an offer hereunder. To the extent the provisions of any securities laws or regulations conflict with the provisions under this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. B. Manner and Time of Payment. All payments of principal and interest hereunder and under the Notes by the Company shall be made without defense, setoff or counterclaim and in same-day funds and delivered to the Agent, unless otherwise specified, not later than 3:00 P.M. (New York time) on the date due at the Payment Office for the account of the Lenders; funds received by the Agent after that time shall be deemed to have been paid by the Company on the next succeeding Business Day. The Company hereby authorizes the Agent to charge its account with the Agent in order to cause timely payment to be made of all principal, interest and fees due hereunder (subject to sufficient funds being available in its account for that purpose). 52 -45- C. Payments on Non-Business Days. Whenever any payment to be made hereunder or under the Notes shall be stated to be due on a day which is not a Business Day, the payment shall be made on the next succeeding Business Day and such extension of time shall be included in the compu tation of the payment of interest hereunder or under the Notes or of the commitment and other fees hereunder, as the case may be. D. Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), such Lender will make a notation thereon of all principal payments previously made thereon and of the date to which interest thereon has been paid and will notify the Company of the name and address of the transferee of that Note; provided that the failure to make (or any error in the making of) such a notation or to notify the Company of the name and address of such transferee shall not limit or otherwise affect the obligation of the Company hereunder or under such Notes with respect to the Loans and payments of principal or interest on any such Note. 2.6 Use of Proceeds A. Bridge Loan. The proceeds of the Bridge Loan shall be applied by the Company, together with borrowings under the Credit Agreement, to the payment of the Transaction Costs, to pay for the Acquisitions, to consummate the Tender Offer and to repay other outstanding Indebtedness of the Company. B. Term Loan. Upon the extension of a Term Loan by a Lender, the Company and such Lender shall cancel a corresponding principal amount of Bridge Notes held by such Lender. C. Margin Regulations. No portion of the proceeds of any borrowing under the Loan Documents shall be used by the Company in any manner which might cause the borrowing or the application of such proceeds to violate the applicable requirements of Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of the Board of Governors or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. SECTION 3 CONDITIONS 3.1 Conditions to Bridge Loan The obligations of the Lenders to make the Bridge Loan are subject to prior or concurrent satisfaction of each of the following conditions: A. On or before the Closing Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all 53 -46- documents incidental hereto and thereto not previously found acceptable by the Agent shall be reasonably satisfactory in form and substance to the Agent, and the Agent shall have received on behalf of the Lenders the following items, each of which shall be in form and substance reasonably satisfactory to the Agent and, unless otherwise noted, dated the Closing Date: (1) a copy of the Company's and each Guarantor's charter, certified as of the Closing Date by one of its Officers, together with a certificate of status, compliance, good standing or like certificate with respect to the Company and each Guarantor issued by the appropriate government officials of the jurisdiction of its incorporation, each to be dated a recent date prior to the Closing Date; (2) a copy of the Company's and each Guarantor's bylaws, certified as of the Closing Date by one of its Officers; (3) resolutions of the Company's and each Guarantor's Board of Directors approving and authorizing the execution, delivery and performance of this Agreement, each of the other Documents to which it is a party and any other documents, instruments and certificates required to be executed by the Company or such Guarantor in connection herewith and therewith and approving and authorizing the execution and delivery of the Documents and the consummation of the Transactions, each certified as of the Closing Date by one of its Officers as being in full force and effect without modification or amendment; (4) executed copies of this Agreement and the Bridge Notes substantially in the form of Exhibit I executed in accordance with Section 2.1D drawn to the order of the Lenders and with appropriate insertions; (5) an originally executed Notice of Borrowing substantially in the form of Exhibit IV-A, signed by a duly authorized Officer of the Company; (6) originally executed copies of the written opinions of (i) Gibson, Dunn & Crutcher LLP, special counsel to the Company and the Guarantors, addressed to the Agent and each of the Lenders covering the matters set forth in Exhibit VI-A, (ii) local counsel satisfactory to the Agent, each of which shall be in form and substance reasonably satisfactory to the Agent and the Majority Lenders and shall cover such other matters incident to the transactions contemplated herein as the Agent may reasonably request, substantially in the form of Exhibit VI-B and (iii) local gaming counsel reasonably satisfactory to the Agent, each of which shall be in form and substance reasonably satisfactory to the Agent and the Majority Lenders and shall cover Missouri, 54 -47- Nevada, Mississippi and Iowa Gaming Regulations and such other matters incident to the transactions contemplated herein as the Agent may reasonably request, substantially in the form of Exhibit VI-C, and (III) such other opinions of counsel and such certificates or opinions of accountants, appraisers or other professionals as the Agent shall have reasonably requested including, without limitation, receipt of an environmental report and technical reports from independent consultants in respect of the Company and the Subsidiaries of the Company and their respective properties, reasonably satisfactory to the Agent; (7) a solvency certificate addressed to the Agent and dated the Closing Date from the chief financial officer of the Company, which solvency certificate shall be in the form of Exhibit L (appropriately completed) to the Credit Agreement, expressing opinions of value and other appropriate factual information regarding the solvency of the Company and its Subsidiaries (on a consolidated basis) after giving effect to the Transactions and the incurrence of all financings contemplated herein; (8) true and correct copies of the Acquisition Agreements, which shall not have been amended without the Agent's consent (which consent shall not be unreasonably withheld or delayed) and which shall be in full force and effect and each of the conditions to purchase contained therein shall have been performed or complied with substantially on the terms set forth therein and not waived without the Agent's consent (which consent shall not be unreasonably withheld or delayed); (9) (i) executed or conformed copies of the Credit Agreement and any amendments thereto made on or prior to the Closing Date and a copy of each legal opinion delivered in connection with the Credit Agreement, and the terms and provisions of the Credit Agreement and all documents and instruments relating thereto shall be reasonably satisfactory to the Agent, (ii) an Officers' Certificate from the Company certifying that the Credit Agreement is in full force and effect on the Closing Date and (iii) an Officers' Certificate from the Company to the effect that such party has performed or complied with all agreements and conditions contained in the Credit Agreement, except where such agreements or conditions would not reasonably be expected to have a Material Adverse Effect; the Company shall have received $475.0 million in cash on the Closing Date from borrowings under the Credit Agreement; and (10) a notation of Guarantee, executed and delivered by each Guarantor, dated the date of this Agreement, substantially in the form of Exhibit VIII, as applicable. 55 -48- B. On or prior to the Closing Date, (A) all necessary governmental (domestic and foreign), regulatory and third party approvals in connection with the Transactions including, but not limited to all authorizations, consents and approvals of the relevant Gaming Authorities (except those described in Section 12.24), shall have been obtained and remain in full force and effect and all applicable waiting periods under Law applicable to the Acquisitions shall have expired without any action being taken by any competent authority (including without limitation, any Tribunal) which restrains, prevents or imposes materially adverse conditions upon the completion of the Acquisitions or the financing thereof and evidence of the receipt of such authorizations, consents and approvals satisfactory to the Agent shall have been delivered to the Agent and (B) all necessary material governmental (domestic and foreign), regulatory and third party approvals in connection with any Existing Debt which are to remain outstanding after the Closing Date and the consummation of the Transactions shall have been obtained and remain in full force and effect and evidence thereof shall have been provided to the Agent. On the Closing Date, no litigation by any entity (private or governmental) shall be pending or threatened in writing (i) with respect to the Transactions or any documentation executed in connection therewith (including any Loan Document) or the transactions contemplated thereby or with respect to any Existing Debt or (ii) which the Agent shall reasonably determine would reasonably be likely to have (x) a materially adverse effect on the Transactions or on the rights or remedies of the Agent or the Lenders or on the ability of the Company or any of its Subsidiaries to perform their respective obligations hereunder to the Agent and the Lenders or (y) a Material Adverse Effect. C. On or before the Closing Date, the Company shall have paid to Bankers Trust Corporation the fees payable on the Closing Date pursuant to Section 2.4. D. The Company shall have received valid tenders and consents of the holders of at least 51% of the outstanding principal amount of the Ameristar 10.50% Notes pursuant to the Tender Offer, and the Company shall have, simultaneously with the funding of the Bridge Loan, purchased all Ameristar 10.50% Notes so tendered pursuant to the Tender Offer and shall have executed a supplemental indenture therefor. E. Simultaneously with the making of the Bridge Loan by the Lenders, the Company shall have delivered to the Agent an Officers' Certificate from the Company in form and substance satisfactory to the Agent to the effect that (i) the representations and warranties in Section 4 are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date, (ii) on or prior to the Closing Date, the Company has performed and complied with in all material respects all covenants and conditions to be performed and observed by the Company hereunder on or prior to the Closing Date (other than such conditions the 56 -49- satisfaction of which is subject to the satisfaction of the Agent and/or the Majority Lenders) and (iii) all conditions to the consummation of the Acquisitions in the Acquisition Agreements have been satisfied substantially on the terms set forth therein and have not been waived or amended without the Agent's prior written consent (which consent shall not be unreasonably withheld or delayed). F. No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by the Notice of Borrowing which would constitute an Event of Default or Default. G. The pro forma consolidated capital structure of the Company and its Subsidiaries, after giving effect to the Transactions, shall be consistent with the capital structure contemplated in the Commitment Letter, and other than the Bridge Loan and the Credit Agreement and the Existing Debt, the Company and its Subsidiaries, after giving effect to, and upon consummation of, the Transactions, shall have no outstanding indebtedness for money borrowed. H. The Company shall have entered into an agreement to engage Deutsche Bank Securities Inc. (the "Take-Out Bank") reasonably satisfactory to the Agent providing that the Take-Out Bank will, to the extent that the Company deems it necessary and advisable, publicly sell or privately place the Demand Take-Out Notes, and such agreement shall be in full force and effect. I. (i) There shall not have occurred since June 30, 2000 (and the Lenders shall have become aware of no facts or conditions not previously known to the Lenders) anything which the Lenders shall reasonably determine could have a material adverse effect on the rights or remedies of the Lenders, or on the ability of the Company to perform its obligations to the Lenders or which could reasonably be expected to have a materially adverse effect on the business, property, assets, nature of assets, liabilities, condition (financial or otherwise), results of operations or prospects of the Company after giving effect to the Transactions; (ii) trading in securities generally on the New York or American Stock Exchange shall not have been suspended; minimum or maximum prices shall not have been established on any such exchange; (iii) a banking moratorium shall not have been declared by New York or United States authorities; or (iv) there shall not have occurred either (A) an outbreak or escalation of hostilities between the United States and any foreign power, or (B) an outbreak or es calation of any other insurrection or armed conflict involving the United States or any other national or international calamity or emergency, or (C) any material change in the general financial markets of the United States since the date of the Commitment Letter which, in each case, in the reasonable judgment of the Agent, would materially and adversely affect the ability to sell or syndicate the Bridge Loan or to sell or place the Demand Take-Out Notes. 57 -50- J. The Agent and its counsel shall be satisfied that the consummation of the Acquisitions and the related financing, including the funding of the Bridge Loan, shall be in compliance with all applicable Laws (including without limitation Regulation T, U or X of the Board of Governors of the Federal Reserve System). K. Copies of the Projections shall have been made available to the Agent. L. On or prior to the Closing Date, there shall have been made available to the Agent true and correct copies of the following documents, in each case as the same will be in effect on the Closing Date after the consummation of the Transactions: (1) any material employment agreements entered into by the Company or any of its Subsidiaries in connection with the Acquisitions (collectively, the "Employment Agreements"); and (2) all agreements evidencing or relating to Existing Debt of the Company or any of its Subsidiaries after giving effect to the Transactions (other than Existing Debt in the aggregate not in excess of $1.0 million); all of which Employment Agreements and Existing Debt agreements shall be in form and substance reasonably satisfactory to the Agent and the Majority Lenders and shall be in full force and effect on the Closing Date. M. Simultaneously with the making of the Bridge Loan by the Lender, the Acquisitions shall have been consummated on the terms set forth in the Acquisition Agreements and no conditions set forth therein shall have been waived or amended without the Agent's prior written consent. 3.2 Conditions to Term Loan The obligation of the Lenders to make the Term Loan on the Conversion Date is subject to the prior or concurrent satisfaction or waiver of the following conditions precedent: A. The Agent shall have received in accordance with the provisions of Section 2.2B an originally executed Notice of Conversion. B. An Event of Default or Default shall not have occurred and be continuing under Section 7.6 or 7.7. C. No Event of Default or Default (whether matured or not) shall have occurred and be continuing under Section 7.1. 58 -51- D. No Event of Default or Default shall have occurred under Section 7.2; provided that for purposes of this Section 3.2D the reference to $10,000,000 in Section 7.2 shall be deemed to be $5,000,000; provided, further, that if an event described in this Section 3.2D is continuing at the Conversion Date but 10 days has not passed since the date of written notice of the commencement of such 10-day period from the Majority Lenders (the "Grace Period"), the Conversion Date shall be deferred until the earlier to occur of (x) the cure of such event or (y) the expiration of such Grace Period. E. On the Conversion Date, the Agent shall have received an Officers' Certificate from the Company, dated the Conversion Date and satisfactory in form and substance to the Agent, to the effect that the conditions in this Section 3.2 are satisfied on and as of the Conversion Date. F. The Company shall have executed and delivered to the Agent on the Conversion Date for delivery to the Lenders Term Notes dated the Conversion Date substantially in the form of Exhibit II to evidence the Term Loan, in the principal amount of (which principal amount shall be the aggregate principal amount of the Bridge Loan outstanding on the Conversion Date) the Term Loan and with other appropriate insertions. G. The Company shall have paid any fees owing pursuant to Section 2.4 in cash to Bankers Trust Corporation. H. The conversion to the Term Loan shall not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of the Board. SECTION 4 REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Agreement and to make the Loans, the Company represents and warrants to the Lenders that, at the time of execution hereof and after consummation of the Transactions, the following statements are true, correct and complete: 4.1 Company Status Each of the Company and its Subsidiaries (i) is a duly organized and validly existing company in good standing under the laws of the jurisdiction of its organization, (ii) has the company power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its 59 -52- business requires such qualification except for failures to be so qualified which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 4.2 Company Power and Authority Each of the Company and its Subsidiaries has the power and authority to execute, deliver and perform the terms and provisions of each of the Documents to which it is a party and has taken all necessary company action to authorize the execution, delivery and performance by it of each of such Documents. Each of the Company and its Subsidiaries has duly executed and delivered each of the Documents to which it is a party, and each of such Documents constitutes the legal, valid and binding obligation of such party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 4.3 No Violation Neither the execution, delivery or performance by the Company or any of its Subsidiaries of the Documents to which it is a party, nor compliance by it with the terms and provisions thereof, nor consummation of the transactions contemplated therein (i) will contravene any material provision of any applicable law, statute, rule or regulation or of any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Credit Agreement) upon any of the material properties or assets of the Company or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which the Company or any of its Subsidiaries is a party or by which it or any of its material property or assets is bound or to which it may be subject (including, without limitation, the indenture relating to the Ameristar 10.50% Notes, the Credit Agreement and, on and after the execution and delivery thereof, the indentures relating to the Exchange Notes, the Demand Take-Out Notes and the Take-Out Securities), or (iii) will violate any provision of the certificate of incorporation or by-laws (or equivalent organizational documents) of the Company or any of its Subsidiaries. 4.4 Governmental Approvals Subject to certain filings which must be made with the Mississippi Gaming Commission in connection with the Take-Out Securities and except for the approvals described in Section 12.24 hereof or Section 13.17 of the Credit Agreement, no order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made prior to the date when required and which remain in full 60 -53- force and effect), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the Transactions, (ii) the execution, delivery and performance of any Document or (iii) the legality, validity, binding effect or enforceability of any such Document. 4.5 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc. (a) The balance sheets, statements of operations, statements of stockholders' equity, statements of changes in stockholders' equity and statements of cash flows of the Company and its Subsidiaries as furnished to the Lenders prior to the Closing Date fairly present the financial condition and operations of the Company and its Subsidiaries at and for the periods indicated. All such financial statements have been prepared in accordance with GAAP, consistently applied. After giving effect to the Transactions, since June 30, 2000, there has been no material adverse change in the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole. (b)(i) On and as of the Closing Date, after giving effect to the Transactions and to all Indebtedness incurred, and to be incurred, and Liens created, and to be created, by the Company and its Subsidiaries in connection therewith, (a) the sum of the assets, at a fair valuation, of the Company and its Subsidiaries will exceed their debts; (b) the Company and its Subsidiaries taken as a whole have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their ability to pay such debts as such debts mature; and (c) the Company and its Subsidiaries taken as a whole will have sufficient capital with which to conduct their businesses. For purposes of this Section 4.5(b), "debt" means any liability on a claim, and "claim" means (i) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (c) Except as fully disclosed in the financial statements delivered pursuant to Section 4.5(a) or as disclosed in writing to the Lenders prior to the Closing Date, there were as of the Closing Date no liabilities or obligations with respect to the Company or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would be material to the Company or to the Company and its Subsidiaries taken as a whole. As of the Closing Date the Company does not know of any basis for the assertion against it of any liability or obligation of any nature whatsoever that is not fully disclosed in the financial statements delivered pur- 61 -54- suant to Section 4.5(a) which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (d) On and as of the Closing Date, the financial projections dated as of November 2000 (the "Projections") previously delivered to the Agent and the Lenders have been prepared on a basis consistent with the financial statements referred to in Section 4.5(a) (other than as set forth or presented in such Projections), and there are no statements or conclusions in any of the Projections which are based upon or include information known to the Company to be misleading in any material respect or which fail to take into account material information regarding the matters reported therein. On the Closing Date, the Company believed that the Projections were reasonable estimates of the Company's anticipated performance, based on good faith assumptions and the best information available to the Company as of the date of delivery thereof and as of the Closing Date. 4.6 Litigation There are no actions, suits or proceedings pending or, to the best knowledge of the Company, threatened (i) with respect to any Document on the Closing Date or (ii) that could reasonably be expected to have a Material Adverse Effect 4.7 True and Complete Disclosure All factual information (taken as a whole) furnished by or on behalf of the Company or any of its Subsidiaries in writing to the Agent or any Lender (including, without limitation, all information contained in the Documents) for purposes of or in connection with this Agreement, the other Documents or any transaction contemplated herein or therein is, and all other such information (taken as a whole) hereafter furnished by or on behalf of any such Person in writing to the Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided; provided that with respect to projected financial information, the only representations and warranties made hereby are that such information was prepared based on good faith estimates and assumptions made by management of the Company believed to be reasonable at the time made and that there are no statements or conclusions in any such information which are based upon or include information known to the executive officers of the Company to be misleading or which fail to take into account material information regarding the matters reported therein. 4.8 Tax Returns and Payments Each of the Company and its Subsidiaries has timely filed or caused to be timely filed, on the due dates thereof or within applicable grace periods, with the appropriate taxing authority, all Federal and all material state and foreign returns, statements, forms and 62 -55- reports for taxes (the "Returns") required to be filed by or with respect to the income, properties or operations of the Company and/or any of its Subsidiaries. The Returns accurately reflect in all material respects all liability for taxes of the Company and its Subsidiaries, as the case may be, for the periods covered thereby. Each of the Company and its Subsidiaries has paid all material taxes payable by them other than taxes which are not delinquent or are being contested in good faith and for which adequate reserves have been established in accordance with GAAP. Except as disclosed in the financial statements referred to in Section 4.5(a), as of the Closing Date there is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of the Company or any of its Subsidiaries, threatened by any authority regarding any taxes relating to the Company or any of its Subsidiaries. As of the Closing Date, except as set forth in Schedule A, neither the Company nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Company or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Company or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. Neither the Company nor any of its Subsidiaries has incurred, or will incur, any material income tax liability in connection with the Transactions and the other Transactions contemplated hereby (other than as a result of the operations after the Closing Date of properties acquired in the Transactions) 4.9 Compliance with ERISA As of the Closing Date, neither Company, any Subsidiary or any ERISA Affiliate sponsors, contributes to or maintains a Plan or has any actual or contingent liability under any Plan. To the extent that Company, any Subsidiary or any ERISA Affiliate becomes the sponsor, contributes to or maintains a Plan or has any actual or contingent liability under a Plan, Company shall schedule such Plan. To the extent applicable, each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws including, without limitation, ERISA and the Code; each Plan (and each re lated trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred with respect to a Plan; no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has a material Unfunded Current Liability; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither the Company nor any of its Subsidiaries nor any ERISA Affiliate has incurred any 63 -56- material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or reasonably expects to incur any such liability under any of the foregoing Sections with respect to any Plan; no condition exists which presents a material risk to the Company or any of its Subsidiaries or any ERISA Affiliate of incurring a material liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; to the knowledge of Company, Subsidiary and each ERISA Affiliate, no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending or, to the knowledge of Company, Subsidiary and each ERISA Affiliate, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Company, its Subsidiaries and their ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not exceed $5,000,000; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Company, any Subsidiary of the Company, or any ERISA Affiliate has at all times been operated in compliance in all material respects with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of the Company or any Subsidiary of the Company or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Company and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability 4.10 Representations and Warranties in Documents All representations and warranties by the Company and its Subsidiaries set forth in the other Documents were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made) and shall be true and correct in all material respects as of the Closing Date as if such representations or warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations or warranties shall be true and correct in all material respects as of such earlier date. 4.11 Properties Each of the Company and its Subsidiaries has good and marketable title to, or a validly subsisting leasehold interest in, all material properties owned or leased by them, including all property reflected in the balance sheets referred to in Section 4.5(a) and in the Pro 64 -57- Forma Balance Sheet (except as sold or otherwise disposed of since the respective dates of such balance sheets in the ordinary course of business or as otherwise permitted by this Agreement), free and clear of all Liens, other than (i) as referred to in the balance sheets or in the notes thereto or (ii) Liens not prohibited by Section 6.2. 4.12 Capitalization On the Closing Date and after giving effect to the Transactions and the other Transactions contemplated hereby, the authorized capital stock of the Company shall consist of 30,000,000 shares of common stock, $0.01 par value per share, 20,441,254 of which shares are outstanding. All such outstanding shares of common stock have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights. As of the Closing Date, other than options held by officers, directors, employees and consultants, neither the Company nor its Subsidiaries has outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 4.13 Subsidiaries On and as of the Closing Date, the Company has no Subsidiaries other than those Subsidiaries listed on Schedule B. Schedule B correctly sets forth, as of the Closing Date, the percentage ownership (direct and indirect) of the Company in each class of capital stock or other equity interests of each of its Subsidiaries and also identifies the direct owner thereof. All outstanding shares of capital stock of each Subsidiary of the Company have been duly and validly issued, are fully paid and nonassessable and have been issued free of preemptive rights. Except as set forth on Schedule B, no Subsidiary of the Company has out standing any securities convertible into or exchangeable for its capital stock or outstanding any right to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of or any calls, commitments or claims of any character relating to, its capital stock or any stock appreciation or similar rights. 4.14 Compliance with Statutes, etc. Each of the Company and its Subsidiaries and each of their respective Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (excluding applicable statutes, regulations, orders and restrictions relating to environmental standards and controls, which matters are covered under Section 4.17), except such noncompliances as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 65 -58- 4.15 Investment Company Act Neither the Company nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 4.16 Public Utility Holding Company Act Neither the Company nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.17 Environmental Matters Except for matters that either individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect or as is set forth on Schedule F: (a) Each of the Company and its Subsidiaries has complied and is in compliance with all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no past, pending or, to the best knowledge of the Company or any of its Subsidiaries, threatened Environmental Claims against the Company or any of its Subsidiaries or any Real Property currently or, to the best knowledge of the Company or any of its Subsidiaries, previously owned or operated by the Company or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences on any Real Property cur rently owned or operated by the Company or any of its Subsidiaries or, to the best knowledge of the Company or any of its Subsidiaries, on any formerly owned or operated Real Property or any property adjoining or in the vicinity of any currently owned or operated Real Property that could reasonably be expected (i) to form the basis of an Environmental Claim against the Company or any of its Subsidiaries or any currently owned or operated Real Property or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by the Company or any of its Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, or Released on or from, any Real Property owned or operated by the Company or any of its Subsidiaries except in compliance with all Environmental Laws and reasonably required in connection with the operation, use and maintenance of any such Real Property by the Company's or such Subsidiary's business. There are not now any underground storage tanks owned or operated by the Company or any of its Subsidiaries located on any Real Property owned or operated by the Company or any of its Subsidiaries 66 -59- 4.18 Labor Relations Neither the Company nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (i) no unfair labor practice complaint pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against the Company or any of its Subsidiaries and (iii) to the best knowledge of the Company, no concerted and continuous effort to organize a union with respect to the employees of the Company or any of its Subsidiaries, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to have a Material Adverse Effect. 4.19 Patents, Licenses, Franchises and Formulas Except as described on Schedule C, each of the Company and its Subsidiaries owns all patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, reasonably necessary for the present conduct of its business, without any known conflict with the rights of others, which, or the failure to own or obtain which, as the case may be, would be reasonably likely to result in a Material Adverse Effect. 4.20 Indebtedness Schedule D sets forth a true and complete list of all Indebtedness (exclusive of Indebtedness pursuant to (x) this Agreement and (y) the Credit Agreement) of the Company and its Subsidiaries as of the Closing Date and which is to remain outstanding after giving effect to the Transactions and the incurrence of the Bridge Loan on such date, in each case showing the aggregate principal amount thereof (and the aggregate amount of any undrawn commitments with respect thereto) and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. The Company certifies that it has provided true and complete copies of all agreements evidencing or relating to Existing Debt (as defined in the Credit Agreement) of the Company or any of its Subsidiaries after giving effect to the Transactions (other than Existing Debt in the aggregate not in excess of $1.0 million); 67 -60- 4.21 Transactions As of the Closing Date and after giving effect to the application of the proceeds thereof, the Transactions are being consummated in all material respects in accordance with the terms of the respective Documents and all applicable laws. As of the Closing Date, all consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Transactions will have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained), except (x) where the failure to so obtain, give, file or take would not have a Material Adverse Effect; and (y) filings of reports of transactions required to be filed after the Closing Date as provided in Section 13.17 of the Credit Agreement and other matters set forth in Section 13.17 of the Credit Agreement. All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Transactions. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the Transactions, or the making of the Loans hereunder or the performance by the Company or any Guarantor of its obligations under the respective Documents. All actions taken by the Company and each Guarantor pursuant to or in furtherance of the Transactions have been taken in material compliance with the respective Documents and all applicable laws. 4.22 Insurance Set forth on Schedule E hereto is a true, correct and complete summary of all material insurance carried by each of the Company and its Subsidiaries on and as of the Closing Date, with the amounts insured set forth therein. 4.23 No Default No event has occurred and is continuing which constitutes a Default or an Event of Default. 4.24 Compliance with Contracts, etc. None of the Company or any of its Subsidiaries is (A) in violation of its certificate of incorporation, bylaws or other organizational documents or (B) in violation of any applicable law, ordinance, administrative or governmental rule or regulation, or (C) in default (nor will an event occur which with notice or passage of time or both would constitute such a default) under or in violation of any indenture or loan or credit agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound or affected, except, with respect to clauses (B) and (C), for such violations or defaults that would not, singly or in the aggregate, have a Material Adverse Effect. 68 -61- 4.25 Use of Proceeds; Margin Stock, etc. The proceeds of the Bridge Loan will be used solely for the purposes specified herein. Neither the making of the Loans nor the use of proceeds thereof will violate or be inconsistent with the provisions of Regulation T, U or X, of the Board of Governors of the Federal Reserve System. 4.26 Survival of Representations and Warranties Subject to Section 12.10B, all representations and warranties in the Loan Documents shall survive delivery of the Bridge Notes and the making of the Bridge Loan and shall continue until repayment of the Notes and the Obligations, and any investigation at any time made by or on behalf of the Lenders shall not diminish the Lenders' right to rely thereon. 4.27 Guarantees Each future Guarantor shall, on the date it executes and delivers a Guarantee hereunder, have the full corporate power, authority and capacity to execute and deliver such Guarantee and to perform all of its obligations to be performed thereunder; all corporate and other acts, conditions and things required to be done and performed or to have occurred prior to such execution and delivery to constitute such Guarantee as a valid and legally binding ob ligation of such Guarantor enforceable in accordance with its terms shall have been done and performed and shall have occurred in due compliance with all applicable Laws; on the date of such execution and delivery, the execution, delivery and performance of such Guarantee by such Guarantor will not (i) violate any provision of Law, (ii) violate any provision of the charter or bylaws of such Guarantor, or (iii) result in a breach of, a default under (including, without limitation, any event which with notice or lapse of time, or both, would constitute a breach of or a default under), or the creation of any Lien on the properties or assets of such Guarantor, the Company or any other Subsidiary of the Company under any Contract to which such Guarantor or the Company or any other Subsidiary of the Company is a party or by which the properties or assets of such Guarantor, the Company or any other Subsidiary of the Company may be bound or affected, except, in the case of clauses (i) and (iii) for such violations, breaches, defaults or Liens which would not, individually or in the aggregate, have a Material Adverse Effect; on the date of such execution and delivery, each Guarantee executed and delivered by a Guarantor shall constitute legal, valid, binding and unconditional obligations of the Guarantor executing and delivering it to the Lenders hereunder, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). 