MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding made as of June 8, 1999 is
between AMERISTAR CASINO COUNCIL BLUFFS, INC. ("AMERISTAR"),
COUNCIL BLUFFS HOTEL ASSOCIATES, L.C. ("CBHA") and RIVER ROAD
HOTEL ASSOCIATES, L.C. ("RRHA").
WHEREAS, Ameristar and CBHA's predecessor-in-interest have
entered into that certain Amended and Restated Ground Lease
Agreement dated as of September 7, 1995 (as amended, the "HOLIDAY
INN LEASE"), pursuant to which CBHA leases from Ameristar certain
land at Ameristar's riverboat casino complex in Council Bluffs,
Iowa (the "AMERISTAR CASINO COMPLEX") and on which CBHA has
constructed and operates, and intends to expand, a Holiday Inn
Hotel & Suites (the "HOLIDAY INN"); and
WHEREAS, Ameristar and RRHA have entered into that certain
Ground Lease Agreement dated as of May 28, 1999 (the "HAMPTON INN
LEASE"), pursuant to which RRHA will lease from Ameristar certain
land at the Ameristar Casino Complex and on which RRHA intends to
construct and operate a Hampton Inn (the "HAMPTON INN"); and
WHEREAS, Section 2.1(b) of the Holiday Inn Lease provides in
pertinent part as follows (references to Xxxxxxx in the Holiday
Inn Lease are references to CBHA):
"Xxxxxxx agrees to permit Ameristar, at
Ameristar's cost, to connect the Building to
an adjacent pavilion or docking facility with
a covered breezeway, and Ameristar agrees to
construct such breezeway, and a pavilion or
docking facility.";
WHEREAS, Section 11.12 of the Holiday Inn Lease provides as
follows:
"Concurrently with its execution of this
Lease, Ameristar does hereby xxxxx Xxxxxxx an
irrevocable license for a term concurrent
with this Lease, and any renewals, to utilize
the swimming pool and related facilities and
appurtenances thereto to be constructed by
Ameristar on its property adjacent to the
Leased Land. Ameristar agrees to obtain
Xxxxxxx'x prior written approval of the
construction plans and specifications related
to the pool, and the contractor bids for the
pool, which approval shall not be
unreasonably withheld or delayed. Xxxxxxx
agrees to reimburse one-half (1/2) of the
initial cost of construction of the pool
facilities (including necessary site work) to
a maximum reimbursement by Xxxxxxx of Three
Hundred Seventy-Five Thousand Dollars
($375,000), and one-half (1/2) of the actual
operating expenses of the pool on an ongoing
annual basis. This license shall survive any
foreclosure of the interest of Ameristar or
Xxxxxxx or any permitted successor, by any
fee mortgage holder or any Leasehold
Lender.";
WHEREAS, Section 11.9 of the Holiday Inn Lease provides as
follows:
"Xxxxxxx acknowledges that Ameristar may
construct or permit the construction of
another hotel or hotels on or near the Casino
Property and that such hotel(s) will be
entitled to compete with Xxxxxxx'x hotel.