69 -62- 4.28 Senior Subordinated Indenture; etc. Each of the Company and the Guarantors shall (to the extent such documents are executed), on the date it executes and delivers the Senior Subordinated Indenture and the Exchange Notes and the Demand Take-Out Notes and the indenture governing the Demand Take-Out Notes (or the guarantees related thereto, as the case may be), have the full corporate power, authority and capacity to do so and to perform all of its obligations to be performed thereunder; all corporate and other acts, conditions and things required to be done and performed or to have occurred prior to such execution and delivery to constitute them as valid and legally binding obligations of the Company enforceable against the Company and the Guarantors in accordance with their respective terms except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law), shall have been done and performed and shall have occurred in due compliance with all applicable Laws; on the date, if any, of such execution and delivery by the Company and the Guarantors, the Senior Subordinated Indenture and the Exchange Notes and the Demand Take-Out Notes (and the guarantees) and the indenture governing the Demand Take-Out Notes shall constitute legal, valid, binding and unconditional obligations of the Company and the Guarantors, as the case may be, enforceable against the Company and the Guarantors, as the case may be, in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). SECTION 5 AFFIRMATIVE COVENANTS The Company covenants and agrees that, until the Loans and the Notes and all other amounts due under this Agreement have been indefeasibly paid in full it shall perform all covenants in this Section 5 required to be performed by it: 5.1 Financial Statements and Other Reports The Company will furnish to each Lender: (a) Monthly Reports. Within 30 days after the end of each fiscal month of the Company, the combined balance sheets of the Company and its consolidated Subsidiaries as of the end of such month and the related combined statements of income and statements of cash flows for such month and for the last elapsed portion of the fiscal year ended with the last day of such month, in each case setting forth in the statements of income only, the comparative figures for the corresponding month in the prior fiscal year. 70 -63- (b) Quarterly Financial Statements. As soon as available and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Company (subject to extension in the event of a filing with the Commission under Rule 12b-25 (an "SEC 12b-25 filing")), the combined balance sheets of the Company and its consolidated Subsidiaries as of the end of such quarter and the related combined statements of income and statements of cash flows for such quarter and for the last elapsed portion of the fiscal year ended with the last day of such quarter and setting forth in the statements of income only, the comparative figures for the corresponding quarter in the prior fiscal year and the budgeted figures for such quarter as set forth in the respective budget delivered pursuant to Section 5.01(e), (ii) the consolidating balance sheets of each of the Company's Subsidiaries as of the end of such quarter and the related consolidating statements of income and consolidating statements of cash flows for such quarter and for the elapsed portion of the fiscal year ended with the last day of such quarter, in each case setting forth in the statements of income only, the comparative figures for the corresponding quarter in the prior fiscal year and the budgeted figures for such quarter as set forth in the respective budget delivered pursuant to Section 5.01(e), and (iii) management's discussion and analysis of the important operational and financial developments during such quarterly period in respect of the Company and its Subsidiaries. (c) Annual Financial Statements. Within 90 days after the close of each fiscal year of the Company (subject to extension in the event of an SEC 12b-25 filing), the consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such fiscal year and the related statements of income and retained earnings and of cash flows for such fiscal year and, setting forth comparative figures for the preceding fiscal year commencing fiscal year 2000 and certified, in the case of such consolidated statements, by Arthur Andersen LLP or such other independent certified public accountants of recognized national standing reasonably acceptable to the Agent, together with a report of such accounting firm (which report shall be unqualified as to scope), (ii) the consolidating balance sheets of each of the Company's Subsidiaries at the end of such fiscal year and the related consolidating statement of income and retained earnings and statement of cash flows for such fiscal year, in each case setting forth comparative figures for the preceding fiscal year, and (iii) management's discussions and analysis of the important operational and financial developments during such fiscal year in respect of the Company and its Subsidiaries. (d) Management Letters. Promptly after the receipt thereof by the Company or any of its Subsidiaries, a copy of any final "management letter" received by the Company or such Subsidiary from its certified public accountants and management's responses thereto. 71 -64- (e) Budgets. No later than 45 days following the commencement of the first day of each fiscal year of the Company, a budget in form reasonably satisfactory to the Agent prepared by the Company for (x) in the case of budgeted statements of income, each of the twelve months of such fiscal year prepared in detail, and (y) in the case of budgeted statements of sources and uses of cash and balance sheets, for such fiscal year on an annual basis and prepared in detail and for each of the five years immediately following such fiscal year prepared in summary form, accompanied by the statement of the Chief Executive Officer, President, Vice President or Chief Financial Officer of the Company to the effect that, to the best of knowledge of such Person, the budget is a reasonable estimate of anticipated performance, based on assumptions such Person believes to be reasonable, for the period covered thereby. (f) Officer's Certificates. At the time of the delivery of the financial statements provided for in Section 5.01(b) and (c), a certificate in the form of Exhibit III of the Chief Executive Officer, President, Vice President or Chief Financial Officer of the Company to the effect that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof and the action which the Company has taken, is taking, or proposes to take with respect to each such condition or event. (g) Notice of Default or Litigation. Promptly, and in any event within five Business Days after an Authorized Officer of the Company obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default and (ii) any litigation or governmental investigation or proceeding (including, without limitation, any investigation by any Gaming Authority) pending against the Company or any of its Subsidiaries which could reasonably be expected to result in a Material Adverse Effect. (h) Other Reports and Filings. Promptly, copies of all (i) financial information, proxy materials and other information and reports, if any, which the Company or any of its Subsidiaries shall file with the Commission, (ii) notices of default in the observance or performance by the Company or any of its Subsidiaries of any agreement or condition relating to any Indebtedness in a principal amount equal to or exceeding $5,000,000 in the aggregate (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto and (iii) communications with holders of its public Indebtedness pursuant to the terms of the documentation governing such public Indebtedness. (i) Annual Meetings with Lenders. At the request of the Agent, the Company shall within 120 days after the close of each fiscal year of the Company hold a meeting at a time and place selected by the Company and acceptable to the Agent with 72 -65- all of the Lenders at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Company and the budgets presented for the current fiscal year of the Company and its Subsidiaries. (j) Other Information. From time to time, such other information or documents (financial or otherwise) with respect to the Company or its Subsidiaries as any Lender may reasonably request in writing; provided that such written request shall be delivered by any such Lender to the Agent and such other information or documents shall be delivered by the Company to the Agent who shall promptly deliver same to the Lender making such written request. 5.2 Books, Records and Inspections The Company shall maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of consolidated financial statements in conformity with generally accepted accounting principles. The Company shall, and shall cause each of its Subsidiaries to, permit officers and designated representatives of the Agent or any Lender to visit and inspect, at the Agent's or such other Lender's own expense, as the case may be (or, if a Default or Event of Default is in existence, at the Company's expense), during regular business hours, upon reasonable advance notice and under guidance of officers of the Company or such Subsidiary, any of the properties of the Company and any of its Subsidiaries, and to examine the books of account of the Company and any of its Subsidiaries and discuss the affairs, finances and accounts of the Company and any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals and to any reasonable extent as the Agent or any Lender may reasonably request; provided that all such visits and inspections by each Lender shall be limited to one such inspection and visit per Lender in each year (except when a Default or Event of Default has occurred and is continuing, in which case there shall be no limitations on such inspections and visits). 5.3 Maintenance of Property; Insurance The Company will, and will cause each of its Subsidiaries to, (i) keep all property necessary in its business in good working order and condition (ordinary wear and tear excepted), (ii) maintain insurance on all its property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice and (iii) furnish to each Lender, upon written request, full information as to the insurance carried. In addition to the requirements of the immediately preceding sentence, the Company will at all times cause the liability and hazard insurance of the types described in Schedule E to be maintained (with the same scope of coverage as that described in Schedule E) at levels which are at least as great as the respective amount described opposite the respective type of insurance on Schedule E under the column headed "Minimum Amount Required to be Maintained". Notwithstanding the foregoing, if such liability and hazard insurance ceases to be available or is no longer avail- 73 -66- able on commercially reasonable terms, the Company may, with the consent of the Agent (not to be unreasonably withheld), cease to maintain such insurance or maintain such insurance at levels that are commercially reasonable. 5.4 Corporate Franchises The Company shall, and shall cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that nothing in this Section 5.4 shall prevent (i) transactions permitted in accordance with the applicable requirements of Section 6.5 or (ii) the withdrawal by the Company or any of its Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal would not reasonably be expected to have a Material Adverse Effect. 5.5 Compliance with Statutes, etc. The Company shall, and shall cause each of its Subsidiaries to, comply in all material respects (i) with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property and (ii) with all applicable statutes, rules and regulations requiring reports and disclosures to all applicable Gaming Authorities, including, but not limited to, reporting the Transactions, within the time periods required by the regulations of the respective Gaming Authorities. 5.6 Compliance with Environmental Laws Promptly upon, and in any event within thirty days after, an officer of the Company or any of its Subsidiaries obtains knowledge thereof, notice of one or more of the following environmental matters which occurs after the Closing Date unless such environmental matters could not, individually or when aggregated with all other such environmental matters, be reasonably expected to have a Material Adverse Effect: (i) any material Environmental Claim pending or threatened in writing against the Company or any of its Subsidiaries or any Real Property owned, operated or occupied by the Company or any of its Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned, operated or occupied by the Company or any of its Subsidiaries that (a) results in material noncompliance by the Company or any of its Subsidiaries with any applicable Environmental Law or (b) would reasonably be expected to form the basis of a material Environmental Claim against the Company or any of its Subsidiaries or any such Real Property; 74 -67- (iii) any condition or occurrence on any Real Property owned, operated or occupied by the Company or any of its Subsidiaries that would reasonably be expected to cause such Real Property to be subject to any material restrictions on the ownership, occupancy, use or transferability by the Company or any of its Subsidiaries of such Real Property under any Environmental Law; and (iv) the taking of any material removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned, operated or occupied by the Company or any of its Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any event the Company shall deliver to the Agent all material notices received by it or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Company's or such Subsidiary's response thereto. In addition, the Company will provide the Lenders with copies of all material communications with any government or governmental agency and all material communications with any Person relating to any Environmental Claim of which notice is required to be given pursuant to this Section 5.6, and such detailed reports of any such Envi ronmental Claim as to which notice is required, as may reasonably be requested by the Agent or the Lenders. 5.7 ERISA To the extent that Company, any Subsidiary or any ERISA Affiliate sponsors, contributes to or maintains a Plan or has any actual or contingent liability under a Plan, as soon as possible and, in any event, within ten days after the Company or any of its Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Company will deliver to each of the Lenders a certificate of an Authorized Officer of the Company setting forth the full details as to such occurrence and the action, if any, that the Company, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices then required or proposed to be given to or filed with or by the Company, such Subsidiary, the Plan administrator or such ERISA Affiliate to or with the PBGC or any other government agency, or a Plan participant and any material notices received by such Company, such Subsidiary or ERISA Affiliate from the PBGC or any other government agency, or a Plan participant with respect thereto: that a Reportable Event has occurred (except to the extent that the Company has previously delivered to the Lenders a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect 75 -68- to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application is in the reasonable opinion of the Company, likely to be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 or Section 303 or 304 of ERISA of the Code with respect to a Plan; that any contribution required to be made with respect to a Plan has not been timely made; that a Plan has been or is reasonably expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings are in the reasonable opinion of the Company likely to be or have been instituted or notice has been given to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that the Company, any of its Subsidiaries or any ERISA Affiliate will or is reasonably expected to incur any material liability (including any indirect, contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA; or, with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under section 4980B of the Code; or that the Company or any of its Subsidiaries may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA or benefits the full cost of which is borne by the employee) or any Plan. The Company will deliver to each of the Lenders copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. The Company will also deliver to each of the Lenders a complete copy of the annual report (Form 5500 series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the annual report. In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC or any other government agency, and any material notices received by the Company or any of its Subsidiaries or any ERISA Affiliate with respect to any Plan shall be delivered to the Lenders no later than ten days after the date such annual report has been filed with the Internal Revenue Service or such records, documents or other information required to be furnished to the PBGC or any other government agency or such material notice has been received by the Company, the respective Subsidiary or the ERISA Affiliate, as applicable. 5.8 Performance of Obligations Subject to compliance with applicable Laws, the Company shall, and shall cause each of its Subsidiaries to, perform all of its obligations under the terms of each mort- 76 -69- gage, deed of trust, indenture, loan agreement or credit agreement and each other material agreement, contract or instrument, by which it is bound, except such non-performances as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.9 Payment of Taxes The Company shall pay and discharge or cause to be paid and discharged, and will cause each of its Subsidiaries to pay and discharge, all material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, in each case on a timely basis, and all lawful claims for material sums that have become due and payable which, if unpaid, might become a lien or charge upon any properties of the Company or any of its Subsidiaries; provided that neither the Company nor any of its Subsidiaries shall be required to pay any such Tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it maintains adequate reserves with respect thereto in accordance with GAAP. 5.10 Ownership of Subsidiaries Notwithstanding anything to the contrary contained in this Agreement, the Company shall at all times own, directly or indirectly, 100% of the capital stock of each of the Guarantors. 5.11 Take-Out Financing A. The Company agrees that upon request (a "Request") from the Take-Out Bank made at any time prior to the Conversion Date, the Company shall take all reasonable actions necessary or desirable, to the extent within its power, so that the Take-Out Bank can, as soon as practicable after such Request, publicly offer or privately place the Demand Take-Out Notes (the "Initial Request Date"). The Company further agrees that upon notice by the Take-Out Bank (the "Take-Out Securities Notice"), at any time and from time to time following the Initial Request Date, the Company shall issue and sell Demand Take-Out Notes upon such terms and conditions as specified in the Take-Out Securities Notice. The foregoing shall not limit the Company's right to refinance the Bridge Loan by any other means. B. The Company agrees that it shall use its reasonable best efforts to assist the Take-Out Bank in marketing the Demand Take-Out Notes to refinance the Bridge Loan, including, without limitation, preparing an offering memorandum related thereto, making senior management and other representatives available (at mutually agreeable times) to participate in meetings with prospective investors and providing such information and assistance as the Take-Out Bank shall reasonably request during the course of such marketing process. 77 -70- 5.12 Exchange of Term Notes On any date after the Conversion Date, the Company shall, on the 30th Business Day following receipt of (1) the written request (the "Exchange Request") of a holder of Term Notes requesting the exchange of Term Notes for Exchange Notes (and if such Term Notes are not Fixed Rate Loans, requesting the conversion to a Fixed Rate) and (2) the written consent of the Majority Lenders consenting to such exchange: (i) Execute and deliver, cause each Guarantor to execute and deliver, and cause a bank or trust company acting as trustee thereunder to execute and deliver, the Senior Subordinated Indenture, if such Senior Subordinated Indenture has not previously been executed and delivered; (ii) Execute and deliver to such holders or beneficial owners in accordance with the Senior Subordinated Indenture notes in the form attached to the Senior Subordinated Indenture (the "Exchange Notes") bearing a fixed interest rate equal to the Fixed Rate in exchange for such Term Notes dated the date of the issuance of such Exchange Notes, payable to the order of such holder or owner, as the case may be, in the same principal amount as such Term Notes being exchanged, and cause each Guarantor to endorse its guarantee thereon; and (iii) Execute and deliver, and cause each Guarantor to execute and deliver, to such holder or owner, as the case may be, a Registration Rights Agreement in the form of Exhibit V, if such Registration Rights Agreement has not previously been executed and delivered or, if such Registration Rights Agreement has previously been executed and delivered and such holder or owner is not already a party thereto, permit such holder or owner to become a party thereto. The principal amount of the Term Notes to be exchanged pursuant to this Section 5.13 shall be at least $5,000,000 and integral multiples of $10,000 in excess thereof. Term Notes delivered to the Company under this Section 5.12 in exchange for Exchange Notes shall be canceled by the Company and the corresponding amount of the Term Loan deemed repaid and the Exchange Notes shall be governed by and construed in accordance with the terms of the Senior Subordinated Indenture. The bank or trust company acting as trustee under the Senior Subordinated Indenture shall at all times be a corporation organized and doing business under the laws of the United States of America or the State of New York, in good standing and having its principal offices in the Borough of Manhattan, in The City of New York, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal or State authority. 78 -71- 5.13 Payments in U.S. Dollars All payments of any Obligations to be made hereunder or under the Notes by the Company or any other obligor with respect thereto shall be made solely in U.S. Dollars or such other currency as is then legal tender for public and private debts in the United States of America. 5.14 Register The Company hereby designates the Agent to serve as the Company's agent, solely for purposes of this Section 5.14, to maintain a register (the "Register") on which they will record the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Company's obligations in respect of such Loans. With respect to any Lender, the transfer of the Loan Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Loan Commitments shall not be effective until such transfer is recorded on the Register maintained by the Agent with re spect to ownership of such Loan Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Loan Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Loan Commitments and Loans shall be recorded by the Agent on the Register only upon the receipt by the Agent of a properly executed and delivered assignment and assumption agreement pursuant to Section 12.2A. Coincident with the delivery of such an assignment and assumption agreement to the Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes of the same type and in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. SECTION 6 NEGATIVE COVENANTS The Company covenants and agrees that until the satisfaction in full of the Loans and the Notes and all other Obligations due under this Agreement it will fully and timely perform all covenants in this Section 6. 6.1 Limitation on Incurrence of Additional Indebtedness The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that, at any time after the Conversion Date, if no Default or Event of Default shall have occurred and -72- 79 -72- be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company or any of its Restricted Subsidiaries that is or, upon such incurrence, becomes a Guarantor may incur Indebtedness (including, without limitation, Acquired Indebtedness) and any Restricted Subsidiary of the Company that is not or will not, upon such incurrence, become a Guarantor may incur Acquired Indebtedness, in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0. 6.2 Limitation on Liens The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Closing Date or acquired after the Closing Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens, in each case until such time as such Liens no longer secure other Indebtedness or obligations; and (2) in all other cases, the Notes are equally and ratably secured, in each case until such time as such Liens no longer secure other Indebtedness or obligations, except for: (a) Liens existing as of the Closing Date to the extent and in the manner such Liens are in effect on the Closing Date; (b) Liens securing Senior Debt and Liens securing Guarantor Senior Debt; (c) Liens securing the Notes and the Guarantees; (d) Liens of the Company or a Guarantor on assets of any Restricted Subsidiary of the Company; (e) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under this Agreement and which has been incurred in accordance with the provisions of this Agreement; provided, however, that such Liens: (i) are not materially less favorable to the Holders and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness 80 -73- being Refinanced; and (ii) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (f) Permitted Liens. 6.3 Limitation on Restricted Payments (a) The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock; (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or a Guarantor that is subordinate or junior in right of payment to the Notes (except for the purchase, defeasance, redemption, prepayment or other acquisition of such subordinate or junior Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (4) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"). (b) Notwithstanding clause (a) above and (c) below (once clause (c) becomes operative), the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the appli- 81 -74- cation of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (a) shares of Qualified Capital Stock of the Company or (b) Refinancing Indebtedness; (4) if no Default or Event of Default exists or would result therefrom, (A) the Company may pay amounts required for any repurchase, redemption or other acquisition for value of any capital stock or options to acquire capital stock of the Company held by any director, officer, employee or consultant of the Company or any of its Subsidiaries pursuant to any equity subscription agreement or stock option agreement (5) or similar agreement, or otherwise upon their death, disability, retirement or termination of employment or departure from the board of directors of the Company (provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired capital stock and options (other than payments described in clause (4)(B)) shall not exceed (x) $1,000,000 in any twelve-month period or (y) $5,000,000 in the aggregate from and after the Closing Date) and (B) in addition to the amounts set forth in clause 4(A) the Company may pay amounts required under the Missouri Stock Option Agreements in effect on the Closing Date if the trading market for the common stock of the Company is not sufficiently liquid as provided therein; (6) the redemption or repurchase of any Capital Stock or Indebtedness of the Company, including the Notes, if required by any Gaming Authority or if determined, in the good faith judgment of the Board of Directors, to be necessary to prevent the loss or to secure the grant or reinstatement of any gaming license or other right to conduct lawful gaming operations; and after the Conversion Date, Restricted Payments in an amount not to exceed $5.0 million in the aggregate. (c) Notwithstanding clause (a) above, subsequent to the Conversion Date, if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall not have occurred and be continuing and (ii) the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 6.1, the Company may make Restricted Payments in an aggregate amount from the Closing Date not in excess of the sum of: (v) 25% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned 82 -75- subsequent to the Closing Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (w) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Conversion Date and on or prior to the Reference Date of Qualified Capital Stock of the Company or warrants, options or other rights to acquire Qualified Capital Stock of the Company (but excluding any debt security that is convertible into, or exchangeable for, Qualified Capital Stock); plus (x) the aggregate principal amount (or accreted value, if less) of Indebtedness of the Company issued since the Conversion Date (other than Indebtedness issued to or held by a Subsidiary) that has been converted into Qualified Capital Stock (other than Capital Stock issued or sold to a Subsidiary); (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock subsequent to the Conversion Date; and (z) without duplication, the sum of (1) the aggregate amount returned in cash on or with respect to Investments (other than Permitted Investments) made subsequent to the Conversion Date whether through interest payments, principal payments, dividends or other distributions or payments; (2) the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition of all or any portion of such Investments (other than to a Subsidiary of the Company); and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary; provided, however, that the sum of clauses (1), (2) and (3) of this clause (z) shall not exceed the aggregate amount of all such Investments made subsequent to the Conversion Date. In determining the aggregate amount of Restricted Payments in accordance with clause (c), amounts expended pursuant to clauses (b)(1), (b)(2) (ii), (b)(3)(iii)(a), (b)(4), (b)(5) and (b)(6) shall be included in such calculation. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. 83 -76- 6.4 Prohibition on Incurrence of Senior Subordinated Debt The Company will not, and will not permit any Restricted Subsidiary that is a Guarantor to, directly or indirectly, (x) prior to the Conversion Date, incur or suffer to exist any Indebtedness (other than the Notes, the Exchange Notes and the Take-Out Securities) that is by its terms (or by the terms of any agreement governing such Indebtedness) subordinated in right of payment to any other Indebtedness of the Company or of such Subsidiary Guarantor, as the case may be, unless such Indebtedness is also by its terms (or by the terms of any agreement governing such Indebtedness) made expressly subordinate to the Loans and the Notes and the Guarantees to the same extent and in the same manner as such Loans and Notes and Guarantees are subordinated to the Credit Agreement and (y) after the Conversion Date, incur or suffer to exist any Indebtedness that by its terms would rank senior in right of payment to the Notes or any Guarantee, as the case may be, and would rank subordinate in right of payment to any other Indebtedness of the Company or of such Guarantor, as the case may be. 6.5 Merger, Consolidation and Sale of Assets (a) Prior to the Conversion Date, the Company shall not, nor shall it cause or permit any of the Guarantors to (i) enter into any transaction, or series of related transactions, of merger, amalgamation, consolidation or combination, (ii) consolidate, liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), (iii) directly or indirectly convey, sell, lease, sublease, transfer or otherwise dispose of, in one transaction or in a series of transactions, in the case of this clause (iii), all or substantially all of its business, property or assets, whether now owned or hereafter acquired, or (iv) consummate any Asset Acquisition, except: (i) in connection with the Acquisitions; (ii) the Company or any Guarantor may merge with an Affiliate incorporated solely for the purposes of reincorporating the Company or such Subsidiary Guarantor in another jurisdiction; (iii) any Guarantor may be merged, amalgamated, consolidated or combined with or into the Company or any Guarantor or be liquidated, wound up or dissolved, or all or substantially all of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or in a series of transactions, to the Company or to any Guarantor; provided, however, that (A) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (B) in the case of such a merger, amalgamation, consolidation or combination of the Company and a Guarantor, the Company shall be the continuing or surviving corporation, and (C) the surviving entity (I) continues to be bound as such under this Agreement or the 84 -77- Guarantee of such Guarantor, as the case may be, and (II) executes and delivers to the Agent immediately upon consummation of such transaction a written confirmation or acknowledgment to such effect, in form and substance satisfactory to the Agent, together with evidence of appropriate corporate power, authority and action and a written legal opinion in form and substance satisfactory to the Agent to the effect that this Agreement and such Guarantee continue to be a legal, valid and binding obligation of such entity, enforceable against such entity in accordance with its terms (subject to customary exceptions in respect of bankruptcy, insolvency and other equitable remedies), and with respect to such other matters as the Agents may reasonably request; and (iv) the Company or any Restricted Subsidiary may make an Asset Acquisition so long as the total consideration for such acquisition pursuant to this Section 6.5(a)(iv) shall not exceed $1.0 million (including Acquired Indebtedness) and the total consideration for all of such acquisitions pursuant to this Section 6.5(a)(iv) shall not exceed $2.5 million (including Acquired Indebtedness) in the aggregate. (b) After the Conversion Date, the Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Company's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (1) either: (a) the Company shall be the surviving or continuing corporation; or (b) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"): (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (y) shall expressly assume, by supplemental agreement (in form and substance satisfactory to the Agent), executed and delivered to the Agent, the due and punctual payment of the principal of, and 85 -78- premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, this Agreement and the Registration Rights Agreement on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, (a) shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction and (b) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 6.1; (3) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (4) the Company or the Surviving Entity shall have delivered to the Agent an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Agreement and that all conditions precedent in this Agreement relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. (c) After the Conversion Date, no Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Agreement in connection with any sale of such Guarantor in a transaction complying with Section 6.12) will, and the Company will not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor unless: (1) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition 86 -79- shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (2) such entity assumes by supplemental agreement all of the obligations of the Guarantor on the Guarantee; (3) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (4) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the Company could satisfy the provisions of clause (2) of the first paragraph of this covenant. Any merger or consolidation of a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only comply with clause (b)(4) of this covenant. (d) Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement and the Notes with the same effect as if such surviving entity had been named as such and the Company shall be released from the obligations under the Notes and this Agreement except in the case of a lease of the Company's assets and except with respect to any obligations under the Notes and this Agreement that arise from, or related to, such transaction. 6.6 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to: (1) pay dividends or make any other distributions on or in respect of its Capital Stock; (2) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or 87 -80- (3) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (a) applicable law, including restrictions imposed by applicable gaming laws or any applicable Gaming Authority; (b) the Loan Documents; (c) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary of the Company; (d) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries or the properties or assets of the Person so acquired; (e) agreements existing on the Closing Date to the extent and in the manner such agreements are in effect on the Closing Date, including the Credit Agreement; (f) the provisions of security or pledge agreements or mortgages (or similar agreements) granting a Permitted Lien or restricting transfers of the assets secured thereby; (g) FF&E Financing, Purchase Money Indebtedness or Capitalized Lease Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (3) above on the property so acquired; or (h) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (b), (d), (e), (f) or (g) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (b), (d), (e), (f) or (g). 88 -81- 6.7 Limitations on Transactions with Affiliates (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (c) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. (b) All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $2.0 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined in its good faith judgment that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $10.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Agent. (c) The restrictions set forth in the paragraphs (a) and (b) of this Section 6.7 shall not apply to: (1) reasonable fees and compensation paid to, indemnity provided on behalf of, and any benefits provided pursuant to any employee benefit plan or any similar arrangement (including any option or stock purchase plan) on behalf of, officers, directors, employees or consultants of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (2) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries; provided that such transactions are not otherwise prohibited by this Agreement and; provided, further, in each case, that no Affiliate of the Company (other than another Restricted Subsidiary or a director owning qualifying shares) owns Capital Stock of any such Restricted Subsidiary; 89 -82- (3) any agreement as in effect as of the Closing Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Closing Date; (4) loans or advances to officers or employees of the Company or any Restricted Subsidiary made in the ordinary course of business of the Company or such Restricted Subsidiary in accordance with the past practice of the Company; provided that any such loan in excess of $250,000 must be approved by a majority of the members of the Board of Directors who are disinterested in the transaction; (5) Restricted Payments permitted by this Agreement; and (6) the issuance of Qualified Capital Stock. 6.8 Subsidiary Stock Except for any sale of 100% of the Capital Stock or other equity securities of any of the Company's Restricted Subsidiaries in compliance with the provisions of Section 6.6, the Company will not and will not permit any of its Restricted Subsidiaries to directly or indirectly sell or dispose of any shares of Capital Stock or other equity securities of any of its Restricted Subsidiaries, except (i) to qualify directors if required by applicable law, (ii) to the Company or to a Wholly-Owned Restricted Subsidiary of the Company or (iii) Asset Sales made in compliance with this Agreement. 6.9 Conduct of Business The Company and its Restricted Subsidiaries will not engage in any businesses other than Permitted Lines of Business. 6.10 Amendments or Waivers of Certain Documents The Company shall not, nor shall it cause or permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any amendment, modification, supplement or waiver with respect to the Credit Agreement as in effect on the Closing Date that would modify any of the provisions thereof in respect of issuances of Take-Out Securities, the Term Notes or the Exchange Notes in a manner materially adverse to the Lenders. 6.11 Refinancing of the Loans in Part The Company shall not, nor shall the Company cause or permit any of its Restricted Subsidiaries to, Incur any Indebtedness to Refinance the Loans in part other than the Take-Out Securities or the Demand Take-Out Notes, unless the terms, conditions, covenants, 90 -83- events of default and other provisions in respect of the instruments evidencing the Indebtedness Incurred to Refinance the Loans in part shall have been approved in writing by the Agent (which approval shall not be unreasonably delayed or withheld) prior to the Incurrence of any such Indebtedness. 6.12 Limitation on Asset Sales (a) Prior to the Conversion Date, the Company shall not, nor shall it cause or permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale other than the Disposition; provided, that all of the Net Cash Proceeds in respect thereof are applied by the Company or a Restricted Subsidiary of the Company in accordance with Section 2.5A(ii)(a). (b) After the Conversion Date, the Company shall not, nor shall it cause or permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Capital Stock sold or issued or otherwise disposed of (as determined in good faith by the Company's Board of Directors), (2) at least 75% of the consideration received by the Company or such Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents, and is received at the time of such disposition (provided that, for purposes of this clause (2) the following will be considered "cash" or "Cash Equivalents"): (i) any Senior Debt or Guarantor Senior Debt that is assumed by the transferee of any such assets, to the extent the Company or such Restricted Subsidiary is released from any further liability; and (ii) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 30 days after receipt, (3) all of the Net Cash Proceeds in respect thereof are applied by the Company or a Restricted Subsidiary of the Company in accordance with Section 2.5A(ii)(a), (4) the Net Cash Proceeds from any single Asset Sale under this Section 6.12(b) do not exceed $5.0 million; and 91 -84- (5) the Net Cash Proceeds from all such Asset Sales permitted under this Section 6.12(b) do not exceed $25.0 million. 6.13 Additional Subsidiary Guarantees If the Company or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Restricted Subsidiary that is not a Guarantor, or if the Company or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Restricted Subsidiary having total assets with a book value in excess of $500,000, then such transferee or acquired or other Restricted Subsidiary shall: (1) unconditionally guarantee all of the Company's obligations under this Agreement; and (2) deliver to the Lenders an opinion of counsel that such guarantee has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Agreement. It is understood and agreed that in the event the Disposition has not occurred on or prior to March 31, 2001, on such date, and subject to receipt of approval from the applicable Gaming Authority, the Company shall cause ACLVI to enter into a guarantee substantially similar to the Guarantee; provided, that ACLVI has been required to similarly guarantee the Credit Agreement to the extent the Credit Agreement is then in effect. 6.14 Limitation on Preferred Stock of Restricted Subsidiaries The Company will not permit any of its Restricted Subsidiaries that are not Guarantors to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company that is not a Guarantor. SECTION 7 EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur and be continuing: 92 -85- 7.1 Failure To Make Payments When Due Failure to pay (i) any installment of principal of the Loans when due and payable, whether at stated maturity, by acceleration, by notice of prepayment or otherwise (whether or not such payment is prohibited by Section 8 or Section 11), or (ii) any interest on the Loans when due and payable and such failure continues for a period of 30 days (whether or not such payment is prohibited by Section 8 or Section 11). 7.2 Default in Other Agreements Failure of the Company or any of its Restricted Subsidiaries to pay at final maturity (giving effect to any applicable grace period and extensions thereof) the principal of any Indebtedness of the Company or of any of its Restricted Subsidiaries (other than Indebt edness referred to in Section 7.1) or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 30 days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated (in each case with respect to which the 30-day period described above has elapsed), aggregates $10,000,000 or more at any time. 7.3 Breach of Certain Covenants Failure of the Company to perform or comply with any covenant, term or condition contained in Section 2.5A(ii), 2.5A(iv) or 6.5. 7.4 Breach of Warranty Any representation or warranty in this Agreement or certification made by the Company pursuant to this Agreement or in any statement or certificate at any time given by the Company in writing pursuant hereto or thereto or in connection herewith shall be false or incorrect in any material respect on the date as of which made or deemed made. 7.5 Other Defaults Under Agreement or Loan Documents The Company shall default in the performance of or compliance with any covenant, term or condition contained in this Agreement or the other Loan Documents (other than those covered by Section 7.1, 7.3, 7.4, or 7.10) and such default shall not have been remedied or waived in accordance with this Agreement within 30 days after the date of written notice specifying the default (and demanding that such default be remedied) from the holder or holders of not less than 25% in aggregate principal amount of the Loans then outstanding. 93 -86- 7.6 Involuntary Bankruptcy; Appointment of Custodian, etc. A court of competent jurisdiction enters a Bankruptcy Order under any Bankruptcy Law that: (A) is for relief against the Company or any Material Subsidiary in an involuntary case or proceeding, or (B) appoints a Custodian of the Company or any Material Subsidiary for all or substantially all of its properties, or (C) orders the liquidation of the Company or any Material Subsidiary, and in each case the order or decree remains unstayed and in effect for 60 consecutive days. 7.7 Voluntary Bankruptcy; Appointment of Custodian, etc. The Company or any Material Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding, or (B) consents to the entry of a Bankruptcy Order for relief against it in an involuntary case or proceeding, or (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors or files a proposal or scheme of arrangement involving the rescheduling or composition of its indebtedness, or (E) consents to the filing of a petition in bankruptcy against it. 7.8 Judgments and Attachments Any money judgment, writ or warrant of attachment, or similar process involving in any individual case or in the aggregate at any time an amount in excess of $10,000,000 (to the extent not covered by third-party insurance as to which the insurance company has acknowledged coverage) shall be entered or filed against the Company or any of its Restricted Subsidiaries and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 consecutive days. 94 0 -87- 7.9 Guarantee (i) Any Guarantee of a Material Subsidiary shall cease to be in full force or effect (other than by reason of release in accordance with its express terms), shall be declared to be null and void and unenforceable or shall be found to be invalid, or (ii) any Guarantor that is a Material Subsidiary shall deny or disaffirm such Guarantor's obligations under its Guarantee (other than by reason of release in accordance with the terms of this Agreement.) 7.10 Foreclosure At any time prior to the Conversion Date, the agent under the Credit Agreement or any other party entitled to act thereunder commences judicial proceedings to foreclose on the collateral securing the Credit Agreement or exercises any right under applicable law or any instrument evidencing a security interest or other encumbrance in respect of such collateral to take ownership or effect the transfer of such collateral in lieu of foreclosure. 7.11 Gaming Licenses Any gaming license of the Company or any of its Restricted Subsidiaries is revoked, terminated or suspended or otherwise ceases to be effective, resulting in the cessation or suspension of operation for a period of more than 90 days of the casino business of any casino-hotel owned, leased or operated directly or indirectly by the Company or any of its Significant Subsidiaries (other than any voluntary relinquishment of a gaming license if such relinquishment is, in the reasonable, good faith judgment of the Board of Directors of the Company, evidenced by a resolution of such Board, both desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and not disadvantageous in any material respect to the Lender). THEN (i) upon the occurrence and during the continuation of any Event of Default described in the foregoing Section 7.6 or 7.7 with respect to the Company, all of the unpaid principal amount of and accrued interest on the Loans and all other outstanding Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Company, and the commitments of the Lenders hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any Event of Default not referred to in clause (i), the Agent shall, upon written notice of the holder or holders of at least 25% in aggregate principal amount of the Loans then outstanding, by written notice to the Company and the Representative under the Credit Agreement specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), declare all of the unpaid principal amount of and accrued interest on the Loans and all other outstanding Obligations to be, and the same (x) shall forthwith become, due and payable, or (y) if there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Agreement or five business days after receipt 95 -88- by the Company and the Representative under the Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing, and the obligations of the Lenders hereunder shall thereupon terminate. Nevertheless, if at any time after acceleration of the maturity of the Loans, the Company shall pay all arrears of interest and all payments on account of the principal thereof which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement or the Notes) and all Defaults and Events of Default (other than non-payment of principal of and accrued interest on the Loans and the Notes due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 12.6, then the Agent shall, upon written notice of the holders of at least a majority in aggregate principal amount of the Loans then outstanding, by written notice to the Company rescind and annul the acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Default or impair any right consequent thereon. SECTION 8 SUBORDINATION 8.1 Securities Subordinated to Senior Debt Anything herein to the contrary notwithstanding, the Company, for itself and its successors, and each Lender agrees that the payment of all Loan Obligations owing to the Lenders is subordinated, to the extent and in the manner provided in this Section 8, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, of all Senior Debt Obligations (including the Senior Debt Obligations with respect to the Credit Agreement, whether outstanding on the Closing Date or thereafter incurred). This Section 8 shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. 8.2 Suspension of Payment When Senior Debt Is in Default (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Senior Debt (including, without limitation, guarantees of the foregoing items which constitute Senior Debt) (a "Payment Default"), then no payment or distribution of any kind or character shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Loan Obligations or to acquire any of the Loans for cash or property or otherwise until such Payment Default (and all other Payment Defaults) shall have 96 -89- been cured or waived in accordance with the terms of the documentation governing the respective Senior Debt or ceased to exist or all Senior Debt with respect to which any Payment Default has occurred and is continuing shall have been discharged or paid in full in cash or Cash Equivalents. (b) If any event of default (other than a Payment Default) occurs and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a "Non- payment Default"), and if the Representative for the respective issue of Designated Senior Debt gives notice of the event of default to the Agent stating that such notice is a payment blockage notice (a "Payment Blockage Notice"), then during the period (the "Payment Blockage Period") beginning upon the delivery of such Payment Blockage Notice and ending on the earlier of the 180th day after such delivery and the date on which (x) all events of default with respect to all Designated Senior Debt have been cured or waived or cease to exist, (y) all Designated Senior Debt with respect to which any such event of default has occurred and is continuing is discharged or paid in full in cash or Cash Equivalents, or (z) the Agent receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Payment Blockage Period, neither the Company nor any other Person on its behalf shall (i) make any payment of any kind or character with respect to any Loan Obligations or (ii) acquire any of the Loans for cash or property or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 180 days from the date the applicable Payment Blockage Notice is received by the Agent and (y) only one such Payment Blockage Period may be commenced within any 360 consecutive days. For all purposes of this Section 8.2(b), no event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period ending after the date of commencement of such Payment Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Agent or the Lender when such payment is prohibited by the foregoing provisions of this Section 8.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Agent shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the 97 -90- holders of Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Agent shall be paid to the holders of Senior Debt. Nothing contained in this Section 8 shall limit the right of the Agent or the Lenders to take any action to accelerate the maturity of the Loans and all other Obligations pursuant to Section 7 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents before the Lenders are entitled to receive any payment of any kind or character with respect to Loan Obligations. 8.3 Loan Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its assets, whether voluntary or involuntary, all Senior Debt Obligations due or to become due shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations or for the acquisition of any of the Loans for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Lenders or the Agent would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Lenders or by the Agent if received by it, directly to the holders of Senior Debt or creditors of the Company whose obligations are not subordinated to Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trus- 98 -91- tee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of the Company's obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or Cash Equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Section 8, with any turnover of payments as otherwise calculated pursuant to this Section 8 to be made as if no such diminution had occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Lender when such payment or distribution is prohibited by this Section 8.3, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Company with, or the merger of the Company with or into, another corporation, partnership, trust or limited liability company or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation, partnership, trust or limited liability company upon the terms and conditions provided in Section 6.5 and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company's obligations hereunder in accordance with Section 6.5. 8.4 Payments May Be Paid Prior to Dissolution Nothing contained in this Section 8 or elsewhere in this Agreement shall prevent (i) the Company, except under the conditions described in Sections 8.2 and 8.3, from making payments at any time for the purpose of making payments of principal of and interest on the Loan Obligations, or from depositing with the Agent, any monies for such payments, or 99 -92- (ii) in the absence of actual knowledge by the Agent that a given payment would be prohibited by Section 8.2 or 8.3, the application by the Agent of any monies deposited with it for the purpose of making such payments of principal of, and interest on, the Loan Obligations to the Lenders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable the Agent shall have actually received the written notice provided for in the first sentence of Section 8.2(b) (provided that, notwithstanding the foregoing, the Lenders receiving any payments made in contravention of Section 8.2 and/or 8.3 (and the respective such payments) shall otherwise be subject to the provisions of Section 8.2 and Section 8.3). The Company shall give prompt written notice to the Agent of any dissolution, winding-up, liquidation or reorganization of the Company, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. 8.5 Lenders To Be Subrogated to Rights of Holders of Senior Debt Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Lenders shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Loan Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company, or by or on behalf of the Lenders by virtue of this Section 8, which otherwise would have been made to the Lenders shall, as between the Company and the Lenders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Section 8 are and are intended solely for the purpose of defining the relative rights of the Lenders, on the one hand, and the holders of Senior Debt, on the other hand. 8.6 Loan Obligations of the Company Unconditional Nothing contained in this Section 8 or elsewhere in this Agreement is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Lenders, the obligation of the Company, which is absolute and unconditional, to pay to the Lenders the principal of and any interest on the Loan Obligations as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Lenders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent any Lender or the Agent on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Section 8, of the holders of Senior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy. 100 -93- 8.7 Reliance on Judicial Order or Certificate of Liquidating Agent Upon any payment or distribution of assets of the Company referred to in this Section 8, the Agent, subject to the provisions of Section 9, and the Lenders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Agent or the Lenders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 8. 8.8 Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Agent, without incurring responsibility to the Agent or the Lenders and without impairing or releasing the subordination provided in this Section 8 or the obligations hereunder of the Lenders to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. 101 -94- 8.9 Lenders Authorize Agent To Effectuate Subordination of Loan Obligations Each Lender authorizes and expressly directs the Agent on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Lenders, the subordination provided in this Section 8, and appoints the Agent its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Company, the filing of a claim for the unpaid balance of its Loan Obligations and accrued interest in the form required in those proceedings. If the Agent does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Lenders. Nothing herein contained shall be deemed to authorize the Agent or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Loan Obligations or the rights of any Lender thereof, or to authorize the Agent or the holders of Senior Debt or their Representative to vote in respect of the claim of any Lender in any such proceeding. 8.10 This Section 8 Not To Prevent Events of Default The failure to make a payment on account of principal of or interest on the Loan Obligations by reason of any provision of this Section 8 will not be construed as preventing the occurrence of an Event of Default. 8.11 Amendments or Modifications to Section 8 Notwithstanding anything to the contrary contained in this Agreement, no amendment or modification to any provision of this Section 8 or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any Senior Debt then outstanding) shall be permitted without the consent of the "Required Lenders," as such term is used in the Credit Agreement to the extent the Credit Agreement is then in effect. 102 -95- SECTION 9 THE AGENT 9.1 Appointment Each Lender hereby irrevocably designates and appoints BTCo as its Agent to act as specified herein and in the other Loan Documents, and each Lender hereby irrevocably authorizes BTCo as the Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent agrees to act as such upon the express conditions contained in this Section 9. Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Loan Documents, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. The provisions of this Section 9 are solely for the benefit of the Agent and the Lenders, and neither the Company nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Lenders and the Agent does not assume and shall not be deemed to have assumed any obligation or relationship of agent or trust with or for the Company or any of its Subsidiaries. 9.2 Delegation of Duties The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by them with reasonable care except to the extent otherwise required by Section 9.3. 9.3 Exculpatory Provisions Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by them or such Person under or in connection with this Agreement or the other Loan Documents (except for their or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Company, any of its Subsidiaries or any of their respective officers contained in this Agreement, any other Loan Documents, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document or for any failure of the Company, any of its Subsidiaries or any of their respective officers to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascer- 103 -96- tain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the other Loan Documents, or to inspect the properties, books or records of the Company or any of its Subsidiaries. The Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Company or any of its Subsidiaries to the Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 9.4 Reliance by Agent The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including, without limitation, counsel to the Company or any of its Subsidiaries), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. As between the Agent and the Lenders, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. 9.5 Notice of Default The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has actually received notice from the Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by Lenders holding in the aggregate more than 50% of the outstanding principal amount of Notes; provided that, as between the Agent and the Lenders unless and until 104 -97- the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agent Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Company and its Subsidiaries and made its own decision to make the Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Company and its Subsidiaries. The Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial and other condition, prospects or creditworthiness of the Company or any of its Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.7 Indemnification The Lenders agree to indemnify the Agent in its capacity as such ratably according to their respective "percentages" as used in determining the Majority Lenders at such time, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment in full of the Obligations) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Loan Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby of any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Company or any of its Subsidiaries; provided that no Lender shall be liable to the Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful miscon- 105 -98- duct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 9.7 shall survive the payment in full of all Obligations. 9.8 Agent in Its Individual Capacity The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and its Subsidiaries as though the Agent were not the Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Agent and the term "Lender" and "Lenders" shall include the Agent in its individual capacities. 9.9 Resignation of the Agent; Successor Agent The Agent may resign as Agent upon 20 days' notice to the Lenders and the Company. Upon the resignation of the Agent, Lenders holding in the aggregate more than 50% of the outstanding principal amount of Notes shall appoint from among the Lenders a successor Agent which shall be a Qualified Person and which shall be a bank or a trust company for the Lenders subject to prior approval by the Company (such approval not to be unreasonably withheld or delayed), whereupon such successor Agent shall succeed to the rights, powers and duties of the resigning Agent, and the term "Agent" shall include such successor Agent effective upon its appointment, and the resigning Agent's rights, powers and duties as the Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the resignation of the Agent hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 9.10 Documentation Agent No Person listed on the signature pages hereto as a Documentation Agent shall have any obligations hereunder in its capacity as such. SECTION 10 GUARANTEE 10.1 Unconditional Guarantee Each Guarantor hereby unconditionally, jointly and severally, guarantees (such guarantee to be referred to herein as the "Guarantee"), subject to Section 11, to each of the Lenders and to the Agent and their respective successors and assigns that (i) the principal of 106 -99- and interest on the Loans will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal, if any, and interest on any interest, if any, to the extent lawful, of the Loans and all other obligations of the Company to the Lenders or the Agent hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any of the Loans or of any such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 10.5. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Loans or this Agreement, the absence of any action to enforce the same, any waiver or consent by any of the Lenders with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Loans, this Agreement and in this Guarantee. If any Lender or the Agent is required by any court or otherwise to return to the Company, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Guarantor, any amount paid by the Company or any Guarantor to the Agent or such Lender, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Lenders and the Agent, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 7 for the purposes of this Guarantee, and (y) in the event of any acceleration of such obligations as provided in Section 7, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee. 10.2 Subordination of Guarantee The obligations of each Guarantor to the Lenders and to the Agent pursuant to the Guarantee of such Guarantor and this Agreement are expressly subordinate and subject in right of payment to the prior payment in full of all Guarantor Senior Debt of such Guarantor, to the extent and in the manner provided in Section 11. 107 -100- 10.3 Severability In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 10.4 Release of a Guarantor Upon (i) the release by the lenders under the Credit Agreement and related documents of all guarantees of a Guarantor and all Liens on the property and assets of such Guarantor relating to such Indebtedness, or (ii) the sale or disposition (whether by merger, stock purchase, asset sale or otherwise) of a Guarantor (or all or substantially all its assets) to an entity which is not a Subsidiary of the Company and which sale or disposition is otherwise in compliance with the terms of this Agreement (other than Section 2.5A), such Guarantor shall be deemed released from all obligations under this Section 10 without any further action required on the part of the Agent or any Lender; provided that any such termination shall occur only to the extent that all obligations of such Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, such Indebtedness of the Company shall also terminate upon such release, sale or transfer. The Agent shall promptly deliver an appropriate instrument evidencing such release upon receipt of a request by the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section 10.4. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Loans as provided in this Section 10. 10.5 Limitation of Guarantor's Liability Each Guarantor and by its acceptance hereof each of the Lenders hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Lenders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under the Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, but not limited to, the Guarantor Senior Debt of such Guarantor) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 10.7, result in the obligations of such Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance. 108 -101- 10.6 Guarantors May Consolidate, etc., on Certain Terms (a) Nothing contained in this Agreement or in the Loans shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety, to the Company or another Guarantor. Upon any such consolidation, merger, sale or conveyance, the Guarantee given by such Guarantor shall no longer have any force or effect. (b) Except as set forth in Section 6.5, nothing contained in this Agreement or in the Loans shall prevent any consolidation or merger of a Guarantor with or into a corporation or corporations other than the Company or another Guarantor (whether or not affiliated with the Guarantor); provided that, subject to Sections 10.4 and 10.6(a), (i) immediately after such transaction, and giving effect thereto, no Default or Event of Default shall have occurred as a result of such transaction and be continuing, and (ii) upon any such consolidation, merger, sale or conveyance, the Guarantee of such Guarantor set forth in this Section 10, and the due and punctual performance and observance of all of the covenants and conditions of this Agreement to be performed by such Guarantor, shall be expressly assumed (in the event that the Guarantor is not the surviving corporation in the merger), by an agreement or supplemental indenture reasonably satisfactory in form to the Agent, executed and delivered to the Agent, by the corporation formed by such consolidation, or into which the Guarantor shall have merged, or by the corporation that shall have acquired such property. In the case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by an agreement or supplemental indenture executed and delivered to the Agent and satisfactory in form and substance to the Agent of the due and punctual performance of all of the covenants and conditions of this Agreement to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. 10.7 Contribution In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Obligations. "Adjusted Net Assets" of such Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date 109 -102- (other than liabilities of such Guarantor under Subordinated Indebtedness)), but excluding liabilities under the Guarantee, of such Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liabilities of such Guarantor on its debts including, without limitation, Guarantor Senior Debt (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee), excluding debt in respect of the Guarantee of such Guarantor, as they become absolute and matured. 10.8 Waiver of Subrogation Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under its Guarantee and this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Lender against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Loans shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Lenders, and shall, subject to the provisions of Section 8, Section 10.2 and Section 11, forthwith be paid to the Agent for the benefit of such Lenders to be credited and applied upon the Loans, whether matured or unmatured, in accordance with the terms of this Agreement. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the waiver set forth in this Section 10.8 is knowingly made in contemplation of such benefits. 10.9 Evidence of Guarantee To evidence their guarantees to the Lenders set forth in this Section 10, each of the Guarantors hereby agrees to execute the notation of Guarantee in substantially the form included in Exhibit VIII. Each such notation of Guarantee shall be signed on behalf of each Guarantor by an Officer or an assistant Secretary. 10.10 Waiver of Stay, Extension or Usury Laws Each Guarantor covenants that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive such Guarantor from performing its 110 -103- Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Agreement; and each Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Agent, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS 11.1 Guarantee Obligations Subordinated to Guarantor Senior Debt Anything herein to the contrary notwithstanding, each of the Guarantors, for itself and its successors, and each Lender agrees that the payment of all Guarantee Obligations of such Guarantor are subordinated, to the extent and in the manner provided in this Section 11, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Guarantor Senior Debt Obligations of such Guarantor (including Guarantor Senior Debt Obligations with respect to the Credit Agreement, whether outstanding on the Closing Date or thereafter incurred). This Section 11 shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Debt, and such provisions are made for the benefit of the holders of Guarantor Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. 11.2 Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Guarantor Senior Debt (including, without limitation, guarantees of the foregoing items which constitute Guarantor Senior Debt), then no payment or distribution of any kind or character shall be made by or on behalf of such Guarantor or any other Person on its or their behalf with respect to any Guarantee Obligations or to acquire any of the Loans for cash or property or otherwise until such Payment Default (and all other Payment Defaults) shall have been cured or waived in accordance with the terms of the documentation governing the respective Guarantor Senior Debt or ceased to exist or all Guarantor Senior Debt with respect to which any Payment Default has occurred and is continuing shall have been discharged or paid in full in cash or Cash Equivalents. (b) During any Payment Blockage Period (as determined in accordance with Section 8.2(b), including the limitations set forth therein), neither any Guarantor nor any 111 -104- other Person on any Guarantor's behalf shall (i) make any payment of any kind or character with respect to any Guarantee Obligations or (ii) acquire any of the Loans for cash or property or otherwise. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Agent or any Lender when such payment is prohibited by the foregoing provisions of this Section 11.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Agent shall be entitled to rely on information regarding amounts then due and owing on the Guarantor Senior Debt, if any, received from the holders of Guarantor Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from a Guarantor and only amounts included in the information provided to the Agent shall be paid to the holders of Guarantor Senior Debt. 11.3 Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor (a) Upon any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all Guarantor Senior Debt Obligations due or to become due shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, before the Lenders shall be entitled to receive any payment or distribution of any kind or character on account of any Guarantee Obligations or for the acquisition of any of the Loans for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Lenders or the Agent would be entitled, except for the provisions hereof, shall be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Lenders or by the Agent if received by them, directly to the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amounts of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash 112 -105- Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Guarantor Senior Debt. (b) To the extent any payment of Guarantor Senior Debt (whether by or on behalf of a Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of any Guarantor's obligation to make any distribution or payment pursuant to any Guarantor Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Guarantor Senior Debt in cash or Cash Equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Section 11, with any turnover of payments as otherwise calculated pursuant to this Section 11 to be made as if no such diminution had occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, shall be received by any Lender when such payment or distribution is prohibited by this Section 11.3, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Debt. (d) The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of a Guarantor following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Section 6.5 and as long as permitted under the terms of the Guarantor Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of 113 -106- such consolidation, merger, conveyance or transfer, assume the Guarantee of such Guarantor hereunder in accordance with Section 6.5. 11.4 Payments May Be Paid Prior to Dissolution Nothing contained in this Section 11 or elsewhere in this Agreement shall prevent (i) any Guarantor, except under the conditions described in Sections 11.2 and 11.3, from making payments at any time for the purpose of making payments on Guarantee Obligations, or from depositing with the Agent any monies for such payments, or (ii) in the absence of actual knowledge by the Agent that a given payment would be prohibited by Section 11.2 or 11.3, the application by the Agent of any monies deposited with it for the purpose of making such payments on Guarantee Obligations to the Lenders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable the Agent shall have actually received the written notice provided for in the first sentence of Section 8.2(b) (provided that, notwithstanding the foregoing, the Lenders receiving any payments made in contravention of Sections 11.2 and/or 11.3 (and the respective such payments) shall otherwise be subject to the provisions of Section 11.2 and Section 11.3). Each Guarantor shall give prompt written notice to the Agent of any dissolution, winding-up, liquidation or reorganization of such Guarantor, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. 