Nothing in this Lease shall be deemed to be a
covenant by Ameristar not to compete with
Xxxxxxx or not to permit such competition by
other hotel owners or
operators, or to permit other hotel
owners or operators or other third-parties to
utilize parking areas on the Casino Property
on a nonexclusive basis.";
WHEREAS, Section 2.1(b) of the Hampton Inn Lease provides in
pertinent part as follows (references in the Hampton Inn Lease
are references to RRHA):
"Xxxxxxx agrees to connect the Building to
the adjacent hotel and/or pavilion and casino
with a covered, climate controlled
breezeway.";
WHEREAS, Section 11.9 of the Hampton Inn Lease provides as
follows:
"Xxxxxxx acknowledges that Ameristar
operates, and may construct or permit the
construction of another hotel or hotels on or
near the Casino Property and that such
hotel(s) will be entitled to compete with
Xxxxxxx'x hotel. Nothing in this Lease shall
be deemed to be a covenant by Ameristar not
to compete with Xxxxxxx or not to permit such
competition by other hotel owners or
operators, or to permit other hotel owners or
operators or other third-parties to utilize
parking areas on the Casino Property on a
nonexclusive basis.";
WHEREAS, Ameristar has informed CBHA and RRHA that, under
Ameristar's pre-existing master plan for the Ameristar Casino
Complex, Ameristar may, at some time in the future, desire to
build additional hotel rooms at the place (the "FUTURE
DEVELOPMENT SITE") where the pool and fitness center shared by
Ameristar and CBHA and the indoor walkway between the Holiday Inn
and the pavilion at Ameristar Casino Complex (the "CURRENT
FACILITIES") currently exist, and in connection with such
construction Ameristar would intend to demolish and reconstruct
the Current Facilities;
WHEREAS, CBHA and RRHA have each advised Ameristar that they
do not believe that Ameristar has any right to demolish the
Current Facilities in connection with any such future development
and construction;
WHEREAS, Ameristar has requested that CBHA and RRHA waive
any rights they may have that would restrict or prohibit
Ameristar from demolishing and reconstructing the Current
Facilities; provided, however, that Ameristar neither admits nor
denies that CBHA and/or RRHA have any such rights; and
WHEREAS, CBHA and RRHA are willing to agree in principle
that Ameristar may demolish and reconstruct the Current
Facilities without breaching either the Holiday Inn Lease or the
Hampton Inn Lease subject to certain conditions, and Ameristar is
willing to agree in principle to such conditions.
NOW, THEREFORE, the parties hereto state that their mutual
understanding and agreement in principle with respect to the
subject matter hereof is as follows:
1. CBHA and RRHA acknowledge that Ameristar has right under
the terms of the Holiday Inn Lease and the Hampton Inn Lease,
respectively, to build additional hotel rooms and related
facilities at the Ameristar Casino Complex, including without
limitation at the Future Development Site.
2. Subject to the other provisions of this Memorandum of
Understanding, Ameristar agrees (a) for the benefit of CBHA, and
its lenders and other permitted assigns, to maintain a pool and
fitness center for
the benefit of the Holiday Inn; and (b) for the benefit of
CBHA and RRHA, and each of their respective lenders and other
permitted assigns, to maintain an indoor walkway from the Holiday
Inn to the Pavilion.
3. Ameristar acknowledges construction of additional rooms
will not be contemplated until there is market justification to
build additional rooms. Market justification will include a
study that would indicate there will not be a materially adverse
impact on occupancy and average daily rate for each of the
Holiday Inn and the Hampton Inn in comparison to the then current
averages for comparable properties in the greater Omaha/Council
Bluffs market. Ameristar further acknowledges that since each of
the Holiday Inn Lease and the Hampton Inn Lease provide for
percentage rentals, the level of rentals to be paid by CBHA and
RRHA to Ameristar is materially dependent upon the ability to
drive lodging demand through the existing and future amenities at
the Ameristar Casino Complex. Ameristar currently contemplates
that future amenities to be developed may include expanded gaming
operations (it is acknowledged that development of a third level
addition to the existing riverboat will commence in the near
future), additional parking facilities (it is acknowledged that
development of a parking structure in replacement of surface
parking will commence in the near future), conference or meeting
facilities, arcades, bowling alleys, movie theatres, restaurants,
lounges, shopping outlets and other entertainment, food &
beverage and retail facilities. The parties mutually contemplate
that the development of future amenities will be necessary to
warrant a market justification for the development of additional
hotel rooms at the Ameristar Casino Complex; provided, however,
that Ameristar does not commit to develop in the future any
particular amenities.
4. If Ameristar does develop, or causes to be developed,
additional hotel rooms at the Future Development Site that
disturbs any of the Current Facilities, Ameristar agrees that it
will, at a minimum:
4.1 If required to satisfy non-waivable requirements
of CBHA's current franchisor, build a temporary or permanent
swimming pool that will satisfy such requirements. Subject to
such franchisor requirements, it is contemplated that any such
pool may be an outdoor pool, with an adequate shelter to permit
guest use during the cold weather seasons of the construction
period, if any, or thereafter in the case of a permanent pool.
Any such pool will be conveniently accessible to the Holiday Inn.
If any such pool is constructed, Ameristar may either demolish it
after construction or leave it in place as an additional outdoor
pool for use by Holiday Inn guests.