11.5 Lenders To Be Subrogated to Rights of Holders of Guarantor Senior Debt Subject to the payment in full in cash or Cash Equivalents of all Guarantor Senior Debt, the Lenders shall be subrogated to the rights of the holders of Guarantor Senior Debt of such Guarantor to receive payments or distributions of cash, property or securities of such Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Lenders by virtue of this Section 11, which otherwise would have been made to the Lenders shall, as between such Guarantor and the Lenders, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Debt, it being understood that the provisions of this Section 11 are and are intended solely for the purpose of defining the relative rights of the Lenders, on the one hand, and the holders of Guarantor Senior Debt, on the other hand. 11.6 Guarantee Obligations of the Guarantors Unconditional Nothing contained in this Section 11 or elsewhere in this Agreement or in the Guarantees is intended to or shall impair, as among the Guarantors, their creditors other than the holders of Guarantor Senior Debt, and the Lenders, the obligation of the Guarantors, 114 -107- which is absolute and unconditional, to pay to the Lenders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Lenders and creditors of the Guarantors other than the holders of the Guarantor Senior Debt, nor shall anything herein or therein prevent any Lender or the Agent on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Section 11, of the holders of Guarantor Senior Debt in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy. 11.7 Reliance on Judicial Order or Certificate of Liquidating Upon any payment or distribution of assets of a Guarantor referred to in this Section 11, the Agent, subject to the provisions of Section 9 hereof, and the Lenders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Agent or the Lenders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 11. 11.8 Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt No right of any present or future holders of any Guarantor Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Guarantor Senior Debt may, at any time and from time to time, without the consent of or notice to the Agent, without incurring responsibility to the Agent or the Lenders and without impairing or releasing the subordination provided in this Section 11 or the obligations hereunder of the Lenders to the holders of Guarantor Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner Guarantor Senior Debt, or any instrument evidencing the same or any agreement under which 115 -108- Guarantor Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights against the Guarantors and any other Person. 11.9 Lenders Authorize Agent To Effectuate Subordination of Guarantee Obligations Each Lender, by its acceptance of the Guarantee Obligations, authorizes and expressly directs the Agent on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Guarantor Senior Debt and the Lenders, the subordination provided in this Section 11, and appoints the Agent its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of any Guarantor, the filing of a claim for the unpaid balance under its Guarantee Obligations and accrued interest in the form required in those proceedings. If the Agent does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Guarantor Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Lenders. Nothing herein contained shall be deemed to authorize the Agent or the holders of Guarantor Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Lender, or to authorize the Agent or the holders of Guarantor Senior Debt or their Representative to vote in respect of the claim of any Lender in any such proceeding. 11.10 This Section 11 Not To Prevent Events of Default The failure to make a payment on account of principal of or interest on the Guarantee Obligations by reason of any provision of this Section 11 will not be construed as preventing the occurrence of an Event of Default. 11.11 Amendments or Modifications to Section 11 Notwithstanding anything to the contrary contained in this Agreement, no amendment or modification to any provision of this Section 11 or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any 116 -109- Guarantor Senior Debt then outstanding) shall be permitted without the consent of the "Required Lenders," as such term is used in the Credit Agreement to the extent the Credit Agreement is then in effect. SECTION 12 MISCELLANEOUS 12.1 Representation of the Lenders Each Lender hereby represents that it is a commercial lender which makes loans in the ordinary course of its business and that it will make the Loans hereunder for its own account or the account of its affiliates in the ordinary course of such business. 12.2 Participations in and Assignments of Loans and Notes A. Each Lender shall have the right at any time to sell, assign, transfer or negotiate (collectively, a "Syndication") all or any portion of its Notes or its Loan Commitment in an aggregate amount of not less than $1,000,000 to any Eligible Assignee, other than to an Eligible Assignee which has, or has an Affiliate which has, a principal line of business similar to any principal line of business of the Company or any of its Subsidiaries. In the case of any sale, transfer or negotiation of all or part of the Notes or any Loan Commitment authorized under this Section 12.2A, the assignee, transferee or recipient shall become a party to this Agreement as a Lender by execution of an assignment and assumption agreement; provided that (i) at such time Section 2.1A or 2.2A, as the case may be, shall be deemed modified to reflect the Loan Commitment of such new Lender and of the existing Lenders, (ii) upon surrender of the Notes, new Notes will be issued to such new Lender and to the assigning Lender, such new Notes to be in conformity with the requirements of Section 2.1D or 2.2E, as the case may be (with appropriate modifications), to the extent needed to reflect the revised Loan Commitment, and (iii) the Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,500; and provided, further, that such transfer or assignment will not be effective until recorded by the Agent on the Register pursuant to Section 5.15. To the extent of any assignment pursuant to this Section 12.2A, the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Loan Commitment, and the assignee, transferee or recipient shall have, to the extent of such sale, assignment, transfer or negotiation, the same rights, benefits and obligations as it would if it were a Lender with respect to such Notes or Loan Commitment, including, without limitation, the right to approve or disapprove actions which, in accordance with the terms hereof, require the approval of a Lender. At the time of each assignment pursuant to this Section 12.2A to an Eligible Assignee which is not already a Lender hereunder and which is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for Federal income tax purposes, the respective Eligible Assignee 117 -110- shall provide to the Company and the Agent the appropriate Internal Revenue Service Forms (and, if applicable, a Section 12.2D(ii) Certificate) described in Section 12.2D. B. Each Lender may grant participations in all or any part of its Notes or its Loan Commitment in an aggregate amount of not less than $1,000,000 to any Eligible Assignee. C. Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loan and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank. D. Each Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 12.2A (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer) and that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) agrees to deliver to the Company and the Agent, on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Company and the Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Company and the Agent of its inability to deliver any such Form or Certificate. Subject to Section 12.2A and the immediately succeeding sentence, the Company shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder or made on any other Loan Document for the account of any Lender which is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Company U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 12.2D and except as 118 -111- set forth in Section 12.2A, the Company agrees to pay additional amounts and to indemnify and hold harmless each Lender (without regard to the identity of the jurisdiction requiring the deduction or withholding), and reimburse such Lender upon its written request, in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the date of any assignment or transfer in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar Taxes. E. Subject to the last sentence of this Section 12.2E, each Lender agrees that all participations and assignments made hereunder shall be subject to, and made in compliance with, all Gaming Regulations applicable to lenders. The Company hereby acknowledges that unless the Company has provided the Lenders with a written opinion of counsel as to the suitability standards applicable to lenders of any relevant Gaming Authority with jurisdiction over the gaming business of the Company and its Subsidiaries, no Lender shall have the responsibility of determining whether or not a potential assignee of such Lender would be a Qualified Person under the Gaming Regulations of any such jurisdiction 12.3 Expenses Whether or not the transactions contemplated hereby shall be consummated (but other than with respect to the sale of Demand Take-Out Securities, the fees and expenses in connection with which will be payable as is customary in such transactions), the Company agrees to promptly pay (i) all the actual and reasonable costs and expenses of preparation of the Loan Documents and all the costs of furnishing all opinions by counsel for the Company (including without limitation any opinions reasonably requested by the Lenders as to any legal matters arising hereunder), all the actual reasonable costs and expenses of the Agent (including, without limitation, the reasonable fees and disbursements of Cahill Gordon & Reindel and local counsel) in connection with its syndication efforts with respect to the Loan Docu ments and of the Company's performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with; (ii) the reasonable fees, reasonable expenses and reasonable disbursements of counsel to the Lenders in connection with the negotiation, preparation, execution and syndication of the Loan Documents and the Loans hereunder, and any amendments, modifications and waivers hereto or thereto and consents to departures from the terms hereof and thereof; and (iii) after the occurrence of an Event of Default, all costs and expenses (including actual and reasonable attorneys fees and costs of settlement) incurred by the Lenders or the Agent in enforcing any Obligations of or in collecting any payments due from the Company hereunder or under the Notes by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceedings. 119 -112- 12.4 Indemnity In addition to the payment of expenses pursuant to Section 12.3, whether or not the transactions contemplated hereby shall be consummated, the Company agrees to indemnify, pay and hold each of the Lenders, the Agent and any holder of any of the Notes, and each of their respective officers, directors, employees, agents, representatives and affiliates (collectively called the "Indemnitees"), harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated as a party thereto), which may be suffered by, imposed on, incurred by, or asserted against that Indemnitee, in any manner resulting from, connected with, in respect of, relating to or arising out of this Agreement, the other Loan Documents, the Commitment Letter, the Lenders' agreements to make the Loans or the use or intended use of any of the proceeds of the Loans hereunder, the issuance of the Exchange Notes or the Take-Out Securities or the Acquisitions (the "Indemnified Liabilities"); provided that the Company shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities (i) to the extent such liabilities are finally judicially determined to have resulted solely from (A) the gross negligence, bad faith or recklessness of that Indemnitee or (B) the failure of such Indemnitee to perform its obligations under any Loan Document or (C) such Indemnitee's violation of law or (ii) in connection with the obligations of any Indemnitee under any Loan Document or for any transfer fees. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. 12.5 Setoff Subject to Section 8, in addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, each Lender, each Agent and each subsequent holder of any Note are hereby authorized by the Company at any time or from time to time, without notice to the Company, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured but not including trust accounts or any other accounts held for the benefit of another Person) and any other Indebtedness at any time held or owing by such Person or any such subsequent holder to or for the credit or the account of the Company against and on account of the obligations and liabilities of the Company to such Person or such subsequent holder under this Agreement and the Notes, including, but not limited to, all claims of any nature or description arising out of 120 -113- or connected with this Agreement or the Notes, irrespective of whether or not (a) such Person or such subsequent holder shall have made any demand hereunder or (b) such Person or such subsequent holder shall have declared the principal of or the interest on its portion of the Loans and its Notes and other amounts due hereunder to be due and payable as permitted by Section 7 and although said obligations and liabilities, or any of them, may be contingent or unmatured. 12.6 Amendments and Waivers No amendment, modification, termination or waiver of any term or provision of this Agreement, of the Notes, any Guarantee or, prior to the execution and delivery thereof, of the form of the Registration Rights Agreement or the form of the Senior Subordinated Indenture, or consent to any departure by the Company or any Guarantor therefrom, shall in any event be effective without the prior written concurrence of the Company or such Guarantor, as the case may be, and the Majority Lenders; provided that without the prior written consent of each Lender affected, an amendment, modification, termination or waiver of this Agreement, any Notes, any Guarantee, and, prior to the execution and delivery thereof, of the form of Registration Rights Agreement or the form of Senior Subordinated Indenture or consent to departure from a term or provision hereof or thereof may not: (i) reduce the principal amount of Notes whose holders must consent to any such amendment, modification, termination, waiver or consent; (ii) reduce the rate of or extend the time for payment of principal or interest on any Note (other than an extension of the Conversion Date; provided that such extension shall not be beyond the Maturity Date); (iii) reduce the principal amount of any Note; (iv) make any Note payable in money other than that stated in the Note; (v) make any change in Section 2.5A(iv) or in the definition of Change of Control, in the last paragraph of Section 7 or in Section 8.5, 11.5 or 12.6; (vi) modify the provisions of Section 8 or Section 11 or any of the defined terms related thereto in any manner adverse to the Lenders; or (vii) waive per formance by the Company of its obligations under, or consent to any departure from any of the terms and provisions of, Section 2.5A(iv); and provided, further, that without the consent of the Agent, no such amendment, modification, termination or waiver may amend, modify, terminate or waive any provision of Section 9 as the same applies to the Agent or any other provision of this Agreement as it relates to the rights or obligations of the Agent. No amendment, modification or waiver of any provision of this Agreement, the Notes, any Guarantee or the form of the Senior Subordinated Indenture shall adversely affect the rights of the holders of Senior Debt or the holders of Guarantor Senior Debt without their consent. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Company in any case shall entitle the Company to any further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 12.6 shall be binding upon each holder of the Notes at the time outstanding, each further holder of the Notes, and, if signed by the Company or a Guarantor, on the Company and such Guarantor. In addition to the provisions contained in this Section 12.6, the provisions of Sections 8.10 121 -114- and 11.11 shall apply with respect to amendments or modifications of the subordination provisions contained in Sections 8 and 11, respectively. 12.7 Independence of Covenants All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant shall not avoid the occurrence of an Event of Default or Default if such action is taken or condition exists. 12.8 Entirety The Loan Documents and the Commitment Letter embody the entire agreement of the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof and thereof. 12.9 Notices Unless otherwise provided herein, any notice or other communications herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by mail and shall be deemed to have been given when delivered in person, upon receipt of telecopy or telex against receipt of answer back or four Business Days after depositing it in the mail, registered or certified, with postage prepaid and properly addressed; provided that notices shall not be effective until received. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 12.9 (at which time notice of a change thereof shall also be delivered to the adminis trative agent under the Credit Agreement and the Representative for any other Designated Senior Debt)) shall be set forth under each party's name on the signature pages hereto. 12.10 Survival of Warranties and Certain Agreements A. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the Commitment Letter, the making of the Loans hereunder and the execution and delivery of the Notes and, notwithstanding the making of the Loans, the execution and delivery of the Notes or any investigation made by or on behalf of any party, shall continue in full force and effect. The closing of the transactions herein contemplated shall not prejudice any right of one party against any other party in respect of anything done or omitted hereunder or in respect of any right to damages or other remedies. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Company set forth in Sections 12.3, 12.4, 12.14, 12.15, 12.17, 122 -115- 12.19 and 12.22 shall survive the payment of the Loans and the Notes and the termination of this Agreement. 12.11 Failure or Indulgence Not Waiver; Remedies Cumulative No failure or delay on the part of the Agent or any Lender or any holder of any Note in the exercise of any power, right or privilege hereunder, under a Guarantee or under the Notes shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement, under a Guarantee or the Notes are cumulative to and not exclusive of any rights or remedies otherwise available. 12.12 Severability In case any provision in or obligation under this Agreement, under a Guarantee or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 12.13 Headings Section and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 12.14 Applicable Law THIS AGREEMENT, EACH GUARANTEE AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. 12.15 Successors and Assigns; Subsequent Holders of Notes This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Lenders. The terms and provisions of this Agreement and each Guarantee shall inure to the benefit of any assignee or transferee of the Notes pursuant to Section 12.2A, and in the event of such transfer or assignment, the rights and privileges herein conferred upon the Lenders shall automatically extend to and be vested in such transferee or assignee, 123 -116- all subject to the terms and conditions hereof. In determining whether the holders of a sufficient aggregate principal amount of the Loans shall have consented to any action under this Agreement, any amount of the Loans owned or held by the Company, any Guarantor or any of their respective Affiliates shall be disregarded. The Company's rights or any interest therein hereunder may not be assigned without the prior express written consent of each of the Lenders. 12.16 Counterparts; Effectiveness This Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto, and delivery thereof to the Agent or, in the case of the Lenders, written telex or facsimile notice or telephonic notification (confirmed in writing) of such execution and delivery. The Agent will give the Company and each Lender prompt notice of the effectiveness of this Agreement. 12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial A. Any legal action or proceeding with respect to this Agreement, any Note or any Guarantee may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each of the parties to this Agreement hereby irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the parties to this Agreement hereby further irrevocably waives any claim that any such courts lack jurisdiction over such party, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement, the Notes or the Guarantees brought in any of the aforesaid courts, that any such court lacks jurisdiction over such party. Each of the parties to this Agreement irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party, at its respective address for notices pursuant to Section 12.9, such service to become effective 30 days after such mailing. To the extent permitted by law, each of the parties to this Agreement hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any Note or any Guarantee that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any party to this Agreement to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any party in any other jurisdiction. B. Each of the parties to this Agreement hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid 124 -117- actions or proceedings arising out of or in connection with this Agreement, the Notes or the Guarantees brought in the courts referred to in clause A above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. C. Each of the parties to this Agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the Notes or the Guarantees or the transactions contemplated hereby or thereby. 12.18 Payments by Agent A. The Agent agrees that promptly after its receipt of each payment of any interest or premium on or principal of the Notes from or on behalf of the Company or any Guarantor, it shall, except as otherwise provided in this Agreement, distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of such payment) pro rata based upon their respective pro rata shares, if any, of such payment. B. Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Loan Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the Company to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount; provided that, if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 12.19 Taxes A. Any and all payments by the Company hereunder or under any of the other Loan Documents shall be made free and clear of and without deduction or withholding for any and all present or future Taxes, unless such Taxes are required by law or the administration thereof to be deducted or withheld and excluding (i) in the case of each Lender and the Agent, Taxes imposed on its net income and franchise taxes imposed on it by the jurisdiction under the laws of which such Person is organized or any political subdivision thereof, (ii) in the case of each such Lender and the Agent, any Taxes that are in effect and that would apply to a payment to such Person, as applicable, as of the Closing Date, and (iii) if any Person acquires any interest in this Agreement (a "Transferee"), any Taxes to the extent that they 125 -118- are in effect and would apply to a payment to such Transferee as of the date of the acquisition of such interest, as the case may be (all such nonexcluded Taxes being hereinafter referred to as "Covered Taxes"). If the Company shall be required by Law or the administration thereof to deduct or withhold any Covered Taxes from or in respect of any sum payable hereunder or under any other Loan Document, (a) unless such requirement results from the failure of the payee to perform its obligations under Section 12.2D, the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional amounts paid under this paragraph), the Lender receives an amount equal to the sum it would have received if no such deduction or withholding had been made; (b) the Company shall make such deductions or withholdings; and (c) the Company forthwith shall pay the full amount deducted or withheld to the relevant taxation or other authority in accordance with applicable Law. B. The Company agrees to pay forthwith any present or future stamp documentary taxes or any other excise or property taxes, charges or similar levies (all such taxes, charges and levies being herein referred to as "Other Taxes") imposed by any jurisdiction (or any political subdivision or taxing authority thereof or therein) which arise from any payment made by the Company hereunder or under any of the other Loan Documents or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Loan Documents. C. The Company agrees to indemnify the Agent and each of the Lenders for the full amount of Covered Taxes or Other Taxes not deducted or withheld and paid by the Company in accordance with Sections 12.19A and 12.19B to the relevant taxation or other authority and any Taxes other than Covered Taxes or Other Taxes imposed by any jurisdiction on amounts payable by the Company under this Section 12.19 paid by the Lender or the Agent and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not any such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date the Agent or such Lender makes written demand therefor. A certificate as to the amount of such Taxes or Other Taxes and evidence of payment thereof submitted to the Company shall be prima facie evidence, absent manifest error, of the amount due from the Company to the Agent or such Lender. D. The Company shall furnish to the Agent and each of the Lenders the original or a certified copy of a receipt evidencing any payment of Taxes or Other Taxes made by the Company as soon as such receipt becomes available. E. The provisions of this Section 12.19 shall survive the termination of the Agreement and repayment of all Obligations. 126 -119- 12.20 Waiver of Stay, Extension or Usury Laws The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Loans as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Agreement; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Agent, but will suffer and permit the execution of every such power as though no such law had been enacted. 12.21 Requirements of Law If at any time after the Closing Date any Lender reasonably determines that the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender based on the existence of such Lender's Loans hereunder or its obligations hereunder, then the Company and each of its Subsidiaries jointly and severally agree to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable; provided that such Lender's reasonable good faith determination of compensation owing under this Section 12.21 shall, absent demonstrable error, be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 12.21, will give written notice thereof to the Company (a copy of which shall be sent by such Lender to the Agent), which notice shall show the basis for calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of the Company's or its Subsidiaries' obligations to pay additional amounts pursuant to this Section 12.21 upon the subsequent receipt of such notice. 12.22 Confidentiality A. Subject to the provisions of clause B of this Section 12.22, each Lender agrees that it will use its best efforts not to disclose without the prior consent of the Company (other than to its Affiliates, employees, auditors, advisors or counsel or to another Lender if 127 -120- the Lender or such Lender's holding or parent company in its sole discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 12.22 to the same extent as such Lender) any information with respect to the Company or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Loan Document and which is designated by the Company or any of the Guarantors to the Lenders in writing as confidential, provided that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, (e) to the Agent and (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or any interest therein by such Lender; provided that such prospective transferee agrees to provisions substantially the same as those contained in this Section 12.22. B. Each of the Company and the Guarantors hereby acknowledges and agrees that each Lender may share with any of its affiliates any information related to the Company or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Company and its Subsidiaries); provided such Persons shall be subject to the provisions of this Section 12.22 to the same extent as such Lender. 12.23 Application of Gaming Regulations This Agreement is subject to the Gaming Regulations and laws involving the sale and distribution of liquor (the "Liquor Laws"). Without limiting the foregoing, the Agent and the Lenders acknowledge that (i) they are subject to being called forward by the Gaming Authorities or the government authorities enforcing the Liquor Laws, in their discretion, for licensing or a finding of suitability or to file or provide other information, and (ii) all rights, remedies and powers in or under this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Regulations and Liquor Laws and only to the extent that required approvals (including prior approvals) are obtained from the requisite Gaming Authorities. The Agent and the Lenders agree to cooperate with all Gaming Authorities in connection with the provision of such documents or other information as may be requested by such Gaming Authorities. 12.24 Post-Closing Actions Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, the parties hereto acknowledge and agree that on the Closing Date, (i) 128 -121- restrictions on transfers and agreements not to encumber stock of ACLVI and Cactus Pete's Inc. shall be inapplicable, and (ii) ACLVI shall not be required by this Agreement or any other Loan Document to become a Guarantor. The Company hereby agrees that the Company shall use its commercially reasonable efforts to obtain the necessary approvals from the applicable Gaming Authority in order to cause the restrictions on transfers and agreements not to encumber stock of ACLVI and Cactus Pete's Inc. to be applicable by no later than March 31, 2001. In addition, the parties hereto acknowledge that certain notice filings with respect to the Transactions need to be completed following the Closing Date pursuant to the Gaming Regulations applicable to the Company and its Subsidiaries. The Company agrees to complete all such filings in a timely manner and to notify the Agent upon the completion thereof. All provisions of this Agreement and the other Loan Documents (including, without limitation, all conditions precedent, representations, warranties, covenants, events of default and other agreements herein and therein) shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions and the satisfaction of the conditions described above within the time periods required hereby (and, rather than as otherwise provided in the Loan Documents)); provided, that to the extent any representation and warranty would not be true because the foregoing actions were not taken, or conditions were not satisfied, on the Closing Date, the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken or condition is satisfied (or was required to be taken or satisfied) in accordance with the foregoing provisions of this Section 12.24. 129 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. COMPANY: AMERISTAR CASINOS, INC. By: /s/ Thomas M. Steinbauer ----------------------------------- Name: Thomas M. Steinbauer Title: Senior Vice President and Chief Financial Officer Notice Address: 3773 Howard Hughes Parkway Suite 490 Las Vegas, Nevada 89109 Attention: Chief Financial Officer Telephone: (702) 567-7000 Telecopy: (702) 369-8860 130 SUBSIDIARY GUARANTORS: AMERISTAR CASINO COUNCIL BLUFFS, INC. AMERISTAR CASINO VICKSBURG, INC. AMERISTAR CASINO ST. LOUIS, INC. AMERISTAR CASINO KANSAS CITY, INC. AMERISTAR CASINO ST. CHARLES, INC. CACTUS PETE'S, INC. A.C. FOOD SERVICES, INC. By: /s/ Thomas M. Steinbauer ------------------------------------ Name: Thomas M. Steinbauer Title: Vice President Notice Address for all Guarantors: c/o Ameristar Casinos, Inc. 3773 Howard Hughes Parkway Suite 490 Las Vegas, Nevada 89109 Attention: Chief Financial Officer Telephone: (702) 567-7000 Telecopy: (702) 369-8860 131 AGENT: BANKERS TRUST COMPANY By: /s/ Clay Desjardins ---------------------------------- Name: Clay Desjardins Title: Managing Director Notice Address for Agent: One Bankers Trust Plaza 130 Liberty Plaza New York, New York 10006 Attention: Chris Cicardo with a copy to: Deutsche Bank Securities Inc. 31 West 52nd Street, 3rd Floor New York, New York 10019 Attention: Chris Cicado Telephone: (212) 250-2500 Telecopy: (212) 250-6314 132 LENDER: Commitment: $225,000,000 BANKERS TRUST CORPORATION By: /s/ Clay Desjardins ----------------------------------- Name: Clay Desjardins Title: Managing Director Notice Address: One Bankers Trust Plaza 130 Liberty Plaza, 29th Floor New York, New York 10006 Attention: Chris Cicardo with a copy to: Deutsche Bank Securities Inc. 31 West 52nd Street, 3rd Floor New York, New York 10019 Attention: Paul Whyte Telephone: (212) 250-2500 Telecopy: (212) 250-6314 133 Commitment: $75,000,000 BEAR STEARNS CORPORATE LENDING, INC. By: /s/ Keith C. Barnish ---------------------------------- Name: Keith Barnish Title: Authorized Signatory Notice Address: 245 Park Avenue New York, New York 10167 Attention: Victor F. Bulzacchelli Telephone: (212) 272-3042 Telecopy: (212) 250-9184 EX-4.4 6 v70464ex4-4.txt EXHIBIT 4.4 1 EXHIBIT 4.4 ================================================================================ AMERISTAR CASINOS, INC., the GUARANTORS named herein and U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee ------------------ INDENTURE Dated as of February 2, 2001 ------------------ 10 3/4% Senior Subordinated Notes due 2009 ------------------- ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions.............................................................................1 SECTION 1.02. Other Definitions......................................................................27 SECTION 1.03. Trust Indenture Act Definitions........................................................27 SECTION 1.04. Rules of Construction..................................................................28 ARTICLE 2 THE NOTES SECTION 2.01. Form and Dating........................................................................28 SECTION 2.02. Execution and Authentication...........................................................30 SECTION 2.03. Registrar and Paying Agent.............................................................30 SECTION 2.04. Paying Agent to Hold Money in Trust....................................................31 SECTION 2.05. Holder Lists...........................................................................31 SECTION 2.06. Transfer and Exchange..................................................................31 SECTION 2.07. Replacement Notes......................................................................44 SECTION 2.08. Outstanding Notes......................................................................44 SECTION 2.09. Treasury Notes.........................................................................45 SECTION 2.10. Temporary Notes........................................................................45 SECTION 2.11. Cancellation...........................................................................45 SECTION 2.12. Defaulted Interest.....................................................................46 SECTION 2.13. CUSIP Numbers..........................................................................46 ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. Notices to Trustee.....................................................................46 SECTION 3.02. Selection of Notes to Be Redeemed......................................................47 SECTION 3.03. Notice of Redemption...................................................................47 SECTION 3.04. Effect of Notice of Redemption.........................................................48 SECTION 3.05. Deposit of Redemption Price............................................................48 SECTION 3.06. Notes Redeemed in Part.................................................................49 SECTION 3.07. Optional Redemption....................................................................49 SECTION 3.08. Mandatory Redemption...................................................................49 SECTION 3.09. Offer to Purchase by Application of Net Proceeds Offer Amount..........................49 SECTION 3.10. Redemption Based upon Gaming Laws......................................................52
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Page ---- ARTICLE 4 COVENANTS SECTION 4.01. Payment of Notes.......................................................................53 SECTION 4.02. Maintenance of Office or Agency........................................................53 SECTION 4.03. Reports to Holders.....................................................................54 SECTION 4.04. Compliance Certificate.................................................................54 SECTION 4.05. Payment of Taxes.......................................................................55 SECTION 4.06. Stay, Extension and Usury Laws.........................................................55 SECTION 4.07. Limitation on Restricted Payments......................................................55 SECTION 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries............................................................58 SECTION 4.09. Limitation on Incurrence of Additional Indebtedness....................................59 SECTION 4.10. Limitation on Asset Sales..............................................................59 SECTION 4.11. Limitation on Transactions with Affiliates.............................................62 SECTION 4.12. Limitation on Liens....................................................................63 SECTION 4.13. Conduct of Business....................................................................64 SECTION 4.14. Corporate Existence....................................................................64 SECTION 4.15. Offer to Repurchase upon Change of Control.............................................64 SECTION 4.16. Prohibition on Incurrence of Senior Subordinated Debt..................................66 SECTION 4.17. Additional Subsidiary Guarantees.......................................................66 SECTION 4.18. Limitation on Preferred Stock of Restricted Subsidiaries...............................67 SECTION 4.19. Gaming Approvals.......................................................................67 ARTICLE 5 SUCCESSORS SECTION 5.01. Merger, Consolidation and Sale of Assets...............................................67 SECTION 5.02. Successor Corporation Substituted......................................................69 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default......................................................................69 SECTION 6.02. Acceleration...........................................................................71 SECTION 6.03. Other Remedies.........................................................................72 SECTION 6.04. Waiver of Past Defaults................................................................72 SECTION 6.05. Control by Majority....................................................................72 SECTION 6.06. Limitation on Suits....................................................................73 SECTION 6.07. Rights of Holders of Notes to Receive Payment..........................................73 SECTION 6.08. Collection Suit by Trustee.............................................................73 SECTION 6.09. Trustee May File Proofs of Claim.......................................................73 SECTION 6.10. Priorities.............................................................................74 SECTION 6.11. Undertaking for Costs..................................................................74 SECTION 6.12. Restoration of Rights and Remedies.....................................................75
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Page ---- ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee......................................................................75 SECTION 7.02. Rights of Trustee......................................................................76 SECTION 7.03. Individual Rights of Trustee...........................................................77 SECTION 7.04. Trustee's Disclaimer...................................................................77 SECTION 7.05. Notice of Defaults.....................................................................77 SECTION 7.06. Reports by Trustee to Holders of the Notes.............................................77 SECTION 7.07. Compensation and Indemnity.............................................................78 SECTION 7.08. Replacement of Trustee.................................................................79 SECTION 7.09. Successor Trustee by Merger, etc.......................................................80 SECTION 7.10. Eligibility; Disqualification..........................................................80 SECTION 7.11. Preferential Collection of Claims Against Company......................................80 SECTION 7.12. Trustee Obligations to Holders of Senior Debt..........................................80 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...............................81 SECTION 8.02. Legal Defeasance and Discharge.........................................................81 SECTION 8.03. Covenant Defeasance....................................................................81 SECTION 8.04. Conditions to Legal or Covenant Defeasance.............................................82 SECTION 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions...........................................................84 SECTION 8.06. Satisfaction and Discharge.............................................................84 SECTION 8.07. Repayment to Company...................................................................85 SECTION 8.08. Reinstatement..........................................................................85 SECTION 8.09. Survival...............................................................................85 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. Without Consent of Holders of Notes....................................................86 SECTION 9.02. With Consent of Holders of Notes.......................................................86 SECTION 9.03. Compliance with Trust Indenture Act....................................................88 SECTION 9.04. Revocation and Effect of Consents......................................................88 SECTION 9.05. Notation on or Exchange of Notes.......................................................89 SECTION 9.06. Trustee to Sign Amendments, etc........................................................89 ARTICLE 10 SUBORDINATION SECTION 10.01. Securities Subordinated to Senior Debt.................................................89
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Page ---- SECTION 10.02. Suspension of Payment When Senior Debt Is in Default...................................90 SECTION 10.03. Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company..............................91 SECTION 10.04. Payments May Be Paid Prior to Dissolution..............................................92 SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt...........................92 SECTION 10.06. Obligations of the Company Unconditional...............................................93 SECTION 10.07. Reliance on Judicial Order or Certificate of Liquidating Agent.........................93 SECTION 10.08. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt..........................................................94 SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Obligations...................94 SECTION 10.10. This Article 10 Not To Prevent Events of Default.......................................95 SECTION 10.11. Amendments or Modifications to Article 10..............................................95 SECTION 10.12. Acceleration of Notes..................................................................95 SECTION 10.13. Rights of Trustee and Paying Agent.....................................................95 ARTICLE 11 GUARANTEE SECTION 11.01. Unconditional Guarantee................................................................96 SECTION 11.02. Subordination of Guarantee.............................................................96 SECTION 11.03. Severability...........................................................................97 SECTION 11.04. Release of a Guarantor.................................................................97 SECTION 11.05. Limitation of Guarantor's Liability....................................................97 SECTION 11.06. Guarantors May Consolidate, etc., on Certain Terms.....................................97 SECTION 11.07. Contribution...........................................................................98 SECTION 11.08. Waiver of Subrogation..................................................................98 SECTION 11.09. Evidence of Guarantee..................................................................99 SECTION 11.10. Waiver of Stay, Extension or Usury Laws................................................99 ARTICLE 12 SUBORDINATION OF GUARANTEE OBLIGATIONS SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt............................99 SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default...........................................................................100 SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor.........................................................................101 SECTION 12.04. Payments May Be Paid Prior to Dissolution.............................................102 SECTION 12.05. Holders To Be Subrogated to Rights of Holders of Guarantor Senior Debt................102 SECTION 12.06. Guarantee Obligations of the Guarantors Unconditional.................................102 SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating..............................103 SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt....................................103
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Page ---- SECTION 12.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations.......................................................................104 SECTION 12.10. This Article 12 Not To Prevent Events of Default......................................104 SECTION 12.11. Amendments or Modifications to Article 12.............................................104 SECTION 12.12. Acceleration of Notes.................................................................105 SECTION 12.13. Rights of Trustee and Paying Agent....................................................105 ARTICLE 13 MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls..........................................................105 SECTION 13.02. Notices...............................................................................105 SECTION 13.03. Communication by Holders of Notes with Other Holders of Notes.........................107 SECTION 13.04. Certificate and Opinion as to Conditions Precedent....................................107 SECTION 13.05. Statements Required in Certificate or Opinion.........................................107 SECTION 13.06. Rules by Trustee and Agents...........................................................108 SECTION 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders......................................................................108 SECTION 13.08. Governing Law.........................................................................108 SECTION 13.09. No Adverse Interpretation of Other Agreements.........................................108 SECTION 13.10. Successors............................................................................108 SECTION 13.11. Severability..........................................................................108 SECTION 13.12. Counterpart Originals.................................................................108 SECTION 13.13. Table of Contents, Headings, etc......................................................109 SECTION 13.14. Application of Gaming Regulations.....................................................109 EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF GUARANTEE
-v- 7 INDENTURE dated as of February 2, 2001 among Ameristar Casinos, Inc., a Nevada corporation (the "Company"), the Guarantors (as defined herein) and U.S. Bank Trust National Association, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with or into the Company or any of its Restricted Subsidiaries or assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation. "Additional Interest" means all additional interest then owing pursuant to the Registration Rights Agreement. "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Acquisition" means (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. 8 -2- "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company, a Guarantor or a Wholly Owned Restricted Subsidiary of the Company of: (1) any Capital Stock of any Restricted Subsidiary of the Company; or (2) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that asset sales or other dispositions shall not include: (a) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $2.0 million; (b) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01; (c) any foreclosure sale of FF&E pursuant to a FF&E Financing; (d) any Restricted Payment permitted by Section 4.07 (other than for purposes of the calculation of the Consolidated Fixed Charge Coverage Ratio only, any non-cash Restricted Payment) or that constitutes a Permitted Investment; and (e) leases or subleases of real or personal property in the ordinary course of business on commercially reasonable terms to the extent that the Company determines that such property is immaterial and no longer necessary in the conduct of its business or such lease or sublease is to an operator of a restaurant, store or other enterprise within or adjacent to a casino facility of the Company or its Subsidiaries. "Bankruptcy Law" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute or any other United States federal, state or local law or the law of any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors, whether in effect on the date hereof or hereafter. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day that is not a Legal Holiday. "Capital Stock" means: (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person; and (2) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under 9 -3- GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means: (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250.0 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. "Change of Control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture), other than to the Permitted Holders or a Guarantor and other than a transaction where the holders of the Capital Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Capital Stock of the acquiring Person; (2) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); 10 -4- (3) any Person or Group (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company and at such time (i) the Permitted Holders together do not beneficially own, directly or indirectly, a greater percentage of the aggregate ordinary voting power of the Capital Stock of the Company than is beneficially owned by such other Person or Group and (ii) the Permitted Holders do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company; or (4) the replacement of a majority of the Board of Directors of the Company over a two-year period from the directors who constituted the Board of Directors of the Company at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved. "Clearstream" means Clearstream Banking, S.A. "Commission" means the Securities and Exchange Commission or any successor agency. "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Company" means Ameristar Casinos, Inc. and any and all successors thereto that become a party this Indenture in accordance with its terms. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of: (1) Consolidated Net Income; and (2) to the extent Consolidated Net Income has been reduced thereby: (a) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business); (b) Consolidated Interest Expense; (c) all preopening expenses of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP; 11 -5- (d) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP; and (e) development costs associated with the Company's unsuccessful bid for a gaming license in Lemay, Missouri and the costs of Missouri investigations and fines in each case paid or accrued prior to the Issue Date in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and (2) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act and determined without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income) attributable to the assets which are the subject of the Asset Acquisition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness (as determined under the definition of "Indebtedness"). 12 -6- Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio": (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (1) Consolidated Interest Expense; plus (2) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person and, to the extent permitted under this Indenture, its Restricted Subsidiaries (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (1) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation: (a) any amortization of debt discount and amortization or write-off of deferred financing costs; (b) the net costs under Interest Swap Obligations; (c) all capitalized interest; and (d) the interest portion of any deferred payment obligation; and (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom: (1) after-tax gains from Asset Sales (without regard to the $2.0 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto; (2) after-tax items classified as extraordinary or nonrecurring gains; 13 -7- (3) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Restricted Subsidiary of the referent Person; (4) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise; (5) the net income of any Person, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such Person; (6) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following December 31, 2000; (7) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); (8) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets; and (9) non-cash charges relating to compensation expense in connection with benefits provided under employee stock option plans, restricted stock option plans and other employee stock purchase or stock incentive plans. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to Disqualified Capital Stock of such Person. "Consolidated Non-cash Charges" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (including amortization of goodwill and other intangibles and excluding any such charges constituting an extraordinary item or loss or any such charge which requires an accrual of or a reserve for cash charges for any future period). "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means the Credit Agreement dated as of December 20, 2000, between the Company, the lenders party thereto in their capacities as lenders thereunder and Bankers 14 -8- Trust Company, as administrative agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by Section 4.09) or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Custodian" means any custodian, receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06, in the form of Exhibit A-1 except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Debt" means (1) Indebtedness under or in respect of the Credit Agreement and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount (available or committed) of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), on or prior to the final maturity date of the Notes. "Distribution Compliance Period" means as defined in Regulation S. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "Exchange Notes" means the notes to be issued in exchange for or upon transfer of the Initial Notes pursuant to the Exchange Offer or Shelf Registration Statements provided for in the Registration Rights Agreement. 15 -9- "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Debt" means the Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date. "fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith, whose determination shall be conclusive if evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Trustee. "FF&E Financing" means Indebtedness the proceeds of which will be used to finance the acquisition or lease by the Company or its Restricted Subsidiaries of furniture, fixtures or equipment ("FF&E") used in the operation of their business and secured by a Lien on such FF&E. "Futuresouth Royalty" means the royalty payments required to be made pursuant to the Asset Purchase and Sale Agreement, dated as of February 15, 2000, by and between Futuresouth, Southboat Lemay, Inc., Southboat Limited Partnership and Ameristar Casino St. Louis, Inc., as in effect on the Issue Date and without giving effect to any subsequent amendment, modification and supplement. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. "Gaming Authority" means any governmental authority with regulatory oversight of, authority to regulate or jurisdiction over any gaming businesses or enterprises, including, but not limited to, the Nevada State Gaming Control Board, the Nevada Gaming Commission, the Mississippi Gaming Commission, the Mississippi State Tax Commission, the Missouri Gaming Commission, the Iowa Racing and Gaming Commission and any agency established by a federally recognized Indian tribe to regulate gaming on such tribe's reservation with regulatory oversight of, authority to regulate or jurisdiction over any gaming operation (or proposed gaming operation) owned, managed or operated by the Company or any Subsidiary. "Gaming Regulations" shall mean the laws, rules, regulations and orders applicable to the casino and gaming businesses or activities of the Company or any of its Subsidiaries in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii) which is required to be placed on all Global Notes issued under this Indenture. 16 -10- "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A, issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f). "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and for the payment of which the United States pledges its full faith and credit. "Guarantee Obligations" shall mean, as to any Guarantor, all Obligations of every nature of such Guarantor from time to time owing to the Holders and the Trustee under the Notes (including its Guarantee). "Guarantor" means: (1) each of the Company's existing Subsidiaries and (2) each of the Company's Restricted Subsidiaries that in the future execute a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of this Indenture. "Guarantor Senior Debt" means, with respect to any Guarantor: the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of a Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (x) all monetary obligations of every nature of such Guarantor under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (y) all Interest Swap Obligations (and guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (1) any Indebtedness of such Guarantor to a Subsidiary of such Guarantor; (2) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of such Guarantor or any Subsidiary of such Guarantor (including, without 17 -11- limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Credit Agreement; (3) Indebtedness to trade creditors; (4) Indebtedness represented by Preferred Stock and Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by such Guarantor; (6) that portion of any Indebtedness incurred in violation of Section 4.09 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers' certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture); (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "Holder" or "Noteholder" means a Person in whose name a Note is registered. "IAI Global Note" means a global note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to an Institutional Accredited Investor. "incur" has the meaning set forth in Section 4.09 (and "incurrence," "incurred," "incurrable" and "incurring" shall have meanings correlative to the foregoing). "Indebtedness" means with respect to any Person, without duplication: (1) all Obligations of such Person for borrowed money; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all Obligations of such Person for the deferred purchase price of property or services (other than, to the extent deferred in the ordinary course of business, deferred payments in respect of services by employees) which remain unpaid more than 120 days after the due date therefor other than payments which are being contested in good faith; 18 -12- (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below; (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured; (8) all Interest Swap Obligations of such Person; and (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price at any time prior to its stated repurchase date, but excluding accrued dividends, if any. For purposes hereof, (1) the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock and (2) the principal amount of Indebtedness arising from royalty obligations representing the deferred purchase price of property or services shall equal the greater of (x) the principal amount thereof as determined in accordance with GAAP and (y) the present value of the amounts the management of the Company believes in good faith will be required to be paid under such royalty obligation; provided that in the case of the Futuresouth Royalty, the principal amount of such Indebtedness shall equal the present value of the greater of (x) the minimum royalty payments and (y) the amount actually paid in respect of the Futuresouth Royalty in respect of the most recently ended period. "Indenture" means this Indenture, as amended or supplemented from time to time. "Independent Financial Advisor" means a firm: (1) which does not, and whose directors, officers and employees or Affiliates do not, have any material direct or indirect financial interest in the Company; and (2) which, in the good faith judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means any Notes issued under this Indenture for so long as such securities constitute Restricted Securities. 19 -13- "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is not also a QIB. "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Restricted Subsidiary is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Issue Date" means February 2, 2001. "Issuers" means, collectively, the Company and the Guarantors. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, the city in which the principal corporate trust office of the Trustee is located or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "License Subsidiary" means each Subsidiary of the Company on the Issue Date and any future Subsidiary, in either case that holds any gaming license from any Gaming Authority requiring approval for the incurrence of Indebtedness of such Subsidiary or for the incurring of any Lien on the Capital Stock of such Subsidiary. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). 20 -14- "Maturity," when used with respect to any Note, means the date on which the principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise (including in connection with any offer to purchase that this Indenture requires the Company to make). "Missouri Stock Option Agreements" means the four Non-Qualified Stock Option Agreements dated as of December 18, 2000 between the Company on the one hand, and John Finamore, Troy Stremming, Thomas Burke and Anthony Raymon on the other hand, in each case as in effect on the Issue Date and without giving effect to any amendment, modification or supplement thereto. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayment of Indebtedness that is secured by the property or assets that are the subject of such Asset Sale; and (4) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained (or indemnified against) by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Non-U.S. Person" means a Person who is not a U.S. Person. "Note Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Notes" means, collectively, the Initial Notes and the Exchange Notes, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the documentation governing any such obligation. 21 -15- "Officer" means, with respect to any Person, the President, Chief Executive Officer, any Vice President, Chief Operating Officer, Treasurer, Secretary or the Chief Financial Officer of such Person. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Officers of such Person; provided, however, that every Officers' Certificate with respect to compliance with a covenant or condition provided for in this Indenture shall include (i) a statement that the Officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Indenture relating thereto and (ii) a statement at to whether, in the opinion of the signers, such conditions has been complied with. "144A Global Note" means a global note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee that meets the requirements of Sections 13.04 and 13.05. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Pari Passu Indebtedness" means Indebtedness that is not (1) Senior Debt or (2) expressly subordinated in right of payment to the Notes. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Participating Broker-Dealer" means any broker-dealer that is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer. "Permitted Holders" shall mean and include (i) Craig H. Neilsen or Ray Neilsen, their respective estates, spouses, heirs, ancestors, lineal descendants, legatees, legal representatives or the trustee of any bona fide trust in which no one other than the foregoing has any interest, (ii) any entity controlled, directly or indirectly, by any of the foregoing referred to in the previous clause (i), whether through the ownership of voting securities, by contract or otherwise, and (iii) Craig H. Neilsen or Ray Neilsen (a) in their respective capacity as a trustee under a revocable trust in which no one other than the persons and entities listed in the foregoing clause (i) has any interest, together with each successor trustee thereof, or (b) as the executor of the estate of Gwendolyn Anderson or of any Person named in clause (i). "Permitted Indebtedness" means, without duplication, each of the following: (1) the Indebtedness incurred on the Issue Date in respect of the Notes, this Indenture and the Guarantees (including the Exchange Notes (and the guarantees of such Exchange Notes) issued in exchange therefor pursuant to the Exchange Offer relating to the Notes issued on the Issue Date); 22 -16- (2) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $475.0 million less the amount of all permanent repayments actually made (which are accompanied by a corresponding permanent commitment reduction) thereunder as a result of the application of the Net Cash Proceeds of any Asset Sale; (3) the Existing Debt reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (4) Interest Swap Obligations of the Company or any Restricted Subsidiary of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided, however, that such Interest Swap Obligations are entered into to protect the Company and its Restricted Subsidiaries from fluctuations in interest rates on their outstanding Indebtedness to the extent the notional principal amount of such Interest Swap Obligation does not, at the time of the incurrence thereof, exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates; (5) Indebtedness of a Restricted Subsidiary of the Company to the Company or a Guarantor for so long as such Indebtedness is held by the Company or a Guarantor, in each case subject to no Lien held by a Person other than the Company, a Guarantor or the Representative acting on behalf of the lenders under the Credit Agreement; provided that if as of any date any Person other than the Company, a Guarantor or the Representative acting on behalf of the lenders under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (6) Indebtedness of the Company to a Guarantor for so long as such Indebtedness is held by a Guarantor, subject to no Lien held by any Person other than a Guarantor or the Representative acting on behalf of the lenders under the Credit Agreement; provided that if as of any date any Person other than a Guarantor or the Representative acting on behalf of the lenders under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company; (7) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within three business days of notice of incurrence; (8) Indebtedness of the Company or any of its Restricted Subsidiaries in respect of bankers' acceptances, workers' compensation claims, appeal bonds, payment obligations in connection with self-insurance or similar obligations, deferred compensation to employees and bank overdrafts (and letters of credit in respect thereof), in each case in the ordinary course of business; 23 -17- (9) Indebtedness of the Company or any of its Restricted Subsidiaries incurred solely in respect of performance, surety and similar bonds or completion guarantees, to the extent that such incurrence does not result in the incurrence of any obligation for the payment of borrowed money of others; (10) Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business (including any refinancing thereof) not to exceed $30.0 million in the aggregate at any one time outstanding represented by (A) Capitalized Lease Obligations and (B) FF&E Financing and Purchase Money Indebtedness; (11) Refinancing Indebtedness; (12) the guarantee by the Company or any Guarantor of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this definition (other than Indebtedness that is subordinate or junior in right of payment to the Notes); and (13) Indebtedness under the Futuresouth Royalty; and (14) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $10.0 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Credit Agreement). For purposes of determining compliance with Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such covenant, the Company shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with this defini tion. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of Section 4.09. "Permitted Investments" means: (1) Investments by the Company or any Restricted Subsidiary of the Company in any Person that is or will become immediately after such Investment a Restricted Subsidiary of the Company engaged in a Permitted Line of Business or that will merge or consolidate into the Company or a Restricted Subsidiary of the Company engaged in a Permitted Line of Business; (2) Investments in the Company by any Guarantor; (3) investments in cash and Cash Equivalents; 24 -18- (4) loans and advances to employees and officers of the Company and its Restricted Subsidiaries (or guarantees of third party loans to employees and officers) in the ordinary course of business for bona fide business purposes not in excess of $2.5 million at any one time outstanding; (5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Indenture; (6) Investments in entities engaged or to be engaged in Permitted Lines of Business in an amount not to exceed $10 million in the aggregate at any one time outstanding; (7) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers in good faith settlement of delinquent obligations of such trade creditors or customers; (8) Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.10 or in connection with any disposition of assets not constituting an Asset Sale; and (9) the redemption, repurchase, retirement, defeasance or other acquisition of any Senior Debt, any Guarantor Senior Debt or the Notes. "Permitted Liens" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on their books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums that are not yet delinquent, are bonded or are being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with industry practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) judgment Liens not giving rise to an Event of Default; 25 -19- (5) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation; (7) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (8) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (9) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (10) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (11) Liens securing Indebtedness permitted pursuant to clause (10)(A) of the definition of "Permitted Indebtedness"; provided, however, that the Indebtedness shall not be se cured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property or assets subject to such initial Capitalized Lease Obligation; (12) Liens securing Indebtedness permitted pursuant to clause (10)(B) of the definition of "Permitted Indebtedness"; provided, however, that (a) the Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired, installed, constructed or improved and (b) the initial Lien securing such Indebtedness shall be created within 180 days of such acquisition, installation, construction or improvement or, in the case of a refinancing of any such Indebtedness, within 180 days of such refinancing; (13) Liens securing Refinancing Indebtedness permitted to be incurred under this Indenture or amendments or renewals of Liens that were permitted to be incurred, provided, in each case, that such Liens do not extend to any additional property or asset that did not secure the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or that did not secure the Indebtedness affected by such amendment or renewal; (14) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to aggregate obligations that do not exceed $1,000,000 at any one time outstanding; and 26 -20- (15) Liens securing Acquired Indebtedness incurred in accordance with Section 4.09; provided that: (a) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; and (b) such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and, when considered as a whole, are not materially more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company. "Permitted Lines of Business" means, with respect to any Person, any casino gaming business of such Person (whether owned, leased or managed by such Person) or any business that is related to, ancillary to or supportive of, connected with or arising out of the gaming business of such Person (including, without limitation, developing and operating lodging, dining, amusement, sports or entertainment facilities, transportation services or other related activities or enterprises and any additions or improvements thereto). "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Public Equity Offering" means an underwritten public offering of Qualified Capital Stock of the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act. "Purchase Money Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. 27 -21- "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any Restricted Subsidiary of the Company of Indebtedness incurred in accordance with Section 4.09 (other than pursuant to clause (2), (4), (5), (6), (7), (8), (9), (12), (13) or (14) of the definition of "Permitted Indebtedness"), in each case that does not: (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing); or (2) create Indebtedness with: (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced; or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness being Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the Issue Date by and among the Company, the Guarantors, and the initial purchasers named therein, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof or any other Registration Rights Agreement with similar terms entered into in connection with the issuance of Additional Notes. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Distribution Compliance Period. "Regulation S Temporary Global Note" means a temporary global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend, the Private Placement Legend and the Regula- 28 -22- tion S Temporary Global Note Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Regulation S Temporary Global Note Legend" means the legend set forth in Section 2.06(g)(iii) which is required to be placed on all Regulation S Temporary Global Notes issued under this Indenture. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Responsible Trust Officer" means, when used with respect to the Trustee, any director, principal, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer within the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also shall mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property. "Securities Act" means the Securities Act of 1933, as amended. 29 -23- "Senior Debt" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (1) all monetary obligations of every nature of the Company under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and (2) all Interest Swap Obligations (and guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (1) any Indebtedness of the Company to a Subsidiary of the Company; (2) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Credit Agreement; (3) Indebtedness to trade creditors; (4) Indebtedness represented by Preferred Stock and Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by the Company; (6) that portion of any Indebtedness incurred in violation of Section 4.09 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers' certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company; and 30 -24- (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary", with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Exchange Act. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Station" shall mean Station Casinos, Inc., a Nevada corporation. "Subsidiary", with respect to any Person, means: (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Sections 77aaa-77bbbb). "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. 31 -25- "Unrestricted Subsidiary" of any Person means: (1) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary), other than Ameristar Casino Council Bluffs, Inc., Ameristar Casino Vicksburg, Inc., Ameristar Casino Kansas City, Inc., Ameristar Casino St. Charles, Inc. and Cactus Pete's, Inc., to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that: (1) the Company certifies to the Trustee that such designation complies with Section 4.07; and (2) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (1) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.09; and (2) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. 32 -26- "Wholly Owned Restricted Subsidiary" of any Person means any Wholly Owned Subsidiary of such Person which at the time of determination is a Restricted Subsidiary of such Person. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person of which all the outstanding voting securities (other than in the case of a foreign Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person. 33 -27- SECTION 1.02. Other Definitions.