4.2 Construct and maintain an alternative indoor
walkway between the Holiday Inn and the Ameristar Casino Complex
pavilion; provided, however, that if such an alternative indoor
walkway is not feasible during any portion of the construction
period, Ameristar may instead provide access to the Ameristar
Casino Complex pavilion from the Holiday Inn and the Hampton Inn
via continuously operating shuttle vans operated by Ameristar at
its own expense.
4.3 Compensate CBHA and RRHA for lost operating
profits. The lost operating profits will be determined based
upon the monthly operating results experienced by CBHA and RRHA
during the period of construction of the new hotel, pool, fitness
center and/or indoor walkway, plus an additional three months
immediately following the completion of such construction, as
compared to the monthly operating profits for the corresponding
calendar month immediately preceding the commencement of such
construction; provided, however, that each of CBHA and RRHA shall
have an obligation to seek to maximize operating profits during
these time periods in accordance with their past business
practices; and provided, further, that the aggregate compensation
to CBHA and RRHA for lost operating profits during the three-
month period immediately following completion of construction
will not exceed $150,000. In addition Ameristar will pay CBHA
and RRHA a marketing allowance of $40,000 and $10,000,
respectively, to be used to assist in rebuilding its business.
The payments under this paragraph will be the
only financial consideration payable by Ameristar to CBHA
and RRHA for the impact of the construction and operation by
Ameristar of additional hotel rooms on the Future Development
Site.
4.4 The design plan for any new facilities built in
replacement of any Current Facilities must meet with CBHA, its
permitted assigns, lender and current franchisor approval, such
approvals not to be unreasonably withheld or delayed. In
addition, the design plan for any new walkway in between the
Holiday Inn and the Ameristar Casino Complex pavilion that may be
built in replacement of the current walkway must meet with RRHA,
its permitted assigns, lender and current franchisor approval,
such approvals not to be unreasonably withheld or delayed. Any
such new facilities will be of equal or better quality as the
applicable Current Facilities, and the pool and fitness center
shall have similar amenities to the Current Facilities and be
sized to accommodate guests from the Holiday Inn and all other
hotels utilizing such facilities. The location of any such new
pool and fitness center will be within the footprint of the new
facilities constructed on the Future Development Site, will be
conveniently accessible to the Holiday Inn guests and will be
readily identifiable as facilities shared by the Holiday Inn and
Ameristar hotels. Any such new walkway will provide as
convenient and as comfortable access as the current walkway and
will provide access as direct as reasonably possible between the
Holiday Inn and the Ameristar Casino Complex pavilion.
4.5 The development of the new hotel, including the
construction thereof, will not unreasonably interfere with
ingress, egress or parking of the Holiday Inn or Hampton Inn
guests, employees or suppliers. Ameristar will at all times
maintain the roadways, ingress, egress and parking so that the
Holiday Inn and Hampton Inn guests, employees and suppliers have
access to the respective hotels generally as convenient as in
existence prior to the commencement of construction. Ameristar
will cooperate with CBHA and RRHA so that construction times will
not unreasonably interfere with their respective guests peaceful
enjoyment of their hotel stay. Notwithstanding the foregoing,
CBHA and RRHA acknowledge and agree that there may be some
interference resulting from construction, and the provisions of
Section 4.3 are intended as the sole compensation to CBHA and
RRHA for such interference.
4.6 The cost of construction and opening the new
facilities will be entirely paid by Ameristar. The cost of
operation of the temporary and/or permanent pool(s) and fitness
center will be split between CBHA and Ameristar on a per room pro-
rata basis, except that if the new pool facilities require
lifeguards or other supervision during operating hours then
Ameristar will pay for all of those costs.
5. The parties hereto agree that this represents a
Memorandum of Understanding and that the specific terms relating
to the general principles will be contained in one or more
definitive agreements and that each party agrees to participate,
in good faith, in negotiating and creating such agreements with
terms consistent with the provisions and intent of this
Memorandum of Understanding.
Dated as of the date first above written.
AMERISTAR CASINO COUNCIL BLUFFS, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
COUNCIL BLUFFS HOTEL ASSOCIATES, L.C.
By: /s/ Xxxxxx X. Xxxxxxx
RIVER ROAD HOTEL ASSOCIATES, L.C.
By: /s/ Xxxxxx X. Xxxxxxx