Defined in Term Section "Acceleration Notice" .................................................. 6.02 "Additional Notes" ..................................................... 2.02 "Affiliate Transaction"................................................. 4.11 "Applicable Date"....................................................... 4.19 "Change of Control Date"................................................ 4.15 "Change of Control Offer"............................................... 4.15 "Covenant Defeasance"................................................... 8.03 "DTC"................................................................... 2.03 "Event of Default"...................................................... 6.01 "Funding Guarantor"..................................................... 11.07 "Guarantee"............................................................. 11.01 "Legal Defeasance"...................................................... 8.02 "Liquor Laws"........................................................... 13.14 "Net Proceeds Offer".................................................... 4.10 "Net Proceeds Offer Amount"............................................. 4.10 "Net Proceeds Offer Payment Date"....................................... 4.10 "Net Proceeds Offer Trigger Date"....................................... 4.10 "Non-payment Default"................................................... 10.02 "Offer Payment Date".................................................... 4.15 "Offer Period".......................................................... 3.09 "Paying Agent".......................................................... 2.03 "Payment Blockage Notice"............................................... 10.02 "Payment Blockage Period"............................................... 10.02 "Payment Default"....................................................... 10.02 "Purchase Date"......................................................... 3.09 "Reference Date"........................................................ 4.07 "Registrar"............................................................. 2.03 "Replacement Assets".................................................... 4.10 "Restricted Payment".................................................... 4.07 "Surviving Entity"...................................................... 5.01
SECTIO8N 1.03. Trust Indenture Act Definitions. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; 34 -28- "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time. ARTICLE 2 THE NOTES SECTION 2.01. Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound 35 -29- thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A-1 or A-2 (including the Global Note Legend thereon). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 (but without the Global Note Legend thereon). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Distribution Compliance Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Distribution Compliance Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(g)(i)), and (ii) an Officers' Certificate from the Company. Following the termination of the Distribution Compliance Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Cedel Bank (as adopted by Clearstream) and any alternative or additional procedures from time to time adopted by Euroclear or Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream. 36 -30- SECTION 2.02. Execution and Authentication. One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate Notes for original issue from time to time in one or more series upon a written order of the Company in the form of an Officers' Certificate. Each such written order shall specify the amount of Notes to be authenticated, whether the Notes are to be Initial Notes or Exchange Notes and whether the Notes are to be issued as Definitive Notes or Global Notes or such other information as the Trustee shall reasonably request. After the Issue Date, any additional amount of Notes issued from time to time (other than the Exchange Notes) ("Additional Notes") shall be subject to Section 4.09 and shall have terms substantially identical in all material respects to the Notes issued on the Issue Date. The Notes shall be issued only in fully registered form, without coupons and only in denominations of $1,000 and any integral multiple thereof. All Notes issued under this Indenture shall vote and consent together on all matters as one class and no series of Notes will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. 37 -31- The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest (including Additional Interest, if any) on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Trustee receives notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10. Except as provided in this Section 2.06(a) and in Section 2.06(b)(ii) and Section 2.06(c) for the exchange or transfer of Global Notes for Defini- 38 -32- tive Notes, every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f). (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Depositary either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Regis trar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f), the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter 39 -33- of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h). (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal or via the Depositary's book-entry system that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 40 -34- (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of a written authentication order in accordance with Section 2.02, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C, including the certifications in item (2)(a) thereof; 41 -35- (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h), and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 2.06(c)(i)(A) and (C), a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the 42 -36- case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii), the Trustee shall cause the aggregate principal 43 -37- amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h), and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(b) thereof; or 44 -38- (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. 45 -39- Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of a written authentication order in accordance with Section 2.02, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. 46 -40- (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial inter- 47 -41- ests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amounts. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN "ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO AMERISTAR OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSAC- 48 -42- TION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF AMERISTAR SO REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND AMERISTAR SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." 49 -43- (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount at maturity of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05). (iii) The Registrar shall not be required (A) to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 3.03 and ending at the close of business on such day, or (B) to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the 50 -44- Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 3.03 and ending at the close of business on such day, or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. (ix) Any transfer of any Note shall be made only in compliance with applicable Gaming Regulations. SECTION 2.07. Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and he Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of a written authentication order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its reasonable out-of-pocket expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof and those described in 51 -45- this Section as not outstanding. Except as set forth in Section 2.09, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10. Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of a written authentication order pursuant to Section 2.02, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation. Certification of the destruction of all canceled Notes shall be delivered to the Company. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. 52 -46- SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or the omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. In the event that the Company shall issue and the Trustee shall authenticate any Notes issued under this Indenture subsequent to the Issue Date pursuant to the fourth paragraph of Section 2.02, the Company shall use its best efforts to obtain the same "CUSIP" number for such Notes as is printed on the Notes outstanding at such time. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date an Officers' Certificate setting forth (i) the clause of Section 3.07 pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the redemption price, (iv) the CUSIP numbers of the Notes to be redeemed and (v) that such redemption will comply with the conditions contained in this Article 3. 53 -47- SECTION 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. No Notes of a principal amount of $1,000 or less shall be redeemed in part. Notwithstanding the foregoing, if less than all of the Notes are to be redeemed pursuant to Section 3.07(b) or purchased pursuant to Section 3.09, the Trustee shall select the Notes to be redeemed among the Holders of the Notes on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures and the requirements of the principal national securities exchange, if any, on which the Notes are listed). In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000. The provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 and Section 3.10, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first-class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed, including CUSIP numbers, and shall state: (a) the redemption date; (b) the redemption price and the amount of accrued and unpaid interest, if any, to be paid; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; 54 -48- (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date and the only remaining right of the Holders is to receive payment of the redemption price upon surrender of the applicable Note to the Paying Agent; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. Deposit of Redemption Price. On or before 10:00 a.m. New York City time on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption unless the payment thereof is prohibited by the provisions of Article 10. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01. 55 -49- SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. Optional Redemption. (a) Except as provided in paragraph (b) below, the Notes are not redeemable before February 15, 2006. Thereafter, the Company may redeem the Notes at its option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount thereof) set forth below plus accrued and unpaid interest and Additional Interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period commencing on February 15 of the years set forth below:
Percentage of Principal Year Amount ---- ------------ 2006..................................................... 105.375% 2007..................................................... 102.688% 2008 and thereafter...................................... 100.000%
(b) Notwithstanding the foregoing, at any time, or from time to time, on or prior to February 15, 2004, the Company may, at its option, use the net cash proceeds from one or more Public Equity Offerings to redeem up to 35% of the principal amount of the Notes issued under this Indenture at a redemption price of 110.75% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided that (i) at least 65% of the principal amount of Notes issued under this Indenture on the Issue Date remains outstanding immediately after any such redemption; and (ii) the Company makes such redemption not more than 90 days after the consummation of any such Public Equity Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06. SECTION 3.08. Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. SECTION 3.09. Offer to Purchase by Application of Net Proceeds Offer Amount. In the event that the Company shall be required to commence a Net Proceeds Offer pursuant to Section 4.10, it shall follow the procedures specified below. 56 -50- The Net Proceeds Offer shall remain open for a period of 20 Business Days following its commencement or such longer period as may be required by applicable law (the "Offer Period"). No later than the date of the termination of the Offer Period (the "Purchase Date"), the Company shall purchase an amount of Notes (and, to the extent required by the terms of any Pari Passu Indebtedness, an amount of Pari Passu Indebtedness, on a pro rata basis) equal to the Net Proceeds Offer Amount except as provided in Section 3.02 or, if Notes in an aggregate principal amount less than the Net Proceeds Offer Amount (less the portion of the Net Proceeds Offer Amount required to be used to repurchase Pari Passu Indebtedness) have been tendered, all Notes validly tendered in response to the Net Proceeds Offer. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Net Proceeds Offer. Upon the commencement of an Net Proceeds Offer, the Company shall send, by first-class mail, a notice of such Net Proceeds Offer to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Net Proceeds Offer. The Net Proceeds Offer shall be made to all Holders. The notice, which shall govern the terms of the Net Proceeds Offer, shall state: (a) that the Net Proceeds Offer is being made pursuant to this Section 3.09 and Section 4.10 and the length of time the Net Proceeds Offer shall remain open; (b) the Net Proceeds Offer Amount, the purchase price and the Purchase Date; (c) the aggregate amount of Pari Passu Indebtedness to which an offer comparable to the Net Proceeds Offer is being made and that, if the Holders properly tendering Notes and the holders of Pari Passu Indebtedness properly tender such Indebtedness in an amount exceeding the Net Proceeds Offer Amount, the tendered Notes and the tendered Pari Passu Indebtedness will be purchased on a pro rata basis on the amount of Notes and such Indebtedness tendered. (d) that any Note not validly tendered or accepted for payment shall continue to accrue interest; (e) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Purchase Date and the only remaining right of the Holder is to receive payment of the purchase price upon surrender of the applicable Note to the Paying Agent; (f) that Holders electing to have a portion of a Note purchased pursuant to an Net Proceeds Offer may only elect to have such Note purchased in integral multiples of $1,000; (g) that Holders electing to have a Note purchased pursuant to any Net Proceeds Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect 57 -51- Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (h) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the third Business Day before the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (i) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Net Proceeds Offer Amount (less the portion of the Net Proceeds Offer Amount required to be used to repurchase Pari Passu Indebtedness), the Company shall select the Notes to be purchased on a pro rata basis (based on amounts tendered and with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (j) that Holders whose Notes were purchased only in part shall be issued a new Note or Notes in principal amount equal to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) in the name of the Holder thereof upon cancellation of the original Note. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary and, except as provided in Section 3.02, an amount of Notes or portions thereof validly tendered pursuant to the Net Proceeds Offer equal to the Net Proceeds Offer Amount (less the portion of the Net Proceeds Offer Amount required to be used to repurchase Pari Passu Indebtedness), or if less than the Net Proceeds Offer Amount attributed to the Notes has been validly tendered, all Notes or portions thereof validly tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Net Proceeds Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 and Section 4.10 shall be made pursuant to the provisions of Sections 3.01 through 3.06. To the extent that the provisions of any securities laws or regulations conflict with this Section 3.09 or Section 4.10, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 3.09 or Section 4.10. 58 -52- SECTION 3.10. Redemption Based upon Gaming Laws. Notwithstanding any other provision of this Indenture, if any Gaming Authority requires that a holder or beneficial owner of Notes must be licensed, qualified, found suitable or otherwise obtain any approval, consent, permit or finding under any applicable gaming law and such holder or beneficial owner (i) fails to apply therefor within 30 days (or such shorter period as may be required by the applicable Gaming Authority) after being requested to do so by the Gaming Authority or (ii) is denied such license or qualification or not found suitable or denied such other approval, consent, permit or finding, or otherwise fails to qualify under applicable Gaming Regulations, the Company shall have the right, at its option: (A) to require any such holder or beneficial owner to dispose of its Notes within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of receipt of such notice or finding by such Gaming Authority or other failure to qualify under applicable Gaming Regulations, or (B) to call for the redemption of the Notes of such holder or beneficial owner at a redemption price equal to (a) the least of: (1) the principal amount thereof, together with accrued interest and Additional Interest, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability or of the denial of such other approval, consent, permit or finding by such Gaming Authority or other failure to qualify under applicable Gaming Regulations, (2) the price at which such holder or beneficial owner acquired the Notes, together with accrued interest and Additional Interest, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability or of the denial of such other approval, consent, permit or finding by such Gaming Authority or other failure to qualify under applicable Gaming Regulations, and (3) the fair market value of the Notes to be redeemed on the date of redemption; or (b) such other amount as may be required by applicable law or order of such Gaming Authority. The Company shall notify the Trustee in writing of any such redemption as soon as practicable. The holder or beneficial owner applying for a license, qualification or a finding of suitability, or for any other approval, consent, permit or finding must pay all costs of the licensure or investigation for such qualification or finding of suitability. 59 -53- Other than as specifically provided in this Section 3.10, any purchase pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.01 through 3.06. ARTICLE 4 COVENANTS SECTION 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal amount, premium, if any, and interest and Additional Interest, if any, on the Notes on the dates and in the manner provided in the Notes. Principal amount, premium, if any, and interest and Additional Interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal amount, premium, if any, and interest and Additional Interest, if any, then due unless the provisions of Article 10 hereof prohibit such payment. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. 60 -54- The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03. Reports to Holders. Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish the Holders of Notes: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including: (a) a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, ) either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company, if any), (b) information with respect to the net revenues, EBITDA and operating income for each of the Company's principal operating subsidiaries and (c) with respect to the annual information only, a report thereon by the Company's certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case within the time periods specified in the Commission's rules and regulations. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.04. Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and 61 -55- what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. Payment of Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06. Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock; (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or a Guarantor that is subordinate or junior in right of payment to the Notes or a guarantee of the Notes 62 -56- (except for the purchase, defeasance, redemption, prepayment or other acquisition of such subordinate or junior Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (4) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"); if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing; or (ii) the Company is not able to incur at least $1. 00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.09; or (iii) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date shall exceed the sum of: (v) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to December 31, 2000 and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (w) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company or warrants, options or other rights to acquire Qualified Capital Stock of the Company (but excluding any debt security that is convertible into, or exchangeable for, Qualified Capital Stock and excluding any net cash proceeds from a Public Equity Offering to the extent used to redeem the Notes in compliance with Section 3.07(b)); plus (x) the aggregate principal amount (or accreted value, if less) of Indebtedness of the Company issued since the Issue Date (other than Indebtedness issued to or held by a Subsidiary) that has been converted into Qualified Capital Stock (other than Capital Stock issued or sold to a Subsidiary); (y) without duplication of any amounts included in clause (iii)(w) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding any net cash proceeds from a Public Equity Offering to the extent used to redeem the Notes in compliance with Section 3.07(b)); plus 63 -57- (z) without duplication, the sum of: (1) the aggregate amount returned in cash on or with respect to Investments (other than Permitted Investments) made subsequent to the Issue Date whether through interest payments, principal payments, dividends or other distributions or payments; (2) the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition of all or any portion of such Investments (other than to a Subsidiary of the Company); and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary; provided, however, that the sum of clauses (1), (2) and (3) above shall not exceed the aggregate amount of all such Investments made subsequent to the Issue Date. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (a) shares of Qualified Capital Stock of the Company or (b) Refinancing Indebtedness; (4) if no Default or Event of Default exists or would result therefrom, (A) the Company may pay amounts required for any repurchase, redemption or other acquisition for value of any capital stock or options to acquire capital stock of the Company held by any director, officer, employee or consultant of the Company or any of its Subsidiaries pursuant to any equity subscription agreement or stock option agreement or similar agreement, or otherwise upon their death, disability, retirement or termination of employment or departure from the board of directors of the Company (provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired capital stock and options (other than payments described in clause (4)(B)) shall not exceed (x) $2.0 million in any twelve-month period or (y) 64 -58- $5.0 million in the aggregate from and after the Issue Date) and (B) the Company may pay amounts required under the Missouri Stock Option Agreements in effect on the Issue Date if the trading market for the common stock of the Company is not sufficiently liquid as provided therein in an aggregate amount not to exceed $3.75 million in each of the four calendar years commencing with calendar year 2001; provided that unused amounts may be carried forward to succeeding years through the maturity date of the Notes; (5) the redemption or repurchase of any Capital Stock or Indebtedness of the Company, including the Notes, if required by any Gaming Authority or if determined, in the good faith judgment of the Board of Directors, to be necessary to prevent the loss or to secure the grant or reinstatement of any gaming license or other right to conduct lawful gaming operations; and (6) Restricted Payments in an amount not to exceed $10.0 million in the aggregate. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, amounts expended pursuant to clauses (1), (2)(ii), (3)(ii)(a), (4), (5) (to the extent any payment under clause (5) would have constituted a Restricted Payment) and (6) shall be included in such calculation. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. SECTION 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to: (1) pay dividends or make any other distributions on or in respect of its Capital Stock; (2) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (3) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (a) applicable law, including restrictions imposed by applicable gaming laws or any applicable Gaming Authority; (b) the Notes, the Guarantees and this Indenture; 65 -59- (c) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary of the Company; (d) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries or the properties or assets of the Person so acquired; (e) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date, including the Credit Agreement; (f) the provisions of security or pledge agreements or mortgages (or similar agreements) granting a Permitted Lien or restricting transfers of the assets secured thereby; (g) FF&E Financing, Purchase Money Indebtedness or Capitalized Lease Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (3) above on the property so acquired; or (h) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (b), (d), (e), (f) or (g) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are not less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (b), (d), (e), (f) or (g). SECTION 4.09. Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company or any of its Restricted Subsidiaries that is or, upon such incurrence, becomes a Guarantor may incur Indebtedness (including, without limitation, Acquired Indebtedness) and any Restricted Subsidiary of the Company that is not or will not, upon such incurrence, become a Guarantor may incur Acquired Indebtedness, in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0. SECTION 4.10. Limitation on Asset Sales. The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly consummate an Asset Sale unless: (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of 66 -60- the assets or Capital Stock sold or issued or otherwise disposed of (as determined in good faith by the Company's Board of Directors); (2) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; provided that, for purposes of this clause (2) the following will be considered "cash" or "Cash Equivalents": (a) any Senior Debt or Guarantor Senior Debt that is assumed by the transferee of any such assets, to the extent the Company or such Restricted Subsidiary is released from any further liability; and (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 30 days after receipt; (3) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds (excluding amounts received and considered as "cash" or "Cash Equivalents" pursuant to clause (2)(a) above) relating to such Asset Sale within 365 days of receipt thereof either: (a) to repay any Senior Debt or Guarantor Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility; (b) to make an investment in properties and assets that replace the properties and assets that were the subject of such Asset Sale, in the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of such investment and that is engaged primarily in a Permitted Line of Business or in properties and assets that will be used by the Company and its Restricted Subsidiaries in a Permitted Business ("Replacement Assets"); and/or (c) a combination of prepayment and investment permitted by the foregoing clauses (3)(a) and (3)(b). Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in any manner that is not prohibited by this Indenture. On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a), (3)(b) and 3(c) of the preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and 3(c) of the preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by the Company or such Restricted Subsidiary to make an offer (the "Net Proceeds Offer") to all holders of Notes pursuant to Section 3.09 and, to the extent required by the 67 -61- terms of any Pari Passu Indebtedness, an offer to purchase to all holders of such Pari Passu Indebtedness, on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders (and holders of any such Pari Passu Indebtedness) on a pro rata basis, that amount of Notes (and Pari Passu Indebtedness) equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount thereof to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10.0 million, shall be applied as required pursuant to this paragraph). Notwithstanding the first two paragraphs of this covenant, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent that: 1. at least 75% of the consideration for such Asset Sale constitutes Replacement Assets; and 2. such Asset Sale is for fair market value; provided that any consideration not constituting Replacement Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the first two paragraphs of this covenant. In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under Section 5.01, which transaction does not constitute a Change of Control, the successor corporation shall be deemed to have sold the properties and assets of the Company and its Restricted Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant (other than the first paragraph of this covenant) with respect to such deemed sale as if it were an Asset Sale. In addition, the fair market value of such properties and assets of the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this covenant. Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in Section 3.09. Upon completion of a Net Proceeds Offer (including payment of the purchase price for Notes duly tendered) the Net Cash Proceeds that were the subject to such offer shall cease to be Net Cash Proceeds and the Company or Res 68 -62- tricted Subsidiary that engaged in the Asset Sale, as applicable, may use the remaining Net Cash Proceeds for general corporate purposes. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.10 or Section 3.09, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.10 or Section 3.09 by virtue thereof. SECTION 4.11. Limitation on Transactions with Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under the third paragraph of this covenant and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $2.0 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined in its good faith judgment that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $10.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. The restrictions set forth in the first and second paragraphs of this covenant shall not apply to: (1) reasonable fees and compensation paid to, indemnity provided on behalf of, and any benefits provided pursuant to any employee benefit plan or any similar arrangement (including any option or stock purchase plan) on behalf of, officers, directors, employees or consultants of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (2) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries; provided that such transactions are not otherwise prohibited by this Indenture and; provided, further, in 69 -63- each case, that no Affiliate of the Company (other than another Restricted Subsidiary or a director owning qualifying shares) owns Capital Stock of any such Restricted Subsidiary; (3) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (4) loans or advances to officers or employees of the Company or any Restricted Subsidiary made in the ordinary course of business of the Company or such Restricted Subsidiary in accordance with the past practice of the Company; provided that any such loan in excess of $250,000 must be approved by a majority of the members of the Board of Directors who are disinterested in the transaction; (5) Restricted Payments permitted by this Indenture; and (6) the issuance of Qualified Capital Stock. SECTION 4.12. Limitation on Liens. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens, in each case until such time as such Liens no longer secure other Indebtedness or obligations; and (2) in all other cases, the Notes are equally and ratably secured, in each case until such time as such Liens no longer secure other Indebtedness or obligations, except for: (a) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (b) Liens securing Senior Debt and Liens securing Guarantor Senior Debt; (c) Liens securing the Notes and the Guarantees; (d) Liens of the Company or a Guarantor on assets of any Restricted Subsidiary of the Company; 70 -64- (e) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens: (i) are not materially less favorable to the Holders and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced; and (ii) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (g) Permitted Liens. SECTION 4.13. Conduct of Business. The Company and its Restricted Subsidiaries will not engage in any businesses other than Permitted Lines of Business. SECTION 4.14. Corporate Existence. Subject to Article 5 and Section 11.06, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.15. Offer to Repurchase upon Change of Control. (a) Upon the occurrence of a Change of Control (the date of such occurrence, the "Change of Control Date"), each Holder shall have the right to require the purchase of all or a portion of such Holder's Notes pursuant to an offer to purchase (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof plus accrued interest thereon to the date of purchase. Prior to the mailing of the notice to the Holders and the Trustee provided for in paragraphs (b) and (c) below but in any event within 30 days following any Change of Control, the Company hereby covenants to (i) repay in full and terminate all commitments under Indebtedness under the Credit Agreement and all other Senior Debt the terms of which require repayment upon a Change of Control (or that prohibits a Change of Control Offer) or to offer to repay in full and terminate all commitments under all Indebtedness under the Credit Agreement and all other such Senior Debt and to repay the Indebtedness of each lender which has accepted such offer or (ii) obtain the requisite consents under the Credit Agreement and all other such Senior Debt to permit the repurchase of the Notes as provided for in paragraph (d) below. The Company shall first comply with the covenant in the imme- 71 -65- diately preceding sentence before it shall be required to repurchase the Notes pursuant to this Section 4.15. (b) The notice to the Holders and the Trustee shall contain all instructions and materials necessary to enable the Holders to tender Notes pursuant to the Change of Control Offer. The notice will govern the terms of the Change of Control Offer. (c) Within 30 days following the Change of Control Date the Company shall send, by first class mail, a notice to the Holders and the Trustee stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes validly tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be a Business Day that is no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Offer Payment Date") other than as may be required by law; (3) that any Note not tendered will continue to accrue interest; (4) that any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Offer Payment Date unless the Company shall default in the payment of the purchase price of the Notes and the only remaining right of the Holder is to receive payment of the purchase price upon surrender of the applicable Note to the Paying Agent; (5) that Holders electing to have a portion of a Note purchased pursuant to a Change of Control Offer may only elect to have such Note purchased in integral multiples of $1,000; (6) that if a Holder elects to have a Note purchased pursuant to the Change of Control Offer it will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Offer Payment Date; (7) that a Holder will be entitled to withdraw its election if the Company or the Trustee receives, not later than the third Business Day preceding the Offer Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes such Holder delivered for purchase, and a statement that such Holder is withdrawing its election to have such Note purchased; (8) that if Notes are purchased only in part a new Note of the same type will be issued in principal amount equal to the unpurchased portion of the Notes surrendered; and (9) that Holders whose Notes were purchased only in part shall be issued a new Note or Notes in principal amount equal to the unpurchased portion of the Notes surrendered 72 -66- (or transferred by book-entry transfer) in the name of the Holder upon cancellation of the original Note. (d) On or before the Offer Payment Date, the Company shall, to the extent lawful, accept for payment, all Notes or portions thereof validly tendered pursuant to the Change of Control Offer, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.15. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Offer Payment Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Change of Control Offer on the Offer Payment Date. (e) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes pursuant to an offer hereunder. To the extent the provisions of any securities laws or regulations conflict with the provisions under this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. (f) The Company is not required to make a Change of Control Offer upon a Change of Control if a third party (i) makes the Change of Control Offer in the manner and at the time and otherwise in compliance with the terms of this Section, and (ii) purchases all Notes validly tendered and not withdrawn under the Change of Control Offer. SECTION 4.16. Prohibition on Incurrence of Senior Subordinated Debt. The Company will not, and will not permit any Restricted Subsidiary that is a Guarantor to, directly or indirectly incur or suffer to exist any Indebtedness that by its terms would rank senior in right of payment to the Notes or any Guarantee, as the case may be, and would rank subordinate in right of payment to any other Indebtedness of the Company or such Guarantor, as the case may be. SECTION 4.17. Additional Subsidiary Guarantees. If the Company or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Restricted Subsidiary that is not a Guarantor, or if the Company or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Restricted Subsidiary having total assets with a book value in excess of $500,000, then, such transferee or acquired or other Restricted Subsidiary shall: (1) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall uncondi- 73 -67- tionally guarantee all of the Company's obligations under the Notes and this Indenture on the terms set forth in this Indenture; and (2) deliver to the Trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture. SECTION 4.18. Limitation on Preferred Stock of Restricted Subsidiaries. The Company will not permit any of its Restricted Subsidiaries that are not Guarantors to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company that is not a Guarantor. SECTION 4.19. Gaming Approvals. Restrictions on the transfer of the Capital Stock of the Company's License Subsidiaries licensed in Nevada, Missouri, Iowa, Mississippi or other jurisdictions, and agreements not to encumber such Capital Stock, in each case, in respect of the Notes, are not effective without the prior approval of the applicable Gaming Authorities. No License Subsidiary will be subject to such restrictions until the earlier of such time (the "Applicable Date") as (1) prior approval of such restrictions with respect to such License Subsidiary is received from the applicable Gaming Authorities or (2) a registered public offering of the notes is made pursuant to a prior approval of the applicable Gaming Authorities of such offering that includes a prior approval of such restrictions with respect to such License Subsidiary. Such prior approval has been obtained with respect to the Company's Licensed Subsidiaries in Missouri, Iowa and Mississippi as of the Issue Date. The Company will use commercially reasonable efforts to cause the Applicable Date to occur for each other License Subsidiary at the earliest practicable time. ARTICLE 5 SUCCESSORS SECTION 5.01. Merger, Consolidation and Sale of Assets. The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Company's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: 74 -68- (1) either: (a) the Company shall be the surviving or continuing corporation; or (b) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"): (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (y) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, (a) shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction and (b) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.09; (3) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (4) the Company or the Surviving Entity shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company the Capital Stock of which constitutes all or sub- 75 -69- stantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Any merger or consolidation of a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only comply with clause (4) of this Section 5.01. SECTION 5.02. Successor Corporation Substituted. Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such surviving entity had been named as such, and the Company shall be released from the obligations under the Notes and this Indenture except in the case of a lease of the Company's assets and except with respect to any obligations under the Notes and this Indenture that arise from, or related to, such transaction. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. "Events of Default" are: (a) the failure to pay interest on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by Articles 10 or 12); (b) the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by Articles 10 or 12); (c) a default in the observance or performance of any other covenant or agreement contained in this Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to Section 5.01, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); (d) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Re- 76 -70- stricted Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration), if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated (in each case with respect to which the 20-day period described above has elapsed), aggregates $10.0 million or more at any time; (e) one or more judgments in an aggregate amount in excess of $10.0 million shall have been rendered against the Company or any of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; (f) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of Bankruptcy laws: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of the property of the Company or any of its Significant Subsidiaries; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days; (h) any Guarantee of a Significant Subsidiary ceases to be in full force and effect or any Guarantee of a Significant Subsidiary is declared to be null and void and unenforceable or any Guarantee of a Significant Subsidiary is found to be invalid or any Guarantor that is a Significant Subsidiary denies its liability under its Guarantee (other than by reason of release of a Guarantor in accordance with the terms of the Indenture); or 77 -71- (i) any gaming license of the Company or any of its Restricted Subsidiaries is revoked, terminated or suspended or otherwise ceases to be effective, resulting in the cessation or suspension of operation for a period of more than 90 days of the casino business of any casino owned, leased or operated directly or indirectly by the Company or any of its Significant Subsidiaries (other than any voluntary relinquishment of a gaming license if such relinquishment is, in the reasonable, good faith judgment of the Board of Directors of the Company, evidenced by a resolution of such Board, both desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and not disadvantageous in any material respect to the Holders of Notes). SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Sections 6.01(f) and (g) with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same: (a) shall become immediately due and payable; or (b) if there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Agreement or 5 business days after receipt by the Company and the Representative under the Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. If an Event of Default specified in Section 6.01(f) and (g) with respect to the Company occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences: (c) if the rescission would not conflict with any judgment or decree; (d) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration; (e) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (f) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and 78 -72- (g) in the event of the cure or waiver of an Event of Default of the type described in Sections 6.01(f) and (g), the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest and Additional Interest, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes) may, by notice to the Trustee, on behalf of the Holders of all the Notes waive any past Default hereunder and its consequences, except a Default: (a) in the payment of the principal (or premium, if any) or interest on any Note (including any Note which is required to have been purchased pursuant to an offer to purchase that the Company is required to make under this Indenture); or (b) in respect of a Section of this Indenture which cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; provided, however, no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification from the Company satisfactory to it against any fees, loss, liability, cost or expense caused by taking such action or following such direction. 79 -73- SECTION 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(f) or (g) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal amount of, premium and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any amounts due the Trustee under Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or 80 -74- any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal amount, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal amount, premium and Additional Interest, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a 81 -75- Note pursuant to Section 6.07, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and 82 -76- (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (e) and (f) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture or to take any action at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or opinion of such counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 83 -77- SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. Notice of Defaults. (a) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by a Responsible Trust Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. (b) If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default no later than 30 days after it is known to a Responsible Trust Officer or written notice if it received by the Trustee. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Trust Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with May 15, 2001, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes 84 -78- are listed on any stock exchange. SECTION 7.07. Compensation and Indemnity. The Company and the Guarantors shall jointly and severally pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantors shall jointly and severally reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall jointly and severally indemnify the Trustee, its directors, officers, agents and employees, and each predecessor Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of this trust and its duties under this Indenture, including the costs and expenses (including reasonable attorney's fees) of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company and the Guarantors or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its gross negligence, bad faith or willful misconduct. The Trustee shall notify the Company and the Guarantors promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company and the Guarantors shall not relieve the Company and the Guarantors of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company and the Guarantors need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company and the Guarantors under this Section 7.07 shall survive the resignation and removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Company's and the Guarantors' payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(f) or (g) occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. 85 -79- SECTION 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's and the Guarantors' obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. 86 -80- SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities, that meets any requirements under applicable Gaming Regulations, and that has a combined capital and surplus of at least $25.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, the Trustee shall resign immediately in the manner and with the effect specified in this Article 7 SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. SECTION 7.12. Trustee Obligations to Holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. 87 -81- ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a Board Resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. SECTION 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.02, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in clauses (a) through (d) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04(a), and as more fully set forth in such Section, payments in re spect of the principal amount of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith, and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03. SECTION 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04, the Company shall be released from its obligations under the covenants contained in Sections 3.09, 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 and the Guarantors shall be released from their 88 -82- obligations under Section 11.06 with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and Guarantee shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03 and subject to the satisfaction of the conditions set forth in Section 8.04, the failure to comply with the terms of Sections 6.01(d), 6.01(e), 6.01(h) and 6.01(i) shall not constitute Events of Default. SECTION 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 to the outstanding Notes: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally rec ognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, in each case in accordance with the terms of this Indenture and the Notes; (b) in the case of an election under Section 8.02, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (ii) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; 89 -83- (c) in the case of an election under Section 8.03, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Section 6.01(f) or (g) are concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (h) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that: (i) the trust funds will not be subject to any rights of holders of Senior Debt, including, without limitation, those arising under this Indenture; and (ii) assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the date of deposit and that no Holder is an insider of the Company, after the 91st day following the date of deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally or, in the case of Covenant Defeasance, will be subject to a first priority Lien in favor of the Trustee for the benefit of the Holders. Notwithstanding the foregoing, the Opinion of Counsel required by clause (b) above with respect to a Legal Defeasance need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (1) have become due and payable or (2) will become due and payable on the maturity date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. 90 -84- SECTION 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 8.04 in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal amount, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a)), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in this Indenture) as to all outstanding Notes when: (1) either: (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable, pursuant to an optional redemption notice or otherwise, and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; 91 -85- (2) the Company has paid all other sums payable under this Indenture by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 8.07. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.08. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. SECTION 8.09. Survival. The Trustee's rights under this Article 8 shall survive termination of this Indenture. 92 -86- ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company or a Guarantor pursuant to Article 5 or Article 11; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (e) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; (f) to allow any Guarantor to execute a supplemental indenture and/or a Guarantee with respect to the Notes or to provide for the release of a Guarantee in compliance with this Indenture; or (g) to evidence and provide for the acceptance of appointment under this Indenture of a successor Trustee. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 and 9.06, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. With Consent of Holders of Notes. Except as provided in this Section 9.02, this Indenture, the Guarantees and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal 93 -87- amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Sections 7.02 and 9.06, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes) may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Note; (c) reduce the principal of or change or have the effect of changing the fixed maturity of any Note or change the date on which any Notes may be subject to redemption or reduce the redemption price therefor; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the 94 -88- Holders of at least a majority in aggregate principal amount of the then outstanding Notes, and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to the right of each Holder of Notes to receive payments of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default; (g) after the Company's obligation to purchase Notes arises thereunder, amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or, after such Change of Control has occurred or such Asset Sale has been consummated, modify any of the provisions or definitions with respect thereto; (h) modify or change any provision of this Indenture or the related definitions affecting the subordination or ranking of the Notes or any Guarantee in a manner which adversely affects the Holders; (i) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture; or (j) make any change in the foregoing amendment and waiver provisions (except to increase any percentage set forth therein). SECTION 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. 95 -89- SECTION 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, in addition to the documents required by Section 12.04, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and applicable Gaming Regulations. ARTICLE 10 SUBORDINATION SECTION 10.01. Securities Subordinated to Senior Debt. Anything herein to the contrary notwithstanding, the Company, for itself and its successors, and each Holder agrees that the payment of all Obligations owing under the Notes to the Holders is subordinated, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, of all Obligations on Senior Debt (including the Senior Debt Obligations with respect to the Credit Agreement, whether outstanding on the Issue Date or thereafter incurred). Notwithstanding the provisions of this Article 10, payments and distributions made relating to the Notes pursuant to a trust fund established under Section 8.04(a) pursuant to the terms of Article 8 (to the extent such trust fund did not result in a breach or violation of, or constitute a default under, the Credit Agreement) or as required under Section 3.10 shall not be subordinated to Senior Debt under this Article 10. This Article 10 shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. 96 -90- SECTION 10.02. Suspension of Payment When Senior Debt Is in Default. (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Senior Debt (including, without limitation, guarantees of the foregoing items which constitute Senior Debt) (a "Payment Default"), then no payment or distribution of any kind or character shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Obligations owing under the Notes or to acquire any of the Notes for cash or property or otherwise until such Payment Default (and all other Payment Defaults) shall have been cured or waived in accordance with the terms of the documentation governing the respective Senior Debt or ceased to exist or all Senior Debt with respect to which any Payment Default has occurred and is continuing shall have been discharged or paid in full in cash or Cash Equivalents. (b) If any event of default (other than a Payment Default) occurs and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a "Non-payment Default"), and if the Representative for the respective issue of Designated Senior Debt gives notice of the event of default to the Trustee stating that such notice is a payment blockage notice (a "Payment Blockage Notice"), then during the period (the "Payment Blockage Period") beginning upon the delivery of such Payment Blockage Notice and ending on the earlier of (x) all events of default with respect to all Designated Senior Debt have been cured or waived or ceased to exist, (y) 180 days after the date on which the applicable Payment Blockage Notice is received, or (z) the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Payment Blockage Period, neither the Company nor any other Person on its behalf shall (i) make any payment of any kind or character with respect to any Obligations owing under the Notes or (ii) acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 180 days from the date the applicable Payment Blockage Notice is received by the Trustee and (y) only one such Payment Blockage Period may be commenced within any 360 consecutive days. For all purposes of this Section 10.02(b), no event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period ending after the date of commencement of such Payment Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or the Holder when such payment is prohibited by the foregoing provisions of this Section 10.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests 97 -91- may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt. Nothing contained in this Article 10 shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Notes and all other Obligations owing under the Notes pursuant to Article 6 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations owing under the Notes. SECTION 10.03. Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company. (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its assets, whether voluntary or involuntary, all Obligations in respect of Senior Debt due or to become due shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt (including interest after the commencement of any bankruptcy or other like proceeding at the rate specified in the applicable Senior Debt whether or not such interest is an allowed claim in any such proceeding), before any payment or distribution of any kind or character is made on account of any Obligations on or for the acquisition of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee if received by it, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part 98 -92- thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of the Company's obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or Cash Equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Section 10, with any turnover of payments as otherwise calculated pursuant to this Section 10 to be made as if no such diminution had occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. SECTION 10.04. Payments May Be Paid Prior to Dissolution. Nothing contained in this Article 10 or elsewhere in this Agreement shall prevent (i) the Company, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of and interest on the Obligations owing under the Notes, or from depositing with the Trustee, any monies for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of, and interest on, the Obligations owing under the Notes to the Holders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable the Trustee shall have actually received the written notice provided for in the first sentence of Section 10.02(b) (provided that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Section 10.02 and/or 10.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 10.02 and Section 10.03). The Company shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Company, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt. Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Holders shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Obliga- 99 -93- tions owing under the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company, or by or on behalf of the Holders by virtue of this Article 10, which otherwise would have been made to the Holders shall, as between the Company and the Holders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article 10 are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. SECTION 10.06. Obligations of the Company Unconditional. Nothing contained in this Article 10 or elsewhere in this Agreement is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and any interest on the Obligations owing under the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Article 10, of the holders of Senior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy. SECTION 10.07. Reliance on Judicial Order or Certificate of Liquidating Agent. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee, subject to the provisions of Article 7, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Nothing in this Article 10 shall apply to the claims of, or payments to, the Trustee in its capacity as such under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the 100 -94- reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 10, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.08. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt. No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 10 or the obligations hereunder of the Holders to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Obligations. Each Holder authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination provided in this Article 10, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Company, the filing of a claim for the unpaid balance of its Obligations owing under the Notes and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Obligations owing under the 101 -95- Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.10. This Article 10 Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Obligations owing under the Notes by reason of any provision of this Article 10 will not be construed as preventing the occurrence of an Event of Default. SECTION 10.11. Amendments or Modifications to Article 10. Notwithstanding anything to the contrary contained in this Agreement, no amendment or modification to any provision of this Article 10 or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any Senior Debt then outstanding) shall be permitted without the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes) or, if required by Section 9.02(h), by each Holder affected. SECTION 10.12. Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 10.13. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless a Responsible Trust Officer of the Trustee shall have received at the Corporate Trust Office at least one Business Day prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10 (although the receipt of such payment shall otherwise be subject to the applicable provisions of this Article 10). Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee in its capacity as such under or pursuant to Section 7.07. Nothing in this Section 10.13 is intended to or shall relieve any Holder of Notes from the obligations imposed under Sections 10.02(c) and 10.03 (c) with respect to other distributions received in violation of the provisions hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. 102 -96- ARTICLE 11 GUARANTEE SECTION 11.01. Unconditional Guarantee. Each Guarantor hereby unconditionally, jointly and severally, guarantees (such guarantee to be referred to herein as the "Guarantee"), subject to Article 12, to each of the Holders and to the Trustee and their respective successors and assigns that (i) the principal of and interest on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal, if any, and interest on any interest, if any, to the extent lawful, of the Notes and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any of the Notes or of any such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 11.05. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Agreement, the absence of any action to enforce the same, any waiver or consent by any of the Holders with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Notes, this Agreement and in this Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Guarantor, any amount paid by the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of this Guarantee, and (y) in the event of any acceleration of such obligations as provided in Article 6, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee. SECTION 11.02. Subordination of Guarantee. The obligations of each Guarantor to the Holders and to the Trustee pursuant to the Guarantee of such Guarantor and this Agreement are expressly subordinate and subject in right of payment to the prior payment in full of all Guarantor Senior Debt of such Guarantor, to the extent and in the manner provided in Article 12. 103 -97- SECTION 11.03. Severability. In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.04. Release of a Guarantor. In the event of a sale or other disposition of all of the properties and assets of any Guarantor, by way of merger, consolidation or otherwise, the sale of all of the Capital Stock of a Guarantor, whether by way of merger, consolidation or otherwise, in either case provided that such sale or other disposition complies with Section 4.10 (other than provisions for future application of the Net Cash Proceeds), or in the event of the designation of any Guarantor as an Unrestricted Subsidiary in accordance with this Indenture, the Guarantor's Guarantee will be released. The Trustee shall promptly deliver an appropriate instrument evidencing such release upon receipt of a request by the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section 11.04. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Notes as provided in this Article 11. SECTION 11.05. Limitation of Guarantor's Liability. Each Guarantor and by its acceptance hereof each of the Holders hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under the Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, but not limited to, the Guarantor Senior Debt of such Guarantor) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 11.07, result in the obligations of such Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance. SECTION 11.06. Guarantors May Consolidate, etc., on Certain Terms. No Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Indenture in connection with any sale of such Guarantor in a transaction complying with Section 4.10) will, and the Company will not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor that is a Wholly Owned Restricted Subsidiary unless: (1) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; 104 -98- (2) such entity assumes by supplemental indenture all of the obligations of the Guarantor on the Guarantee; and (3) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. Any merger or consolidation of a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only comply with clause (4) of Section 5.01. SECTION 11.07. Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Obligations. "Adjusted Net Assets" of such Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date (other than liabilities of such Guarantor under Subordinated Indebtedness)), but excluding liabilities under the Guarantee, of such Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liabilities of such Guarantor on its debts including, without limitation, Guarantor Senior Debt (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee), excluding debt in respect of the Guarantee of such Guarantor, as they become absolute and matured. SECTION 11.08. Waiver of Subrogation. Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under its Guarantee and this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim or other rights unless and until the Notes shall have been paid in full. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall, subject to the provisions of Article 10, Section 11.02 and Article 12, forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Notes, whether matured or unmatured, in accordance with the terms of this Agreement. Each Guar- 105 -99- antor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the waiver set forth in this Section 11.08 is knowingly made in contemplation of such benefits. SECTION 11.09. Evidence of Guarantee. To evidence their guarantees to the Holders set forth in this Article 11, each of the Guarantors hereby agrees to execute the notation of Guarantee in substantially the form included in Exhibit E Each such notation of Guarantee shall be signed on behalf of each Guarantor by an Officer or an assistant Secretary. Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer or assistant Secretary whose signature is on this Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors. SECTION 11.10. Waiver of Stay, Extension or Usury Laws. Each Guarantor covenants that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive such Guarantor from performing its Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Agreement; and each Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 12 SUBORDINATION OF GUARANTEE OBLIGATIONS SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt. Anything herein to the contrary notwithstanding, each of the uarantors, for itself and its successors, and each Holder agrees that the payment of all Guarantee Obligations of such Guarantor are subordinated, to the extent and in the manner provided in this Article 12, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of such Guarantor 106 -100- (including Guarantor Senior Debt Obligations with respect to the Credit Agreement, whether outstanding on the Issue Date or thereafter incurred). Notwithstanding the provisions of this Article 12, payments and distributions made as required under Section 3.10 shall not be subordinated to Guarantor Senior Debt under this Article 12. This Article 12 shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Debt, and such provisions are made for the benefit of the holders of Guarantor Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Guarantor Senior Debt (including, without limitation, guarantees of the foregoing items which constitute Guarantor Senior Debt), then no payment or distribution of any kind or character shall be made by or on behalf of such Guarantor or any other Person on its or their behalf with respect to any Guarantee Obligations or to acquire any of the Notes for cash or property or otherwise until such Payment Default (and all other Payment Defaults) shall have been cured or waived in accordance with the terms of the documentation governing the respective Guarantor Senior Debt or ceased to exist or all Guarantor Senior Debt with respect to which any Payment Default has occurred and is continuing shall have been discharged or paid in full in cash or Cash Equivalents. (b) During any Payment Blockage Period (as determined in accordance with Section 10.02(b), including the limitations set forth therein), neither any Guarantor nor any other Person on any Guarantor's behalf shall (i) make any payment of any kind or character with respect to any Guarantee Obligations or (ii) acquire any of the Notes for cash or property or otherwise. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 12.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Guarantor Senior Debt, if any, received from the holders of Guarantor Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from a Guarantor and only amounts included in the information provided to the Trustee shall be paid to the holders of Guarantor Senior Debt. 107 -101- SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor. (a) Upon any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all Obligations in respect of Guarantor Senior Debt Obligations due or to become due shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt (including interest after the commencement of any bankruptcy or other like proceeding at the rate specified in the applicable Guarantor Senior Debt whether or not such interest is an allowed claim in any such proceeding), before the Holders shall be entitled to receive any payment or distri bution of any kind or character on account of any Guarantee Obligations or for the acquisition of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee would be entitled, except for the provisions hereof, shall be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee if received by them, directly to the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amounts of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Guarantor Senior Debt. (b) To the extent any payment of Guarantor Senior Debt (whether by or on behalf of a Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 12.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior 108 -102- Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Debt. SECTION 12.04. Payments May Be Paid Prior to Dissolution. Nothing contained in this Article 12 or elsewhere in this Agreement shall prevent (i) any Guarantor, except under the conditions described in Sections 12.02 and 12.03, from making payments at any time for the purpose of making payments on Guarantee Obligations, or from depositing with the Trustee any monies for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 12.02 or 12.03, the application by the Trustee of any monies deposited with it for the purpose of making such payments on Guarantee Obligations to the Holders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable the Trustee shall have actually received the written notice provided for in the first sentence of Section 10.02(b) (provided that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Sections 12.02 and/or 12.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 12.02 and Section 12.03). Each Guarantor shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of such Guarantor, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 12.05. Holders To Be Subrogated to Rights of Holders of Guarantor Senior Debt. Subject to the payment in full in cash or Cash Equivalents of all Guarantor Senior Debt, the Holders shall be subrogated to the rights of the holders of Guarantor Senior Debt of such Guarantor to receive payments or distributions of cash, property or securities of such Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Holders by virtue of this Article 12, which otherwise would have been made to the Holders shall, as between such Guarantor and the Holders, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Debt, it being understood that the provisions of this Article 12 are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Guarantor Senior Debt, on the other hand. SECTION 12.06. Guarantee Obligations of the Guarantors Unconditional. Nothing contained in this Article 12 or elsewhere in this Agreement or in the Guarantees is intended to or shall impair, as among the Guarantors, their creditors other than the holders of Guarantor Senior Debt, and the Holders, the obligation of the Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantors other than the holders of the Guarantor Senior Debt, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, 109 -103- subject to the rights, if any, under this Article 12, of the holders of Guarantor Senior Debt in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy. SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating. Whenever a distribution is to be made or a notice given to holders of the Guarantor Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of a Guarantor referred to in this Article 12, the Trustee, subject to the provisions of Article 7 hereof, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or pro ceeding is pending, or upon a certificate of the trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. Nothing in this Article 12 shall apply to the claims of, or payments to, the Trustee in its capacity as such under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of the Guarantor Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Guarantor Senior Debt or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of the Guarantor Senior Debt to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of the Guarantor Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 12, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt. No right of any present or future holders of any Guarantor Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Guarantor Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 12 or the obligations hereunder of the Holders to the 110 -104- holders of Guarantor Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner Guarantor Senior Debt, or any instrument evidencing the same or any agreement under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights against the Guarantors and any other Person. SECTION 12.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations. Each Holder, by its acceptance of the Guarantee Obligations, authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Guarantor Senior Debt and the Holders, the subordination provided in this Article 12, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of any Guarantor, the filing of a claim for the unpaid balance under its Guarantee Obligations and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Guarantor Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder, or to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 12.10. This Article 12 Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Guarantee Obligations by reason of any provision of this Article 12 will not be construed as preventing the occurrence of an Event of Default. SECTION 12.11. Amendments or Modifications to Article 12. Notwithstanding anything to the contrary contained in this Agreement, no amendment or modification to any provision of this Article 12 or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any Guarantor Senior Debt then outstanding) shall be permitted without the consent of the Holders of at least a majority in principal 111 -105- amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes) or, if required by Section 9.02(h), by each Holder affected. SECTION 12.12. Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Guarantor Senior Debt of the acceleration. SECTION 12.13. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 12 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless a Responsible Trust Officer of the Trustee shall have received at the Corporate Trust Office at least one Business Day prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 12 (although the receipt of such payment shall otherwise be subject to the applicable provisions of this Article 12). Only the Company or a Representative may give the notice. Nothing in this Article 12 shall impair the claims of, or payments to, the Trustee in its capacity as such under or pursuant to Section 7.07. Nothing in this Section 12.13 is intended to or shall relieve any Holder of Notes from the obligations imposed under Sections 12.02(c) and 12.03 (c) with respect to other distributions received in violation of the provisions hereof. The Trustee in its individual or any other capacity may hold the Guarantor Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. ARTICLE 13 MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 13.02. Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: 112 -106- If to the Company and/or any Guarantor: Ameristar Casinos, Inc. 3773 Howard Hughes Parkway Suite 490 Las Vegas, Nevada 89109 Attention: Chief Financial Officer with copies to: Gibson, Dunn & Crutcher, LLP 331 South Grand Avenue Los Angeles, California 90071 Attention: Jonathan K. Layne, Esq. and Ameristar Casinos, Inc. 16633 Ventura Boulevard Encino, California 91436 Attention: General Counsel If to the Trustee: U.S. Bank Trust National Association 180 East 5th Street St. Paul, Minnesota 55101 Attention: Corporate Trust Administration The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. 113 -107- If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has or they have made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. 114 -108- SECTION 13.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or such Guarantor under the Notes, the Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note and Guarantee waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and Guarantees. SECTION 13.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 13.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.12. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 115 -109- SECTION 13.13. Table of Contents, Headings, etc. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 13.14. Application of Gaming Regulations This Indenture is subject to the Gaming Regulations and laws involving the sale and distribution of liquor (the "Liquor Laws"). Without limiting the foregoing, the Trustee and the Holders acknowledge that (i) they are subject to being called forward by the Gaming Authorities or the government authorities enforcing the Liquor Laws, in their discretion, for licensing or a finding of suitability or to file or provide other information, and (ii) all rights, remedies and powers in or under this Indenture may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Regulations and Liquor Laws and only to the extent that required approvals (including prior approvals) are obtained from the requisite Gaming Authorities. The Trustee and the Holders agree to cooperate with all Gaming Authorities in connection with the provision of such documents or other information as may be requested by such Gaming Authorities. 116 S-1 Dated as of February 2, 2001 AMERISTAR CASINOS, INC. By: /s/ Gordon R. Kanofsky --------------------------------------------- Name: Gordon R. Kanofsky Title: Senior Vice President of Legal Affairs AMERISTAR CASINO COUNCIL BLUFFS, INC. AMERISTAR CASINO LAS VEGAS, INC. AMERISTAR CASINO VICKSBURG, INC. AMERISTAR CASINO ST. LOUIS, INC. AMERISTAR CASINO KANSAS CITY, INC. AMERISTAR CASINO ST. CHARLES, INC. CACTUS PETE'S, INC. A.C. FOOD SERVICES, INC., as Guarantors By: /s/ Thomas M. Steinbauer -------------------------------------------- Name: Thomas M. Steinbauer Title: Vice President U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: /s/ Richard H. Prokosch --------------------------------------------- Name: Richard H. Prokosch Title: Authorized Signatory EX-10.4(B) 7 v70464ex10-4b.txt EXHIBIT 10.4(B) 1 EXHIBIT 10.4(b) FIRST AMENDMENT TO AMERISTAR CASINOS, INC. 1999 STOCK INCENTIVE PLAN THIS FIRST AMENDMENT TO AMERISTAR CASINOS, INC. 1999 STOCK INCENTIVE PLAN ("Amendment") is made as of this 8th day of December, 2000. WHEREAS, at the meeting of the Board of Directors of Ameristar Casinos, Inc. (the "Company") on December 8, 2000, the Board determined that it was in the Company's best interests to amend the Company's 1999 Stock Incentive Plan (the "Plan") to increase the number of shares of the Company's common stock ("Shares") that may be distributed under the Plan and to increase the number of Shares that may be distributed to any one person in any calendar year under the Plan. WHEREAS, pursuant to the authority granted by the Board, the Company has decided to amend the Plan in accordance with the terms and conditions set forth below. AMENDMENTS 1. TOTAL SHARES FOR DISTRIBUTION. The existing paragraph 4.1 of the Plan is deleted, and the following is inserted as the new paragraph 4.1: The total number of shares of Stock reserved and available for distribution under the Plan shall be 4,600,000 (subject to adjustment as provided in Section 4.3); provided, however, that no award of a Stock Option or Restricted Stock may be made at any time if, after giving effect to such award, (i) the total number of shares of Stock issued upon the exercise of options under the Plan and the Company's Management Stock Option Incentive Plan, as amended and restated through September 4, 1996 (the "Prior Plan") plus (ii) the total number of shares of Stock issuable upon exercise of all outstanding options of the Company under the Plan and the Prior Plan plus (iii) the total number of shares of Stock underlying awards of Restricted Stock under the Plan (whether or not the applicable restrictions have lapsed) would exceed 4,600,000 shares (subject to adjustment as provided in Section 4.3). Shares of Stock issuable in connection with any award under the Plan may consist of authorized but unissued shares or treasury shares. 2. CALENDAR YEAR LIMIT. The existing clause (c) of paragraph 3.2 of the Plan is deleted, and the following is inserted as the new clause (c) of paragraph 3.2. (c) to determine the number of shares of the common stock of the Company, $0.01 par value (the "Stock"), to be covered by each award granted hereunder, provided that no Participant will be granted Stock Options on or with respect to more than 1,000,000 shares of Stock in any calendar year. 3. GENERAL. Except as modified in this Amendment, the Plan remains in full force and effect. The headings used in this Amendment are for convenience purposes only and should not be read to limit or alter provisions of this Amendment. 2 IN WITNESS WHEREOF, Ameristar Casinos, Inc. has executed this Amendment as of the date set forth above. AMERISTAR CASINOS, INC., a Nevada corporation By: /s/ THOMAS M. STEINBAUER ------------------------------------------------------ Thomas M. Steinbauer Senior Vice President and Chief Financial Officer 2 EX-10.14 8 v70464ex10-14.txt EXHIBIT 10.14 1 Exhibit 10.14 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ EFFECTIVE APRIL 1, 2001 2 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ TABLE OF CONTENTS
PAGE ---- Purpose......................................................................................................... 1 ARTICLE 1 Definitions............................................................................................1 ARTICLE 2 Selection, Enrollment, Eligibility.....................................................................9 2.1 Selection by Committee.........................................................................9 2.2 Enrollment Requirements........................................................................9 2.3 Eligibility; Commencement of Participation.....................................................9 2.4 Termination of Participation and/or Deferrals..................................................9 ARTICLE 3 Deferral Commitments/Company Matching/Crediting/Taxes.................................................10 3.1 Minimum Deferrals.............................................................................10 3.2 Maximum Deferral..............................................................................10 3.3 Election to Defer; Effect of Election Form....................................................11 3.4 Withholding of Annual Deferral Amounts........................................................11 3.5 Annual Company Contribution Amount............................................................11 3.6 Annual Company Matching Amount................................................................11 3.7 Rollover Contributions and Rollover Transfers.................................................12 3.8 Investment of Trust Assets....................................................................12 3.9 Vesting.......................................................................................12 3.10 Crediting/Debiting of Account Balances........................................................14 3.11 FICA and Other Taxes..........................................................................16 3.11 FICA and Other Taxes..........................................................................16 3.12 Distributions.................................................................................16 ARTICLE 4 Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Election..........................17 4.1 Short-Term Payout.............................................................................17 4.2 Other Benefits Take Precedence Over Short-Term................................................17 4.3 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies.........................17 4.4 Withdrawal Election...........................................................................17 ARTICLE 5 Retirement Benefit....................................................................................18 5.1 Retirement Benefit............................................................................18 5.2 Payment of Retirement Benefit.................................................................18 5.3 Death Prior to Completion of Retirement Benefit...............................................18 ARTICLE 6 Pre-Retirement Survivor Benefit.......................................................................19 6.1 Pre-Retirement Survivor Benefit...............................................................19
i 3 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ PAGE 6.2 Payment of Pre-Retirement Survivor Benefit....................................................19 ARTICLE 7 Termination Benefit...................................................................................19 7.1 Termination Benefit...........................................................................19 7.2 Payment of Termination Benefit................................................................19 ARTICLE 8 Disability Waiver and Benefit.........................................................................20 8.1 Disability Waiver.............................................................................20 8.2 Continued Eligibility; Disability Benefit.....................................................20 ARTICLE 9 Beneficiary Designation...............................................................................21 9.1 Beneficiary...................................................................................21 9.2 Beneficiary Designation; Change; Spousal Consent..............................................21 9.3 Acknowledgment................................................................................21 9.4 No Beneficiary Designation....................................................................21 9.5 Doubt as to Beneficiary.......................................................................21 9.6 Discharge of Obligations......................................................................21 ARTICLE 10 Leave of Absence.....................................................................................22 10.1 Paid Leave of Absence.........................................................................22 10.2 Unpaid Leave of Absence.......................................................................22 ARTICLE 11 Termination, Amendment or Modification...............................................................22 11.1 Termination...................................................................................22 11.2 Amendment.....................................................................................23 11.3 Plan Agreement................................................................................23 11.4 Effect of Payment.............................................................................23 ARTICLE 12 Administration.......................................................................................23 12.1 Committee Duties..............................................................................23 12.2 Administration Upon Change In Control.........................................................24 12.3 Agents........................................................................................24 12.4 Binding Effect of Decisions...................................................................24 12.5 Indemnity of Committee........................................................................25 12.6 Employer Information..........................................................................25 ARTICLE 13 Other Benefits and Agreements........................................................................25 13.1 Coordination with Other Benefits..............................................................25 ARTICLE 14 Claims Procedures....................................................................................25 14.1 Presentation of Claim.........................................................................25 14.2 Notification of Decision......................................................................26 14.3 Review of a Denied Claim......................................................................26 14.4 Decision on Review............................................................................26
ii 4 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ 14.5 Legal Action..................................................................................26 ARTICLE 15 Trust 28 15.1 Establishment of the Trust....................................................................27 15.2 Interrelationship of the Plan and the Trust...................................................27 15.3 Distributions From the Trust..................................................................27 ARTICLE 16 Miscellaneous........................................................................................27 16.1 Status of Plan................................................................................27 16.2 Unsecured General Creditor....................................................................27 16.3 Employer's Liability..........................................................................27 16.4 Nonassignability..............................................................................28 16.5 Not a Contract of Employment..................................................................38 16.6 Furnishing Information........................................................................28 16.7 Terms.........................................................................................28 16.8 Captions......................................................................................28 16.9 Governing Law.................................................................................29 16.10 Notice .....................................................................................29 16.11 Successors....................................................................................29 16.12 Spouse's Interest.............................................................................29 16.13 Validity 31 16.14 Incompetent...................................................................................29 16.15 Court Order...................................................................................29 16.16 Distribution in the Event of Taxation.........................................................30 16.17 Insurance.....................................................................................30 16.18 Legal Fees To Enforce Rights After Change in Control..........................................30
iii 5 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ AMERISTAR CASINOS, INC. DEFERRED COMPENSATION PLAN Effective April 1, 2001 PURPOSE The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated Employees who contribute materially to the continued growth, development and future business success of Ameristar Casinos, Inc., a Nevada corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to a Participant, a credit on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the vested portion of the Company Contribution Account balance, (iii) the vested portion of the Company Matching Account balance and (iv) the Rollover Contribution Account, minus (v) the Rollover Transfers. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual Salary relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, payable to a Participant as an Employee under any Employer's annual bonus and cash incentive plans, excluding stock options. 1.3 "Annual Company Contribution Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5. 1 6 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ 1.4 "Annual Company Matching Amount" for any one Plan Year shall be the amount determined in accordance with Section 3.6. 1.5 "Annual Deferral Amount" shall mean that portion of a Participant's Base Annual Salary and Annual Bonus that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.6 "Annual Salary Deferral Amount" shall mean that portion of a Participant's Base Annual Salary that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Salary Deferral Amount shall be the actual amount withheld prior to such event. 1.7 "Annual Bonus Deferral Amount" shall mean that portion of a Participant's Annual Bonus that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Bonus Deferral Amount shall be the actual amount withheld prior to such event. 1.8 "Annual Installment Method" shall mean annual installments over the number of years selected by the Participant or Committee in accordance with this Plan, calculated as follows: The Account Balance of the Participant shall be calculated as of the close of business on the last business day of the year. The annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of annual installments due the Participant. By way of example, if the Participant elects a 10 year Annual Installment Method, the first annual installment shall be 1/10 of the Account Balance, calculated as described in this definition. The following year, the annual installment shall be 1/9 of the Account Balance, calculated as described in this definition. Each annual installment shall be distributed to the Participant in four equal payments, one payment to be made each calendar quarter of the Plan Year, on or as soon as practicable after the first business day of each calendar quarter of the Plan Year. By way of example, if the annual installment for Plan Year 2002 totals $1,000, $250 shall be paid to the Participant on or as soon as practicable after January 1, April 1, July 1 and October 1. 1.9 "Base Annual Salary" shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding 2 7 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, directors fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Employee. 1.10 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.11 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.12 "Board" shall mean the board of directors of the Company. 1.13 A "Change in Control" shall be deemed to have occurred if: (a) individuals who, as of the date of this Agreement, constitute the entire Board of Directors of the Company ("Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of the Company; PROVIDED, HOWEVER, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the then Incumbent Directors (other than an election or nomination of an individual whose assumption of office is the result of an actual or threatened election contest relating to the election of directors of the Company), also shall be an Incumbent Director; or (b) the stockholders of the company shall approve (A) any merger, consolidation, or recapitalization of the Company (or, if the capital stock of the Company is affected, any subsidiary of the Company) or any sale, lease, or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company (each of the foregoing being an "Acquisition Transaction") where (1) the stockholders of the Company immediately prior to such Acquisition Transaction would not immediately after such Acquisition Transaction beneficially own, directly or indirectly, shares representing in the aggregate more than fifty percent (50%) of (a) the then outstanding common stock of the corporation surviving or resulting 3 8 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ from such merger, consolidation or recapitalization or acquiring such assets of the Company, as the case may be (the "Surviving Corporation") (or of its ultimate parent corporation, if any) and (b) the Combined Voting Power (as defined below) of the then outstanding Voting Securities (as defined below) of the Surviving Corporation (or of its ultimate parent corporation, if any) or (2) the Incumbent Directors at the time of the initial approval of such Acquisition Transaction would not immediately after such Acquisition Transaction constitute a majority of the Board of Directors of the Surviving Corporation (or of its ultimate parent corporation, if any) or (B) any plan or proposal for the liquidation or dissolution of the Company; or (c) any Person (as defined below) other than a Permitted Holder (as defined below) shall become the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of securities of the Company representing in the aggregate fifty percent (50%) or more of either (i) the then outstanding shares of the Company Common Stock or (ii) the Combined Voting Power of all then outstanding Voting Securities of the Company; PROVIDED, HOWEVER, that notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred for purposes of this clause (c) solely as the result of: (A) an acquisition of securities by the Company which, by reducing the number of shares of the Company Common Stock or other Voting Securities outstanding, increases (i) the proportionate number of shares of the Company Common Stock beneficially owned by any Person to fifty percent (50%) or more of the shares of the Company Common Stock then outstanding or (ii) the proportionate voting power represented by the Voting Securities beneficially owned by any Person to fifty percent (50%) or more of the Combined Voting Power of all then outstanding Voting Securities; or (B) an acquisition of securities directly from the Company except that this paragraph B shall not apply to: (1) any conversion of a security that was not acquired directly from the Company; or (2) any acquisition of securities if the Incumbent Directors at the time of the initial approval of such acquisition would not immediately after (or otherwise as a result of) such acquisition constitute a majority of the Board of Directors of the Company. (d) For purposes of this Section 1.13: 4 9 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ (i) "Person" shall mean any individual, entity (including, without limitation, any corporation, partnership, limited liability company, trust, joint venture, association or governmental body) or group (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act and the rules and regulations thereunder); provided, however, that "Person" shall not include the Company, any of its subsidiaries, any employee benefit plan of the Company or any of its majority-owned subsidiaries or any entity organized, appointed or established by the Company or such subsidiary for or pursuant to the terms of any such plan; (ii) "Voting Securities" shall mean all securities of a corporation having the right under ordinary circumstances to vote in an election of the Board of Directors of such corporation; (iii) "Combined Voting Power" shall mean the aggregate votes entitled to be cast generally in the election of directors of a corporation by holders of then outstanding Voting Securities of such corporation; and (iv) "Permitted Holder" shall mean (A) the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company and (B) to the extent they hold securities in any capacity whatsoever, Craig H. Neilsen and Ray Neilsen and their respective estates, spouses, heirs, ancestors, lineal descendants, step children, legatees and legal representatives, and the trustees of any bona fide trusts of which one or more of the foregoing are the sole beneficiaries or grantors thereof and (C) any person controlled, directly or indirectly, by one or more of the foregoing Persons referred to in the immediately preceding clause (B), whether through the ownership of voting securities, by contract or otherwise. 1.14 "Claimant" shall have the meaning set forth in Section 14.1. 1.15 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 1.16 "Committee" shall mean the committee described in Article 12. 1.17 "Company" shall mean Ameristar Casinos, Inc., a Nevada corporation, and any successor to all or substantially all of the Company's assets or business. 1.18 "Company Contribution Account" shall mean (i) the sum of the Participant's Annual Company Contribution Amounts, plus (ii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Company Contribution Account, less (iii) all distributions made to the Participant or his or her 5 10 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ Beneficiary pursuant to this Plan that relate to the Participant's Company Contribution Account. 1.19 "Company Matching Account" shall mean (i) the sum of all of a Participant's Annual Company Matching Amounts, plus (ii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Company Matching Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Matching Account. 1.20 "Deduction Limitation" shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are "subject to the Deduction Limitation" under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer, at the direction of the Committee, may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.10 below, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control. 1.21 "Deferral Account" shall mean (i) the sum of all of a Participant's Annual Deferral Amounts, plus (ii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.22 "Disability" shall mean a period of disability during which a Participant qualifies for permanent disability benefits under the Participant's Employer's long-term disability plan, or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for permanent disability benefits under such a plan had the Participant been a participant in such a plan, as determined in the sole discretion of the Committee. If the Participant's Employer does not sponsor such a plan, or 6 11 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ discontinues to sponsor such a plan, Disability shall be determined by the Committee in its sole discretion. 1.23 "Disability Benefit" shall mean the benefit set forth in Article 8. 1.24 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.25 "Employee" shall mean a person who is an employee of any Employer. 1.26 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor. 1.27 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 1.28 "First Plan Year" shall mean the period beginning April 1, 2001 and ending December 31, 2001. 1.29 "Participant" shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant's benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce. 1.30 "Plan" shall mean the Company's Deferred Compensation Plan adopted effective April 1, 2001, and as hereafter amended from time to time. 1.31 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant's Employer shall provide for the entire benefit to which such Participant is entitled under the Plan attributable to that Employer. Should there be more than one Plan Agreement in respect of a particular Employer, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional 7 12 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ benefits or benefit limitations must be agreed to by both the Employer and the Participant. 1.32 "Plan Year" shall, except for the First Plan Year, mean a period beginning on January 1 of each calendar year and ending December 31. 1.33 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in Article 6. 1.34 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to an Employee, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the earlier of the attainment of (a) age sixty-five (65) or (b) age fifty-five (55) with five (5) Years of Service. 1.35 "Retirement Benefit" shall mean the benefit set forth in Article 5. 1.36 "Rollover Contribution(s)" shall have the meaning set forth in Section 3.7. 1.37 "Rollover Contribution Account" shall mean the sum of (a) a Participant's Rollover Contribution, plus (b) amounts credited in accordance with all of the applicable crediting provisions of the Plan that relate to the Participant's Rollover Contribution Account, less all distribution made from such account pursuant to this Plan. This account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to the Plan. 1.38 "Rollover Transfer(s)" shall have the meaning set forth in Section 3.7. 1.39 "Short-Term Payout" shall mean the payout set forth in Section 4.1. 1.40 "Termination Benefit" shall mean the benefit set forth in Article 7. 1.41 "Termination of Employment" shall mean the severing of employment with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. 1.42 "Trust" shall mean one or more trusts established pursuant to that certain Master Trust Agreement, dated as of April 1, 2001, between the Company and the trustee named therein, as amended from time to time. 1.43 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable 8 13 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. 1.44 "Years of Plan Participation" shall mean the total number of full Plan Years a Participant has been a Participant in the Plan prior to his or her Termination of Employment (determined without regard to whether deferral elections have been made by the Participant for any Plan Year). Any partial year shall not be counted. Also, years in which a Participant is eligible to participate by reason of a withdrawal under Section 4.4 hereof shall not be counted. Notwithstanding the previous sentence, a Participant's first Plan Year of participation shall be treated as a full Plan Year for purposes of this definition, even if it is only a partial Plan Year of participation. 1.45 "Years of Service" shall mean the total number of full years in which a Participant has been employed by one or more Employers. For purposes of this definition, a year shall mean a 365 day period (or 366 days in the case of a leap year). ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated Employees of the Employers, as determined by the Compensation Committee of the Board in its sole discretion. From that group, such Compensation Committee shall select, in its sole discretion, Employees to participate in the Plan. 2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected Employee shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within 30 days after he or she is selected to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary. 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee shall commence participation in the Plan on the first day of the month following the month in which the Employee completes all enrollment requirements. If an Employee fails to meet all such requirements within the period required, in accordance with Section 2.2, that Employee shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents. 2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in 9 14 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ accordance with Sections 201(2), 301(a)(3) and 401(a)(l) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant's membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant's then Account Balance as a Termination Benefit and terminate the Participant's participation in the Plan. ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY MATCHING/CREDITING/TAXES 3.1 MINIMUM DEFERRALS. (a) BASE ANNUAL SALARY AND ANNUAL BONUS. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary and/or Annual Bonus such that the aggregate amount of Base Annual Salary and Annual Bonus deferred is not less than $2,000. If an election is made for less than $2,000, or if no election is made, the amount deferred shall be zero. (b) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the First Plan Year, the minimum Base Annual Salary deferral shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12. 3.2 MAXIMUM DEFERRAL. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary and/or Annual Bonus up to the following maximum percentages for each deferral elected: DEFERRAL MAXIMUM AMOUNT Base Annual Salary 90% Annual Bonus 100% Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the First Plan Year of the Plan itself, the maximum Annual Deferral Amount, with respect to Base Annual Salary shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance, but the entire amount of the Annual Bonus attributable to the calendar year in which such short Plan Year ends may be subject to deferral. 10 15 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ 3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. (a) FIRST PLAN YEAR. In connection with a Participant's commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee. (b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made, a new Election Form. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year. 3.4 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Annual Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Annual Salary. The Annual Bonus portion of the Annual Deferral Amount shall be withheld at the time the Annual Bonus are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. 3.5 ANNUAL COMPANY CONTRIBUTION AMOUNT. For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant's Company Contribution Account under this Plan, which amount shall be for that Participant the Annual Company Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive an Annual Company Contribution Amount for that Plan Year. The Annual Company Contribution Amount, if any, shall be credited as of the date selected by the Committee, in its sole and absolute discretion. If a Participant is not employed by an Employer as of the last day of a Plan Year other than by reason of his or her Retirement or death while employed, the Annual Company Contribution Amount for that Plan Year shall be zero. 3.6 ANNUAL COMPANY MATCHING AMOUNT. A Participant's Annual Company Matching Amount for any Plan Year shall be equal to the sum of (i) 100% of the Participant's Annual Salary Deferral Amount for such Plan Year, up to an amount that does not exceed 11 16 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ 5% of the Participant's Base Annual Salary taken into account hereunder for such Plan Year and (ii) 100% of the Participant's Annual Bonus Deferral Amount for such Plan Year, up to an amount that does not exceed 5% of the Participant's Annual Bonus. The Annual Company Matching Amount, if any, shall be credited as of the date selected by the Committee, in its sole and absolute discretion. In the event of Retirement or death, a Participant shall be credited with the Annual Company Matching Amount for the Plan Year in which he or she Retires or dies. 3.7 ROLLOVER CONTRIBUTIONS AND ROLLOVER TRANSFERS. If a Participant participates in any other plan or arrangement maintained by an Employer (other than a plan qualified under Section 401 of the Code) that provides for the deferral of income or compensation (an "Other Deferral Plan"), and the Participant has an account balance under such Other Deferral Plan that the Participant is not presently entitled to receive (other than through distributions or withdrawals on account of hardship or which entail a reduction in such account balance or the payment of some other penalty), the Committee, in its sole and absolute discretion, may permit all but not less than all of such Participant's account balance in such Other Deferral Plan to be contributed to this Plan as a Rollover Contribution. The amount of any such Rollover Contribution shall be deducted from the Participant's account balance in such Other Deferral Plan, shall be credited to the Participant's Rollover Contribution Account under this Plan, and shall thereafter be governed by the terms and provisions of this Plan rather than by the terms and provisions of such Other Deferral Plan. Conversely, if a Participant has not become entitled to receive benefits under this Plan (other than pursuant to Sections 4.1 or 4.3 of this Plan) and the Participant also participates in an Other Deferral Plan, the Committee may, in its sole and absolute discretion, permit all but not less than all of the Participant's Account Balance to be transferred to such Other Deferral Plan in a Rollover Transfer. The amount of any Rollover Transfer shall be credited to the participant's account in such Other Deferral Plan, and shall thereafter be governed by the terms and provision of such Other Deferral Plan rather than by the terms and provisions of this Plan. 3.8 INVESTMENT OF TRUST ASSETS. The trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement. 3.9 VESTING. (a) A Participant shall at all times be 100% vested in his or her Deferral Account and Rollover Contribution Account. (b) A Participant shall be vested in his or her Company Contribution Account and Company Matching Account as follows: (i) with respect to all benefits under this Plan other than the Termination Benefit, a Participant's 12 17 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ vested Company Contribution Account and vested Company Matching Account shall equal 100% of such Participant's Company Contribution Account and Company Matching Account; and (ii) with respect to the Termination Benefit, a Participant's Company Contribution Account and Company Matching Account shall vest on the basis of the Participant's Years of Plan Participation at the time the Participant experiences a Termination of Employment, in accordance with the following schedule: YEARS OF PLAN PARTICIPATION VESTED PERCENTAGE OF AT DATE OF TERMINATION OF COMPANY CONTRIBUTION ACCOUNT EMPLOYMENT AND COMPANY MATCHING ACCOUNT Less than 1 year 0% 1 year or more, but less than 2 20% 2 years or more, but less than 3 40% 3 years or more, but less than 4 60% 4 years or more, but less than 5 80% 5 years or more 100% Upon a Termination of Employment, any unvested amounts in a Participant's Company Contribution Account and Company Marketing Account shall be forfeited. (c) Notwithstanding anything to the contrary contained in this Section 3.9, in the event of Retirement, Disability, death, or a Change in Control occurring while a Participant's employed by an Employer, a Participant's Company Contribution Account and Company Matching Account shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules). (d) Notwithstanding subsection (c), the vesting schedule for a Participant's Company Contribution Account and Company Matching Account shall not be accelerated to the extent that the Committee determines that such acceleration would cause the deduction limitations of Section 280G of the Code to become effective. In the event that all of a Participant's Company Contribution Account and Company Matching Account is not vested pursuant to such a determination, the Participant may request independent verification of the Committee's calculations with respect to the application of Section 280G. In such case, the Committee must provide to the Participant within 15 business days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the "Accounting Firm"). The opinion shall state the Accounting Firm's opinion that any limitation in the vested percentage hereunder is necessary 13 18 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ to avoid the limits of Section 280G and contain supporting calculations. The cost of such opinion shall be paid for by the Company. 3.10 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance (including for this purpose unvested amounts in the Participants Company Matching and Company Contribution Accounts) in accordance with the following rules: (a) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.10(c) below) to be used to determine the additional amounts to be credited to his or her Account Balance for the first calendar month or portion thereof in which the Participant commences participation in the Plan and continuing thereafter for each subsequent calendar month in which the Participant participates in the Plan, unless changed in accordance with the next sentence. Commencing with the first month that follows the Participant's commencement of participation in the Plan and continuing thereafter for each subsequent month in which the Participant participates in the Plan, no later than the next to last business day of the month, the Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the additional amounts to be credited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply to the next month and continue thereafter for each subsequent month in which the Participant participates in the Plan, unless changed in accordance with the previous sentence. (b) PROPORTIONATE ALLOCATION. In making any election described in Section 3.10(a) above, the Participant shall specify on the Election Form, in increments of one percentage points (1%), the percentage of his or her Account Balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Account Balance). (c) MEASUREMENT FUNDS. The Participant may elect one or more measurement funds, based on certain mutual funds selected and announced by the Committee (the "Measurement Funds"), for the purpose of crediting additional amounts to his or her Account Balance. As 14 19 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ necessary, the Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund. Each such action will take effect no earlier than the first day of the month that follows by thirty (30) days the day on which the Committee gives Participants advance written notice of such change. If the effective date of such a change occurs before a fund reallocation date and the change affects one of the Measurement Funds to which a Participant's Account Balance is allocated, the Participant's Account Balance shall be credited as if the change had not been made effective. (d) CREDITING OR DEBITING METHOD. The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its reasonable discretion, based on the performance of the Measurement Funds themselves. A Participant's Account Balance shall be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant, as determined by the Committee in its sole discretion, as though (i) a Participant's Account Balance were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable to such calendar month, as of the close of business on the first business day of such calendar month, at the closing price on such date; (ii) the portion of the Annual Deferral Amount that was actually deferred during any calendar month were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable to such calendar month, no later than the close of business on the first business day after the day on which such amounts are actually deferred from the Participant's Base Annual Salary through reductions in his or her payroll, at the closing price on such date; and (iii) any distribution made to a Participant that decreases such Participant's Account Balance ceased being invested in the Measurement Fund(s), in the percentages applicable to such calendar month, no earlier than one business day prior to the distribution, at the closing price on such date. The Participant's Annual Company Matching Amount shall be credited to his or her Company Matching Account for purposes of this Section 3.10 as of the close of business as of the first business day of the payroll period to which it relates. (e) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance SHALL NOT be considered or construed in any manner as an actual investment of his or her Account 15 20 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company. 3.11 FICA AND OTHER TAXES. (a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Annual Salary and Annual Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.11. (b) COMPANY MATCHING AMOUNTS AND COMPANY CONTRIBUTION AMOUNTS. When a participant becomes vested in a portion of his or her Company Matching Account or Company Contribution Account, the Participant's Employer(s) shall withhold from the Participant's Base Annual Salary or Annual Bonus that is not deferred, or both, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such vested portion of his or her Company Matching Account or Company Contribution Account. If necessary, the Committee may reduce the vested portion of the Participant's Company Matching Account or Company Contribution Account, as the case may be, in order to comply with this Section 3.11. (c) ROLLOVER CONTRIBUTIONS. For each Plan Year in which a Rollover Contribution is contributed by a Participant to the Plan, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Annual Salary or Annual Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Rollover Contribution. If necessary, the Committee may reduce the Rollover Contribution in order to comply with this Section 3.11. 3.12 DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local 16 21 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust. ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION 4.1 SHORT-TERM PAYOUT. For each Plan Year, a Participant may irrevocably elect to receive a future "Short-Term Payout" from the Plan solely with respect to all or part of the Annual Deferral Amount for such Plan Year. Subject to the Deduction Limitation, the Short-Term Payout shall be a lump sum payment in an amount that is equal to the specified portion of the Annual Deferral Amount plus amounts credited or debited in the manner provided in Section 3.10 above on that amount, determined at the time that the Short-Term Payout becomes payable (rather than the date of a Termination of Employment). Subject to the Deduction Limitation and the other terms and conditions of this Plan, each Short-Term Payout shall be paid out during a 60 day period commencing immediately after the last day of any Plan Year designated by the Participant that is at least four Plan Years after the Plan Year in which the corresponding Annual Deferral Amount is actually deferred. 4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral Amount, plus amounts credited or debited thereon, that is subject to a Short-Term Payout election under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be paid in accordance with the other applicable Article. 4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by a Participant and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant's Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. The payment of any amount under this Section 4.3 shall not be subject to the Deduction Limitation. 4.4 WITHDRAWAL ELECTION. A Participant (or, after a Participant's death, his or her Beneficiary) may elect, at any time, to withdraw all of his or her Account Balance, calculated as if there had occurred a Termination of Employment as of the day of the election, less a withdrawal penalty equal to 10% of such amount (the net amount shall be 17 22 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ referred to as the "Withdrawal Amount"). This election can be made at any time, before or after Retirement, Disability, death or Termination of Employment, and whether or not the Participant (or Beneficiary) is in the process of being paid pursuant to an installment payment schedule. If made before Retirement, Disability or death, a Participant's Withdrawal Amount shall be his or her Account Balance calculated as if there had occurred a Termination of Employment as of the day of the election. No partial withdrawals of the Withdrawal Amount shall be allowed. The Participant (or his or her Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee. The Participant (or his or her Beneficiary) shall be paid the Withdrawal Amount within 60 days of his or her election. Once the Withdrawal Amount is paid, the withdrawal penalty plus any nonvested amounts allocable to the Participant shall be permanently forfeited, the Participant's participation in the Plan shall terminate and the Participant shall not be eligible to participate in the Plan for the remainder of the Plan Year and the next Plan Year. The payment of this Withdrawal Amount shall not be subject to the Deduction Limitation. ARTICLE 5 RETIREMENT BENEFIT 5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, his or her Account Balance. 5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of any whole number of years not to exceed 15. The Participant may annually change his or her election to an allowable alternative payout period by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least 1 year prior to the Participant's Retirement and is accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the last day of the Plan Year in which the Participant Retires. Any payment made shall be subject to the Deduction Limitation. 5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participant's unpaid Retirement Benefit payments shall continue and shall be paid to the Participant's Beneficiary (a) over the remaining number of years and in the same amounts as that benefit would have been paid to the Participant had the Participant survived, or (b) in a 18 23 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ lump sum, if requested by the Beneficiary and allowed in the sole discretion of the Committee, that is equal to the Participant's unpaid remaining Account Balance. ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT 6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant's Account Balance if the Participant dies before he or she Retires, experiences a Termination of Employment or suffers a Disability. 6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. The Pre-Retirement Survivor Benefit shall be paid in the payment period previously elected by the Participant for the payment of the Retirement Benefit, but commencing upon the Participant's death. The Election Form most recently accepted by the Committee prior to the Participant's death shall govern the payout of the Participant's Pre-Retirement Survivor Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be paid in a lump sum. Notwithstanding the foregoing, payment of the Pre-Retirement Survivor Benefit may be made, in the sole discretion of the Committee, in a lump sum or in not more than 12 monthly installments. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the last day of the Plan Year in which the Committee is provided with proof that is satisfactory to the Committee of the Participant's death. Any payment made shall be subject to the Deduction Limitation. ARTICLE 7 TERMINATION BENEFIT 7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participant's Account Balance if a Participant experiences a Termination of Employment prior to his or her Retirement, death or Disability. 7.2 PAYMENT OF TERMINATION BENEFIT. If the Participant's Account Balance at the time of his or her Termination of Employment is less than $25,000, payment of his or her Termination Benefit shall be paid in a lump sum. If his or her Account Balance at such time is equal to or greater than that amount, the Committee, in its sole discretion, may cause the Termination Benefit to be paid in a lump sum or pursuant to an Annual Installment Method of up to 5 years. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the last day of the month in which the Participant experiences the Termination of Employment. Any payment made shall be subject to the Deduction Limitation. 19 24 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ ARTICLE 8 DISABILITY WAIVER AND BENEFIT 8.1 DISABILITY WAIVER. (a) WAIVER OF DEFERRAL. A Participant who is determined by the Committee to be suffering from a Disability shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant's Base Annual Salary and/or Annual Bonus for the Plan Year during which the Participant first suffers a Disability. During the period of Disability, the Participant shall not be allowed to make any additional deferral elections, but will continue to be considered a Participant for all other purposes of this Plan. (b) RETURN TO WORK. If a Participant returns to employment with an Employer, after a Disability ceases, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment or service and for every Plan Year thereafter while a Participant in the Plan; provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.3 above. 8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant suffering a Disability shall, for benefit purposes under this Plan, continue to be considered to be employed, and shall be eligible for the benefits provided for in Articles 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right to, in its sole and absolute discretion and for purposes of this Plan only, and must in the case of a Participant who is otherwise eligible to Retire, deem the Participant to have experienced a Termination of Employment, or in the case of a Participant who is eligible to Retire, to have Retired, at any time (or in the case of a Participant who is eligible to Retire, as soon as practicable) after such Participant is determined to be suffering a Disability, in which case the Participant shall receive a Disability Benefit equal to his or her Account Balance at the time of the Committee's determination; provided, however, that should the Participant otherwise have been eligible to Retire, he or she shall be paid in accordance with Article 5. The Disability Benefit shall be paid commencing 90 days of the Committee's exercise of such right pursuant to Article 7, or if the Participant is otherwise eligible to Retire, pursuant to Article 5. Any payment made shall be subject to the Deduction Limitation. 20 25 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ ARTICLE 9 BENEFICIARY DESIGNATION 9.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. 9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent. 9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction. 9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. 21 26 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ ARTICLE 10 LEAVE OF ABSENCE 10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3. 10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take an unpaid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld. ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION 11.1 TERMINATION. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Employees, by action of its board of directors. Upon the termination of the Plan with respect to any Employer, the Plan Agreements of the affected Participants who are employed by that Employer shall terminate and their Account Balances, determined as if they had experienced a Termination of Employment on the date of Plan termination or, if Plan termination occurs after the date upon which a Participant was eligible to Retire, then with respect to that Participant as if he or she had Retired on the date of Plan termination, shall be paid to the Participants as follows: Prior to a Change in Control, if the Plan is terminated with respect to all of its Participants, an Employer shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay such benefits in a lump sum or pursuant to an Annual Installment Method of up to 15 years, with amounts credited and debited during the installment period as provided herein. If the Plan is terminated with respect to less than all of its Participants, an Employer shall be required to pay such benefits in a lump sum or pursuant to an Annual Installment Method of up to 15 years, with amounts credited or debited during the installment period as provided herein. If the Plan is terminated after a Change in Control, the Employer shall be required to pay such benefits in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment 22 27 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ of any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments by paying the Account Balance in a lump sum or pursuant to an Annual Installment Method using fewer years provided that earnings continue to be credited or debited during the installment period as provided herein. 11.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer by the action of its board of directors; provided, however, that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant's Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification, and (ii) no amendment or modification of this Section 11.2 or Section 12.2 of the Plan shall be effective. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Employer shall have the right to accelerate installment payments by paying the Account Balance in a lump sum or pursuant to an Annual Installment Method using fewer years (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the consent of the Participant. 11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant's Plan Agreement shall terminate. ARTICLE 12 ADMINISTRATION 12.1 COMMITTEE DUTIES. Except as otherwise provided in this Article 12 or Section 2.1 hereof, this Plan shall be administered by a Committee which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the 23 28 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. 12.2 ADMINISTRATION UPON CHANGE IN CONTROL. For purposes of this Plan, the Company shall be the "Administrator" at all times prior to the occurrence of a Change in Control. Upon and after the occurrence of a Change in Control, the "Administrator" shall be an independent third party selected by the Trustee and approved by the individual who, immediately prior to such event, was the Company's Chief Executive Officer or, if not so identified, the Company's highest ranking officer (the "Ex-CEO"). The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney's fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator or all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Company. 12.3 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 12.4 BINDING EFFECT OF DECISIONS. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 24 29 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ 12.5 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator. 12.6 EMPLOYER INFORMATION. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require. ARTICLE 13 OTHER BENEFITS AND AGREEMENTS 13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 14 CLAIMS PROCEDURES 14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within a reasonable time, and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: 25 30 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 14.3 below. 14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 14.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. 14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. 26 31 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ ARTICLE 15 TRUST 15.1 ESTABLISHMENT OF THE TRUST. The Company has established a Trust, and each Employer shall at least annually transfer over to the Trust such assets as the Employer determines, in its sole discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Annual Deferral Amounts, Annual Company Contribution Amounts, and Company Matching Amounts for such Employer's Participants for all periods prior to the transfer, as well as any debits and credits to the Participants' Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in the trust at the time of the transfer. 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan. 15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan. ARTICLE 16 MISCELLANEOUS 16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employee" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(l). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant and shall be limited to its particular obligation to a Participant based on compensation deferred while the Participant was employed by that Employer. An Employer shall have no obligation to a Participant under the Plan except as expressly 27 32 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ provided in the Plan and his or her Plan Agreement. Each Employer's obligation, however, is also guaranteed by the Company, so that both the Company and the affected Employer (if other than the Company) are jointly and severally responsible for that particular Employer's obligations hereunder. 16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 16.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan and any Plan Agreement shall be construed and interpreted according to the internal laws of the State of Nevada without regard to its conflicts of laws principles. 28 33 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ 16.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Deferred Compensation Plan Committee Ameristar Casinos, Inc. 37773 Howard Hughes Pkwy Suite 490 South Las Vegas, NV 89109 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries. 16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 16.15 COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In 29 34 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant's benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to that spouse or former spouse. 16.16 DISTRIBUTION IN THE EVENT OF TAXATION. (a) IN GENERAL. If, for any reason, all or any portion of a Participant's benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participant's Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant's unpaid Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. (b) TRUST. If the Trust terminates and benefits are distributed from the Trust to a Participant, the Participant's benefits under this Plan shall be reduced to the extent of such distributions. 16.17 INSURANCE. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance. 16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant's Employer(s) (which might then be composed of new members) or a shareholder of the Company or the Participant's Employers, or of any successor corporation might then cause or attempt to cause the Company, the Participant's Employer(s) or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participant's 30 35 AMERISTAR CASINOS, INC. Deferred Compensation Plan Master Plan Document ================================================================================ Employer(s) to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participant's Employer(s) or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer(s) or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the Participant's Employer(s) irrevocably authorize such Participant to retain counsel of his or her choice whose reasonable fees and charges shall be borne by the Company and the Participant's Employer(s) (who shall be jointly and severally liable for such amounts) to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, the Participant's Employer(s) or any director, officer, shareholder or other person affiliated with the Company, the Participant's Employer or any successor thereto in any jurisdiction. IN WITNESS WHEREOF, the Company has signed this Plan document as of April 1, 2001. Ameristar Casinos, Inc., a Nevada corporation By: /s/ Gordon R. Kanofsky --------------------------------------- Gordon R. Kanofsky Senior Vice President of Legal Affairs 31 EX-21.1 9 v70464ex21-1.txt EXHIBIT 21.1 1 EXHIBIT 21.1 Subsidiaries of Ameristar Casinos, Inc. 1. Cactus Pete's, Inc., a Nevada corporation 2. Ameristar Casino Vicksburg, Inc., a Mississippi corporation 3. Ameristar Casino Council Bluffs, Inc., an Iowa corporation 4. Ameristar Casino Las Vegas, Inc., a Nevada corporation 5. A.C. Food Services, Inc., a Nevada corporation 6. Ameristar Casino St. Louis, Inc., a Missouri corporation 7. Ameristar Casino St. Charles, Inc., a Missouri corporation 8. Ameristar Casino Kansas City, Inc., a Missouri corporation EX-23.1 10 v70464ex23-1.txt EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this 2000 Annual Report on Form 10-K into the Company's previously filed Registration Statements on Form S-8 (File Nos. 33-83378, 333-34313, 333-33860 and 333-56612). ARTHUR ANDERSEN LLP Las Vegas, Nevada March 28, 2001 EX-99.1 11 v70464ex99-1.txt EXHIBIT 99.1 1 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 all omitted exhibits and schedules to the following agreements: 1. Credit Agreement dated as of December 20, 2000 among ACI, the Lenders party thereto from time to time, Wells Fargo Bank, N.A., as Co-Arranger and Syndication Agent, Bear Stearns Corporate Lending Inc., as Documentation Agent, Deutsche Bank Securities Inc., as Lead Arranger and Sole Book Manager, and Bankers Trust Company, as Administrative Agent; 2. Senior Subordinated Credit Agreement dated as of December 20, 2000 by and among ACI, the Guarantors named on the signature pages thereto, the Lenders named on the signature pages thereto, Bankers Trust Company, as Agent for the Lenders, and Bear Stearns Corporate Lending Inc., as Documentation Agent for the Lenders; and 3. Indenture dated as of February 2, 2001 among ACI, the Guarantors (as defined therein) and U.S. Bank Trust National Association, as trustee. -----END PRIVACY-ENHANCED MESSAGE-----